Echelon 10-Q 9 Aug 16 2016 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 31, 2016
Document and Entity Information [Abstract]
Document Fiscal Period Focus	Q2
Entity Registrant Name	ECHELON CORP
Entity Central Index Key	31,347
Document Type	10-Q
Document Period End Date	Jun. 30, 2016
Amendment Flag	false
Document Fiscal Year Focus	2,016
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		4,430,055

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands		Jun. 30, 2016	Dec. 31, 2015
CURRENT ASSETS:
Cash and cash equivalents		$ 10,807	$ 7,691
Restricted Investments, Current		1,401	1,401
Short-term investments		12,000	16,978
Accounts receivable, net	[1]	3,664	4,030
Inventories		2,814	2,893
Deferred cost of goods sold		1,339	1,122
Other current assets		888	1,109
Total current assets		32,913	35,224
Property and equipment, net		499	595
Intangible assets, net		1,069	1,183
Other long-term assets		1,047	1,044
Total assets		35,528	38,046
CURRENT LIABILITIES:
Accounts payable		1,459	2,267
Accrued liabilities		1,821	2,885
Deferred revenues		4,411	3,359
Total current liabilities		7,691	8,511
LONG-TERM LIABILITIES:
Other long-term liabilities		739	614
Total long-term liabilities		739	614
STOCKHOLDERS' EQUITY:
Common stock		48	47
Additional paid-in capital		356,772	356,746
Treasury stock		(28,130)	(28,130)
Accumulated other comprehensive income		(1,920)	(1,594)
Accumulated deficit		(299,926)	(298,402)
Total Echelon Corporation stockholders' equity		26,844	28,667
Noncontrolling interest in subsidiary		254	254
Total stockholders' equity		27,098	28,921
Total liabilities and stockholders' equity		$ 35,528	$ 38,046
[1]	Includes related party receivable of $0 and $827 as of June 30, 2016 and December 31, 2015, respectively

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Related Parties Account Receivable Current	$ 0	$ 827

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenues:
Revenues	[1]	$ 8,061	$ 9,363	$ 16,708	$ 19,231
Cost of revenues:
Cost of revenues	[2]	3,354	3,821	7,191	8,065
Gross profit		4,707	5,542	9,517	11,166
Operating expenses:
Product development	[3]	1,886	2,340	4,126	4,952
Sales and marketing	[3]	1,625	2,194	2,938	4,382
General and administrative	[3]	2,219	2,187	4,218	5,008
Lease termination charges		0	3,337	0	3,337
Total operating expenses		5,730	10,058	11,282	17,679
Loss from operations		(1,023)	(4,516)	(1,765)	(6,513)
Interest and other income, net		503	(458)	298	380
Interest expense on lease financing obligations		0	(128)	0	(380)
Loss before provision for income taxes		(520)	(5,102)	(1,467)	(6,513)
Income tax expense		51	61	57	74
Net loss		$ (571)	$ (5,163)	$ (1,524)	$ (6,587)
Basic and diluted net loss attributable to Echelon Corporation Stockholders		$ (0.13)	$ (1.17)	$ (0.34)	$ (1.50)
Shares used in computing net loss per share:
Basic		4,420	4,406	4,419	4,404
Diluted		4,420	4,406	4,419	4,404
[1]	Represents the portfolio of available for sale securities that is included in restricted investments and short-term investments in the Company’s condensed consolidated balance sheets
[2]	Included in cash and cash equivalents in the Company’s condensed consolidated balance sheets
[3]	See Note 4 for summary of amounts included representing stock-based compensation expense.

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Statement [Abstract]
Revenue from related parties	$ 0	$ 998	$ 1,312	$ 1,785

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Compehensive Loss - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Condensed Consolidated Statements of Comprehensive Loss [Abstract]
Net loss	$ (571)	$ (5,163)	$ (1,524)	$ (6,587)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	(523)	490	(339)	(635)
Unrealized holding gain on available-for-sale securities	1	6	13	14
Total other comprehensive income (loss)	(522)	496	(326)	(621)
Comprehensive loss	$ (1,093)	$ (4,667)	$ (1,850)	$ (7,208)

Condensed Consolidated Stateme7

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss	$ (1,524)	$ (6,587)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	261	1,076
Increase in allowance for doubtful accounts	2	17
Lease termination charges	0	3,337
Increase in accrued investment income	(20)	(16)
Stock-based compensation	62	(47)
Adjustment to contingent consideration	(318)	(96)
Change in operating assets and liabilities:
Accounts receivable	364	110
Inventories	79	317
Deferred cost of goods sold	(230)	145
Other current assets	219	(285)
Accounts payable	(791)	(1,441)
Accrued liabilities	(1,022)	(279)
Deferred revenues	1,038	(322)
Deferred rent	99	(148)
Net cash used in operating activities	(1,781)	(4,219)
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of available‑for‑sale short‑term investments	(7,988)	(3,991)
Proceeds from maturities and sales of available‑for‑sale short‑term investments	13,000	12,852
Change in other long‑term assets	0	0
Capital expenditures	(67)	(16)
Net cash provided by investing activities	4,945	8,845
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Principal payments of lease financing obligations	0	(10,888)
Repurchase of common stock from employees for payment of taxes on vesting of restricted stock units and upon exercise of stock options	(32)	(129)
Net cash used in financing activities	(32)	(11,017)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(16)	(448)
NET CHANGE IN CASH AND CASH EQUIVALENTS	3,116	(6,839)
CASH AND CASH EQUIVALENTS:
Beginning of period	7,691	13,340
End of period	10,807	6,501
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest on lease financing obligations	0	382
Cash paid for income taxes	$ 85	$ 119

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Jun. 30, 2016
Summary of Significant Accounting Policies [Abstract]
Summary of Significant Accounting Policies	1. Summary of Significant Accounting Policies: Basis of Presentation The condensed consolidated financial statements include the accounts of Echelon Corporation, a Delaware corporation, its wholly-owned subsidiaries, and a subsidiary in which it has a controlling interest (collectively referred to as the “Company”). The Company reports non-controlling interests in consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries and other consolidated entities have been eliminated in consolidation. While the financial information furnished is unaudited, the condensed consolidated financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for the fair presentation of the results of operations for the interim periods covered, and of the financial condition of the Company at the date of the interim balance sheet. The results for interim periods are not necessarily indicative of the results for the entire year. The condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2015 included in its Annual Report on Form 10‑K. There have been no material changes to the Company’s significant accounting policies as compared to the significant accounting policies described in its Annual Report on Form 10‑K for the fiscal year ended December 31, 2015 . Risks and Uncertainties The Company’s operations and performance depend significantly on worldwide economic conditions and their impact on purchases of the Company’s products, as well as the ability of suppliers to provide the Company with products and services in a timely manner. The impact of any of the matters described below could have an adverse effect on the Company’s business, results of operations and financial condition. • The Company’s sales are currently concentrated, as approximately 28.3% of revenues for the six months ended June 30, 2016 , were derived from one customer, Avnet Europe Comm VA ("Avnet"), the Company's primary distributor of its IIoT products in Europe and Japan. Customers in any of the Company’s target market sectors may experience unexpected reductions in demand for their products and consequently reduce their purchases from the Company, resulting in either the loss of a significant customer or a notable decrease in the level of sales to a significant customer. In addition, if any of these customers are unable to obtain the necessary capital to operate their business, they may be unable to satisfy their payment obligations to the Company. • The Company utilizes third-party contract electronic manufacturers to manufacture, assemble, and test its products. If any of these third-parties were unable to obtain the necessary capital to operate their business, they may be unable to provide the Company with timely services or to make timely deliveries of products. • From time to time, the Company has experienced shortages or interruptions in supply for certain products or components used in the manufacture of the Company’s products that have been or will be discontinued. In order to ensure an adequate supply of these items, the Company has occasionally purchased quantities of these items that are in excess of the Company’s then current estimate of short-term requirements. If the long-term requirements do not materialize as originally expected, or if the Company develops alternative solutions that no longer employ these items and the Company is not able to dispose of these excess products or components, the Company could be subject to increased levels of excess and obsolete inventories. • Recently, in an effort to manage costs and inventory risks, the Company decreased the inventory levels of certain products. If there is an unexpected increase in demand for these items, the Company might not be able to supply its customers with products in a timely manner. Use of Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions, and estimates that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Significant estimates and judgments are used for revenue recognition, performance-based equity compensation, inventory valuation, intangible asset valuation, contingent consideration valuation, allowance for warranty costs, and other loss contingencies. In order to determine the carrying values of assets and liabilities that are not readily apparent from other sources, the Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances. Actual results experienced by the Company may differ materially from management’s estimates. Recently Issued Accounting Standards On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In July 2015, the FASB deferred the effective date of ASU 2014-09 so that it will apply to annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early application is permitted to the original effective date of December 15, 2016, in which case ASU 2014-09 would apply to annual reporting periods beginning after December 15, 2016 (including interim reporting periods within those periods). The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. In July 2015, the FASB issued an update to ASC 330, Inventory: Simplifying the Measurement of Inventory . Under this update, subsequent measurement of inventory is based on the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and disposal. This update does not apply to inventory that is measured using last-in, first-out or the retail inventory method. This update should be applied prospectively and will be adopted by the Company in the first quarter of fiscal year 2017. Early adoption is permitted. The Company does not believe the adoption will have a significant impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires, among other things, the recognition of lease assets and lease liabilities on the balance sheet by lessees for certain leases classified as operating leases under previous GAAP. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018. ASU 2016-02 mandates a modified retrospective transition method with early adoption permitted. The Company is currently evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718), which identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This update is required to be adopted by the Company in the first quarter of fiscal year 2017. Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and the related footnote disclosures. Revenue Recognition The Company’s revenues are derived from the sale and license of its products and, to a lesser extent, from fees associated with training, technical support, and custom software design services offered to its customers. Product revenues consist of revenues from hardware sales and software licensing arrangements. Service revenues consist of product technical support (including, in limited circumstances, software post-contract support services) and training. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery to the customer’s carrier (and acceptance, as applicable) has occurred, the sales price is fixed or determinable, collectability is probable, and there are no post-delivery obligations. For non-distributor hardware sales, including sales to third party manufacturers, these criteria are generally met at the time of delivery to the customer’s carrier. However, for arrangements that contain contractual acceptance provisions, revenue recognition may be delayed until acceptance by the customer or the acceptance provisions lapse unless the Company can objectively demonstrate that the contractual acceptance criteria have been satisfied, which is generally accomplished by establishing a history of acceptance for the same or similar products. For sales made to the Company’s distributor partners, revenue recognition criteria are generally met at the time the distributor sells the products through to its end-use customer. Service revenue is recognized as the training services are performed, or ratably over the term of the support period. The Company accounts for the rights of return, price protection, rebates, and other sales incentives offered to distributors of its products as a reduction in revenue. With the exception of sales to distributors, the Company’s customers are generally not entitled to return products for a refund. For sales to distributors, due to contractual rights of return and other factors that impact its ability to make a reasonable estimate of future returns and other sales incentives, revenues are not recognized until the distributor has shipped its products to the end customer . Deferred Revenue and Deferred Cost of Goods Sold Deferred revenue consists of amounts billed or payments received in advance of revenue recognition. Deferred cost of goods sold related to deferred product revenues includes direct product costs and applied overhead. Deferred cost of goods sold related to deferred service revenues includes direct labor costs and applied overhead. Once all revenue recognition criteria have been met, the deferred revenues and associated cost of goods sold are recognized. Restricted Investments As of June 30, 2016 , restricted investments consist of balances maintained by the Company with an investment advisor in money market funds and permitted treasury bills. These balances represent collateral for a $1.0 million operating line of credit issued to the Company by its primary bank for credit card purchases, as well as one standby letter of credit for $113,000 . Because the Company’s agreement with the lender prevents the Company from withdrawing these funds, they are considered restricted. No amounts have ever been drawn against the standby letters of credit issued by the bank. Fair Value Measurements The Company measures at fair value its cash equivalents and available-for-sale investments using a valuation hierarchy based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's own assumptions. These two types of inputs have created the following fair value hierarchy: • Level 1 - Quoted prices for identical instruments in active markets; • Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and • Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when estimating fair value. Other than cash and money market funds, the Company's only financial assets and liabilities required to be measured at fair value on a recurring basis at June 30, 2016 , are its fixed income available-for-sale securities and its liability related to contingent consideration due to Lumewave, Inc. ("Lumewave") shareholders. See Note 2 of these Notes to Condensed Consolidated Financial Statements for a summary of the input levels used in determining the fair value of these assets and liabilities as of June 30, 2016 . Long-Lived Assets We evaluate the recoverability of property, plant and equipment in accordance with ASC No. 360, Accounting for the Property, Plant, and Equipment ("ASC No. 360"). We perform periodic reviews to determine whether facts and circumstances exist that would indicate that the carrying amounts of property, plant and equipment might not be fully recoverable. If facts and circumstances indicate that the carrying amount of property, plant and equipment might not be fully recoverable, we compare projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful lives against their respective carrying amounts. In the event that the projected undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the assets. Evaluation of impairment of property, plant and equipment requires estimates in the forecast of future operating results that are used in the preparation of the expected future undiscounted cash flows. Actual future operating results and the remaining economic lives of our property, plant and equipment could differ from our estimates used in assessing the recoverability of these assets. These differences could result in impairment charges, which could have a material adverse impact on our results of operations. During the quarter ended June 30, 2015 , the Company terminated the lease agreements for its corporate headquarter facility in San Jose, California. These leases were scheduled to expire in March 2020 and had been historically accounted for under authoritative guidance pertaining to leases in which the Company is both involved in the construction of the lease assets and for which certain sale-leaseback criteria are not met. This resulted in the Company being the "deemed owner" of the two buildings for accounting purposes only. Accordingly, the leases associated with these facilities were historically accounted for as financing obligations. In conjunction with the termination of these leases and associated financing obligations, in May 2015 the Company paid an up-front lease termination charge of $10.0 million , which allowed the Company to remove approximately $15.3 million of building-related financing obligations from its balance sheet. At the same time, the Company entered into a short-term lease for one of the two buildings for the remainder of 2015 . As a result of the lease termination, the Company wrote the carrying value of the buildings and leasehold improvements down to its fair value, which was equal to the present value of the remaining lease payments under the short-term lease. The net effect of the lease termination transaction was a charge of $3.3 million during the quarter ended June 30, 2015 .

Financial Instruments

Financial Instruments	6 Months Ended
	Jun. 30, 2016
Fair Value Disclosures [Abstract]
Financial Instruments	2. Financial Instruments: The Company’s financial instruments consist of cash equivalents, restricted investments, short-term investments, accounts receivable, and accounts payable. The carrying value of the Company’s financial instruments approximates fair value. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of investments, which are classified as either cash equivalents, restricted investments, or short-term investments, and accounts receivable. With respect to its investments, the Company has an investment policy that limits the amount of credit exposure to any one financial institution and restricts placement of the Company’s investments to financial institutions independently evaluated as highly creditworthy. With respect to its accounts receivable, the Company performs ongoing credit evaluations of each of its customers’ financial condition. For a customer whose credit worthiness does not meet the Company’s minimum criteria, the Company may require partial or full payment prior to shipment. Alternatively, prior to shipment, customers may be required to provide the Company with an irrevocable letter of credit or arrange for some other form of coverage to mitigate the risk of uncollectibility, such as a bank guarantee. Additionally, the Company establishes an allowance for doubtful accounts and sales return allowances based upon factors surrounding the credit risk of specific customers, historical trends, and other available information. Items Measured at Fair Value on a Recurring Basis On a recurring basis, the Company measures certain of its financial assets, namely its cash equivalents and available-for-sale investments, and its liability related to contingent consideration due to Lumewave shareholders, at fair value. The fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis was determined using the following inputs at June 30, 2016 (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Money market funds (1) $ 4,321 $ 4,321 $ — $ — U.S. government securities (2) 13,401 — 13,401 — Total $ 17,722 $ 4,321 $ 13,401 $ — Liabilities: Contingent consideration $ — $ — $ — $ — Total $ — $ — $ — $ — The fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis was determined using the following inputs at December 31, 2015 (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Money market funds (1) $ 2,305 $ 2,305 $ — $ — U.S. government securities (2) 18,379 — 18,379 — Total $ 20,684 $ 2,305 $ 18,379 $ — Liabilities: Contingent consideration $ 318 $ — $ — $ 318 Total $ 318 $ — $ — $ 318 (1) Included in cash and cash equivalents in the Company’s condensed consolidated balance sheets (2) Represents the portfolio of available for sale securities that is included in restricted investments and short-term investments in the Company’s condensed consolidated balance sheets Cash equivalents consist of either investments with remaining maturities of three months or less at the date of purchase, or money market funds for which the carrying amount is a reasonable estimate of fair value. The Company’s available-for-sale securities consist of U.S. government securities with a minimum and weighted average credit rating of A-1+. The Company values these securities based on pricing from pricing vendors, who may use quoted prices in active markets for identical assets (Level 1 inputs) or inputs other than quoted prices that are observable either directly or indirectly (Level 2 inputs) in determining fair value. However, the Company classifies all of its fixed income available-for-sale securities as having Level 2 inputs. The valuation techniques used to measure the fair value of the Company’s financial instruments having Level 2 inputs were derived from non-binding market consensus prices that are corroborated by observable market data, quoted market prices for similar instruments, or pricing models, such as discounted cash flow techniques. The Company's procedures include controls to ensure that appropriate fair values are recorded by comparing prices obtained from a third party independent source. The contingent consideration payable to Lumewave's shareholders, which the Company recognized upon its purchase of Lumewave in August 2014 and is included in Accrued liabilities in the Company's condensed consolidated balance sheets as of December 31, 2015 , is classified within Level 3 because significant assumptions, including revenue levels and gross profit achievement for this obligation, are not observable in the market. The table below includes a rollforward of the balance sheet amounts for financial instruments classified by the Company within Level 3 of the valuation hierarchy for the three months ended March 31, 2016 (in thousands): Contingent Consideration BALANCE AT DECEMBER 31, 2015 $ 318 Adjustment to contingent consideration (318 ) BALANCE AT MARCH 31, 2016 $ — During the quarter ended March 31, 2016, the contingent consideration decreased by approximately $318,000 . This reduction was due to the Company's determination that it was no longer probable that the minimum targets specified in the purchase agreement would be met due to sales force transitions and scheduling delays for some of our larger lighting projects. Accordingly, the Company reduced the associated liability to $0 as of March 31, 2016 . This resulted in a $318,000 adjustment, which was recorded as a reduction to General and Administrative expenses in the Company's Condensed Consolidated Statements of Operations. As of June 30, 2016 , the Company’s available-for-sale securities had contractual maturities from four to ten months and an average remaining term to maturity of two months. As of June 30, 2016 , the amortized cost basis, aggregate fair value, and gross unrealized holding gains and losses of the Company’s short-term investments by major security type were as follows (in thousands): Amortized Cost Aggregate Fair Value Unrealized Holding Gains Unrealized Holding Losses U.S. government securities $ 11,995 $ 11,996 $ 1 $ — The amortized cost basis, aggregate fair value and gross unrealized holding gains and losses for the Company’s available-for-sale short-term investments, by major security type, were as follows as of December 31, 2015 (in thousands): Amortized Cost Aggregate Fair Value Unrealized Holding Gains Unrealized Holding Losses U.S. government securities $ 16,989 $ 16,978 $ — $ 11 Market values were determined for each individual security in the investment portfolio. The Company reviews its investments on a regular basis to evaluate whether or not any have experienced an other-than-temporary decline in fair value.

Earnings Per Share

Earnings Per Share	6 Months Ended
	Jun. 30, 2016
Earnings Per Share [Abstract]
Earnings Per Share	3. Earnings Per Share: The following is a reconciliation of the numerators and denominators of the basic and diluted net loss from continuing and discontinued operations per share computations for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share amounts): Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Net loss (Numerator): Net loss, basic and diluted $ (571 ) $ (5,163 ) $ (1,524 ) $ (6,587 ) Shares (Denominator): Weighted average common shares outstanding 4,420 4,406 4,419 4,404 Shares used in basic computation 4,420 4,406 4,419 4,404 Common shares issuable upon exercise of stock options (treasury stock method) — — — — Shares used in diluted computation 4,420 4,406 4,419 4,404 Net loss per share: Basic and diluted net loss per share $ (0.13 ) $ (1.17 ) $ (0.34 ) $ (1.50 ) For the three and six months ended June 30, 2016 and 2015 , the diluted net loss per share calculation is equivalent to the basic net loss per share calculation as there were no potentially dilutive stock options due to the Company’s net loss position. The number of stock options, performance shares, and contingently issuable shares excluded from this calculation for the three and six months ended June 30, 2016 and 2015 was 355,338 and 382,088 , respectively.

Stockholders' Equity and Employ

Stockholders' Equity and Employee Stock Option Plans	6 Months Ended
	Jun. 30, 2016
Stockholders' Equity and Employee Stock Option Plans [Abstract]
Stockholders' Equity and Employee Stock Option Plans	Stockholders’ Equity and Employee Stock Option Plans: On April 20, 2016, the Company filed a Registration Statement on Form S-8 with the Securities and Exchange Commission to register shares of common stock to be issued pursuant to the 2016 Inducement Equity Incentive Plan (the "Inducement Plan"). The purpose of the Inducement Plan is to facilitate the Company's ability to attract and retain the best available new hires by providing an inducement to such individual entering into employment with the Company or subsidiary of the Company. The Inducement Plan permits the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares. Each award under the Inducement Plan is intended to qualify as an employment inducement award under NASDAQ Listing Rule 5635(c)(4). On April 22, 2016, the Company announced that its Board of Directors (the “Board”) had adopted a Tax Benefit Preservation Plan (the “Tax Plan”) pursuant to which the Board authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock of the Company to stockholders of record as of the close of business on May 6, 2016. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $0.01 per share, exercisable, except in certain circumstances, in the event that a person or group of affiliated or associated persons obtain beneficial ownership of 4.99% or more of the outstanding shares of the Company's common stock. The complete terms of the Rights are set forth in a Tax Benefit Preservation Plan (the “Plan”), dated as of April 22, 2016, between the Company and Computershare Inc., as rights agent, and filed with the Securities and Exchange Commission on April 26, 2016. By adopting the Plan, the Board is helping to preserve the value of certain deferred tax benefits, including those generated by net operating losses (collectively, the “Tax Benefits”), which could be lost in the event of an “ownership change” as defined under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). The Plan reduces the likelihood that changes in the Company’s investor base will have the unintended effect of limiting the Company’s use of its Tax Benefits. The Board has established procedures to consider requests to exempt certain acquisitions of the Company’s securities from the Plan if the Board determines that it is in the best interests of the Company. Until they become exercisable, the Rights are inseparable from and trade with the Company's shares of common stock. The Rights have a de minimus fair value. The Rights Agreement expires April 25, 2017 . Stock-based Compensation Expense The following table summarizes stock-based compensation expense for the three and six months ended June 30, 2016 and 2015 and its allocation within the condensed consolidated statements of operations (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Cost of revenues $ (88 ) $ (27 ) $ (46 ) $ (68 ) Product development (58 ) 36 (12 ) 135 Sales and marketing (12 ) (7 ) (121 ) (90 ) General and administrative 143 (206 ) 241 (24 ) Total $ (15 ) $ (204 ) $ 62 $ (47 ) The negative expense amounts reflected in the three and six months ended June 30, 2016 and 2015 , are primarily due to the reversal of previously recognized expense resulting from the forfeiture of equity awards for certain employees whose employment terminated during the respective periods. Stock Award Activity There were no options exercised during the six months ended June 30, 2016 and 2015 . The total fair value of RSUs vested and released during the three and six months ended June 30, 2016 was $92,000 and $96,000 , respectively. The total fair value of RSUs vested and released during the three and six months ended June 30, 2015 was approximately $72,000 and $316,000 , respectively. The fair value is calculated by multiplying the fair market value of the Company’s common stock on the vesting date by the number of shares of common stock issued upon vesting.

Significant Customers

Significant Customers	6 Months Ended
	Jun. 30, 2016
Risks and Uncertainties [Abstract]
Significant Customers	Significant Customers: The Company markets its products and services throughout the world to original equipment manufacturers (OEMs) and systems integrators in the building, industrial, transportation, utility/home, and other automation markets. During the three and six months ended June 30, 2016 and 2015 , the Company had two customers that accounted for a significant portion of its revenues: Avnet Europe Comm VA (“Avnet”), the Company’s primary distributors of its IIoT products in Europe and Japan, and Enel Distribuzione Spa ("Enel"), an Italian utility company. For the three and six months ended June 30, 2016 and 2015 , the percentage of the Company’s revenues attributable to sales made to these customers was as follows: Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Avnet 29.9 % 28.2 % 28.3 % 27.7 % Enel — % 10.7 % 7.9 % 9.3 % Total 29.9 % 38.9 % 36.2 % 37.0 %

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Jun. 30, 2016
Commitments and Contingencies Disclosure [Abstract]
Commitments And Contingencies	Commitments and Contingencies: Legal Actions From time to time, in the ordinary course of business, the Company may be subject to certain legal proceedings, claims, investigations, and other proceedings, including claims of alleged infringement of third-party patents and other intellectual property rights, and commercial, employment, and other matters. In accordance with generally accepted accounting principles, the Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. While the Company believes it has adequately provided for such contingencies as of June 30, 2016 , the amounts of which were immaterial, it is possible that the Company’s results of operations, cash flows, and financial position could be harmed by the resolution of any such outstanding claims. Line of Credit As of June 30, 2016 , the Company maintained an operating credit line of $1.0 million with its primary bank for company credit card purchases, as well as one standby letter of credit for $113,000 . These lines of credit are secured by a collateral of the first priority on $1.4 million of the Company's investments (presented as restricted investments in the Condensed Consolidated Balance Sheets). The restricted investments are classified as current assets due to the contractual duration of the underlying credit agreement. No amounts have ever been drawn against the standby letters of credit issued by the bank. In July 2016, the standby letter of credit was cancelled, which will reduce the requirement for cash collateral accordingly.

Accumulated Other Comprehensive

Accumulated Other Comprehensive Income (Loss), Net of Tax	6 Months Ended
	Jun. 30, 2016
Equity [Abstract]
Accumulated Other Comprehensive Income (Loss), Net of Tax	Accumulated Other Comprehensive Income (Loss), Net of Tax: Foreign currency translation adjustment (Amount in thousands) Unrealized gain (loss) on available-for-sale securities (Amount in thousands) Accumulated Other Comprehensive Income (Loss) (Amount in thousands) Beginning balance at December 31, 2015 $ (1,582 ) $ (12 ) $ (1,594 ) Change during January - June 2016 (339 ) 13 (326 ) Balance at June 30, 2016 (1,921 ) 1 (1,920 ) None of the above amounts have been reclassified to the Condensed Consolidated Statement of Operations.

Inventories

Inventories	6 Months Ended
	Jun. 30, 2016
Inventory Disclosure [Abstract]
Inventories	Inventories: Inventories are stated at the lower of cost (first‑in, first‑out) or market and include material, labor and manufacturing overhead. When required, provisions are made to reduce excess and obsolete inventories to their estimated net realizable value. Inventories consist of the following (in thousands): June 30, December 31, Purchased materials $ 212 $ 164 Finished goods 2,602 2,729 $ 2,814 $ 2,893

Accrued Liabilities

Accrued Liabilities	6 Months Ended
	Jun. 30, 2016
Payables and Accruals [Abstract]
Accrued Liabilities	Accrued Liabilities: Accrued liabilities consist of the following (in thousands): June 30, December 31, Accrued payroll and related costs $ 1,292 $ 2,119 Warranty reserve 115 120 Contingent consideration — 318 Other accrued liabilities 414 328 $ 1,821 $ 2,885

Segment Disclosure

Segment Disclosure	6 Months Ended
	Jun. 30, 2016
Segment Reporting [Abstract]
Segment Disclosure	Segment Disclosure: ASC Topic 280, Segment Reporting, establishes standards for reporting information about operating segments, products and services, geographic areas of operations and major customers. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing business performance. The Company’s chief operating decision-making group is the Executive Staff, which is comprised of the Chief Executive Officer and his direct reports (CODM). The Company operates in one principal industry segment - the IIoT segment, which is its reportable segment. The Company operates in three main geographic areas: the Americas; Europe, Middle East and Africa (“EMEA”); and Asia Pacific / Japan (“APJ”). Each geographic area provides products and services to the Company’s customers located in the respective region. The Company’s long-lived and other assets include property and equipment, acquired intangible assets, and deposits on its leased facilities. Long-lived assets are attributed to geographic areas based on the country where the assets are located. As of June 30, 2016 and December 31, 2015 , long-lived assets of approximately $2.4 million and $2.6 million , respectively, were domiciled in the United States. Long-lived assets for all other locations are not material to the condensed consolidated financial statements. In North America, the Company sells its products primarily through a direct sales organization and select third-party electronics representatives. Outside North America, the Company sells its products through direct sales organizations, value-added resellers, and local distributors, primarily in EMEA and APJ. Revenues are attributed to geographic areas based on the country where the products are shipped to or the services are delivered. Summary revenue information by geography for the three and six months ended June 30, 2016 and 2015 is as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Americas $ 3,154 $ 3,126 $ 5,709 $ 6,321 EMEA 3,189 4,470 7,861 8,883 APJ 1,718 1,767 3,138 4,027 Total $ 8,061 $ 9,363 $ 16,708 $ 19,231 For information regarding the Company’s major customers, please refer to Note 5, Significant Customers.

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2016
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes: The provision for income taxes for the three months ended June 30, 2016 and 2015 were $51,000 and $61,000 , respectively. The provision for income taxes for the six months ended June 30, 2016 and 2015 were $57,000 and $74,000 , respectively. The difference between the statutory rate and the Company’s effective tax rate is primarily due to the impact of foreign taxes, changes in the valuation allowance on deferred tax assets, and changes in the accruals related to unrecognized tax benefits. As of June 30, 2016 and December 31, 2015 , the Company had gross unrecognized tax benefits of approximately $9.2 million and $9.1 million , respectively, of which $428,000 and $409,000 , respectively, if recognized, would impact the effective tax rate on income from continuing operations. The Company’s policy is to recognize interest and/or penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2016 and December 31, 2015 , the Company had accrued $59,000 and $74,000 , respectively, for interest and penalties. The $15,000 reduction in interest and penalties on gross unrecognized tax benefits during the six months ended June 30, 2016 was primarily attributable to the expiration of the statute of limitations in certain foreign jurisdictions.

Related Parties

Related Parties	6 Months Ended
	Jun. 30, 2016
Related Party Transactions [Abstract]
Related Parties	Related Parties: In June 2000, the Company entered into a stock purchase agreement with Enel pursuant to which Enel purchased 300,000 newly issued shares of its common stock for $130.7 million . The closing of this stock purchase occurred on September 11, 2000. At the closing, Enel had agreed that it would not, except under limited circumstances, sell or otherwise transfer any of those shares for a specified time period. That time period expired September 11, 2003. To the Company’s knowledge, Enel has disposed of none of its 300,000 shares. Under the terms of the stock purchase agreement, Enel has the right to nominate one member of the Company’s board of directors. While a representative of Enel served on the board until March 14, 2012, no Enel representative is presently on the board. In October 2006, the Company entered into a new development and supply agreement with Enel. Under the development and supply agreement, Enel and its contract manufacturers purchase additional electronic components and finished goods from the Company. The development and supply agreement expired in March 2016. For the three months ended June 30, 2016 and 2015 , the Company recognized revenue from products sold to Enel and its designated manufacturers of approximately $0 and $998,000 , respectively. For the six months ended June 30, 2016 and 2015 , the Company recognized revenue from products sold to Enel and its designated manufacturers of approximately $1.3 million and $1.8 million , respectively. As of June 30, 2016 and December 31, 2015 , $0 and $827,000 , respectively, of the Company’s total accounts receivable balance related to amounts owed by Enel and its designated manufacturers.

Joint Venture

Joint Venture	6 Months Ended
	Jun. 30, 2016
Less Than Wholly Owned Subsidiary [Abstract]
Joint Venture	Joint Venture: On March 23, 2012, the Company entered into an agreement with Holley Metering Limited (“Holley Metering”), a designer and manufacturer of energy meters in China, to create a joint venture, Zhejiang Echelon-Holley Technology Co., Ltd. (“Echelon-Holley”). The joint venture's intended focus was on the development and sales of smart energy products for China and rest-of-world markets. The Company has a 51.0% ownership interest in the joint venture and exercises controlling influence. Therefore, Echelon-Holley’s accounts are included in the Company’s Condensed Consolidated Financial Statements as of June 30, 2016 and 2015, and for the six months then ended. Holley Metering’s interests in Echelon-Holley’s net assets are reported in the non-controlling interest in subsidiary on the Condensed Consolidated Balance Sheet as of June 30, 2016 . Net loss attributable to the non-controlling interest in Echelon-Holley was $0 and $0 during the three and six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016 , Echelon and Holley Metering had contributed in cash a total of approximately $4.0 million in Share Capital, as defined in the joint venture agreement, to Echelon-Holley in proportion to their respective ownership interests. In connection with the decision to sell the Grid business announced in the third quarter of 2014, the Company undertook a process to sell the remaining net assets of the joint venture and recorded the net assets and liabilities of the joint venture at the lower of their carrying amount or fair value less cost to sell, and classified them as held for sale on the accompanying balance sheet at December 31, 2014. The major classes of assets and liabilities that were classified as held for sale were inventory, deferred revenues and the related deferred costs of sales, and accrued liabilities. During the quarter ended September 30, 2015, the Company concluded that it would no longer pursue a sale, but would instead work with Holley Metering to shut the joint venture down. The remaining net assets of the joint venture were immaterial as of September 30, 2015. As of June 30, 2016 , the Company is continuing to work with Holley Metering to complete the shut-down.

Summary of Significant Accoun21

Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2016
Summary of Significant Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation The condensed consolidated financial statements include the accounts of Echelon Corporation, a Delaware corporation, its wholly-owned subsidiaries, and a subsidiary in which it has a controlling interest (collectively referred to as the “Company”). The Company reports non-controlling interests in consolidated entities as a component of equity separate from the Company’s equity. All material inter-company transactions between and among the Company and its consolidated subsidiaries and other consolidated entities have been eliminated in consolidation. While the financial information furnished is unaudited, the condensed consolidated financial statements included in this report reflect all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for the fair presentation of the results of operations for the interim periods covered, and of the financial condition of the Company at the date of the interim balance sheet. The results for interim periods are not necessarily indicative of the results for the entire year. The condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2015 included in its Annual Report on Form 10‑K. There have been no material changes to the Company’s significant accounting policies as compared to the significant accounting policies described in its Annual Report on Form 10‑K for the fiscal year ended December 31, 2015 .
Risks and Uncertainties	Risks and Uncertainties The Company’s operations and performance depend significantly on worldwide economic conditions and their impact on purchases of the Company’s products, as well as the ability of suppliers to provide the Company with products and services in a timely manner. The impact of any of the matters described below could have an adverse effect on the Company’s business, results of operations and financial condition. • The Company’s sales are currently concentrated, as approximately 28.3% of revenues for the six months ended June 30, 2016 , were derived from one customer, Avnet Europe Comm VA ("Avnet"), the Company's primary distributor of its IIoT products in Europe and Japan. Customers in any of the Company’s target market sectors may experience unexpected reductions in demand for their products and consequently reduce their purchases from the Company, resulting in either the loss of a significant customer or a notable decrease in the level of sales to a significant customer. In addition, if any of these customers are unable to obtain the necessary capital to operate their business, they may be unable to satisfy their payment obligations to the Company. • The Company utilizes third-party contract electronic manufacturers to manufacture, assemble, and test its products. If any of these third-parties were unable to obtain the necessary capital to operate their business, they may be unable to provide the Company with timely services or to make timely deliveries of products. • From time to time, the Company has experienced shortages or interruptions in supply for certain products or components used in the manufacture of the Company’s products that have been or will be discontinued. In order to ensure an adequate supply of these items, the Company has occasionally purchased quantities of these items that are in excess of the Company’s then current estimate of short-term requirements. If the long-term requirements do not materialize as originally expected, or if the Company develops alternative solutions that no longer employ these items and the Company is not able to dispose of these excess products or components, the Company could be subject to increased levels of excess and obsolete inventories. • Recently, in an effort to manage costs and inventory risks, the Company decreased the inventory levels of certain products. If there is an unexpected increase in demand for these items, the Company might not be able to supply its customers with products in a timely manner.
Use of Estimates	Use of Estimates The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions, and estimates that affect amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Significant estimates and judgments are used for revenue recognition, performance-based equity compensation, inventory valuation, intangible asset valuation, contingent consideration valuation, allowance for warranty costs, and other loss contingencies. In order to determine the carrying values of assets and liabilities that are not readily apparent from other sources, the Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances. Actual results experienced by the Company may differ materially from management’s estimates.
Recently Issued Accounting Standards	Recently Issued Accounting Standards On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers , which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In July 2015, the FASB deferred the effective date of ASU 2014-09 so that it will apply to annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods). Early application is permitted to the original effective date of December 15, 2016, in which case ASU 2014-09 would apply to annual reporting periods beginning after December 15, 2016 (including interim reporting periods within those periods). The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its consolidated financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its ongoing financial reporting. In July 2015, the FASB issued an update to ASC 330, Inventory: Simplifying the Measurement of Inventory . Under this update, subsequent measurement of inventory is based on the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and disposal. This update does not apply to inventory that is measured using last-in, first-out or the retail inventory method. This update should be applied prospectively and will be adopted by the Company in the first quarter of fiscal year 2017. Early adoption is permitted. The Company does not believe the adoption will have a significant impact on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires, among other things, the recognition of lease assets and lease liabilities on the balance sheet by lessees for certain leases classified as operating leases under previous GAAP. ASU 2016-02 is effective for annual and interim periods beginning after December 15, 2018. ASU 2016-02 mandates a modified retrospective transition method with early adoption permitted. The Company is currently evaluating the effect that ASU 2016-02 will have on its consolidated financial statements and related disclosures. In March 2016, the FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718), which identifies areas for simplification involving several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. This update is required to be adopted by the Company in the first quarter of fiscal year 2017. Early adoption is permitted. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements and the related footnote disclosures.
Revenue Recognition	Revenue Recognition The Company’s revenues are derived from the sale and license of its products and, to a lesser extent, from fees associated with training, technical support, and custom software design services offered to its customers. Product revenues consist of revenues from hardware sales and software licensing arrangements. Service revenues consist of product technical support (including, in limited circumstances, software post-contract support services) and training. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery to the customer’s carrier (and acceptance, as applicable) has occurred, the sales price is fixed or determinable, collectability is probable, and there are no post-delivery obligations. For non-distributor hardware sales, including sales to third party manufacturers, these criteria are generally met at the time of delivery to the customer’s carrier. However, for arrangements that contain contractual acceptance provisions, revenue recognition may be delayed until acceptance by the customer or the acceptance provisions lapse unless the Company can objectively demonstrate that the contractual acceptance criteria have been satisfied, which is generally accomplished by establishing a history of acceptance for the same or similar products. For sales made to the Company’s distributor partners, revenue recognition criteria are generally met at the time the distributor sells the products through to its end-use customer. Service revenue is recognized as the training services are performed, or ratably over the term of the support period. The Company accounts for the rights of return, price protection, rebates, and other sales incentives offered to distributors of its products as a reduction in revenue. With the exception of sales to distributors, the Company’s customers are generally not entitled to return products for a refund. For sales to distributors, due to contractual rights of return and other factors that impact its ability to make a reasonable estimate of future returns and other sales incentives, revenues are not recognized until the distributor has shipped its products to the end customer .
Deferred Revenue and Deferred Cost of Goods Sold	Deferred Revenue and Deferred Cost of Goods Sold Deferred revenue consists of amounts billed or payments received in advance of revenue recognition. Deferred cost of goods sold related to deferred product revenues includes direct product costs and applied overhead. Deferred cost of goods sold related to deferred service revenues includes direct labor costs and applied overhead. Once all revenue recognition criteria have been met, the deferred revenues and associated cost of goods sold are recognized.
Restricted Investments	Restricted Investments As of June 30, 2016 , restricted investments consist of balances maintained by the Company with an investment advisor in money market funds and permitted treasury bills. These balances represent collateral for a $1.0 million operating line of credit issued to the Company by its primary bank for credit card purchases, as well as one standby letter of credit for $113,000 . Because the Company’s agreement with the lender prevents the Company from withdrawing these funds, they are considered restricted. No amounts have ever been drawn against the standby letters of credit issued by the bank.
Fair Value Measurements	Fair Value Measurements The Company measures at fair value its cash equivalents and available-for-sale investments using a valuation hierarchy based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's own assumptions. These two types of inputs have created the following fair value hierarchy: • Level 1 - Quoted prices for identical instruments in active markets; • Level 2 - Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and • Level 3 - Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the Company to minimize the use of unobservable inputs and to use observable market data, if available, when estimating fair value. Other than cash and money market funds, the Company's only financial assets and liabilities required to be measured at fair value on a recurring basis at June 30, 2016 , are its fixed income available-for-sale securities and its liability related to contingent consideration due to Lumewave, Inc. ("Lumewave") shareholders. See Note 2 of these Notes to Condensed Consolidated Financial Statements for a summary of the input levels used in determining the fair value of these assets and liabilities as of June 30, 2016 .
Long-Lived Assets	Long-Lived Assets We evaluate the recoverability of property, plant and equipment in accordance with ASC No. 360, Accounting for the Property, Plant, and Equipment ("ASC No. 360"). We perform periodic reviews to determine whether facts and circumstances exist that would indicate that the carrying amounts of property, plant and equipment might not be fully recoverable. If facts and circumstances indicate that the carrying amount of property, plant and equipment might not be fully recoverable, we compare projected undiscounted net cash flows associated with the related asset or group of assets over their estimated remaining useful lives against their respective carrying amounts. In the event that the projected undiscounted cash flows are not sufficient to recover the carrying value of the assets, the assets are written down to their estimated fair values based on the expected discounted future cash flows attributable to the assets. Evaluation of impairment of property, plant and equipment requires estimates in the forecast of future operating results that are used in the preparation of the expected future undiscounted cash flows. Actual future operating results and the remaining economic lives of our property, plant and equipment could differ from our estimates used in assessing the recoverability of these assets. These differences could result in impairment charges, which could have a material adverse impact on our results of operations. During the quarter ended June 30, 2015 , the Company terminated the lease agreements for its corporate headquarter facility in San Jose, California. These leases were scheduled to expire in March 2020 and had been historically accounted for under authoritative guidance pertaining to leases in which the Company is both involved in the construction of the lease assets and for which certain sale-leaseback criteria are not met. This resulted in the Company being the "deemed owner" of the two buildings for accounting purposes only. Accordingly, the leases associated with these facilities were historically accounted for as financing obligations. In conjunction with the termination of these leases and associated financing obligations, in May 2015 the Company paid an up-front lease termination charge of $10.0 million , which allowed the Company to remove approximately $15.3 million of building-related financing obligations from its balance sheet. At the same time, the Company entered into a short-term lease for one of the two buildings for the remainder of 2015 . As a result of the lease termination, the Company wrote the carrying value of the buildings and leasehold improvements down to its fair value, which was equal to the present value of the remaining lease payments under the short-term lease. The net effect of the lease termination transaction was a charge of $3.3 million during the quarter ended June 30, 2015 .

Financial Instruments (Tables)

Financial Instruments (Tables)	6 Months Ended
	Jun. 30, 2016
Fair Value Disclosures [Abstract]
Fair value of asset measured on a recurring basis	The fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis was determined using the following inputs at June 30, 2016 (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Money market funds (1) $ 4,321 $ 4,321 $ — $ — U.S. government securities (2) 13,401 — 13,401 — Total $ 17,722 $ 4,321 $ 13,401 $ — Liabilities: Contingent consideration $ — $ — $ — $ — Total $ — $ — $ — $ — The fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis was determined using the following inputs at December 31, 2015 (in thousands): Fair Value Measurements at Reporting Date Using Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Total (Level 1) (Level 2) (Level 3) Assets: Money market funds (1) $ 2,305 $ 2,305 $ — $ — U.S. government securities (2) 18,379 — 18,379 — Total $ 20,684 $ 2,305 $ 18,379 $ — Liabilities: Contingent consideration $ 318 $ — $ — $ 318 Total $ 318 $ — $ — $ 318 (1) Included in cash and cash equivalents in the Company’s condensed consolidated balance sheets (2) Represents the portfolio of available for sale securities that is included in restricted investments and short-term investments in the Company’s condensed consolidated balance sheets
Level 3 Rollforward	The table below includes a rollforward of the balance sheet amounts for financial instruments classified by the Company within Level 3 of the valuation hierarchy for the three months ended March 31, 2016 (in thousands): Contingent Consideration BALANCE AT DECEMBER 31, 2015 $ 318 Adjustment to contingent consideration (318 ) BALANCE AT MARCH 31, 2016 $ —
Fair value of short term investment unrealized holdings and gains	As of June 30, 2016 , the amortized cost basis, aggregate fair value, and gross unrealized holding gains and losses of the Company’s short-term investments by major security type were as follows (in thousands): Amortized Cost Aggregate Fair Value Unrealized Holding Gains Unrealized Holding Losses U.S. government securities $ 11,995 $ 11,996 $ 1 $ — The amortized cost basis, aggregate fair value and gross unrealized holding gains and losses for the Company’s available-for-sale short-term investments, by major security type, were as follows as of December 31, 2015 (in thousands): Amortized Cost Aggregate Fair Value Unrealized Holding Gains Unrealized Holding Losses U.S. government securities $ 16,989 $ 16,978 $ — $ 11

Earnings Per Share (Tables)

Earnings Per Share (Tables)	6 Months Ended
	Jun. 30, 2016
Earnings Per Share [Abstract]
Reconciliation of Basic and Diluted Earnings (Loss) Per Share	The following is a reconciliation of the numerators and denominators of the basic and diluted net loss from continuing and discontinued operations per share computations for the three and six months ended June 30, 2016 and 2015 (in thousands, except per share amounts): Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Net loss (Numerator): Net loss, basic and diluted $ (571 ) $ (5,163 ) $ (1,524 ) $ (6,587 ) Shares (Denominator): Weighted average common shares outstanding 4,420 4,406 4,419 4,404 Shares used in basic computation 4,420 4,406 4,419 4,404 Common shares issuable upon exercise of stock options (treasury stock method) — — — — Shares used in diluted computation 4,420 4,406 4,419 4,404 Net loss per share: Basic and diluted net loss per share $ (0.13 ) $ (1.17 ) $ (0.34 ) $ (1.50 )

Stockholders' Equity And Empl24

Stockholders' Equity And Employee Stock Option Plans (Tables)	6 Months Ended
	Jun. 30, 2016
Stockholders' Equity and Employee Stock Option Plans [Abstract]
Stock-based Compensation Expense	Stock-based Compensation Expense The following table summarizes stock-based compensation expense for the three and six months ended June 30, 2016 and 2015 and its allocation within the condensed consolidated statements of operations (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Cost of revenues $ (88 ) $ (27 ) $ (46 ) $ (68 ) Product development (58 ) 36 (12 ) 135 Sales and marketing (12 ) (7 ) (121 ) (90 ) General and administrative 143 (206 ) 241 (24 ) Total $ (15 ) $ (204 ) $ 62 $ (47 )

Significant Customers (Tables)

Significant Customers (Tables)	6 Months Ended
	Jun. 30, 2016
Risks and Uncertainties [Abstract]
Revenues attributable to sales to major customers	For the three and six months ended June 30, 2016 and 2015 , the percentage of the Company’s revenues attributable to sales made to these customers was as follows: Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Avnet 29.9 % 28.2 % 28.3 % 27.7 % Enel — % 10.7 % 7.9 % 9.3 % Total 29.9 % 38.9 % 36.2 % 37.0 %

Accumulated Other Comprehensi26

Accumulated Other Comprehensive Income (Loss), Net of Tax (Tables)	6 Months Ended
	Jun. 30, 2016
Equity [Abstract]
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]	Foreign currency translation adjustment (Amount in thousands) Unrealized gain (loss) on available-for-sale securities (Amount in thousands) Accumulated Other Comprehensive Income (Loss) (Amount in thousands) Beginning balance at December 31, 2015 $ (1,582 ) $ (12 ) $ (1,594 ) Change during January - June 2016 (339 ) 13 (326 ) Balance at June 30, 2016 (1,921 ) 1 (1,920 )

Inventories (Tables)

Inventories (Tables)	6 Months Ended
	Jun. 30, 2016
Inventory Disclosure [Abstract]
Schedule of Inventory, Current [Table Text Block]	Inventories consist of the following (in thousands): June 30, December 31, Purchased materials $ 212 $ 164 Finished goods 2,602 2,729 $ 2,814 $ 2,893

Accrued Liabilities (Tables)

Accrued Liabilities (Tables)	6 Months Ended
	Jun. 30, 2016
Payables and Accruals [Abstract]
Accrued liabilities	Accrued liabilities consist of the following (in thousands): June 30, December 31, Accrued payroll and related costs $ 1,292 $ 2,119 Warranty reserve 115 120 Contingent consideration — 318 Other accrued liabilities 414 328 $ 1,821 $ 2,885

Segment Disclosure (Tables)

Segment Disclosure (Tables)	6 Months Ended
	Jun. 30, 2016
Segment Reporting [Abstract]
Revenue information by geography	Summary revenue information by geography for the three and six months ended June 30, 2016 and 2015 is as follows (in thousands): Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Americas $ 3,154 $ 3,126 $ 5,709 $ 6,321 EMEA 3,189 4,470 7,861 8,883 APJ 1,718 1,767 3,138 4,027 Total $ 8,061 $ 9,363 $ 16,708 $ 19,231

Summary of Significant Accoun30

Summary of Significant Accounting Policies (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016USD ($)customerletter_of_credit	Jun. 30, 2015USD ($)customer	Jun. 30, 2016USD ($)letter_of_credit	Jun. 30, 2015USD ($)customer
Revenues attributable to sales [Line Items]
Number of Major Customers | customer	1	2		2
Line of Credit Maintained			$ 1,000
Number of Letter of Credit | letter_of_credit	1		1
Letters of Credit Outstanding, Amount	$ 113		$ 113
Early Contract Termination Charge		$ 10,000
Decrease in Capital Lease Obligations		15,300
Lease termination charges	$ 0	$ 3,337	$ 0	$ 3,337
Significant Customers [Member]
Revenues attributable to sales [Line Items]
Percentage of net revenue	29.90%	38.90%	36.20%	37.00%
Significant Customers [Member] | Avnet [Member]
Revenues attributable to sales [Line Items]
Percentage of net revenue	29.90%	28.20%	28.30%	27.70%

Financial Instruments (Details)

Financial Instruments (Details) - USD ($) $ in Thousands		Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015
Fair value of asset measured on a recurring basis
Fixed income available-for-sale securities		$ 11,996		$ 16,978
Contingent consideration			$ 0
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Fair value of asset measured on a recurring basis
Money market funds	[1]	4,321		2,305
Fixed income available-for-sale securities	[2]	0		0
Total		4,321		2,305
Contingent consideration		0		0
Total		0		0
Significant Other Observable Inputs (Level 2) [Member]
Fair value of asset measured on a recurring basis
Money market funds	[1]	0		0
Fixed income available-for-sale securities	[2]	13,401		18,379
Total		13,401		18,379
Contingent consideration		0		0
Total		0		0
Significant Unobservable Inputs (Level 3) [Member]
Fair value of asset measured on a recurring basis
Money market funds	[1]	0		0
Fixed income available-for-sale securities	[2]	0		0
Total		0		0
Contingent consideration		0		318
Total		0		318
Fair Value, Measurements, Recurring [Member]
Fair value of asset measured on a recurring basis
Money market funds	[1]	4,321		2,305
Fixed income available-for-sale securities	[2]	13,401		18,379
Total		17,722		20,684
Contingent consideration		0		318
Total		$ 0		$ 318
[1]	Included in cash and cash equivalents in the Company’s condensed consolidated balance sheets
[2]	Represents the portfolio of available for sale securities that is included in restricted investments and short-term investments in the Company’s condensed consolidated balance sheets

Financial Instruments-Available

Financial Instruments-Available for Sale Securities (Details 1) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair value of short term investment unrealized holdings and gains
Amortized Cost	$ 11,995	$ 16,989
Aggregate Fair Value	11,996	16,978
Unrealized Holding Gains	1	0
Unrealized Holding Losses	$ 0	$ 11

Financial Instruments (Details

Financial Instruments (Details Textual)	6 Months Ended
	Jun. 30, 2016
Financial Instruments (Textual) [Abstract]
Short-term investments contractual maturity period minimum	4 months
Maximum remaining maturities period of investments included in cash equivalents	3 months
Short-term investments contractual maturity period maximum	10 months
Average short-term investments maturity period	2 months

Financial Instruments Contingen

Financial Instruments Contingent Consideration (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2016	Jun. 30, 2016	Jun. 30, 2015
Adjustment to contingent consideration	$ (318)	$ (318)	$ (96)
Contingent Consideration, Ending Balance	0
Fair Value, Inputs, Level 3 [Member]
Contingent Consideration, Beginning Balance	$ 318	318
Contingent Consideration, Ending Balance		$ 0

Earnings Per Share (Details)

Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Net loss (Numerator):
Net loss	$ (571)	$ (5,163)	$ (1,524)	$ (6,587)
Shares (Denominator):
Weighted average common shares outstanding	4,420,000	4,406,000	4,419,000	4,404,000
Shares used in basic computation	4,420,000	4,406,000	4,419,000	4,404,000
Common shares issuable upon exercise of stock options (treasury stock method)	0	0	0	0
Shares used in diluted computation	4,420,000	4,406,000	4,419,000	4,404,000
Net loss per share:
Basic and diluted net loss attributable to Echelon Corporation Stockholders	$ (0.13)	$ (1.17)	$ (0.34)	$ (1.50)

Earnings Per Share (Details Tex

Earnings Per Share (Details Textual) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Number of potentially dilutive stock options (in shares)	0	0	0	0
Number of antidilutive shares excluded from computation of earnings per share (in shares)			355,338	382,088

Stockholders' Equity and Empl37

Stockholders' Equity and Employee Stock Option Plans (Details Textual) $ / shares in Units, $ in Thousands	Apr. 22, 2016right$ / sharesshares	Jun. 30, 2016USD ($)	Jun. 30, 2015USD ($)	Jun. 30, 2016USD ($)shares	Jun. 30, 2015USD ($)
Stockholders' Equity and Employee Stock Option Plans [Abstract]
Rights issued as common stock dividend (in right) | right	1
Number of shares available to purchase for each right (usd per share)	0.0010
Preferred stock, par value (usd per share) | $ / shares	$ 0.01
Beneficial ownership percentage excluded from exercise of rights	4.99%
Stockholders' Equity and Employee Stock Option Plans (Textual) [Abstract]
Options exercised (in shares)				0
Total fair value of RSUs vested and released | $		$ 92	$ 72	$ 96	$ 316

Stockholders' Equity and Empl38

Stockholders' Equity and Employee Stock Option Plans (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Stock-based Compensation Expense
Stock-based Compensation Expense, Total	$ (15)	$ (204)	$ 62	$ (47)
Cost of Revenues [Member]
Stock-based Compensation Expense
Stock-based Compensation Expense, Total	(88)	(27)	(46)	(68)
Product development [Member]
Stock-based Compensation Expense
Stock-based Compensation Expense, Total	(58)	36	(12)	135
Sales and marketing [Member]
Stock-based Compensation Expense
Stock-based Compensation Expense, Total	(12)	(7)	(121)	(90)
General and administrative [Member]
Stock-based Compensation Expense
Stock-based Compensation Expense, Total	$ 143	$ (206)	$ 241	$ (24)

Significant Customers (Details

Significant Customers (Details Textual) - customer	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Significant Customers (Textual) [Abstract]
Numbers of customers	1	2		2
Significant Customers [Member]
Revenues attributable to sales [Line Items]
Total	29.90%	38.90%	36.20%	37.00%
Significant Customers [Member] | Avnet [Member]
Revenues attributable to sales [Line Items]
Total	29.90%	28.20%	28.30%	27.70%
Significant Customers [Member] | Enel [Member]
Revenues attributable to sales [Line Items]
Total	0.00%	10.70%	7.90%	9.30%

Commitments and Contingencies L

Commitments and Contingencies Line of Credit (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016USD ($)letter_of_credit	Dec. 31, 2015USD ($)
Commitments and Contingencies Disclosure [Abstract]
Line of Credit Maintained	$ 1,000
Number of Letter of Credit | letter_of_credit	1
Letters of Credit Outstanding, Amount	$ 113
Restricted Investments, Current	$ 1,401	$ 1,401

Accumulated Other Comprehensi41

Accumulated Other Comprehensive Income (Loss), Net of Tax (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016USD ($)
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	$ 28,667
Current period change	(326)
Balance at end of period	26,844
Foreign currency translation adjustment (Amount in thousands) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(1,582)
Current period change	(339)
Balance at end of period	(1,921)
Unrealized gain (loss) on available-for-sale securities (Amount in thousands) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(12)
Current period change	13
Balance at end of period	1
Accumulated Other Comprehensive Income (Loss) (Amount in thousands) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at beginning of period	(1,594)
Balance at end of period	$ (1,920)

Inventories Inventories (Detail

Inventories Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Purchased materials	$ 212	$ 164
Finished goods	2,602	2,729
Inventory, Net	$ 2,814	$ 2,893

Accrued Liabilities (Details)

Accrued Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Payables and Accruals [Abstract]
Accrued payroll and related costs	$ 1,292	$ 2,119
Warranty reserve	115	120
Accrued taxes	0	318
Other accrued liabilities	414	328
Accrued liabilities	$ 1,821	$ 2,885

Segment Disclosure (Details 1)

Segment Disclosure (Details 1) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue Information by Geography [Abstract]
Revenues	[1]	$ 8,061	$ 9,363	$ 16,708	$ 19,231
Americas [Member]
Revenue Information by Geography [Abstract]
Revenues		3,154	3,126	5,709	6,321
EMEA [Member]
Revenue Information by Geography [Abstract]
Revenues		3,189	4,470	7,861	8,883
APJ [Member]
Revenue Information by Geography [Abstract]
Revenues		$ 1,718	$ 1,767	$ 3,138	$ 4,027
[1]	Represents the portfolio of available for sale securities that is included in restricted investments and short-term investments in the Company’s condensed consolidated balance sheets

Segment Disclosure (Details Tex

Segment Disclosure (Details Textual) $ in Millions	6 Months Ended
	Jun. 30, 2016USD ($)segmentgeographic_area	Dec. 31, 2015USD ($)
Segment Disclosure (Textual) [Abstract]
Number of reportable segments (in segment) | segment	1
Number of geographic areas (in geographic area) | geographic_area	3
Long-lived assets US | $	$ 2.4	$ 2.6

Income Taxes (Details Textual)

Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Income tax expense	$ 51	$ 61	$ 57	$ 74
Income Taxes (Textual) [Abstract]
Unrecognized tax benefits	9,200		9,200		$ 9,100
Unrecognized tax benefits that would impact effective tax rate	428		428		409
Accrued for interest and penalties	$ 59		59		$ 74
Reduction in gross unrecognized tax benefits			$ 15

Related Parties (Details Textua

Related Parties (Details Textual) shares in Thousands, $ in Thousands	1 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2000USD ($)shares	Jun. 30, 2016USD ($)board_membershares	Jun. 30, 2015USD ($)	Jun. 30, 2016USD ($)board_membershares	Jun. 30, 2015USD ($)	Dec. 31, 2015USD ($)
Related Parties - Enel (Additional Textual) [Abstract]
Stock Issued During Period, Shares, New Issues | shares	300
Stock Issued During Period, Value, New Issues	$ 130,700
Number of shares sold by Related Party. | shares		0		0
Number of board members Related Party can nominate | board_member		1		1
Number of Related Party Representatives on Board | board_member		0		0
Revenue from Related Parties		$ 0	$ 998	$ 1,312	$ 1,785
Accounts receivable balance related to amounts owed by Enel and its designated manufacturers		$ 0		$ 0		$ 827

Joint Venture (Details Textual)

Joint Venture (Details Textual) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Joint Venture (Textual) [Abstract]
Ownership interest in the joint venture	51.00%
Net loss from discontinued operations attributable to non-controlling interest, net of income taxes	$ 0	$ 0
Registered capital of the Joint venture	$ 4,000