Item 1. Financial Statements
CSP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value)
|
|
|
|
|
|
|
|
|
|
June 30,
2017
|
|
September 30,
2016
|
|
(Unaudited)
|
|
|
ASSETS
|
|
|
|
Current assets:
|
|
|
|
Cash and cash equivalents
|
$
|
16,001
|
|
|
$
|
13,103
|
|
Accounts receivable, net of allowances of $248 and $240
|
20,307
|
|
|
18,997
|
|
Unbilled accounts receivable
|
832
|
|
|
567
|
|
Inventories, net
|
9,136
|
|
|
5,580
|
|
Deferred costs
|
2,215
|
|
|
635
|
|
Deferred income taxes
|
1,466
|
|
|
1,331
|
|
Other current assets
|
1,188
|
|
|
1,586
|
|
Total current assets
|
51,145
|
|
|
41,799
|
|
Property, equipment and improvements, net
|
1,547
|
|
|
1,680
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
Intangibles, net
|
197
|
|
|
287
|
|
Deferred costs
|
26
|
|
|
18
|
|
Deferred income taxes
|
1,741
|
|
|
1,723
|
|
Cash surrender value of life insurance
|
3,264
|
|
|
3,015
|
|
Other assets
|
187
|
|
|
185
|
|
Total other assets
|
5,415
|
|
|
5,228
|
|
Total assets
|
$
|
58,107
|
|
|
$
|
48,707
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
Current liabilities:
|
|
|
|
Accounts payable and accrued expenses
|
$
|
19,484
|
|
|
$
|
11,932
|
|
Deferred revenue
|
6,189
|
|
|
4,704
|
|
Pension and retirement plans
|
523
|
|
|
581
|
|
Income taxes payable
|
331
|
|
|
166
|
|
Total current liabilities
|
26,527
|
|
|
17,383
|
|
Pension and retirement plans
|
13,605
|
|
|
13,441
|
|
Other long term liabilities
|
28
|
|
|
228
|
|
Total liabilities
|
40,160
|
|
|
31,052
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
Common stock, $.01 par value per share; authorized, 7,500 shares; issued and outstanding 3,923 and 3,821 shares, respectively
|
40
|
|
|
39
|
|
Additional paid-in capital
|
13,440
|
|
|
12,924
|
|
Retained earnings
|
16,415
|
|
|
16,623
|
|
Accumulated other comprehensive loss
|
(11,948
|
)
|
|
(11,931
|
)
|
Total shareholders’ equity
|
17,947
|
|
|
17,655
|
|
Total liabilities and shareholders’ equity
|
$
|
58,107
|
|
|
$
|
48,707
|
|
See accompanying notes to unaudited consolidated financial statements.
CSP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
June 30,
2017
|
|
June 30,
2016
|
|
June 30,
2017
|
|
June 30,
2016
|
Sales:
|
|
|
|
|
|
|
|
Product
|
$
|
23,512
|
|
|
$
|
20,345
|
|
|
$
|
56,834
|
|
|
$
|
58,320
|
|
Services
|
7,020
|
|
|
6,567
|
|
|
18,930
|
|
|
19,407
|
|
Total sales
|
30,532
|
|
|
26,912
|
|
|
75,764
|
|
|
77,727
|
|
|
|
|
|
|
|
|
|
Cost of sales:
|
|
|
|
|
|
|
|
Product
|
19,934
|
|
|
16,460
|
|
|
48,037
|
|
|
47,750
|
|
Services
|
3,797
|
|
|
3,247
|
|
|
10,779
|
|
|
11,249
|
|
Total cost of sales
|
23,731
|
|
|
19,707
|
|
|
58,816
|
|
|
58,999
|
|
|
|
|
|
|
|
|
|
Gross profit
|
6,801
|
|
|
7,205
|
|
|
16,948
|
|
|
18,728
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Engineering and development
|
578
|
|
|
779
|
|
|
1,747
|
|
|
2,368
|
|
Selling, general and administrative
|
5,163
|
|
|
4,573
|
|
|
13,621
|
|
|
13,286
|
|
Total operating expenses
|
5,741
|
|
|
5,352
|
|
|
15,368
|
|
|
15,654
|
|
|
|
|
|
|
|
|
|
Operating income
|
1,060
|
|
|
1,853
|
|
|
1,580
|
|
|
3,074
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
Foreign exchange gain (loss)
|
(14
|
)
|
|
(55
|
)
|
|
68
|
|
|
(118
|
)
|
Other expense, net
|
(13
|
)
|
|
(21
|
)
|
|
(34
|
)
|
|
(47
|
)
|
Total other income (expense)
|
(27
|
)
|
|
(76
|
)
|
|
34
|
|
|
(165
|
)
|
Income before income taxes
|
1,033
|
|
|
1,777
|
|
|
1,614
|
|
|
2,909
|
|
Income tax expense
|
338
|
|
|
520
|
|
|
533
|
|
|
866
|
|
Net income
|
$
|
695
|
|
|
$
|
1,257
|
|
|
$
|
1,081
|
|
|
$
|
2,043
|
|
Net income attributable to common stockholders
|
$
|
664
|
|
|
$
|
1,198
|
|
|
$
|
1,035
|
|
|
$
|
1,959
|
|
Net income per share – basic
|
$
|
0.18
|
|
|
$
|
0.33
|
|
|
$
|
0.28
|
|
|
$
|
0.54
|
|
Weighted average shares outstanding – basic
|
3,744
|
|
|
3,618
|
|
|
3,713
|
|
|
3,599
|
|
Net income per share – diluted
|
$
|
0.17
|
|
|
$
|
0.32
|
|
|
$
|
0.27
|
|
|
$
|
0.52
|
|
Weighted average shares outstanding – diluted
|
3,819
|
|
|
3,743
|
|
|
3,811
|
|
|
3,733
|
|
See accompanying notes to unaudited consolidated financial statements.
CSP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
|
June 30,
2017
|
|
June 30,
2016
|
|
June 30,
2017
|
|
June 30,
2016
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
695
|
|
|
$
|
1,257
|
|
|
$
|
1,081
|
|
|
$
|
2,043
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
Foreign currency translation gain adjustments
|
|
(79
|
)
|
|
21
|
|
|
(17
|
)
|
|
144
|
|
Other comprehensive income (loss)
|
|
(79
|
)
|
|
21
|
|
|
(17
|
)
|
|
144
|
|
Total comprehensive income
|
|
$
|
616
|
|
|
$
|
1,278
|
|
|
$
|
1,064
|
|
|
$
|
2,187
|
|
See accompanying notes to unaudited consolidated financial statements.
CSP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
For the nine Months Ended June 30, 2017:
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Additional
Paid-in
Capital
|
|
Retained
Earnings
|
|
Accumulated
other
comprehensive
loss
|
|
Total
Shareholders’
Equity
|
Balance as of September 30, 2016
|
3,821
|
|
|
$
|
39
|
|
|
$
|
12,924
|
|
|
$
|
16,623
|
|
|
$
|
(11,931
|
)
|
|
$
|
17,655
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
1,081
|
|
|
—
|
|
|
1,081
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(17
|
)
|
|
(17
|
)
|
Exercise of stock options
|
5
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
411
|
|
|
—
|
|
|
—
|
|
|
411
|
|
Restricted stock cancellation
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Restricted stock issuance
|
94
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
Issuance of shares under employee stock purchase plan
|
11
|
|
|
—
|
|
|
90
|
|
|
—
|
|
|
—
|
|
|
90
|
|
Cash dividends on common stock ($0.33 per share)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,289
|
)
|
|
—
|
|
|
(1,289
|
)
|
Balance as of June 30, 2017
|
3,923
|
|
|
$
|
40
|
|
|
$
|
13,440
|
|
|
$
|
16,415
|
|
|
$
|
(11,948
|
)
|
|
$
|
17,947
|
|
See accompanying notes to unaudited consolidated financial statements.
CSP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
|
|
|
|
|
|
|
|
|
|
For the nine months ended
|
|
June 30,
2017
|
|
June 30,
2016
|
Cash flows provided by operating activities:
|
|
|
|
Net income
|
$
|
1,081
|
|
|
$
|
2,043
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
408
|
|
|
445
|
|
Amortization of intangibles
|
90
|
|
|
97
|
|
Loss on sale of fixed assets, net
|
6
|
|
|
23
|
|
Foreign exchange gain (loss)
|
(68
|
)
|
|
118
|
|
Non-cash changes in accounts receivable
|
39
|
|
|
103
|
|
Non-cash changes in inventories
|
165
|
|
|
431
|
|
Stock-based compensation expense on stock options and restricted stock awards
|
411
|
|
|
300
|
|
Deferred income taxes
|
(136
|
)
|
|
(22
|
)
|
Increase in cash surrender value of life insurance
|
(99
|
)
|
|
(78
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Increase in accounts receivable
|
(1,509
|
)
|
|
(1,017
|
)
|
Decrease in life insurance receivable
|
413
|
|
|
—
|
|
Increase in inventories
|
(3,702
|
)
|
|
(500
|
)
|
(Increase) decrease in deferred costs
|
(1,495
|
)
|
|
438
|
|
Decrease in refundable income taxes
|
—
|
|
|
43
|
|
Increase in other current assets
|
(19
|
)
|
|
(686
|
)
|
Decrease in other assets
|
—
|
|
|
71
|
|
Increase (decrease) in accounts payable and accrued expenses
|
7,489
|
|
|
(708
|
)
|
Increase in deferred revenue
|
1,345
|
|
|
707
|
|
Decrease in pension and retirement plans liabilities
|
(14
|
)
|
|
(124
|
)
|
Increase in income taxes payable
|
169
|
|
|
840
|
|
Increase (decrease) in other long term liabilities
|
(193
|
)
|
|
6
|
|
Net cash provided by operating activities
|
4,381
|
|
|
2,530
|
|
Cash flows used in investing activities:
|
|
|
|
|
|
Life insurance premiums paid
|
(150
|
)
|
|
(161
|
)
|
Purchases of property, equipment and improvements
|
(273
|
)
|
|
(486
|
)
|
Net cash used in investing activities
|
(423
|
)
|
|
(647
|
)
|
Cash flows used in financing activities:
|
|
|
|
|
|
Dividends paid
|
(1,289
|
)
|
|
(1,250
|
)
|
Proceeds from issuance of shares under equity compensation plans
|
106
|
|
|
72
|
|
Net cash used in financing activities
|
(1,183
|
)
|
|
(1,178
|
)
|
Effects of exchange rate on cash
|
123
|
|
|
(296
|
)
|
Net increase in cash and cash equivalents
|
2,898
|
|
|
409
|
|
Cash and cash equivalents, beginning of period
|
13,103
|
|
|
11,181
|
|
Cash and cash equivalents, end of period
|
$
|
16,001
|
|
|
$
|
11,590
|
|
Supplementary cash flow information:
|
|
|
|
|
|
Cash paid for income taxes
|
$
|
469
|
|
|
$
|
37
|
|
Cash paid for interest
|
$
|
75
|
|
|
$
|
85
|
|
See accompanying notes to unaudited consolidated financial statements.
CSP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2017 AND 2016
Organization and Business
CSP Inc. was founded in 1968 and is based in Lowell, Massachusetts. To meet the diverse requirements of its industrial, commercial and defense customers worldwide, CSP Inc. and its subsidiaries (collectively “we”, “us”, “our”,
“CSPI” or the “Company”) develop and market IT integration solutions and high-performance cluster computer systems. The Company operates in two segments, its High Performance Products (“HPP”) segment (formerly the “High Performance Products and Solutions” segment) and its Technology Solutions (“TS”) segment (formerly the "Information Technology Solutions" segment).
1. Basis of Presentation
The accompanying consolidated financial statements have been prepared by the Company, without audit, and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. All adjustments were of a normal recurring nature. Certain information and footnote disclosures normally included in the annual consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States, have been omitted.
Accordingly, the Company believes that although the disclosures are adequate to make the information presented not misleading, the unaudited consolidated financial statements should be read in conjunction with the footnotes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2016
.
Reclassifications
Certain reclassifications have been made to prior year financial statements to conform to current period financial statement presentation with no effect on previously reported financial positions, results of operations or cash flows. The reclassification was to break out deferred costs separately from inventory on the balance sheet.
2. Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States 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 financial statements and the reported amounts of revenues and expenses during the reporting period, including estimates and assumptions related to reserves for bad debt, reserves for inventory obsolescence, the impairment assessment of intangible assets, the calculation of estimated selling price and post-delivery support obligations used for revenue recognition, the calculation of liabilities related to deferred compensation and retirement plans and the calculation of income tax liabilities. Actual results may differ from those estimates under different assumptions or conditions.
3. Earnings Per Share of Common Stock
Basic net income per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income per common share reflects the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive stock options and is computed by dividing net income by the assumed weighted average number of common shares outstanding.
We are required to present earnings per share, or EPS, utilizing the two class method because we had outstanding, non-vested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, which are considered participating securities.
Basic and diluted earnings per share computations for the Company’s reported net income attributable to common stockholders are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
For the nine months ended
|
|
June 30, 2017
|
|
June 30, 2016
|
|
June 30, 2017
|
|
June 30, 2016
|
|
(Amounts in thousands except per share data)
|
Net income
|
$
|
695
|
|
|
$
|
1,257
|
|
|
$
|
1,081
|
|
|
$
|
2,043
|
|
Less: net income attributable to nonvested common stock
|
31
|
|
|
59
|
|
|
46
|
|
|
84
|
|
Net income attributable to common stockholders
|
$
|
664
|
|
|
$
|
1,198
|
|
|
$
|
1,035
|
|
|
$
|
1,959
|
|
|
|
|
|
|
|
|
|
Weighted average total shares outstanding – basic
|
3,921
|
|
|
3,797
|
|
|
3,876
|
|
|
3,754
|
|
Less: weighted average non-vested shares outstanding
|
177
|
|
|
179
|
|
|
163
|
|
|
155
|
|
Weighted average number of common shares outstanding – basic
|
3,744
|
|
|
3,618
|
|
|
3,713
|
|
|
3,599
|
|
Potential common shares from non-vested stock awards and the assumed exercise of stock options
|
75
|
|
|
125
|
|
|
98
|
|
|
134
|
|
Weighted average common shares outstanding – diluted
|
3,819
|
|
|
3,743
|
|
|
3,811
|
|
|
3,733
|
|
|
|
|
|
|
|
|
|
Net income per share – basic
|
$
|
0.18
|
|
|
$
|
0.33
|
|
|
$
|
0.28
|
|
|
$
|
0.54
|
|
Net income per share – diluted
|
$
|
0.17
|
|
|
$
|
0.32
|
|
|
$
|
0.27
|
|
|
$
|
0.52
|
|
All anti-dilutive securities, including certain stock options, are excluded from the diluted income per share computation. For the three and nine months ended June 30, 2017, there were no shares subject to stock options excluded from the diluted income per share calculation because their inclusion would have been anti-dilutive as their exercise price exceeded fair value. For the three and nine months ended June 30, 2016,
30,000
and
31,000
shares subject to stock options, respectively, were excluded from the diluted income per share calculation because their inclusion would have been anti-dilutive as their exercise price exceeded fair value.
4. Inventories
Inventories consist of the following:
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
September 30, 2016
|
|
(Amounts in thousands)
|
Raw materials
|
$
|
1,498
|
|
|
$
|
1,658
|
|
Work-in-process
|
748
|
|
|
814
|
|
Finished goods
|
6,890
|
|
|
3,108
|
|
Total
|
$
|
9,136
|
|
|
$
|
5,580
|
|
Finished goods includes inventory that has been shipped, but for which all revenue recognition criteria has not been met, of approximately
$0.4 million
and
$0.1 million
as of
June 30, 2017
and
September 30, 2016
, respectively.
Total inventory balances in the table above are shown net of reserves for obsolescence of approximately
$3.1 million
and
$3.0 million
as of
June 30, 2017
and
September 30, 2016
, respectively.
5.
Deferred Costs
Deferred costs represent costs of labor, third party maintenance and support contracts, and outside consultants related to transactions where the revenue recognition criteria has not been met.
6. Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
September 30, 2016
|
|
|
(Amounts in thousands)
|
Cumulative effect of foreign currency translation
|
|
$
|
(2,824
|
)
|
|
$
|
(2,807
|
)
|
Cumulative unrealized loss on pension liability
|
|
(9,124
|
)
|
|
(9,124
|
)
|
Accumulated other comprehensive loss
|
|
$
|
(11,948
|
)
|
|
$
|
(11,931
|
)
|
7.
Pension and Retirement Plans
The Company has defined benefit and defined contribution plans in the United Kingdom, Germany and the U.S. In the United Kingdom and Germany, the Company provides defined benefit pension plans and defined contribution plans for some of its employees. In the U.S., the Company provides benefits through supplemental retirement plans to certain former employees. The domestic supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. Domestically, the Company also provides for officer death benefits through post-retirement plans to certain officers. All of the Company’s defined benefit plans are closed to newly hired employees and have been since September 2009.
The Company funds its pension plans in amounts sufficient to meet the requirements set forth in applicable employee benefits laws and local tax laws. Liabilities for amounts in excess of these funding levels are accrued and reported in the consolidated balance sheets.
The Company's pension plan in the United Kingdom is the only plan with plan assets. The plan assets consist of an investment in a commingled fund which in turn comprises a diversified mix of assets including corporate equity securities, government securities and corporate debt securities.
The components of net periodic benefit costs related to the U.S. and international plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30,
|
|
2017
|
|
2016
|
|
Foreign
|
|
U.S.
|
|
Total
|
|
Foreign
|
|
U.S.
|
|
Total
|
|
(Amounts in thousands)
|
Pension:
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
9
|
|
Interest cost
|
97
|
|
|
11
|
|
|
108
|
|
|
146
|
|
|
11
|
|
|
157
|
|
Expected return on plan assets
|
(68
|
)
|
|
—
|
|
|
(68
|
)
|
|
(92
|
)
|
|
—
|
|
|
(92
|
)
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service gain
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of net gain (loss)
|
94
|
|
|
(1
|
)
|
|
93
|
|
|
44
|
|
|
(1
|
)
|
|
43
|
|
Net periodic benefit cost
|
$
|
133
|
|
|
$
|
10
|
|
|
$
|
143
|
|
|
$
|
107
|
|
|
$
|
10
|
|
|
$
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Retirement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
—
|
|
|
$
|
10
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
7
|
|
Interest cost
|
—
|
|
|
10
|
|
|
10
|
|
|
—
|
|
|
11
|
|
|
11
|
|
Amortization of net gain (loss)
|
—
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
(21
|
)
|
|
(21
|
)
|
Net periodic cost (benefit)
|
$
|
—
|
|
|
$
|
24
|
|
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended June 30,
|
|
2017
|
|
2016
|
|
Foreign
|
|
U.S.
|
|
Total
|
|
Foreign
|
|
U.S.
|
|
Total
|
|
(Amounts in thousands)
|
Pension:
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
29
|
|
|
$
|
—
|
|
|
$
|
29
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
27
|
|
Interest cost
|
285
|
|
|
32
|
|
|
317
|
|
|
442
|
|
|
32
|
|
|
474
|
|
Expected return on plan assets
|
(198
|
)
|
|
—
|
|
|
(198
|
)
|
|
(281
|
)
|
|
—
|
|
|
(281
|
)
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service gain
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Amortization of net gain (loss)
|
276
|
|
|
(3
|
)
|
|
273
|
|
|
134
|
|
|
(3
|
)
|
|
131
|
|
Net periodic benefit cost
|
$
|
392
|
|
|
$
|
29
|
|
|
$
|
421
|
|
|
$
|
322
|
|
|
$
|
29
|
|
|
$
|
351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Retirement:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
—
|
|
|
$
|
29
|
|
|
$
|
29
|
|
|
$
|
—
|
|
|
$
|
20
|
|
|
$
|
20
|
|
Interest cost
|
—
|
|
|
33
|
|
|
33
|
|
|
—
|
|
|
32
|
|
|
32
|
|
Amortization of net gain (loss)
|
—
|
|
|
11
|
|
|
11
|
|
|
—
|
|
|
(60
|
)
|
|
(60
|
)
|
Net periodic cost (benefit)
|
$
|
—
|
|
|
$
|
73
|
|
|
$
|
73
|
|
|
$
|
—
|
|
|
$
|
(8
|
)
|
|
$
|
(8
|
)
|
The fair value of the assets held by the U.K. pension plan by asset category are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Values as of
|
|
June 30, 2017
|
|
September 30, 2016
|
|
Fair Value Measurements Using Inputs Considered as
|
|
Fair Value Measurements Using Inputs Considered as
|
Asset Category
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
(Amounts in thousands)
|
Cash on deposit
|
$
|
71
|
|
|
$
|
71
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
86
|
|
|
$
|
86
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Pooled funds
|
7,817
|
|
|
—
|
|
|
7,817
|
|
|
—
|
|
|
7,543
|
|
|
—
|
|
|
7,543
|
|
|
—
|
|
Total plan assets
|
$
|
7,888
|
|
|
$
|
71
|
|
|
$
|
7,817
|
|
|
$
|
—
|
|
|
$
|
7,629
|
|
|
$
|
86
|
|
|
$
|
7,543
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Segment Information
The following tables presents certain operating segment information for the
three and nine months ended
June 30, 2017
and
June 30, 2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology Solutions Segment
|
|
|
For the three months ended June 30,
|
|
High Performance Products Segment
|
|
Germany
|
|
United
Kingdom
|
|
U.S.
|
|
Total
|
|
Consolidated
Total
|
|
|
(Amounts in thousands)
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
1,635
|
|
|
$
|
428
|
|
|
$
|
1,748
|
|
|
$
|
19,701
|
|
|
$
|
21,877
|
|
|
$
|
23,512
|
|
Service
|
|
1,680
|
|
|
3,675
|
|
|
252
|
|
|
1,413
|
|
|
5,340
|
|
|
7,020
|
|
Total sales
|
|
3,315
|
|
|
4,103
|
|
|
2,000
|
|
|
21,114
|
|
|
27,217
|
|
|
30,532
|
|
Income (loss) from operations
|
|
388
|
|
|
(282
|
)
|
|
58
|
|
|
896
|
|
|
672
|
|
|
1,060
|
|
Assets
|
|
17,277
|
|
|
16,509
|
|
|
2,078
|
|
|
22,243
|
|
|
40,830
|
|
|
58,107
|
|
Capital expenditures
|
|
32
|
|
|
17
|
|
|
—
|
|
|
46
|
|
|
63
|
|
|
95
|
|
Depreciation and amortization
|
|
58
|
|
|
46
|
|
|
2
|
|
|
63
|
|
|
111
|
|
|
169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
3,354
|
|
|
$
|
1,074
|
|
|
$
|
1,805
|
|
|
$
|
14,112
|
|
|
$
|
16,991
|
|
|
$
|
20,345
|
|
Service
|
|
2,248
|
|
|
2,892
|
|
|
325
|
|
|
1,102
|
|
|
4,319
|
|
|
6,567
|
|
Total sales
|
|
5,602
|
|
|
3,966
|
|
|
2,130
|
|
|
15,214
|
|
|
21,310
|
|
|
26,912
|
|
Income (loss) from operations
|
|
1,585
|
|
|
(139
|
)
|
|
(10
|
)
|
|
417
|
|
|
268
|
|
|
1,853
|
|
Assets
|
|
17,486
|
|
|
13,306
|
|
|
2,641
|
|
|
14,966
|
|
|
30,913
|
|
|
48,399
|
|
Capital expenditures
|
|
28
|
|
|
30
|
|
|
60
|
|
|
23
|
|
|
113
|
|
|
141
|
|
Depreciation and amortization
|
|
59
|
|
|
36
|
|
|
39
|
|
|
57
|
|
|
132
|
|
|
191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology Solutions Segment
|
|
|
For the nine months ended June 30,
|
|
High Performance Products Segment
|
|
Germany
|
|
United
Kingdom
|
|
U.S.
|
|
Total
|
|
Consolidated
Total
|
|
|
(Amounts in thousands)
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
5,155
|
|
|
$
|
4,827
|
|
|
$
|
4,611
|
|
|
$
|
42,241
|
|
|
$
|
51,679
|
|
|
$
|
56,834
|
|
Service
|
|
4,331
|
|
|
10,803
|
|
|
565
|
|
|
3,231
|
|
|
14,599
|
|
|
18,930
|
|
Total sales
|
|
9,486
|
|
|
15,630
|
|
|
5,176
|
|
|
45,472
|
|
|
66,278
|
|
|
75,764
|
|
Income (loss) from operations
|
|
802
|
|
|
(124
|
)
|
|
(183
|
)
|
|
1,085
|
|
|
778
|
|
|
1,580
|
|
Assets
|
|
17,277
|
|
|
16,509
|
|
|
2,078
|
|
|
22,243
|
|
|
40,830
|
|
|
58,107
|
|
Capital expenditures
|
|
90
|
|
|
104
|
|
|
—
|
|
|
79
|
|
|
183
|
|
|
273
|
|
Depreciation and amortization
|
|
168
|
|
|
137
|
|
|
7
|
|
|
186
|
|
|
330
|
|
|
498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Product
|
|
$
|
8,165
|
|
|
$
|
4,365
|
|
|
$
|
5,150
|
|
|
$
|
40,640
|
|
|
$
|
50,155
|
|
|
$
|
58,320
|
|
Service
|
|
3,712
|
|
|
11,691
|
|
|
777
|
|
|
3,227
|
|
|
15,695
|
|
|
19,407
|
|
Total sales
|
|
11,877
|
|
|
16,056
|
|
|
5,927
|
|
|
43,867
|
|
|
65,850
|
|
|
77,727
|
|
Income (loss) from operations
|
|
661
|
|
|
1,042
|
|
|
(58
|
)
|
|
1,429
|
|
|
2,413
|
|
|
3,074
|
|
Assets
|
|
17,486
|
|
|
13,306
|
|
|
2,641
|
|
|
14,966
|
|
|
30,913
|
|
|
48,399
|
|
Capital expenditures
|
|
193
|
|
|
149
|
|
|
93
|
|
|
51
|
|
|
293
|
|
|
486
|
|
Depreciation and amortization
|
|
176
|
|
|
118
|
|
|
77
|
|
|
171
|
|
|
366
|
|
|
542
|
|
Income (loss) from operations consists of sales less cost of sales, engineering and development expenses, and selling, general and administrative expenses but is not affected by either other income/expense or by income taxes expense/benefit. Non-operating charges/income consists principally of investment income and interest expense. All intercompany transactions have been eliminated.
The following table lists customers from which the Company derived revenues in excess of
10%
of total revenues for the
three and nine months ended
June 30, 2017
, and
2016
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30,
|
|
For the nine months ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
Customer Revenues
|
|
% of Total
Revenues
|
|
Customer Revenues
|
|
% of Total
Revenues
|
|
Customer Revenues
|
|
% of Total
Revenues
|
|
Customer Revenues
|
|
% of Total
Revenues
|
|
|
|
(dollars in millions)
|
Customer A
|
|
$
|
8.2
|
|
|
27
|
%
|
|
$
|
3.6
|
|
|
13
|
%
|
|
$
|
14.8
|
|
|
20
|
%
|
|
$
|
12.0
|
|
|
15
|
%
|
Customer B
|
|
$
|
2.3
|
|
|
7
|
%
|
|
$
|
3.1
|
|
|
11
|
%
|
|
$
|
8.3
|
|
|
11
|
%
|
|
$
|
10.7
|
|
|
14
|
%
|
Customer C
|
|
$
|
1.8
|
|
|
6
|
%
|
|
$
|
2.8
|
|
|
10
|
%
|
|
$
|
4.1
|
|
|
5
|
%
|
|
$
|
4.5
|
|
|
6
|
%
|
In addition, accounts receivable from Customer A totaled approximately
$3.7 million
, or
18%
, and approximately
$3.0 million
, or
15%
, of total consolidated accounts receivable as of June 30, 2017 and September 30, 2016, respectively. Accounts receivable from Customer B totaled approximately
$2.2 million
, or
10%
, and approximately
$2.5 million
, or
13%
, of total consolidated accounts receivable as of June 30, 2017 and September 30, 2016, respectively. Accounts receivable from Customer C totaled approximately
$0.5 million
, or
2%
, and approximately
$0.4 million
, or
2%
, of total consolidated accounts receivable as of June 30, 2017 and September 30, 2016, respectively. We believe that the Company is not exposed to any
significant credit risk with respect to the accounts receivable with these customers as of
June 30, 2017
. No other customers accounted for
10%
or more of total consolidated accounts receivable as of
June 30, 2017
or September 30, 2016.
9.
Dividends
On January 12, 2017, the Company's board of directors declared a cash dividend of
$0.11
per share which was paid on February 8, 2017 to shareholders of record as of January 27, 2017, the record date.
On February 23, 2017, the Company's board of directors declared a cash dividend of
$0.11
per share which was paid on March 17, 2017 to shareholders of record as of March 3, 2017, the record date.
On May 24, 2017, the Company's board of directors declared a cash dividend of
$0.11
per share which was paid on June 15, 2017 to shareholders of record as of June 1, 2017, the record date.
10. Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014 ‑09
, Revenue from Contracts with Customers
, which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This ASU clarifies the principles for recognizing revenue by, among other things, removing inconsistencies in revenue requirements, improving comparability of revenue recognition practices across entities and industries and providing improved disclosure requirements. In August 2015, the FASB approved a one year deferral of the effective date for this ASU to interim and annual reporting periods beginning after December 15, 2017; however, early adoption at the original effective date is still permitted. While the Company has begun its assessment of the new standard, it has not yet selected a transition method nor has it determined the effect the standard will have on its ongoing financial reporting.
In August 2014, the FASB issued ASU No. 2014-15
(Subtopic 205-40), Presentation of Financial Statements-Going Concern (Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern)
to provide guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The standard, which applies to annual and interim reporting periods for all entities, requires that management to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. The amendments in this Topic are effective for financial statements issued for annual periods beginning after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company does not expect the implementation of this ASU to have a material impact on our consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-11,
Inventory (Topic 330) Simplifying the Measurement of Inventory
, which requires entities to measure inventory at the lower of cost or net realizable value, except for inventory measured using last-in, first-out (LIFO) or the retail inventory method. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017 and requires prospective application, with early adoption permitted as of the beginning of an interim or annual reporting period. The Company has not yet assessed the potential impact of implementing this ASU on our consolidated financial statements.
In November 2015, the FASB issued ASU No. 2015-17,
Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes,
which require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The amendments in this Topic apply to all entities that present a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in this Topic. The amendments in this Topic are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The implementation of this guidance is not expected to have a material impact to the disclosures on our consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842),
to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This updated Topic 842 affects any entity that enters into a lease (as that term is defined in this Update), with some specified scope exemptions. The guidance in this Update supersedes Topic 840, Leases. The amendments in this Topic are effective for financial statements issued for annual periods beginning after December 15, 2018, and interim periods
within those annual periods. The Company has not yet assessed the potential impact of implementing this ASU on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-08
(Topic 606), Principal versus Agent Considerations (Reporting Revenue Gross versus Net)
to clarify the implementation guidance on principal versus agent considerations. The amendments in this update provides additional guidance on indicators to assist an entity in determining whether it controls a specified good or service before it is transferred to the customer and does not change the core principle of previously issued guidance. The amendments in this Topic are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within those annual periods. The Company does not expect the implementation of this ASU to have a material impact on our consolidated financial statements.
In March 2016, the FASB issued ASU No. 2016-09
(Topic 718), Compensation - Stock Compensation, Improvements to Employee Share-Based Payment Accounting
to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Additionally, the amendments eliminate the guidance in Topic 718 that was indefinitely deferred shortly after the issuance of FASB Statement No. 123 (revised 2004), Share-Based Payment. This should not result in a change in practice because the guidance that is being superseded was never effective. The amendments in this Topic are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company does not expect the implementation of this ASU to have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04
(Topic 350), Intangibles - Goodwill and Other (Simplifying the Test for Goodwill Impairment)
to simplify the subsequent measurement of goodwill. The amendments in this update provides for the elimination of Step 2, which required an entity to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) including those procedures that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. The amendments in this update define an impairment loss as the excess of the carrying amount of the intangible assets to the fair value of a reporting unit. The amendments in this Topic are effective for financial statements issued for annual periods beginning after December 15, 2019, and early adoption is permitted for interim or annual goodwill impairment tests performed on testing after January 1, 2017. The Company does not expect the implementation of this ASU to have a material impact on our consolidated financial statements.
In March 2017, the FASB issued ASU No. 2017-07
(Topic 715), Compensation - Retirement Benefits (Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost)
to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost by requiring employers disaggregate the service cost component from the other components of net benefit cost.
The amendments in this Topic are effective for financial statements issued for annual periods beginning after December 15, 2017, and early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The Company does not expect the implementation of this ASU to have a material impact on our consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09
(Topic 718), Compensation - Stock Compensation (Scope of Modification Accounting)
to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718 in order to reduce both (1) the diversity in practice and (2) the cost and complexity of applying the guidance in Topic 718. The amendments in this Topic are effective for financial statements issued for annual periods beginning after December 15, 2017, and early adoption is permitted as of the beginning of an annual period for which financial statements (interim or annual) have not been issued or made available for issuance. The Company does not expect the implementation of this ASU to have a material impact on our consolidated financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The discussion below contains certain forward-looking statements including, but not limited to, among others, statements concerning future revenues and future business plans. Forward-looking statements include statements in which we use words such as “expect”, “believe”, “anticipate”, “intend”, “project”, “estimate”, “should”, “could”, “may”, “plan”, “potential”, “predict”, “project”, “will”, “would” and similar expressions. Although we believe the expectations reflected in such forward-looking statements are based on reasonable assumptions, the forward-looking statements are subject to significant risks and uncertainties, and thus we cannot assure you that these expectations will prove to have been correct, and actual results may vary from those contained in such forward-looking statements. We discuss many of these risks and uncertainties in Item 1A under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016. Factors that may cause such variances include, but are not limited to, our dependence on a small number of customers for a significant portion of our revenue, our high dependence on contracts with the U.S. federal government, our reliance in certain circumstances on single sources for supply of key product components, and intense competition in the market segments in which we operate. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this document. Except as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise. This management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our financial statements and the related notes included elsewhere in this filing and in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate our estimates, including those related to uncollectible receivables, inventory valuation, impairment assessment of intangibles, income taxes, deferred compensation and retirement plans, as well as estimated selling prices used for revenue recognition and contingencies. We base our estimates on historical performance and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A description of our critical accounting policies is contained in our Annual Report on Form 10-K for the fiscal year ended
September 30, 2016
in the “Critical Accounting Policies” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
Overview of the
three
months ended
June 30, 2017
Our revenues
increase
d by approximately
$3.6 million
, or
13%
, to
$30.5 million
for the
three
months ended
June 30, 2017
as compared to
$26.9 million
for the
three
months ended
June 30, 2016
. The
increase
in revenue is the result of an
increase
of
$5.9 million
in our TS segment, partially offset by a
$2.3 million
decrease
in our HPP segment. Our gross margin percentage
decrease
d overall, from
27%
of revenues for the
three
months ended
June 30, 2016
, to
22%
for the
three
months ended
June 30, 2017
due in part to the shift in revenue to the TS segment, which operates at lower gross margins. Operating income
decrease
d by
$0.8 million
to
$1.1 million
for the
three
month period ended
June 30, 2017
as compared to
$1.9 million
for the three month period ended
June 30, 2016
as a result of a
$404 thousand
decrease in gross profit combined with an increase of
$389 thousand
of higher operating expenses primarily related to higher operating costs in our German division of the TS segment, partially offset by lower engineering costs in the HPP segment
.
The following table details our results of operations in dollars and as a percentage of sales for the
three
months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
%
of sales
|
|
June 30, 2016
|
|
%
of sales
|
|
|
(Dollar amounts in thousands)
|
Total sales
|
|
$
|
30,532
|
|
|
100
|
%
|
|
$
|
26,912
|
|
|
100
|
%
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
23,731
|
|
|
78
|
%
|
|
19,707
|
|
|
73
|
%
|
Engineering and development
|
|
578
|
|
|
2
|
%
|
|
779
|
|
|
3
|
%
|
Selling, general and administrative
|
|
5,163
|
|
|
17
|
%
|
|
4,573
|
|
|
17
|
%
|
Total costs and expenses
|
|
29,472
|
|
|
97
|
%
|
|
25,059
|
|
|
93
|
%
|
Operating income
|
|
1,060
|
|
|
3
|
%
|
|
1,853
|
|
|
7
|
%
|
Other expense
|
|
(27
|
)
|
|
—
|
%
|
|
(76
|
)
|
|
—
|
%
|
Income before income taxes
|
|
1,033
|
|
|
3
|
%
|
|
1,777
|
|
|
7
|
%
|
Income tax expense
|
|
338
|
|
|
1
|
%
|
|
520
|
|
|
2
|
%
|
Net income
|
|
$
|
695
|
|
|
2
|
%
|
|
$
|
1,257
|
|
|
5
|
%
|
Revenues
Our revenues
increase
d by approximately
$3.6 million
to
$30.5 million
for the
three
months ended
June 30, 2017
as compared to
$26.9 million
of revenues for the three months ended
June 30, 2016
. The TS segment revenues
increase
of
$5.9 million
was partially offset by a
$2.3 million
decrease
in our HPP segment.
HPP segment revenue change was as follows for the
three
months ended
June 30, 2017
and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease
|
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
|
(Dollar amounts in thousands)
|
|
|
Products
|
|
$
|
1,635
|
|
|
$
|
3,354
|
|
|
$
|
(1,719
|
)
|
|
(51
|
)%
|
Services
|
|
1,680
|
|
|
2,248
|
|
|
(568
|
)
|
|
(25
|
)%
|
Total
|
|
$
|
3,315
|
|
|
$
|
5,602
|
|
|
$
|
(2,287
|
)
|
|
(41
|
)%
|
The decrease in HPP product revenues is primarily attributed to lower Multicomputer product shipments and parts sales for the period. The decrease in HPP services revenues is primarily attributed to a decrease in royalties on high-speed processing boards related to the E2D program shipped for the three months ended
June 30, 2017
as compared to the three months ended
June 30, 2016
.
TS segment revenue change was as follows for the
three
months ended June 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
|
(Dollar amounts in thousands)
|
|
|
Products
|
|
$
|
21,877
|
|
|
$
|
16,991
|
|
|
$
|
4,886
|
|
|
29
|
%
|
Services
|
|
5,340
|
|
|
4,319
|
|
|
1,021
|
|
|
24
|
%
|
Total
|
|
$
|
27,217
|
|
|
$
|
21,310
|
|
|
$
|
5,907
|
|
|
28
|
%
|
The
$5.9 million
increase in TS segment total revenues during the period was primarily the result of an increase in product and service revenues of
$5.9 million
in our U.S. division. Overall product revenues increased by
$4.9 million
as a result of a
$5.6 million
increase in our U.S. division attributed to the timing of orders from two major customers, partially offset by a
$0.6 million
and a
$0.1 million
decrease in our Germany and U.K. divisions, respectively. The $
1.0 million
increase in TS segment service revenues during the period was primarily the result of increases of
$0.8 million
and
$0.3 million
in service revenues of our German and U.S. divisions, respectively.
Our revenues by geographic area based on the customer location to which the products were shipped or services rendered were as follows for the
three
months ended
June 30, 2017
and
June 30, 2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
2017
|
|
%
|
|
2016
|
|
%
|
|
$
|
|
%
|
|
|
(Dollar amounts in thousands)
|
Americas
|
|
$
|
21,663
|
|
|
71
|
%
|
|
$
|
19,689
|
|
|
73
|
%
|
|
$
|
1,974
|
|
|
10
|
%
|
Europe
|
|
7,839
|
|
|
26
|
%
|
|
6,464
|
|
|
24
|
%
|
|
1,375
|
|
|
21
|
%
|
Asia
|
|
1,030
|
|
|
3
|
%
|
|
759
|
|
|
3
|
%
|
|
271
|
|
|
36
|
%
|
Totals
|
|
$
|
30,532
|
|
|
100
|
%
|
|
$
|
26,912
|
|
|
100
|
%
|
|
$
|
3,620
|
|
|
13
|
%
|
The
$3.6 million
increase in revenues is primarily attributed to our TS segment. The
$2.0
million increase in revenue from the Americas is primarily the result of increased sales to a major customer of the U.S. division and the
$1.4
million increase in Europe is primarily the result of increased sales to a U.S division customer.
Gross Margins
Our gross margin ("GM")
decrease
d by
$0.4 million
to
$6.8 million
for the three months ended
June 30, 2017
as compared to a gross margin of
$7.2 million
for the
three
months ended
June 30, 2016
. The GM as a percentage of revenue decreased from 27% for the three months ended June 30, 2016 to 22% for the three months ended June 30, 2017 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Increase (decrease)
|
|
|
GM$
|
GM%
|
|
GM$
|
GM%
|
|
GM$
|
|
GM%
|
|
|
(Dollar amounts in thousands)
|
HPP
|
|
$
|
2,411
|
|
73
|
%
|
|
$
|
3,885
|
|
69
|
%
|
|
$
|
(1,474
|
)
|
|
4
|
%
|
TS
|
|
4,390
|
|
16
|
%
|
|
3,320
|
|
16
|
%
|
|
1,070
|
|
|
—
|
%
|
Total
|
|
$
|
6,801
|
|
22
|
%
|
|
$
|
7,205
|
|
27
|
%
|
|
$
|
(404
|
)
|
|
(5
|
)%
|
The impact of product mix within our HPP segment on gross margin for the period was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Decrease
|
|
|
GM$
|
GM%
|
|
GM$
|
GM%
|
|
GM$
|
|
GM%
|
|
|
(Dollar amounts in thousands)
|
Products
|
|
$
|
749
|
|
46
|
%
|
|
$
|
1,650
|
|
49
|
%
|
|
$
|
(901
|
)
|
|
(3
|
)%
|
Services
|
|
1,662
|
|
99
|
%
|
|
2,235
|
|
99
|
%
|
|
(573
|
)
|
|
—
|
%
|
Total
|
|
$
|
2,411
|
|
73
|
%
|
|
$
|
3,885
|
|
69
|
%
|
|
$
|
(1,474
|
)
|
|
4
|
%
|
The overall HPP segment gross margin as a percentage of sales increased to
73%
for the period . The
4%
increase in gross margin as a percentage of sales in the HPP segment was primarily attributed to a favorable mix of high margin Multicomputer royalty revenues and less inventory write-offs during the period.
The impact of product mix within our TS segment on gross margin for the
three
months ended
June 30, 2017
and 2016 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Increase
|
|
|
GM$
|
GM%
|
|
GM$
|
GM%
|
|
GM$
|
|
GM%
|
|
|
(Dollar amounts in thousands)
|
Products
|
|
$
|
2,829
|
|
13
|
%
|
|
$
|
2,235
|
|
13
|
%
|
|
$
|
594
|
|
|
—
|
%
|
Services
|
|
1,561
|
|
29
|
%
|
|
1,085
|
|
25
|
%
|
|
476
|
|
|
4
|
%
|
Total
|
|
$
|
4,390
|
|
16
|
%
|
|
$
|
3,320
|
|
16
|
%
|
|
$
|
1,070
|
|
|
—
|
%
|
The overall TS segment gross margin as a percentage of sales was unchanged at
16%
for the period. The
4%
increase in service margins as a percentage of TS segment revenues is primarily attributed to having improved margins in our German and U.S. divisions.
Operating Expenses
Engineering and Development Expenses
The engineering and development expenses incurred by our HPP segment were
$0.6 million
and
$0.8 million
for the
three
months ended
June 30, 2017
and 2016, respectively. The current period expenses are primarily for Myricom product engineering expenses incurred in connection with the development of new Myricom security products. The lower engineering and development expenses for the three month period ended June 30, 2017 as compared to the three month period ended June 30, 2016 is primarily attributed to a reduction in outside consulting expenditures.
Selling, General and Administrative Expenses
The following table details our selling, general and administrative (“SG&A”) expense by operating segment for the
three
months ended
June 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30,
|
|
|
|
|
|
2017
|
|
% of
Total
|
|
2016
|
|
% of
Total
|
|
$ Increase (decrease)
|
|
% Increase (decrease)
|
|
(Dollar amounts in thousands)
|
By Operating Segment:
|
|
|
|
|
|
|
|
|
|
|
|
HPP segment
|
$
|
1,445
|
|
|
28
|
%
|
|
$
|
1,521
|
|
|
33
|
%
|
|
$
|
(76
|
)
|
|
(5
|
)%
|
TS segment
|
3,718
|
|
|
72
|
%
|
|
3,052
|
|
|
67
|
%
|
|
666
|
|
|
22
|
%
|
Total
|
$
|
5,163
|
|
|
100
|
%
|
|
$
|
4,573
|
|
|
100
|
%
|
|
$
|
590
|
|
|
13
|
%
|
SG&A expenses increased by
$0.6 million
, or
13%
, for the three months ended
June 30, 2017
as compared to the three months ended
June 30, 2016
. The decrease in HPP segment SG&A expenses is primarily attributed to decreases in variable compensation costs. The increase in the TS segment SG&A expenses is primarily attributed to increases in variable compensation in our U.S. operations combined with increases in recruiting and severance costs in our German operations.
Other Income/Expenses
The following table details our other income (expense) for the
three
months ended
June 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended,
|
|
|
|
June 30, 2017
|
|
June 30, 2016
|
|
Increase
|
|
(Amounts in thousands)
|
Interest expense
|
$
|
(18
|
)
|
|
$
|
(22
|
)
|
|
$
|
4
|
|
Interest income
|
2
|
|
|
1
|
|
|
1
|
|
Foreign exchange loss
|
(14
|
)
|
|
(55
|
)
|
|
41
|
|
Other income, net
|
3
|
|
|
—
|
|
|
3
|
|
Total other expense, net
|
$
|
(27
|
)
|
|
$
|
(76
|
)
|
|
$
|
49
|
|
The decrease to other expenses for the three months ended June 30, 2017 as compared to the three months ended June 30, 2016 was primarily driven by the decrease of approximately
$41 thousand
in the foreign exchange loss on foreign currency holdings in the current period as compared to the prior year period.
Income Taxes
For the three months ended June 30, 2017, the Company recognized an income tax expense of approximately $338 thousand. The U.S. tax expense is 100% of the income tax expense with a small benefit from the loss in Germany. The Company's effective tax rate was 32.7% for the quarter ended June 30, 2017 as compared to an effective tax rate of 29.3% for the quarter ended June 30, 2016.
Overview of the
nine
months ended
June 30, 2017
Our revenues
decrease
d by approximately
$2.0 million
, or
3%
, to
$75.8 million
for the
nine
months ended
June 30, 2017
as compared to
$77.7 million
for the
nine
months ended
June 30, 2016
. Revenues decreased by
$2.4 million
in our HPP segment, and increased by
$0.4 million
in our TS segment. We recognized approximately $3.7 million of royalties on high-speed processing boards during the
nine
months ended
June 30, 2017
as compared $3.2 million of royalty revenues for the
nine
month period ended
June 30, 2016
. Our gross margin percentage
decrease
d overall, from
24%
of revenues for the
nine
months ended
June 30, 2016
, to
22%
for the
nine
months ended
June 30, 2017
. Our operating
income
decreased by approximately
$1.5 million
to
$1.6 million
for the
nine
month period ended
June 30, 2017
as compared to
$3.1 million
for the
nine
months ended
June 30, 2016
primarily as a result of a lower gross profit.
The following table details our results of operations in dollars and as a percentage of sales for the
nine
months ended:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
%
of sales
|
|
June 30, 2016
|
|
%
of sales
|
|
|
(Dollar amounts in thousands)
|
Sales
|
|
$
|
75,764
|
|
|
100
|
%
|
|
$
|
77,727
|
|
|
100
|
%
|
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
58,816
|
|
|
78
|
%
|
|
58,999
|
|
|
76
|
%
|
Engineering and development
|
|
1,747
|
|
|
2
|
%
|
|
2,368
|
|
|
3
|
%
|
Selling, general and administrative
|
|
13,621
|
|
|
18
|
%
|
|
13,286
|
|
|
17
|
%
|
Total costs and expenses
|
|
74,184
|
|
|
98
|
%
|
|
74,653
|
|
|
96
|
%
|
Operating income
|
|
1,580
|
|
|
2
|
%
|
|
3,074
|
|
|
4
|
%
|
Other income (expense)
|
|
34
|
|
|
—
|
%
|
|
(165
|
)
|
|
—
|
%
|
Income before income taxes
|
|
1,614
|
|
|
2
|
%
|
|
2,909
|
|
|
4
|
%
|
Income tax expense
|
|
533
|
|
|
1
|
%
|
|
866
|
|
|
1
|
%
|
Net income
|
|
$
|
1,081
|
|
|
1
|
%
|
|
$
|
2,043
|
|
|
3
|
%
|
Revenues
Our revenues
decrease
d by
$2.0 million
to
$75.8 million
for the
nine
months ended
June 30, 2017
as compared
$77.7 million
of revenues for the
nine
months ended
June 30, 2016
.
HPP segment revenue change was as follows for the nine months ended June 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
|
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
|
(Dollar amounts in thousands)
|
|
|
Products
|
|
$
|
5,155
|
|
|
$
|
8,165
|
|
|
$
|
(3,010
|
)
|
|
(37
|
)%
|
Services
|
|
4,331
|
|
|
3,712
|
|
|
619
|
|
|
17
|
%
|
Total
|
|
$
|
9,486
|
|
|
$
|
11,877
|
|
|
$
|
(2,391
|
)
|
|
(20
|
)%
|
The decrease in HPP product revenues for the period was primarily the result of a $2.2 million decrease in Myricom product line sales, partially due to a large shipment in the prior year and a $0.8 million decrease in Multicomputer parts shipments. The increase in HPP services revenues for the period was primarily the result of recognizing approximately $3.7 million of royalty revenues on high-speed processing boards related to the E2D program during the
nine
months ended
June 30, 2017
as compared to $3.2 million of royalty revenues for the
nine
month period ended
June 30, 2016
. We expect to recognize royalty revenue related to the equivalent number of high-speed processing boards used in two aircraft during the fourth quarter of fiscal year 2017, which ends September 30, 2017.
TS segment revenue change was as follows for the
nine
months ended
June 30, 2017
and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease)
|
|
|
2017
|
|
2016
|
|
$
|
|
%
|
|
|
(Dollar amounts in thousands)
|
|
|
Products
|
|
$
|
51,679
|
|
|
$
|
50,155
|
|
|
$
|
1,524
|
|
|
3
|
%
|
Services
|
|
14,599
|
|
|
15,695
|
|
|
(1,096
|
)
|
|
(7
|
)%
|
Total
|
|
$
|
66,278
|
|
|
$
|
65,850
|
|
|
$
|
428
|
|
|
1
|
%
|
The increase in TS segment revenues for the period was the result of an increase of
$1.6 million
of product revenues in our U.S. division, partially offset by decreases of
$0.4 million
and
$0.8 million
in our German and U.K. divisions, respectively. The decreases in our Germany and U.K. divisions were due to decreased service revenues of
$0.9 million
and
$0.2 million
in our German and U.K. divisions, respectively, combined with decreased product revenues in the U.K. division of
$0.5 million
,
offset by increased product revenues in Germany of
$0.5 million
. Revenue attributed to orders from 2 major customers in the U.S. and Germany declined by $1.8 million and $1.6 million, respectively.
Our revenues by geographic area based on the customer location to which the products were shipped or services rendered were as follows for the
nine
months ended
June 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine Months Ended June 30,
|
|
Increase (decrease)
|
|
|
2017
|
|
%
|
|
2016
|
|
%
|
|
$
|
|
%
|
|
|
(Dollars in thousands)
|
Americas
|
|
$
|
50,385
|
|
|
66
|
%
|
|
$
|
52,869
|
|
|
68
|
%
|
|
$
|
(2,484
|
)
|
|
(5
|
)%
|
Europe
|
|
23,247
|
|
|
31
|
%
|
|
21,969
|
|
|
28
|
%
|
|
1,278
|
|
|
6
|
%
|
Asia
|
|
2,132
|
|
|
3
|
%
|
|
2,889
|
|
|
4
|
%
|
|
(757
|
)
|
|
(26
|
)%
|
Totals
|
|
$
|
75,764
|
|
|
100
|
%
|
|
$
|
77,727
|
|
|
100
|
%
|
|
$
|
(1,963
|
)
|
|
(3
|
)%
|
The
$2.0 million
decrease in revenues is primarily attributed to our HPP segment. The
$2.5 million
decrease in revenue to the Americas is primarily the result of the timing of sales to two major customers by our U.S. division, and the
$0.8 million
decrease in Asia is primarily the result of decreased product sales by both our U.K division of our TS segment and our HPP segment. The
$1.3 million
increase in Europe revenue is primarily due to increased sales by our U.S. division of our TS segment.
Gross Margins
Our gross margin decreased by
$1.8 million
, or
2%
of revenues, to
$16.9 million
for the
nine
months ended
June 30, 2017
as compared to a gross margin of
$18.7 million
for the for the
nine
months ended
June 30, 2016
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Decrease
|
|
|
(Dollars in thousands)
|
|
|
GM$
|
GM%
|
|
GM$
|
GM%
|
|
GM$
|
|
GM%
|
HPP
|
|
$
|
6,343
|
|
67
|
%
|
|
$
|
7,376
|
|
62
|
%
|
|
$
|
(1,033
|
)
|
|
5
|
%
|
TS
|
|
10,605
|
|
16
|
%
|
|
11,352
|
|
17
|
%
|
|
(747
|
)
|
|
(1
|
)%
|
Total
|
|
$
|
16,948
|
|
22
|
%
|
|
$
|
18,728
|
|
24
|
%
|
|
$
|
(1,780
|
)
|
|
(2
|
)%
|
The impact of product mix within our HPP segment on gross margin was as follows for the
nine
months ended
June 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Increase (decrease)
|
|
|
(Dollars in thousands)
|
|
|
GM$
|
GM%
|
|
GM$
|
GM%
|
|
GM$
|
|
GM%
|
Products
|
|
$
|
2,143
|
|
42
|
%
|
|
$
|
3,753
|
|
46
|
%
|
|
$
|
(1,610
|
)
|
|
(4
|
)%
|
Services
|
|
4,200
|
|
97
|
%
|
|
3,623
|
|
98
|
%
|
|
577
|
|
|
(1
|
)%
|
Total
|
|
$
|
6,343
|
|
67
|
%
|
|
$
|
7,376
|
|
62
|
%
|
|
$
|
(1,033
|
)
|
|
5
|
%
|
The overall HPP segment gross margin as a percentage of sales increased to
67%
for the period . The
5%
increase in gross margin as a percentage of sales in the HPP segment was primarily attributed to an increase in Multicomputer high margin royalty revenues and a reduction in inventory write-offs during the comparative period.
The impact of product mix within our TS segment on gross margin was as follows for the
nine
months ended
June 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
Decrease
|
|
|
GM$
|
GM%
|
|
GM$
|
GM%
|
|
GM$
|
|
GM%
|
|
|
(Dollar amounts in thousands)
|
Products
|
|
$
|
6,654
|
|
13
|
%
|
|
$
|
6,817
|
|
14
|
%
|
|
$
|
(163
|
)
|
|
(1
|
)%
|
Services
|
|
3,951
|
|
27
|
%
|
|
4,535
|
|
29
|
%
|
|
(584
|
)
|
|
(2
|
)%
|
Total
|
|
$
|
10,605
|
|
16
|
%
|
|
$
|
11,352
|
|
17
|
%
|
|
$
|
(747
|
)
|
|
(1
|
)%
|
The gross margin as a percentage of sales for TS segment product revenues decreased by
1%
for the period as a result of a decrease in higher gross margin sales for our U.S. division and an increase of relatively lower gross margin product sales for our German division. The
2%
decrease of gross margin as a percentage of services sales is the result changes in sales mix for our German and U.S. divisions.
Engineering and Development Expenses
Engineering and development expenses
decrease
d by
$0.6 million
to
$1.7 million
for the
nine
months ended
June 30, 2017
as compared to
$2.4 million
for the
nine
months ended
June 30, 2016
. The current year expenses are primarily for Myricom engineering expenses incurred in connection with the development of new Myricom security products. The reduction in engineering and development expenses for the period as compared to the prior year period is primarily attributed to a reduction in outside consulting expenditures partially offset by increases in personnel costs.
Selling, General and Administrative Expenses
The following table details our SG&A expense by operating segment for the nine months ended June 30, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine Months Ended June 30,
|
|
|
|
|
|
2017
|
|
% of
Total
|
|
2016
|
|
% of
Total
|
|
$ Increase (decrease)
|
|
% Increase (decrease)
|
|
(Dollar amounts in thousands)
|
By Operating Segment:
|
|
|
|
|
|
|
|
|
|
|
|
HPP segment
|
$
|
3,794
|
|
|
28
|
%
|
|
$
|
4,347
|
|
|
33
|
%
|
|
$
|
(553
|
)
|
|
(13
|
)%
|
TS segment
|
9,827
|
|
|
72
|
%
|
|
8,939
|
|
|
67
|
%
|
|
888
|
|
|
10
|
%
|
Total
|
$
|
13,621
|
|
|
100
|
%
|
|
$
|
13,286
|
|
|
100
|
%
|
|
$
|
335
|
|
|
3
|
%
|
SG&A expenses increased by
$0.3 million
, or
3%
, for the nine months ended June 30, 2017 as compared to the nine months ended June 30, 2016. The
$0.6 million
, or
13%
,
decrease
in HPP segment expenses is primarily attributed to decreases in variable compensation costs, and personnel costs. The
$0.9 million
, or
10%
,
increase
in TS segment expenses is primarily attributed to higher variable compensation costs, recruiting, severance and audit costs.
Other Income/Expenses
The following table details our other income (expense) for the
nine
months ended
June 30, 2017
and
2016
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended,
|
|
|
|
June 30, 2017
|
|
June 30, 2016
|
|
Increase (decrease)
|
|
(Amounts in thousands)
|
Interest expense
|
$
|
(55
|
)
|
|
$
|
(65
|
)
|
|
$
|
10
|
|
Interest income
|
8
|
|
|
4
|
|
|
4
|
|
Foreign exchange gain (loss)
|
68
|
|
|
(118
|
)
|
|
186
|
|
Other income, net
|
13
|
|
|
14
|
|
|
(1
|
)
|
Total other income (expense), net
|
$
|
34
|
|
|
$
|
(165
|
)
|
|
$
|
199
|
|
The increase to other income (expenses) for the nine months ended June 30, 2017 as compared to the nine months ended June 30, 2016 was primarily driven by the increase of approximately
$0.2 million
in the foreign exchange gain (loss) on foreign currency holdings in the current period as compared to the prior year period.
Income Taxes
For the nine months ended June 30, 2017, the Company recognized an income tax expense of $533 thousand, which is primarily related to profits of $1.9 million in the U.S. Our German and U.K. divisions experienced losses of $141 thousand and $91 thousand, respectively, for the nine months ended June 30, 2017. The Company's effective tax rate was 33.0% for the nine months ended June 30, 2017, as compared to 29.8% for the nine months ended June 30, 2016.
Liquidity and Capital Resources
Our primary source of liquidity is our cash and cash equivalents, which increased by
$2.9 million
to
$16.0 million
as of
June 30, 2017
from
$13.1 million
as of
September 30, 2016
.
Significant sources of cash for the
nine
months ended
June 30, 2017
included an increase in accounts payable and accrued expenses of
$7.5 million
, an increase in deferred revenues of
$1.3 million
, net income of
$1.1 million
and a decrease in life insurance receivable of $
0.4 million
.
Significant uses of cash for the
nine
months ended
June 30, 2017
included an increase in inventories of
$3.7 million
, an increase in accounts receivable of
$1.5 million
, an increase in deferred costs of
$1.5 million
, and dividends paid of
$1.3 million
.
Cash held by our foreign subsidiaries located in Germany and the United Kingdom totaled approximately $6.0 million as of
June 30, 2017
as compared to $6.4 million as of
September 30, 2016
. This cash is included in our total cash and cash equivalents reported above. We consider this cash to be permanently reinvested into these foreign locations.
If cash generated from operations is insufficient to satisfy working capital requirements, we may need to access funds through lines of credit, the equity markets, or other means. There is no assurance that we will be able to raise any such capital on terms acceptable to us, on a timely basis or at all. If we are unable to secure additional financing, we may not be able to complete the development or enhancement of our products, take advantage of future opportunities, respond to competition or continue to effectively operate our business.
Based on our current plans and business conditions, management believes that the Company’s available cash and cash equivalents, the cash generated from operations and availability on our lines of credit will be sufficient to provide for the Company’s working capital and capital expenditure requirements for the foreseeable future.