Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Apr. 03, 2015 | 8-May-15 | |
Document and Entity Information: | ||
Entity Registrant Name | EVANS & SUTHERLAND COMPUTER CORPORATION | |
Document Type | 10-Q | |
Document Period End Date | 3-Apr-15 | |
Amendment Flag | FALSE | |
Entity Central Index Key | 276283 | |
Current Fiscal Year End Date | -19 | |
Entity Common Stock, Shares Outstanding | 11,177,316 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Document Fiscal Year Focus | 2015 | |
Document Fiscal Period Focus | Q1 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Apr. 03, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Current assets: | ||
Cash and cash equivalents | $4,310 | $7,038 |
Restricted cash | 732 | 711 |
Accounts receivable, net | 6,203 | 4,586 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 2,158 | 1,699 |
Inventories, net | 5,838 | 4,163 |
Prepaid expenses and deposits | 983 | 635 |
Total current assets | 20,224 | 18,832 |
Property and equipment, net | 4,756 | 4,803 |
Goodwill | 635 | 635 |
Intangible assets, net | 58 | 68 |
Other assets | 1,069 | 1,118 |
Total assets | 26,742 | 25,456 |
Current liabilities: | ||
Accounts payable | 910 | 710 |
Accrued liabilities | 1,297 | 1,142 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 5,458 | 5,176 |
Customer deposits | 4,539 | 4,081 |
Current portion of retirement obligations | 529 | 535 |
Current portion of long-term debt | 191 | 2,362 |
Total current liabilities | 12,924 | 14,006 |
Pension and retirement obligations, net of current portion | 40,135 | 40,076 |
Long-term debt, net of current portion | 2,109 | |
Deferred rent obligation | 1,970 | 2,077 |
Total liabilities | 57,138 | 56,159 |
Commitments and contingencies | ||
Stockholders' deficit: | ||
Preferred stock, no par value: 10,000,000 shares authorized; no shares outstanding | ||
Common stock, $0.20 par value: 30,000,000 shares authorized; 11,441,666 shares issued | 2,288 | 2,288 |
Additional paid-in-capital | 54,509 | 54,500 |
Common stock in treasury, at cost, 352,467 shares | -4,709 | -4,709 |
Accumulated deficit | -49,054 | -49,157 |
Accumulated other comprehensive loss | -33,430 | -33,625 |
Total stockholders' deficit | -30,396 | -30,703 |
Total liabilities and stockholders' deficit | $26,742 | $25,456 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Apr. 03, 2015 | Dec. 31, 2014 |
Statement of Financial Position | ||
Preferred Stock, par value | ||
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred Stock, shares outstanding | ||
Common Stock, par value | $0.20 | $0.20 |
Common Stock, shares authorized | 30,000,000 | 30,000,000 |
Common Stock, shares issued | 11,441,666 | 11,441,666 |
Common stock in treasury, shares | 352,467 | 352,467 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) | 3 Months Ended | |
In Thousands, except Per Share data, unless otherwise specified | Apr. 03, 2015 | Mar. 28, 2014 |
Statement of Comprehensive Income | ||
Sales | $8,002 | $6,672 |
Cost of sales | -5,011 | -4,528 |
Gross profit | 2,991 | 2,144 |
Operating expenses: | ||
Selling, general and administrative | -1,842 | -1,748 |
Research and development | -595 | -560 |
Pension | -375 | -209 |
Total operating expenses | -2,812 | -2,517 |
Operating income (loss) | 179 | -373 |
Other expense, net | -25 | -169 |
Income (loss) before income tax provision | 154 | -542 |
Income tax provision | -51 | -9 |
Net income (loss) | 103 | -551 |
Net income (loss) per common share - basic and diluted | $0.01 | ($0.05) |
Weighted average common shares outstanding - basic | 11,089 | 11,089 |
Weighted average common shares outstanding - diluted | 11,477 | 11,089 |
Comprehensive income (loss), net of tax: | ||
Net income (loss) | 103 | -551 |
Other comprehensive income: | ||
Reclassification of pension expense to net income (loss) | 195 | 102 |
Other comprehensive income | 195 | 102 |
Total comprehensive income (loss) | $298 | ($449) |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Apr. 03, 2015 | Mar. 28, 2014 |
Cash flows from operating activities: | ||
Net income (loss) | $103 | ($551) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 71 | 128 |
Amortization of deferred pension costs | 195 | 102 |
Provision for excess and obsolete inventory | 10 | 40 |
Other | 19 | 101 |
Decrease (increase) in restricted cash | -21 | 19 |
Decrease (increase) in accounts receivable | -1,627 | 368 |
Decrease (increase) in inventories | -1,685 | 14 |
Decrease (increase) in costs and estimated earnings in excess of billings on uncompleted contracts, net | -177 | 1,986 |
Decrease (increase) in prepaid expenses and other assets | -299 | 59 |
Increase (decrease) in accounts payable | 200 | -655 |
Increase (decrease) in accrued liabilities | 155 | -14 |
Increase (decrease) in accrued pension and retirement liabilities | 53 | -14 |
Increase (decrease) in customer deposits | 458 | -151 |
Increase (decrease) in deferred rent obligation | -107 | 4 |
Net cash provided by (used in) operating activities | -2,652 | 1,436 |
Cash flows from investing activities: | ||
Purchases of property and equipment | -14 | -61 |
Proceeds from sale of marketable securities | 110 | |
Net cash provided by (used in) investing activities | -14 | 49 |
Cash flows from financing activities: | ||
Principal payments on long-term debt | -62 | -43 |
Net cash used in financing activities | -62 | -43 |
Net increase (decrease) in cash and cash equivalents | -2,728 | 1,442 |
Cash and cash equivalents as of beginning of the period | 7,038 | 3,376 |
Cash and cash equivalents as of end of the period | 4,310 | 4,818 |
Supplemental disclosures of cash flow information: | ||
Cash paid during the period for: Interest | 45 | 130 |
Cash paid during the period for: Income taxes | $11 | $39 |
1_General
1. General | 3 Months Ended | ||
Apr. 03, 2015 | |||
Notes | |||
1. General | 1. GENERAL | ||
Basis of Presentation | |||
The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company” and “E&S”) have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flows, in conformity with U.S. generally accepted accounting principles (“US GAAP”). This report on Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2014. | |||
The accompanying unaudited condensed consolidated balance sheets, statements of comprehensive income (loss), and statements of cash flows reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for the three months ended April 3, 2015 are not necessarily indicative of the results to be expected for the full year ending December 31, 2015. The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the calendar quarter. | |||
Revenue Recognition | |||
Sales include revenues from system hardware and the related integrated software, database products and service contracts. The following methods are used to determine revenue recognition: | |||
Percentage of Completion. In arrangements that are longer in term and require significant production, modification or customization, revenue is recognized using the percentage-of-completion method. In applying this method, the Company utilizes cost-to-cost methodology whereby it estimates the percent complete by calculating the ratio of costs incurred (consisting of material, labor and subcontracting costs, as well as an allocation of indirect costs) for each contract to its total anticipated costs for that contract. This ratio is then utilized to determine the amount of gross profit earned based on the Company’s estimate of total gross profit at completion for each contract. The Company routinely reviews estimates related to percentage-of-completion contracts and adjusts for changes in the period the revisions are made. Billings on uncompleted percentage-of-completion contracts may be greater than or less than incurred costs and estimated earnings and are recorded as an asset or liability in the accompanying condensed consolidated balance sheets. | |||
In those arrangements where software is a significant component of the contract, the Company uses the percentage-of-completion method as described above. | |||
Completed Contract. Contract arrangements which typically require a relatively short period of time to complete the production, modification, and customization of products are accounted for using the completed contract method. Accordingly, revenue is recognized upon delivery of the completed product, provided persuasive evidence of an arrangement exists, title and risk of loss have transferred to the customer, the fee is fixed or determinable, and collection is reasonably assured. | |||
Multiple Element Arrangements. Some contracts include multiple elements. Significant deliverables in such arrangements commonly include various hardware components of the Company’s visual display systems, domes, show content and various service and maintenance elements. Revenue earned on elements such as products, services and maintenance contracts are allocated to each element based on the relative fair values of the elements. Relative fair values of elements are generally determined based on actual and estimated selling price. Delivery times of such contracts typically occur within a three to six-month time period. | |||
Other. Other revenue consists primarily of amounts earned under maintenance contracts that are generally sold as a single element. Revenue from product maintenance contracts, including separately priced extended warranty contracts, is deferred and recognized over the period of performance under the contract. | |||
Anticipated Losses. For contracts with anticipated losses at completion, a provision is recorded when the loss is probable. After an anticipated loss is recorded, subsequent revenues and cost of sales are recognized in equal, offsetting amounts as contract costs are incurred. | |||
Stock-Based Compensation | |||
Compensation cost for all stock-based awards is measured at fair value on the date of grant and is recognized over the service period for awards expected to vest. Determining the fair value of share-based awards at the grant date requires judgment, including estimating the value of share-based awards that are expected to be forfeited. Actual results and future estimates may differ from the Company’s current estimates. | |||
Net Income (Loss) Per Common Share | |||
Basic net income (loss) per common share is computed based on the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed based on the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period. Stock options are considered to be common stock equivalents. When the Company incurs a loss, potentially dilutive common stock equivalents are excluded as their effect would be anti-dilutive, thereby decreasing the net loss per common share. | |||
Inventories, net | |||
Inventories consisted of the following: | |||
April 3, | December 31, | ||
2015 | 2014 | ||
Raw materials | $6,021 | $5,468 | |
Work in process | 2,779 | 1,678 | |
Finished goods | 264 | 233 | |
Reserve for obsolete inventory | -3,226 | -3,216 | |
Inventories, net | $5,838 | $4,163 | |
Liquidity | |||
The Company has experienced recurring annual losses since 2007, except for 2013. As of April 3, 2015, the unfunded obligation of the Company’s qualified defined benefit pension plan (“Pension Plan”), as measured for accounting purposes, amounted to $35,143, contributing to a total stockholders’ deficit of $30,396. Aided by prior cost reduction efforts and improved sales volume, the Company reported net income for the three months ended April 3, 2015 of $103. In order to preserve the liquid resources required to operate the business, the Company stopped making cash payments due to the Pension Plan trust beginning in October 2012. In January 2013, the Company initiated an application process for the distress termination of the Pension Plan in accordance with provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”) with the goal of settling its Pension Plan liabilities on terms that are feasible for the Company to continue in business as a going concern. On April 21, 2015, the Company executed an agreement (the “Settlement Agreement”) which terminated the Pension Plan and settled the Pension Plan’s liabilities in exchange for an obligation to pay to the Pension Benefit Guaranty Corporation (“PBGC”) $10,500 over twelve years and issue to the PBGC 88,117 shares of E&S treasury stock (see Notes 3 and 5). In addition, the Settlement Agreement has led to a new banking relationship and improved credit capacity. In summary, the Company’s unrestricted cash balances totaling $4,310 as of April 3, 2015, improved credit capacity and forecasted operations, indicate sufficient resources will be available to meet its obligations including the terms of the Settlement Agreement through at least March 31, 2016. |
2_Stock_Option_Plan
2. Stock Option Plan | 3 Months Ended | ||
Apr. 03, 2015 | |||
Notes | |||
2. Stock Option Plan | 2. STOCK OPTION PLAN | ||
As of April 3, 2015, options to purchase 1,476,168 shares of common stock under the Company’s stock option plan were authorized and reserved for future grant. | |||
A summary of activity in the stock option plan for the three months ended April 3, 2015 follows (shares in thousands): | |||
Weighted- | |||
Average | |||
Number | Exercise | ||
of Shares | Price | ||
Outstanding as of the beginning of the period | 1,333 | $2.08 | |
Granted | 211 | 0.35 | |
Exercised | - | - | |
Forfeited or expired | -68 | 7.58 | |
Outstanding as of the end of the period | 1,476 | 1.58 | |
Exercisable as of the end of the period | 1,078 | $2.07 | |
As of April 3, 2015, options exercisable and options outstanding had a weighted average remaining contractual term of 4.07 and 5.47 years, respectively, and aggregate intrinsic value of $116 and $191, respectively. | |||
The Black-Scholes option-pricing model is used to estimate the fair value of options under the Company’s stock option plan. The weighted average values of employee stock options granted under the stock option plan, as well as the weighted average assumptions used in calculating these values during the first three months of 2015, were based on estimates as of the date of grant as follows: | |||
Risk-free interest rate | 0.91% | ||
Dividend yield | 0.00% | ||
Volatility | 343% | ||
Expected life | 3.5 years | ||
Expected option life and volatility are based on historical data of the Company. The risk-free interest rate is calculated based on the average US Treasury bill rate that corresponds with the option life. Historically, the Company has not declared dividends and there are no foreseeable plans to do so. | |||
As of April 3, 2015, there was approximately $57 of total unrecognized share-based compensation cost related to grants under the stock option plan that will be recognized over a weighted-average period of 2.5 years. | |||
Share-based compensation expense included in selling, general and administrative expense in the statements of comprehensive income (loss) for each of the three-month periods ended April 3, 2015 and March 28, 2014 was $9 and $5, respectively. |
3_Employee_Retirement_Benefit_
3. Employee Retirement Benefit Plans | 3 Months Ended | ||||
Apr. 03, 2015 | |||||
Notes | |||||
3. Employee Retirement Benefit Plans | 3. EMPLOYEE RETIREMENT BENEFIT PLANS | ||||
Distress Termination Application | |||||
On January 7, 2013, the Company submitted a PBGC Form 600 Distress Termination, Notice of Intent to Terminate, to the PBGC. The notice filing initiated an application process by the Company with the PBGC for the distress termination of the Pension Plan. The Pension Plan benefits are guaranteed by the ERISA Title IV insurance fund, which is administered by the PBGC. The Company proposed a termination date of March 8, 2013. Through the application process, the Company’s intent was to demonstrate to the PBGC that it qualified for a distress termination of the Pension Plan under either of two of the criteria of Section 4041(c)(2) of ERISA (inability to continue in business absent termination and unreasonably increased pension costs) and applicable PBGC regulations. To satisfy the criteria, the Company and its wholly owned subsidiary each must demonstrate to the satisfaction of the PBGC that, unless the termination occurs, the Company will be unable to pay its debts when they come due and will be unable to continue in business, or that the costs of the Pension Plan have become unreasonably burdensome solely as a result of a decline in the workforce covered by the Pension Plan. A distress termination under Section 4041(c)(2) of ERISA transfers the Pension Plan’s benefit obligations to the PBGC, up to ERISA guaranteed limits, without requiring reorganization under bankruptcy law. The Pension Plan’s actuary has informed the Company that following termination of the Pension Plan and subject to the PBGC’s review of participant benefits, all of the benefits earned by participants as of the date of plan termination are expected to fall within ERISA guaranteed limits. | |||||
On April 21, 2015, the Company executed the Settlement Agreement with the PBGC, whereby the Pension Plan was terminated and the PBGC assumed all liabilities of the Pension Plan in exchange for $10,500 and 88,117 shares of E&S treasury stock (see Note 5). | |||||
The Company’s goal in seeking a distress termination of the Pension Plan is to ensure that the pension benefits of all Pension Plan participants are paid up to federally guaranteed limits and that the Company continues to operate as a going concern while avoiding the costly damage and disruption to the business which would result from bankruptcy reorganization. | |||||
Employer Contributions | |||||
Through September 15, 2012, the Company’s funding policy was to contribute to the Pension Plan trust amounts sufficient to satisfy regulatory funding standards, based upon independent actuarial valuations. Beginning in October 2012, the Company discontinued this policy in order to preserve the necessary liquidity for its operations. As a result, a lien in favor of the PBGC has arisen against the assets of the Company to secure aggregate unpaid contributions which amount to $6,979, including interest, as of January 15, 2015, which is the date the most recent contribution was due. However, under the Settlement Agreement all of the Pension Plan’s liabilities, including the unpaid contributions will be settled for an amount substantially less than the total (see Note 5). | |||||
The Company is not currently required to fund the Supplemental Executive Retirement Plan (SERP). All benefit payments are made by the Company directly to those who receive benefits from the SERP. As such, these payments are treated as both contributions and benefits paid for reporting purposes. The Company expects to contribute and pay SERP benefits of approximately $535 in the next 12 months. | |||||
Components of Net Periodic Benefit Expense | |||||
Supplemental Executive | |||||
Pension Plan | Retirement Plan | ||||
For the three months ended: | 3-Apr-15 | 28-Mar-14 | 3-Apr-15 | 28-Mar-14 | |
Service cost | - | - | - | - | |
Interest cost | 617 | 569 | 44 | 55 | |
Expected return on assets | -585 | -574 | - | - | |
Amortization of actuarial loss | 195 | 101 | 17 | 12 | |
Amortization of prior year service cost | - | - | -12 | -12 | |
Settlement charge | - | - | - | - | |
Net periodic benefit expense | 227 | 96 | 49 | 55 | |
Insurance premium due PBGC | 99 | 58 | - | - | |
$326 | $154 | $49 | $55 | ||
For the three months ended April 3, 2015 and March 28, 2014, the Company reclassified $195 and $102, respectively, of actuarial loss from accumulated other comprehensive loss that was included in pension expense on the statement of comprehensive loss for the same periods. |
4_Debt
4. Debt | 3 Months Ended |
Apr. 03, 2015 | |
Notes | |
4. Debt | 4. Debt |
Mortgage Notes | |
On October 3, 2014, the holder of the mortgage notes, a commercial bank, notified the Company that the liens placed on the Company’s assets by the Pension Plan constituted an event of default under the mortgage notes’ loan agreements. The commercial bank agreed to forbear from exercising any further remedies, other than suspension of advances under the working capital line of credit, until August 1, 2015 at which time the process of withdrawing the Pension Plan liens is expected to be completed in accordance with terms of the Settlement Agreement (see Note 5). The agreement to forbear from exercising any further remedies is subject to the Company continuing to make debt service payments under the mortgage notes’ loan agreements, the occurrence of no further adverse events in the condition of the Company and the Company’s agreement to the incorporation of the financial covenants in the line of credit agreement as additional covenants in the mortgage notes’ loan agreements effective immediately and continuing until the mortgage notes are paid in full. One of the covenants requires the Company’s subsidiary, Spitz, Inc. (“Spitz”), to maintain tangible net worth of at least $6,000 measured upon issuance of quarterly and annual financial statements. As of the end of the second and third quarter of 2014, Spitz’s tangible net worth measured $5,914 and $5,801, respectively. As of December 31, 2014, Spitz’s tangible net worth measured $5,744. The commercial bank has granted a waiver of the event of default for the failure to maintain Spitz’s tangible net worth of at least $6,000 as of the end of the second and third quarter of 2014 and as of December 31, 2014. As of April 3, 2015, Spitz’s tangible net worth was approximately $6,900. The Company believes that it will be able to comply with the additional covenants in future periods based on forecasts and management of intercompany accounts payable and receivable. | |
Line of Credit | |
Because of cross default provisions, the October 3, 2014 notice of default under the mortgage notes included notification by the commercial bank that it is no longer obligated to make advances under its line of credit agreement with Spitz and its election to suspend future advances. The Company expects that with the settlement of the pension liabilities (see Note 5) and the cure of the default under the mortgage notes, that the commercial bank will resume advances for working capital requirements later in 2015. As of April 3, 2015, there were no borrowings outstanding under the credit agreement and there have been no borrowings outstanding since February 2011. |
5_Subsequent_Events
5. Subsequent Events | 3 Months Ended |
Apr. 03, 2015 | |
Notes | |
5. Subsequent Events | 5. SUBSEQUENT EVENTS |
On April 21, 2015, the Company entered into the Settlement Agreement with the PBGC to settle previously disclosed liabilities (the “ERISA Liabilities”) of the Company under ERISA, and all other liabilities of the Company relating to the Pension Plan (except for those resulting from any violation of Part 4 of Subtitle B of Title 1 of ERISA) (the “Settled ERISA Liabilities”). | |
Pursuant to the Settlement Agreement, the Company agreed to (a) pay to the PBGC a total of $10,500, with $1,500 due within ten days following the effective date of the Settlement Agreement and the remainder paid in twelve annual installments of $750 beginning on October 31, 2015 and (b) issue within ten days following the effective date of the Settlement Agreement 88,117 shares of the Company’s treasury stock in the name of the PBGC. On April 23, 2015, the Company issued to the PBGC the 88,117 shares of stock and on May 1, 2015 it paid the initial $1,500 amount due to the PBGC. | |
In connection with the Settlement Agreement, on April 21, 2015, the Company, as the administrator of the Pension Plan, and the PBGC entered into an Agreement For Appointment of Trustee and Termination of Pension Plan (the “Termination Agreement”) (a) terminating the Pension Plan, (b) establishing March 8, 2013 as the Pension Plan’s termination date and (c) appointing the PBGC as statutory trustee of the Pension Plan. | |
To secure the Company’s obligations under the Settlement Agreement, on April 21, 2015, the Company entered into a Security Agreement with the PBGC (the “Security Agreement”) granting to the PBGC a security interest on all of the Company’s presently owned and after-acquired personal property and proceeds thereof, free and clear of all liens and other encumbrances, except those described therein, and Spitz executed an Open-End Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Filing in favor of the PBGC (the “Mortgage”) on certain real property owned by Spitz and described therein. The PBGC’s security interest in the Company’s property is subordinate to the Company’s senior lenders pursuant to agreements between the PBGC and the lenders. The Settlement Agreement also requires that the PBGC withdraw all lien notices with respect to the statutory liens it previously perfected on behalf of the Pension Plan with respect to all real and personal property of the Company as soon as reasonably practicable after the 91st day after the perfection of all consensual liens granted to the PBGC by the Security Agreement and Mortgage. | |
The Settlement Agreement further provides that on the 91st day after the full payment of all amounts owed to the PBGC, the PBGC will be deemed to have released the Company from the Settled ERISA Liabilities and that the PBGC will not take any action to enforce the Settled ERISA Liabilities for so long as the Company is not in default in its obligations under the Settlement Agreement, the Security Agreement or the Mortgage. |
1_General_Policies
1. General (Policies) | 3 Months Ended | ||
Apr. 03, 2015 | |||
Policies | |||
Basis of Presentation | Basis of Presentation | ||
The accompanying unaudited condensed consolidated financial statements of Evans & Sutherland Computer Corporation and subsidiaries (collectively, the “Company” and “E&S”) have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and notes necessary for a complete presentation of financial position, results of operations, and cash flows, in conformity with U.S. generally accepted accounting principles (“US GAAP”). This report on Form 10-Q should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2014. | |||
The accompanying unaudited condensed consolidated balance sheets, statements of comprehensive income (loss), and statements of cash flows reflect all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the Company’s financial position, results of operations and cash flows. The results of operations for the three months ended April 3, 2015 are not necessarily indicative of the results to be expected for the full year ending December 31, 2015. The Company operates on a calendar year with the first three fiscal quarters ending on the last Friday of the calendar quarter. | |||
Revenue Recognition | Revenue Recognition | ||
Sales include revenues from system hardware and the related integrated software, database products and service contracts. The following methods are used to determine revenue recognition: | |||
Percentage of Completion. In arrangements that are longer in term and require significant production, modification or customization, revenue is recognized using the percentage-of-completion method. In applying this method, the Company utilizes cost-to-cost methodology whereby it estimates the percent complete by calculating the ratio of costs incurred (consisting of material, labor and subcontracting costs, as well as an allocation of indirect costs) for each contract to its total anticipated costs for that contract. This ratio is then utilized to determine the amount of gross profit earned based on the Company’s estimate of total gross profit at completion for each contract. The Company routinely reviews estimates related to percentage-of-completion contracts and adjusts for changes in the period the revisions are made. Billings on uncompleted percentage-of-completion contracts may be greater than or less than incurred costs and estimated earnings and are recorded as an asset or liability in the accompanying condensed consolidated balance sheets. | |||
In those arrangements where software is a significant component of the contract, the Company uses the percentage-of-completion method as described above. | |||
Completed Contract. Contract arrangements which typically require a relatively short period of time to complete the production, modification, and customization of products are accounted for using the completed contract method. Accordingly, revenue is recognized upon delivery of the completed product, provided persuasive evidence of an arrangement exists, title and risk of loss have transferred to the customer, the fee is fixed or determinable, and collection is reasonably assured. | |||
Multiple Element Arrangements. Some contracts include multiple elements. Significant deliverables in such arrangements commonly include various hardware components of the Company’s visual display systems, domes, show content and various service and maintenance elements. Revenue earned on elements such as products, services and maintenance contracts are allocated to each element based on the relative fair values of the elements. Relative fair values of elements are generally determined based on actual and estimated selling price. Delivery times of such contracts typically occur within a three to six-month time period. | |||
Other. Other revenue consists primarily of amounts earned under maintenance contracts that are generally sold as a single element. Revenue from product maintenance contracts, including separately priced extended warranty contracts, is deferred and recognized over the period of performance under the contract. | |||
Anticipated Losses. For contracts with anticipated losses at completion, a provision is recorded when the loss is probable. After an anticipated loss is recorded, subsequent revenues and cost of sales are recognized in equal, offsetting amounts as contract costs are incurred. | |||
Stock-based Compensation | Stock-Based Compensation | ||
Compensation cost for all stock-based awards is measured at fair value on the date of grant and is recognized over the service period for awards expected to vest. Determining the fair value of share-based awards at the grant date requires judgment, including estimating the value of share-based awards that are expected to be forfeited. Actual results and future estimates may differ from the Company’s current estimates. | |||
Net Income (loss) Per Common Share | Net Income (Loss) Per Common Share | ||
Basic net income (loss) per common share is computed based on the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per common share is computed based on the weighted-average number of common shares and dilutive common stock equivalents outstanding during the period. Stock options are considered to be common stock equivalents. When the Company incurs a loss, potentially dilutive common stock equivalents are excluded as their effect would be anti-dilutive, thereby decreasing the net loss per common share. | |||
Inventories, Net | Inventories, net | ||
Inventories consisted of the following: | |||
April 3, | December 31, | ||
2015 | 2014 | ||
Raw materials | $6,021 | $5,468 | |
Work in process | 2,779 | 1,678 | |
Finished goods | 264 | 233 | |
Reserve for obsolete inventory | -3,226 | -3,216 | |
Inventories, net | $5,838 | $4,163 |
1_General_Inventories_Net_Sche
1. General: Inventories, Net: Schedule of Inventory (Tables) | 3 Months Ended | ||
Apr. 03, 2015 | |||
Tables/Schedules | |||
Schedule of Inventory | |||
April 3, | December 31, | ||
2015 | 2014 | ||
Raw materials | $6,021 | $5,468 | |
Work in process | 2,779 | 1,678 | |
Finished goods | 264 | 233 | |
Reserve for obsolete inventory | -3,226 | -3,216 | |
Inventories, net | $5,838 | $4,163 |
2_Stock_Option_Plan_Schedule_o
2. Stock Option Plan: Schedule of Stock Option Plan Activity (Tables) | 3 Months Ended | ||
Apr. 03, 2015 | |||
Tables/Schedules | |||
Schedule of Stock Option Plan Activity | A summary of activity in the stock option plan for the three months ended April 3, 2015 follows (shares in thousands): | ||
Weighted- | |||
Average | |||
Number | Exercise | ||
of Shares | Price | ||
Outstanding as of the beginning of the period | 1,333 | $2.08 | |
Granted | 211 | 0.35 | |
Exercised | - | - | |
Forfeited or expired | -68 | 7.58 | |
Outstanding as of the end of the period | 1,476 | 1.58 | |
Exercisable as of the end of the period | 1,078 | $2.07 |
2_Stock_Option_Plan_Schedule_o1
2. Stock Option Plan: Schedule of Stock Options Valuation Assumptions (Tables) | 3 Months Ended | |
Apr. 03, 2015 | ||
Tables/Schedules | ||
Schedule of Stock Options Valuation Assumptions | The Black-Scholes option-pricing model is used to estimate the fair value of options under the Company’s stock option plan. The weighted average values of employee stock options granted under the stock option plan, as well as the weighted average assumptions used in calculating these values during the first three months of 2015, were based on estimates as of the date of grant as follows: | |
Risk-free interest rate | 0.91% | |
Dividend yield | 0.00% | |
Volatility | 343% | |
Expected life | 3.5 years |
3_Employee_Retirement_Benefit_1
3. Employee Retirement Benefit Plans: Schedule of Net Periodic Benefit Expense (Tables) | 3 Months Ended | ||||
Apr. 03, 2015 | |||||
Tables/Schedules | |||||
Schedule of Net Periodic Benefit Expense | Components of Net Periodic Benefit Expense | ||||
Supplemental Executive | |||||
Pension Plan | Retirement Plan | ||||
For the three months ended: | 3-Apr-15 | 28-Mar-14 | 3-Apr-15 | 28-Mar-14 | |
Service cost | - | - | - | - | |
Interest cost | 617 | 569 | 44 | 55 | |
Expected return on assets | -585 | -574 | - | - | |
Amortization of actuarial loss | 195 | 101 | 17 | 12 | |
Amortization of prior year service cost | - | - | -12 | -12 | |
Settlement charge | - | - | - | - | |
Net periodic benefit expense | 227 | 96 | 49 | 55 | |
Insurance premium due PBGC | 99 | 58 | - | - | |
$326 | $154 | $49 | $55 |
1_General_Inventories_Net_Sche1
1. General: Inventories, Net: Schedule of Inventory (Details) (USD $) | Apr. 03, 2015 | Dec. 31, 2014 |
In Thousands, unless otherwise specified | ||
Details | ||
Raw Materials | $6,021 | $5,468 |
Work in process | 2,779 | 1,678 |
Finished goods | 264 | 233 |
Reserve for obsolete inventory | -3,226 | -3,216 |
Inventories, net | $5,838 | $4,163 |
1_General_Details
1. General (Details) (USD $) | 3 Months Ended | ||||||
In Thousands, except Share data, unless otherwise specified | Apr. 03, 2015 | Apr. 03, 2015 | Mar. 28, 2014 | Jan. 03, 2015 | Dec. 31, 2014 | Dec. 28, 2013 | Apr. 21, 2015 |
Pension and retirement obligations, net of current portion | $40,135 | $40,135 | $40,076 | ||||
Total Stockholders' Deficit | -30,396 | -30,396 | -30,703 | ||||
Net income (loss) | 103 | 103 | -551 | ||||
Cash and cash equivalents | 4,310 | 4,310 | 4,818 | 7,038 | 7,038 | 3,376 | |
Subsequent Event | |||||||
Pension Plan Settlement Agreement, Amount Payable | 10,500 | ||||||
Pension Plan Settlement Agreement, Stock Payable | 88,117 | ||||||
Pension Plans, Defined Benefit | |||||||
Pension and retirement obligations, net of current portion | $35,143 | $35,143 |
2_Stock_Option_Plan_Details
2. Stock Option Plan (Details) (USD $) | 3 Months Ended | |
In Thousands, except Share data, unless otherwise specified | Apr. 03, 2015 | Mar. 28, 2014 |
Options exercisable, weighted average remaining contractual term | 4 years 25 days | 5 years 5 months 19 days |
Options, Outstanding, Aggregate Intrinsic Value | $116 | $191 |
Total unrecognized share-based compensation cost | 57 | |
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition | 2 years 6 months | |
Allocated Share-based Compensation Expense | $9 | $5 |
Employee Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | 1,476,168 |
2_Stock_Option_Plan_Schedule_o2
2. Stock Option Plan: Schedule of Stock Option Plan Activity (Details) (USD $) | 3 Months Ended |
In Thousands, except Per Share data, unless otherwise specified | Apr. 03, 2015 |
Details | |
Outstanding as of the beginning of the period | 1,333 |
Outstanding as of the beginning of the period, weighted average exercise price | $2.08 |
Granted | 211 |
Granted, weighted average exercise price | $0.35 |
Exercised | |
Exercised, weighted average exercise price | |
Forfeited or expired | -68 |
Forfeited or expired, weighted average exercise price | $7.58 |
Outstanding as of the end of the period | 1,476 |
Outstanding as of the end of the period, weighted average exercise price | $1.58 |
Exercisable as of the end of the period | 1,078 |
Exercisable as of the end of the period, weighted average exercise price | $2.07 |
2_Stock_Option_Plan_Schedule_o3
2. Stock Option Plan: Schedule of Stock Options Valuation Assumptions (Details) | 3 Months Ended |
Apr. 03, 2015 | |
Details | |
Method Used | Black-Scholes option-pricing model |
Risk-free interest rate | 0.91% |
Dividend yield | 0.00% |
Volatility | 343.00% |
Expected life | 3 years 6 months |
3_Employee_Retirement_Benefit_2
3. Employee Retirement Benefit Plans (Details) (USD $) | 3 Months Ended | ||||
In Thousands, except Share data, unless otherwise specified | Apr. 03, 2015 | Apr. 03, 2015 | Mar. 28, 2014 | Mar. 28, 2014 | Apr. 21, 2015 |
Lien against assets of the company for unpaid pension contributions | $6,979 | $6,979 | |||
Reclassification of pension expense to net income (loss) | 195 | 195 | 102 | 102 | |
Supplemental Executive Retirement Plan | |||||
Expected Future Benefit Payments, Next Twelve Months | 535 | 535 | |||
Subsequent Event | |||||
Pension Plan Settlement Agreement, Amount Payable | $10,500 | ||||
Pension Plan Settlement Agreement, Stock Payable | 88,117 |
3_Employee_Retirement_Benefit_3
3. Employee Retirement Benefit Plans: Schedule of Net Periodic Benefit Expense (Details) (USD $) | 3 Months Ended | |
In Thousands, unless otherwise specified | Apr. 03, 2015 | Mar. 28, 2014 |
Pension Plans, Defined Benefit | ||
Service cost | $0 | $0 |
Interest cost | 617 | 569 |
Expected return on assets | -585 | -574 |
Amortization of actuarial loss | 195 | 101 |
Amortization of prior year service cost | 0 | 0 |
Settlement charge | 0 | 0 |
Net periodic benefit cost | 227 | 96 |
Insurance premium due PBGC | 99 | 58 |
Supplemental Executive Retirement Plan | ||
Service cost | 0 | 0 |
Interest cost | 44 | 55 |
Expected return on assets | 0 | 0 |
Amortization of actuarial loss | 17 | 12 |
Amortization of prior year service cost | -12 | -12 |
Settlement charge | 0 | 0 |
Net periodic benefit cost | 49 | 55 |
Insurance premium due PBGC | $0 | $0 |
4_Debt_Details
4. Debt (Details) (USD $) | 3 Months Ended | |||
In Thousands, unless otherwise specified | Apr. 03, 2015 | Dec. 31, 2014 | Sep. 30, 2014 | Jun. 30, 2014 |
Debt Instrument, Covenant Description | One of the covenants requires the Company’s subsidiary, Spitz, Inc. (“Spitz”), to maintain tangible net worth of at least $6,000 measured upon issuance of quarterly and annual financial statements. | |||
Long-term Line of Credit | $0 | |||
Spitz, Inc. | ||||
Tangible Net Worth | $6,900 | $5,744 | $5,801 | $5,914 |
5_Subsequent_Events_Details
5. Subsequent Events (Details) (Subsequent Event, USD $) | 0 Months Ended | 3 Months Ended | ||
In Thousands, except Share data, unless otherwise specified | 1-May-15 | Apr. 23, 2015 | Apr. 03, 2015 | Apr. 21, 2015 |
Subsequent Event | ||||
Pension Plan Settlement Agreement, Amount Payable | $10,500 | |||
Pension Plan Settlement Agreement, Payment Schedule | $1,500 due within ten days following the effective date of the Settlement Agreement and the remainder paid in twelve annual installments of $750 beginning on October 31, 2015 | |||
Pension Plan Settlement Agreement, Stock Payable | 88,117 | |||
Stock issued pursuant to Pension Plan Settlement Agreement | 88,117 | |||
Pension Contributions | $1,500 |