Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 26, 2019 | Jun. 30, 2018 | |
Document and Entity Information | |||
Entity Registrant Name | NORTECH SYSTEMS INC | ||
Entity Central Index Key | 0000722313 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Public Float | $ 3,520,018 | ||
Entity Common Stock, Shares Outstanding | 2,684,672 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | ||
Net Sales | $ 113,370 | $ 112,335 |
Cost of Goods Sold | 100,059 | 100,217 |
Gross Profit | 13,311 | 12,118 |
Operating Expenses | ||
Selling Expenses | 3,629 | 4,747 |
General and Administrative Expenses | 8,433 | 8,086 |
Impairment of Goodwill | 0 | 908 |
Gain on Sale of Property and Equipment | (355) | |
Total Operating Expenses | 12,062 | 13,386 |
Income from Operations | 1,249 | (1,268) |
Other Expense | ||
Loss on Extinguishment of Debt | (175) | |
Interest Expense | (757) | (628) |
Income (Loss) Before Income Taxes | 492 | (2,071) |
Income Tax Expense | 326 | 375 |
Net Income (Loss) | $ 166 | $ (2,446) |
Earnings (Loss) Per Common Share: | ||
Basic (in dollars per share) | $ 0.06 | $ (0.89) |
Weighted Average Number of Common Shares Outstanding - Basic (in shares) | 2,692,382 | 2,745,602 |
Diluted (in dollars per share) | $ 0.06 | $ (0.89) |
Weighted Average Number of Common Shares Outstanding - Dilutive (in shares) | 2,699,614 | 2,745,602 |
Other comprehensive income (loss) | ||
Foreign currency translation adjustment | $ (132) | $ (57) |
Comprehensive income (loss), net of tax | $ 34 | $ (2,503) |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash | $ 480 | $ 473 |
Restricted Cash | 467 | 306 |
Accounts Receivable, less allowances of $222 and $209 | 20,093 | 17,417 |
Inventories | 17,004 | 18,527 |
Contract Assets | 6,431 | |
Prepaid Assets and Other Current Assets | 1,381 | 1,044 |
Total Current Assets | 45,856 | 37,767 |
Property and Equipment, Net | 10,178 | 10,176 |
Goodwill | 2,375 | 2,375 |
Other Intangible Assets, Net | 1,523 | 1,739 |
Other Non Current Assets | 28 | 28 |
Total Assets | 59,960 | 52,085 |
Current Liabilities | ||
Current Maturities of Long-Term Debt | 780 | 1,003 |
Current Portion of Capital Lease Obligation | 337 | 295 |
Accounts Payable | 18,142 | 11,699 |
Accrued Payroll and Commissions | 2,747 | 2,900 |
Other Accrued Liabilities | 2,886 | 2,148 |
Total Current Liabilities | 24,892 | 18,045 |
Long-Term Liabilities | ||
Long-Term Line of Credit | 9,264 | 8,503 |
Long-Term Debt, Net of Current Maturities | 3,624 | 4,353 |
Long-Term Capital Lease Obligation, Net of Current Portion | 951 | 1,222 |
Other Long-Term Liabilities | 139 | 137 |
Total Long-Term Liabilities | 13,978 | 14,215 |
Total Liabilities | 38,870 | 32,260 |
Commitments and Contingencies | ||
Shareholders' Equity | ||
Preferred Stock, $1 par value; 1,000,000 Shares Authorized: 250,000 Shares Issued and Outstanding | 250 | 250 |
Common Stock - $0.01 par value; 9,000,000 Shares Authorized; 2,663,049 and 2,739,250 Shares Issued and Outstanding, respectively | 27 | 27 |
Additional Paid-In Capital | 15,610 | 15,760 |
Accumulated Other Comprehensive Loss | (233) | (101) |
Retained Earnings | 5,436 | 3,889 |
Total Shareholders' Equity | 21,090 | 19,825 |
Total Liabilities and Shareholders' Equity | $ 59,960 | $ 52,085 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
CONSOLIDATED BALANCE SHEETS | ||
Accounts Receivable Allowances | $ 222 | $ 209 |
Preferred Stock, par value (in dollars per share) | $ 1 | $ 1 |
Preferred Stock, Shares Authorized | 1,000,000 | 1,000,000 |
Preferred Stock, Shares Issued | 250,000 | 250,000 |
Preferred Stock, Shares Outstanding | 250,000 | 250,000 |
Common Stock - par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock - Shares Authorized | 9,000,000 | 9,000,000 |
Common Stock - Shares Issued | 2,663,049 | 2,739,250 |
Common Stock - Shares Outstanding | 2,663,049 | 2,739,250 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash Flows From Operating Activities | ||
Net Income (Loss) | $ 166 | $ (2,446) |
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities | ||
Depreciation | 1,877 | 2,186 |
Amortization | 312 | 315 |
Compensation on Stock-Based Awards | 126 | 43 |
Loss on Extinguishment of Debt | 17 | |
Compensation on Equity Appreciation Rights | (22) | |
Deferred Taxes | 1 | 439 |
Change in Contingent Consideration | (486) | |
Change in Accounts Receivable Allowance | 13 | (674) |
Change in Inventory Reserves | 268 | 171 |
Impairment of Goodwill | 0 | 908 |
Gain on Disposal of Property and Equipment | (355) | |
Changes in Current Operating Items | ||
Accounts Receivable | (2,746) | 578 |
Inventories and Contract Assets | (3,875) | 1,956 |
Prepaid Expenses | (302) | 233 |
Income Taxes Receivable | (37) | (31) |
Income Taxes Payable | (39) | 39 |
Accounts Payable | 6,028 | (2,115) |
Accrued Payroll and Commissions | (154) | (411) |
Other Accrued Liabilities | 806 | 461 |
Net Cash Provided by Operating Activities | 2,444 | 806 |
Cash Flows from Investing Activities | ||
Proceeds from Sale of Property and Equipment | 14 | 669 |
Purchase of Intangible Asset | (4) | (114) |
Purchases of Property and Equipment | (1,400) | (813) |
Net Cash Used in Investing Activities | (1,390) | (258) |
Cash Flows from Financing Activities | ||
Net Change in Line of Credit | 761 | 1,187 |
Proceeds from Long-Term Debt | 5,123 | |
Principal Payments on Long-Term Debt | (1,044) | (5,893) |
Payments on Capital Leases Obligation | (330) | |
Loss on Extinguishment of Debt | (158) | |
Debt Issuance Costs | (267) | |
Share Repurchases | (276) | (30) |
Net Cash used in Financing Activities | (889) | (38) |
Effect of Exchange Rate Changes on Cash | 3 | 1 |
Net Change in Cash | 168 | 511 |
Cash - Beginning of Year | 779 | 268 |
Cash - End of Year | 947 | 779 |
Reconciliation of cash and restricted cash reported within the condensed consolidated balance sheets | ||
Cash | 480 | 473 |
Restricted cash | 467 | 306 |
Cash - End of Year | 947 | 779 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash Paid for Interest | 719 | 538 |
Cash Paid for Income Taxes | 335 | 20 |
Supplemental Noncash Investing and Financing Activities: | ||
Property and Equipment Purchases in Accounts Payable | 445 | 29 |
Equipment Acquired under Capital Lease | $ 100 | $ 1,517 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Income | Total |
Balance at Dec. 31, 2016 | $ 250 | $ 27 | $ 15,747 | $ (44) | $ 6,335 | $ 22,315 |
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income (Loss) | (2,446) | (2,446) | ||||
Foreign currency translation adjustment | (57) | (57) | ||||
Compensation on stock-based awards | 43 | 43 | ||||
Share repurchases | (30) | (30) | ||||
Balance at Dec. 31, 2017 | 250 | 27 | 15,760 | (101) | 3,889 | 19,825 |
Increase (Decrease) in Stockholders' Equity | ||||||
Net Income (Loss) | 166 | 166 | ||||
Cumulative adjustment | ASU 2014-09 | 1,381 | 1,381 | ||||
Foreign currency translation adjustment | (132) | (132) | ||||
Compensation on stock-based awards | 126 | 126 | ||||
Share repurchases | (276) | (276) | ||||
Balance at Dec. 31, 2018 | $ 250 | $ 27 | $ 15,610 | $ (233) | $ 5,436 | $ 21,090 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Nature of Business Our manufacturing services include complete medical devices, printed circuit board assemblies, wire and cable assemblies, and complex higher level electromechanical assemblies for a wide range of medical, industrial and defense and aerospace industries. We provide a full “turn‑key” contract manufacturing service to our customers. All products are built to the customer’s design specifications. We also provide engineering services and repair services. Our manufacturing facilities are located in Bemidji, Blue Earth, Merrifield, Milaca and Mankato, Minnesota as well as, Monterrey, Mexico and Suzhou, China. Products are sold to customers both domestically and internationally. Principles of Consolidation The consolidated financial statements include the accounts of Nortech Systems Incorporated and its wholly-owned subsidiaries, Manufacturing Assembly Solutions of Monterrey, Inc. and Nortech Systems Hong Kong Company, Limited and its subsidiary, Nortech Systems Suzhou Company, Limited. All significant intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our consolidated financial statements. Estimates also affect the reported amounts of revenue and expense during the reporting period. Significant items subject to estimates and assumptions include the valuation allowance for inventories, allowance for doubtful accounts, accrued warranties, realizability of deferred tax assets, goodwill impairment and long-lived asset impairment testing. Actual results could differ from those estimates. Restricted Cash Cash and cash equivalents classified as restricted cash on our consolidated balance sheets are restricted as to withdrawal or use under the terms of certain contractual agreements. The December 31, 2018 balance included cash collateral required to be held against our corporate employee purchasing card program and lockbox deposits that are temporarily restricted due to timing at the period end. The lockbox deposits are applied against our line of credit the next business day. As of December 31, 2018, we had no outstanding letters of credit. Restricted cash as of December 31, 2018 and December 31, 2017 was $467 and $306, respectively. Accounts Receivable and Allowance for Doubtful Accounts We grant credit to customers in the normal course of business. Accounts receivable are unsecured and are presented net of an allowance for doubtful accounts. The allowance for doubtful accounts was $222 and $209 at December 31, 2018 and 2017, respectively. We determine our allowance by considering a number of factors, including the length of time accounts receivable are past due, our previous loss history, the customers’ current ability to pay their obligations to us, and the condition of the general economy and the industry as a whole. We write‑off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Inventories Inventories are stated at the lower of cost (first‑in, first‑out method) or market (based on the lower of replacement cost or net realizable value). Costs include material, labor, and overhead required in the production of our products. Inventory reserves are maintained for inventories that may have a lower value than stated or quantities in excess of future production needs. Inventories are as follows: (in thousands) 2018 2017 Raw materials $ 16,769 $ 13,870 Work in process 1,015 3,112 Finished goods 332 2,389 Reserves (1,112) (844) Total $ 17,004 $ 18,527 Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Additions, improvements and major renewals are capitalized, while maintenance and minor repairs are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in operations. Leasehold improvements are depreciated over the shorter of their estimated useful lives or their remaining lease terms. All other property and equipment are depreciated by the straight‑line method over their estimated useful lives, as follows: Buildings 39 Years Leasehold improvements 3-15 Years Manufacturing equipment 3-7 Years Office and other equipment 3-7 Years Property and equipment at December 31, 2018 and 2017: (in thousands) 2018 2017 Land $ 360 $ 360 Building and Leasehold Improvements 9,184 8,827 Manufacturing Equipment 21,260 21,267 Office and Other Equipment 7,074 6,035 Accumulated Depreciation (27,700) (26,313) Total Property and Equipment, net $ 10,178 $ 10,176 Other Intangible Assets Finite life intangible assets at December 31, 2018 and 2017 are as follows: December 31, 2018 Gross Accumulated Net Book Carrying Amortization Value (in thousands) Years Amount Amount Amount Customer Relationships 9 1,302 506 796 Intellectual Property 3 100 61 39 Trade Names 20 814 143 671 Other 7 17 — 17 Totals $ 2,233 $ 710 $ 1,523 December 31, 2017 Gross Accumulated Net Book Carrying Amortization Value Years Amount Amount Amount Customer Relationships 9 1,302 361 941 Intellectual Property 3 100 28 72 Trade Names 20 814 102 712 Other 7 14 — 14 Totals $ 2,230 $ 491 $ 1,739 Amortization of finite life intangible assets was $219 and $237 for the years ended December 31, 2018 and 2017, respectively. Estimated future annual amortization expense (except projects in process) related to these assets is approximately as follows: Year Amount 2019 $ 219 2020 191 2021 185 2022 185 2023 185 Thereafter 541 $ 1,506 Goodwill and Other Intangible Assets In accordance with ASC 350, Goodwill and Other Intangible Assets , goodwill is not amortized but is required to be reviewed for impairment at least annually or when events or circumstances indicate that carrying value may exceed fair value. We test impairment annually as of October 1 st . In testing goodwill for impairment we perform a quantitative impairment test, including computing the fair value of the reporting unit and comparing that value to its carrying value. If the fair value is less than its carrying value, then the goodwill is determined to be impaired. In the event that goodwill is impaired, an impairment charge to earnings would become necessary. Based upon our annual goodwill impairment test we concluded that goodwill was impaired due to a significant reduction of results from operations during the fourth quarter of 2017. We adopted Accounting Standards Update No, 2017-04, Simplifying the Test for Goodwill Impairment, and performed a single step in performing our impairment analysis, which is to determine the estimated fair value of our reporting unit and compare it to the carrying value of the reporting unit, including goodwill. To the extent the carrying amount of goodwill exceeds the implied goodwill, the difference is the amount of the goodwill impairment. Our annual impairment test as of October 1, 2017, resulted in $908 of impairment charges related to our goodwill. The impairment charge was based on a combined approach using both the income approach which is based on discounted cash flows and the market approach which is based on the guideline public company method. Discounted cash flow models include assumptions related to our product revenue, gross margins, operating margins and other assumptions. There was no impairment of goodwill recorded in 2018. We recognize the assets acquired and liabilities assumed in business combinations on the basis of their fair values at the date of acquisition. We assess the fair value of assets, including intangible assets, using a variety of methods and each asset is measured at fair value from the perspective of a market participant. The method used to estimate the fair values of intangible assets incorporates significant assumptions regarding the estimates a market participant would make in order to evaluate an asset, including a market participant’s use of the asset and the appropriate discount rates for a market participant. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. On July 1, 2015, we completed the acquisition of substantially all of the assets of Devicix, LLC upon the terms and conditions contained in an Asset Purchase Agreement entered into on June 17, 2015. The Devicix acquisition resulted in $3,200 of goodwill, which is deductible for tax purposes. We recorded an impairment charge of $908 on the goodwill related to the Devicix, LLC purchase as of December 31, 2017. There was no impairment of goodwill recorded in 2018. Long-Lived Asset Impairment We evaluate long‑lived assets, primarily property and equipment, as well as the related depreciation periods, whenever current events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability for assets to be held and used is based on our projection of the undiscounted future operating cash flows of the underlying assets or asset group. To the extent such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amounts of related assets, a charge might be required to reduce the carrying amount to equal estimated fair value. Assets held for sale are reported at the lower of the carrying amount or fair value less costs to dispose. We determined there was a triggering event during the fourth quarter of 2017 and determined the undiscounted cash flows exceeded the carrying amounts of long-lived assets. We determined there were no triggering events in 2018. Preferred Stock Preferred stock issued is non‑cumulative and nonconvertible. The holders of the preferred stock are entitled to a non‑cumulative dividend of 12% when and if declared. In liquidation, holders of preferred stock have preference to the extent of $1.00 per share plus dividends accrued but unpaid. No preferred stock dividends were declared or paid during the years ended December 31, 2018 and 2017. Revenue Recognition Our revenue is comprised of product, engineering services and repair services. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our revenue being recognized over time including goods produced under contract manufacturing agreements and services revenue. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of our contracts have a single performance obligation. Revenue is recorded net of returns, allowances and customer discounts. Our net sales for services were less than 10% of our total sales for all periods presented, and accordingly, are included in net sales in the Consolidated Statements of Operations and Comprehensive Income (Loss). Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs charged to our customers are included in net sales, while the corresponding shipping expenses are included in cost of goods sold. Effective January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition.” ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract.The Company adopted the provisions of ASU 2014-09 using the modified retrospective approach with application to contracts that were not completed as of January 1, 2018. The adoption of ASU 2014-09 had a significant impact to the Company’s results of operations, cash flow and financial position, and as a result we now recognize the majority of our revenue over time rather than upon shipment resulting in an adjustment to retained earnings of $1,381 on January 1, 2018. The Company has presented the disclosures required by this new standard, refer to Note 3. Product Warranties We provide limited warranty for the replacement or repair of defective product within a specified time period after the sale at no cost to our customers. We make no other guarantees or warranties, expressed or implied, of any nature whatsoever as to the goods including, without limitation, warranties to merchantability, fit for a particular purpose or non‑infringement of patent or the like unless agreed upon in writing. We estimate the costs that may be incurred under our limited warranty and provide a reserve based on actual historical warranty claims coupled with an analysis of unfulfilled claims at the balance sheet date. Our warranty claim costs are not material given the nature of our products and services. Advertising Advertising costs are charged to operations as incurred. The total amount charged to expense was $132 and $68 for the years ended December 31, 2018 and 2017, respectively. Income Taxes We account for income taxes under the asset and liability method. Deferred income tax assets and liabilities are recognized annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The company recognizes interest and penalties accrued on any unrecognized tax benefits as a component on income tax expense. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Management must also assess whether uncertain tax positions as filed could result in the recognition of a liability for possible interest and penalties if any. Our estimates are based on the information available to us at the time we prepare the income tax provisions. Our income tax returns are subject to audit by federal, state, and local governments, generally three years after the returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws. Incentive Compensation We use a Black-Scholes option-pricing model to determine the grant date fair value of our incentive awards and recognize the expense on a straight-line basis over the vesting period less awards expected to be forfeited using estimated forfeiture rates. See Note 7 for additional information. Net Income (Loss) Per Common Share Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Dilutive net income (loss) per common share assumes the exercise and issuance of all potential common stock equivalents in computing the weighted-average number of common shares outstanding, unless their effect is antidilutive. A reconciliation of basic and diluted share amounts for the years ended December 31, 2018 and 2017 is as follows: 2018 2017 Basic weighted average common shares outstanding 2,692,382 2,745,602 Weighted average common stock equivalents from assumed exercise of stock options 7,232 — Diluted weighted average common shares outstanding 2,699,614 2,745,602 Fair Value of Financial Instruments The carrying amounts of all financial instruments approximate their fair values. The carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these instruments. Based on the borrowing rates currently available to us for bank loans with similar terms and average maturities, the carrying value of our long-term debt and line of credit approximates its fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value framework requires the categorization of assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability, reflecting the reporting entity’s own assumptions about the assumptions that market participants would use in pricing Our assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. We endeavor to use the best available information in measuring fair value. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Acquisition-Related Contingent Consideration The Company acquired Devicix on July 1, 2015. The aggregate consideration paid to Devicix shareholders includes up to $2,500 of contingent consideration to be paid based on the achievement of certain performance-based milestones. The fair value of the contingent consideration was measured using an expected present value approach to estimate an expected value. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of this Level 3 measured liability was $34 and $70 at December 31, 2018 and 2017, respectively. Goodwill The changes in the carrying amount of goodwill for the years presented are as follows: Carrying amount at December 31, 2016 $ 3,283 Impairment of goodwill (908) Carrying amount at December 31, 2017 2,375 Impairment of goodwill — Carrying amount at December 31,2018 $ 2,375 In determining the nonrecurring fair value measurements of impairment of goodwill we utilized a blend of the market value and discounted cash flow approach. We determined there was no impairment of goodwill during the year ended December 31, 2018. During the year ended December 31, 2017, we determined fair values for the identified assets and recorded an impairment charge of goodwill, set forth in the table below: Quoted Prices Significant Fair value as in active other Significant of markets for observable unobservable measurement identical assets inputs inputs Impairment date (Level 1) (Level 2) (Level 3) Charge December 31, 2017 Goodwill $ 2,375 — — $ 2,375 $ 908 Enterprise‑Wide Disclosures Our results of operations for the years ended December 31, 2018 and 2017 represent a single operating and reporting segment referred to as Contract Manufacturing within the EMS industry. We strategically direct production between our various manufacturing facilities based on a number of considerations to best meet our customers’ requirements. We share resources for sales, marketing, engineering, supply chain, information services, human resources, payroll and all corporate accounting functions. Consolidated financial information is available that is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources. Export sales from our domestic operations represent approximately 4.8% and 4.5% of consolidated net sales for the years ended December 31, 2018 and 2017, respectively. Net sales by our major EMS industry markets for the years ended December 31, 2018 and 2017 are as follows: (in thousands) 2018 2017 Aerospace and Defense $ 18,314 $ 15,683 Medical 45,082 51,449 Industrial 49,974 45,203 Total Net Sales $ 113,370 $ 112,335 Noncurrent assets, excluding deferred taxes, by country are as follows: (in thousands) United States Mexico China Total December 31, 2018 Property and equipment, net $ 8,687 $ 821 $ 670 $ 10,178 Other assets 3,898 8 — 3,906 December 31, 2017 Property and equipment, net $ 8,713 $ 1,003 $ 460 $ 10,176 Other assets 4,114 8 — 4,122 Foreign Currency Transactions The functional currency for our Mexico subsidiary is the US dollar. Foreign exchange transaction gains and losses attributable to exchange rate movements related to transactions made in the local currency and on intercompany receivables and payables not deemed to be of a long-term investment nature are recorded in other income (expense). The functional currency for our China subsidiary is the Renminbi (“RMB”). Assets and liabilities of the China operation are translated from RMB into U.S. dollars at period-end rates, while income and expense are translated at the weighted-average exchange rates for the period. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive income (loss) within shareholders’ equity. The total foreign currency translation adjustment decreased shareholders’ equity by $132, from an accumulated foreign currency translation loss of $101 as of December 31, 2017 to an accumulated foreign currency translation loss of $233 as of December 31, 2018. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the consolidated statements of income. Net foreign currency transaction losses included in the determination of net earnings was $170 and $192 for the years ended December 31, 2018 and 2017, respectively. Recently Issued and Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842), which supersedes the existing guidance for lease accounting, "Leases" (Topic 840). ASU No. 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases that extend beyond one year. The amendments in this ASU will be effective for us for interim and annual periods beginning after December 15, 2018. The original guidance required application on a modified retrospective basis with the earliest period presented in the financial statements. In August 2018, the FASB issued ASU 2018-11, "Targeted Improvements" to ASC 842, which includes an option to not restate comparative periods in transition and instead to elect to use the effective date of ASC 842, "Leases", as the date of initial application of transition. Based on the effective date, this guidance will apply and the Company will adopt this ASU beginning on January 1, 2019, and the Company plans to elect the transition option provided under ASU 2018-11. We have completed the qualitative analysis from the lessee perspective. As part of our process, we elected to utilize certain practical expedients that were provided for transition relief. Accordingly, we are not reassessing expired or existing contracts, lease classifications or related initial direct costs as part of our assessment process. Additionally, we elected the practical expedient to treat lease and non-lease components of fixed payments due to the lessor as one, and therefore no separate allocation is required on the initial implementation date of January 1, 2019, and thereafter. We anticipate the adoption of this standard will result in an increase in our right of use assets and lease liabilities in the range of $5,500 to $6,500 recorded on our consolidated balance sheets on January 1, 2019; however, these estimates are subject to change as the Company finalizes its implementation. In 2019, the Company will also implement additional internal controls to comply with the requirements of the standard. The Company does not believe the adoption of this guidance will have a material impact on its consolidated results of operations or cash flows. In March 2018, we adopted FASB ASU 2018-05 , Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 , which updates the income tax accounting in U.S. GAAP to reflect the Securities and Exchange Commission (“SEC”) interpretive guidance released on December 22, 2017, when the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. Additional information regarding the adoption of this standard is contained in Note 5 , 'Income Taxes '. |
CONCENTRATION OF CREDIT RISK AN
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS | 12 Months Ended |
Dec. 31, 2018 | |
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS | |
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS | NOTE 2. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. With regard to cash, we maintain our excess cash balances in checking accounts at two high‑credit quality financial institutions. These accounts may at times exceed federally insured limits. We grant credit to customers in the normal course of business and do not require collateral on our accounts receivable. Our largest customer has two divisions that together accounted for 10% or more of our net sales during the year ended December 31, 2018 and 2017. One division accounted for approximately 20.8% and 23.5% of net sales for the years ended December 31, 2018 and 2017, respectively. The second division accounted for approximately 2.4% and 1.4% of net sales for the years ended December 31, 2018 and 2017, respectively. Together they accounted for approximately for 23.2% and 24.9% of net sales for the years ended December 31, 2018 and 2017, respectively. Accounts receivable from the customer at December 31, 2018 and 2017 represented 16.3% and 16.4% of our total accounts receivable, respectively. |
REVENUE
REVENUE | 12 Months Ended |
Dec. 31, 2018 | |
REVENUE | |
REVENUE | NOTE 3. REVENUE Revenue recognition Our revenue is comprised of product, engineering services and repair services. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our revenue being recognized over time including goods produced under contract manufacturing agreements and services revenue. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of our contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances and customer discounts. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold. The majority of our revenue is derived from the transfer of goods produced under contract manufacturing agreements which have no alternative use and we have an enforceable right to payment for our performance completed to date. Our performance obligations within our contract manufacturing agreements are generally satisfied over time as the goods are produced based on customer specifications and we have an enforceable right to payment for the goods produced. If these requirements are not met, the revenue is recognized at a point in time, generally upon shipment. Revenue under contract manufacturing agreements that was recognized over time accounted for approximately 91% of our revenue for the twelve months ended December 31, 2018. Revenues under these agreements are generally recognized over time using an input measure based upon the proportion of actual costs incurred. Accounting for contract manufacturing agreements involves the use of various techniques to estimate total revenue and costs. We estimate profit on these agreements as the difference between total estimated revenue and expected costs to complete the performance obligation within the terms of the agreement and recognize the respective profit as the goods are produced. The estimates to determine the profit earned on the performance obligation are based on anticipated selling prices and historical cost of goods sold and represent our best judgement at the time. Changes in judgements on these above estimates could impact the timing and amount of revenue recognized with a resulting impact on the timing and amount of associated profit. On occasion our customers provide materials to be used in the manufacturing process and the fair value of the materials is included in revenue as noncash consideration at the point in time when the manufacturing process commences along with the same corresponding amount recorded as cost of goods sold. The inclusion of noncash consideration has no impact on overall profitability. Contract Assets Contract assets, recorded as such in the consolidated balance sheet, consist of unbilled amounts related to revenue recognized over time. Significant changes in the contract assets balance during the year ended December 31, 2018 was as follows: Year Ended December 31, 2018 Outstanding at January 1, 2018 $ 6,459 Increase (decrease) attributed to: Transferred to receivables from contract assets recognized Product transferred over time Outstanding at December 31, 2018 $ 6,431 We expect substantially all of the remaining performance obligations for the contract assets recorded as of December 31, 2018, to be transferred to receivables within 90 days, with any remaining amounts to be transferred within 180 days. We bill our customers upon shipment with payment terms of up to 120 days. The following tables summarize our net sales by market for the year ended December 31, 2018: Year Ending December 31, 2018 Product/ Service Product Transferred Over Transferred at Noncash Total Net Sales (in thousands) Time Point in Time Consideration by Market Aerospace and Defense $ 17,263 $ 232 $ 819 $ 18,314 Medical 39,071 4,157 1,854 45,082 Industrial 46,950 821 2,203 49,974 Total net sales $ 103,284 $ 5,210 $ 4,876 $ 113,370 Impact of New Revenue Guidance on Financial Statement Line Items The following table compares the reported consolidated statement of operations and comprehensive loss, balance sheet and cash flows, as of and for the year ended December 31, 2018, to the pro-forma amounts had the previous guidance been in effect: Year Ending December 31, 2018 Pro forma as if the previous accounting guidance was in Consolidated Statement of Operations As Reported effect Net Sales $ 113,370 $ 108,522 Cost of Goods Sold 100,059 95,249 Gross Profit 13,311 13,273 Income from Operations 1,249 1,211 Income Before Income Taxes 492 454 Income Tax Expense 326 326 Net Income $ 166 $ 128 Net Income Per Common Share - Diluted $ 0.06 $ 0.05 As of December 31, 2018 Pro forma as if the previous accounting guidance was in Consolidated Balance Sheet As Reported effect Assets Inventories $ 17,004 $ 22,015 Contract Assets $ 6,431 $ — Shareholders' Equity Retained Earnings $ 21,090 $ 19,671 Year Ending December 31, 2018 Pro forma as if the previous accounting guidance was in Consolidated Statement of Cash Flows As Reported effect Net Income $ 166 $ 128 Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities Change in Current Operating Items Inventories (3,875) (3,809) Contract Asset 28 — Net Cash Provided by Operating Activities $ 2,444 $ 2,444 |
FINANCING ARRANGEMENTS
FINANCING ARRANGEMENTS | 12 Months Ended |
Dec. 31, 2018 | |
FINANCING ARRANGEMENTS | |
FINANCING ARRANGEMENTS | NOTE 4. FINANCING ARRANGEMENTS We have a credit agreement with Bank of America which was entered into on June 15, 2017 and provides for a line of credit arrangement of $16,000 that expires on June 15, 2022. The credit arrangement also has a $5,000 real estate term note outstanding with a maturity date of June 15, 2022. The Bank of America credit agreement replaces our previous credit agreement with Wells Fargo Bank which terminated on June 20, 2017 and resulted in a loss on the extinguishment of debt of $175 primarily related to legal and terminations fees. Under the Bank of America credit agreement, both the line of credit and real estate term notes are subject to variations in the LIBOR rate. Our line of credit bears interest at a weighted-average interest rate of 4.8% as of December 31, 2018. We had borrowings on our line of credit of $9,264 and $8,503 outstanding as of December 31, 2018 and December 31, 2017, respectively. There are no subjective acceleration clauses under the credit agreement that would accelerate the maturity of our outstanding borrowings. The line of credit and real estate term notes with Bank of America contain certain covenants which, among other things, require us to adhere to regular reporting requirements, abide by annual shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual capital expenditures. The availability under our line is subject to borrowing base requirements, and advances are at the discretion of the lender. The line of credit is secured by substantially all of our assets. The Bank of America credit agreement as amended provides for, among other things, a fixed charge coverage ratio of not less than (i) 1.0 to 1.0 for each period of four fiscal quarters, commencing with the period of four fiscal quarters ending December 31, 2018. In addition, the agreement requires that the Company comply with certain minimum levels of cumulative EBITDA for measurement periods during fiscal 2018, including cumulative EBITDA of $1,970 for the twelve months ending December 31, 2018. The availability under the line is subject to borrowing base requirements, and advances are at the discretion of the lender. At December 31, 2018 and 2017, we had unused availability under our line of credit of $6,137 and $4,231, respectively, supported by our borrowing base. The line is secured by substantially all of our assets. As part of the July 1, 2015 Devicix acquisition we entered into two unsecured subordinated promissory notes payable to the seller in the principal amounts of $1,000 and $1,300. The $1,000 promissory note has a four-year term, bearing interest at 4% per annum, requiring monthly principal and interest payments of $23 and is subject to offsets if certain revenue levels are not met. The $1,300 promissory note has a four-year term and bears interest at 4% per annum, requiring monthly principal and interest payments of $29 and is not subject to offset. Long-term debt balances at December 31, 2018 and 2017 consisted of the following (in thousands): December 31, December 31, (in thousands) 2018 2017 Term note payable - Bank of America Real estate term note bearing interest at one-month LIBOR + 2.25% (4.8% and 4.5% as of December 31, 2018 and 2017, respectively) maturing June 15, 2022 with monthly payments of approximately $41,000 plus interest secured by substantially all assets. $ 4,253 $ 4,751 Devicix Acquistion Note 1 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019. 156 394 Devicix Acquistion Note 2 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019. 203 512 4,612 5,657 Discount on Devicix Notes Payable (23) (63) Debt issuance Costs (185) (238) Total long-term debt 4,404 5,356 Current maturities of long-term debt (780) (1,003) Long-term debt - net of current maturities $ 3,624 $ 4,353 Future maturity requirements for long‑term debt outstanding as of December 31, 2018, are as follows: Years Ending December 31, Amount 2019 $ 857 2020 498 2021 498 2022 2,759 $ 4,612 During the third quarter of fiscal year 2017, the Company entered into a five-year lease of equipment used in the normal course of business with a principal borrowing amount of $1,096. The lease qualified as a capital lease and is accounted for accordingly, based on an effective interest rate of 4.97%. As of December 31, 2017, the property held under the capital lease was $1,103. The Company entered into a second lease in September 2017, with a four year, six-month term used in the normal course of business with a principal borrowing amount of $502. The lease qualified as a capital lease and is accounted for accordingly, based on an effective interest rate of 6.22%. As of December 31, 2017, the property held under the capital lease was $421. As of December 31, 2018, the Company had no depreciation expense related to the leased assets as it was not in operational use and related implementation costs were not complete. The Company has lease financing facilities for property and equipment. The obligations are collateralized by the property underlying lease. Total cost of the leased equipment was $1,624 at December 31, 2018 and $1,524 at December 31, 2017. Current maturities of capital leases were $337 at December 31, 2018 and $295 at December 31, 2017. Interest expense related to the leased assets was $91 and $9 for the years ended December 31, 2018 and 2017, respectively. Depreciation expense related to the leased assets was $201 and $0 for the years ended December 31, 2018 and 2017, respectively. Approximate future minimum lease payments under non-cancelable capital leases subsequent to December 31, 2018 are as follows: Years Ending December 31, Amount 2019 $ 398 2020 398 2021 398 2022 211 2023 2 Total noncancelable future lease commitments $ 1,407 Less: interest (119) Present value of obligations under capital leases $ 1,288 |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
INCOME TAXES | |
INCOME TAXES | NOTE 5. INCOME TAXES On December 22, 2017, the Tax Cuts and Jobs Act ("U.S. Tax Reform") was enacted. The legislation significantly changed U.S. tax law by lowering the federal corporate tax rate from 34.0% to 21.0%, effective January 1, 2018, modifying the foreign earnings deferral provisions, and imposing a one-time toll charge on deemed repatriated earnings of foreign subsidiaries as of December 31, 2017. Effective for 2018 and forward, there is a tax on global intangible low-taxed income provisions ("GILTI"). As of December 31, 2017, two provisions that affected the consolidated financial statements were the corporate tax rate reduction and the one-time toll charge. As the corporate tax rate reduction was enacted in 2017 and effective January 1, 2018, we appropriately accounted for the tax rate change in the valuation of our deferred taxes. As a result of GILTI, we recorded a tax expense of $296 in 2018. Global Intangible Low Taxed Income (GILTI): The Tax Act creates a new requirement that certain income (i.e. GILTI) earned by controlled foreign corporations (CFCs) must be included currently in the gross income of the CFCs' U.S. Shareholder. GILTI is the excess of the shareholder's "net CFC tested income" over the net deemed tangible income return, which is currently defined as the excess of 1) 10 percent of the aggregate of the U.S. shareholder's pro rata share of the qualified business asset investment of each CFC with respect to which it is a U.S. shareholder over 2) the amount of certain interest expense taken into account in the determination of net CFC-tested income. Under U.S. GAAP, we are allowed to make an accounting policy choice of either 1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the "period cost method") or 2) factoring such amounts into a company's measurement of its deferred taxes (the "deferred method"). We have selected the period cost method. As a result, we have not provided deferred taxes related to the temporary differences that upon reversal will affect the amount of income subject to GILTI in the period. The SEC issued Staff Accounting Bulletin No. 118 ("SAB 118"), which provides us with up to one year to finalize accounting for the impacts of U.S. Tax Reform. In 2017, we estimated the provisional tax impacts related to the toll charge, deferred income taxes, including the impacts of the change in corporate tax rate, and out indefinite reinvestment assertion. As of the fourth quarter of 2018, we have completed our accounting for the tax effects of U.S. Tax Reform and determined we would not be subject to the one-time transition tax. The total impact was calculated to be $223. The income tax expense for the years ended December 31, 2018 and 2017 consists of the following: (in thousands) 2018 2017 Current taxes - Federal $ (38) $ (124) Current taxes - State 10 10 Current taxes - Foreign 334 49 Deferred taxes - Federal — 176 Deferred taxes - State — 239 Deferred taxes - Foreign 20 25 Income tax expense $ 326 $ 375 The statutory rate reconciliation for the years ended December 31, 2018 and 2017 is as follows: (in thousands) 2018 2017 Statutory federal tax provision (benefit) $ 107 $ (704) State income tax benefit (36) (117) Effect of foreign operations 52 (88) Uncertain tax positions (19) — Income tax credits — (112) Valuation allowance (199) 1,011 Permanent differences 15 8 Global Intangile Low-Taxed Income Effect 296 — Return to Provision - Credits and NOL 176 — Deferred adjustments (62) — Loss of Section 199 due to carryback claim — 46 Effects of tax reform — 280 Other (4) 51 Income tax expense $ 326 $ 375 Income (loss) from operations before income taxes was derived from the following sources: (in thousands) 2018 2017 Domestic $ (1,090) $ (2,831) Foreign 1,582 760 Total $ 492 $ (2,071) Deferred tax assets (liabilities) at December 31, 2018 and 2017, consist of the following: (in thousands) 2018 2017 Deferred Tax Allowance for uncollectable accounts $ 53 $ 49 Inventories reserve 267 198 Accrued vacation 145 194 Amortization — 191 Stock-based compensation and equity appreciation rights 54 23 Net operating loss carryforwards 175 359 Tax credit carryforwards 449 613 Other 76 24 1,219 1,651 Valuation allowance (614) (1,146) Deferred tax assets 605 505 Prepaid expenses (40) (165) Section 481(a) adjustment (249) — Property and equipment (316) (319) Deferred tax liabilities (605) (484) Net deferred tax assets $ — $ 21 We currently have significant deferred tax assets as a result of temporary differences between taxable income on our tax returns and U.S. GAAP income, research and development tax credit carry forwards and federal and state net operating loss carry forwards. A deferred tax asset generally represents future tax benefits to be received when temporary differences previously reported in our financial statements become deductible for income tax purposes, or when net operating loss carry forwards are applied against future taxable income, or when tax credit carry forwards are utilized on our tax returns. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on the guidance provided in current financial accounting standards. Significant judgment is required in determining the realizability of our deferred tax assets. The assessment of whether valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with loss carry forwards not expiring unused and tax planning alternatives. We have concluded that a valuation allowance is needed for all of our United States based deferred tax assets due to the cumulative net losses we have sustained in the past three years and our near term financial outlook. In analyzing the need for a valuation allowance, we considered our history of operating results for income tax purposes over the past three years in each of the tax jurisdictions where we operate, statutory carry forward periods and tax planning alternatives. Finally, we considered both our near and long-term financial outlook and timing regarding when we might return to profitability. After considering all available evidence both positive and negative, we concluded that the valuation allowance is needed for all of our U.S. based deferred tax assets, no valuation allowance was placed on the foreign assets. At December 31, 2018, we had federal general business tax credit carryforwards of $284 that will begin to expire in 2028 and a federal net operating loss (“NOL”) carry forward of $23 that will begin to expire in 2037, if unused. For U.S. state tax purposes we have Minnesota R&D credit carryforwards of $198 and various state net operating loss carryforwards of $400 for Iowa, $4 for Montana, $1,168 for Minnesota, $662 for Wisconsin. The state credits and NOLs expire at various years starting in 2024. The tax effects from an uncertain tax positions can be recognized in our consolidated financial statements, only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The following table sets forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for the years ended December 31, 2018 and 2017 (in thousands): Balance as of December 31, 2016 $ 52 Tax positions related to 2017: Additions based on tax positions related to the current year 22 Statute of limitations (22) Balance as of December 31, 2017 $ 52 Tax positions related to current year: Additions based on tax positions related to the current year — Statute of limitations (19) Balance as of December 31, 2018 $ 33 The $33 of unrecognized tax benefits as of December 31, 2018 includes amounts which, if ultimately recognized, will reduce our annual effective tax rate. In prior years, it was included in other long‑term liabilities on the accompanying consolidated balance sheets. In 2018, the amount has been netted against the applicable deferred tax asset as any adjustment would reduce the recorded asset. Our policy is to accrue interest and any penalties related to potential underpayment of income taxes within the provision for income taxes. The liability for accrued interest as of December 31, 2018 and 2017 was not significant. Interest is computed on the difference between our uncertain tax benefit positions and the amount deducted or expected to be deducted in our tax returns. We are subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2018, with few exceptions, the Company or its subsidiaries are no longer subject to examination prior to tax year 2012. |
401(K) RETIREMENT PLAN
401(K) RETIREMENT PLAN | 12 Months Ended |
Dec. 31, 2018 | |
401(K) RETIREMENT PLAN | |
401(K) RETIREMENT PLAN | NOTE 6. 401(K) RETIREMENT PLAN We have a 401(k) profit sharing plan (the 401(k) Plan) for our employees. The 401(k) Plan is a defined contribution plan covering substantially all of our U.S. employees. Employees are eligible to participate in the Plan after completing three months of service and attaining the age of 18. Employees are allowed to contribute up to 60% of their wages to the 401(k) Plan. Historically we have matched 25% of the employees’ contributions up to 6% of covered compensation. We made contributions of approximately $286 and $287 during the years ended December 31, 2018 and 2017, respectively. |
INCENTIVE PLANS
INCENTIVE PLANS | 12 Months Ended |
Dec. 31, 2018 | |
INCENTIVE PLANS | |
INCENTIVE PLANS | NOTE 7. INCENTIVE PLANS Stock Options On May 3, 2005, the shareholders approved the 2005 Incentive Compensation Plan (the 2005 Plan) and eliminated the remaining 172,500 option shares available for grant under the prior 2003 Plan effective February 23, 2005. The total number of shares of common stock that may be granted under the 2005 Plan is 200,000. The 2005 Plan has not been renewed, and therefore no further grants may be made under the 2005 Plan. The 2005 Plan provides that option shares granted come from our authorized but unissued common stock. Under the 2005 Incentive Compensation Plan, there were no stock options granted during the years ended December 31, 2017 and 2016. In May 2017, the shareholders approved the 2017 Stock Incentive Plan which authorized the issuance of 350,000 shares. There were 134,000 and 150,000 options granted during the year ended December 31, 2018 and 2017, respectively. For both of the above plans, The price of the option shares granted under the plan will not be less than 100% of the fair market value of the common shares on the date of grant. Options are generally exercisable after one or more years and expire no later than 10 years from the date of grant. We estimate the fair value of share-based awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense in the consolidated statements of operations over the requisite service periods. Because share-based compensation expense is based on awards that are ultimately expected to vest, share-based compensation expense will be reduced to account for estimated forfeitures. We estimate forfeitures at the time of grant and revise the estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We used the Black‑Scholes option‑pricing model to calculate the fair value of option‑based awards. Our determination of fair value of option‑based awards on the date of grant using the Black‑Scholes model is affected by our stock price as well as assumptions regarding a number of subjective variables. These variables include, but are not limited to, our expected stock price, volatility over the term of the awards, risk‑free interest rate, and the expected life of the options. The risk‑free interest rate is based on a treasury instrument whose term is consistent with the expected life of our stock options. The expected volatility and holding period are based on our historical experience. For all grants, the amount of compensation expense recognized has been adjusted for an estimated forfeiture rate, which is based on historical data. A summary of option activity as of and for the year-ended December 31, 2018 is as follows: Weighted- Average Weighted- Remaining Average Contractual Exercise Price Term Aggregate Shares Per Share (in years) Intrinsic Value Outstanding-January 1, 2017 37,750 $ 4.75 Granted 150,000 3.43 Exercised — — Cancelled — — Outstanding-December 31, 2017 187,750 $ 3.70 8.13 $ 74,070 Granted 134,000 3.36 Exercised — — Cancelled (97,000) (3.84) Outstanding-December 31, 2018 224,750 $ 3.44 8.60 $ 52,715 Exercisable on December 31, 2018 44,750 $ 3.65 6.59 $ 8,075 There were no options exercises during the years ended December 31, 2018 and 2017.Total compensation expense related to stock options for the years ended December 31, 2018 and 2017 was $126 and $43, respectively. As of December 31, 2018, there was $160 of unrecognized compensation which will vest over the next 4.05 years. Equity Appreciation Rights Plan In November 2010, the Board of Directors approved the adoption of the Nortech Systems Incorporated Equity Appreciation Rights Plan (the 2010 Plan). The total number of Equity Appreciation Right Units (Units) the Plan can issue shall not exceed an aggregate of 1,000,000 Units as amended and restated on March 11, 2015 and approved by the shareholders on May 6, 2015. The 2010 Plan provides that Units issued shall fully vest three years from the base date as defined in the agreement unless terminated earlier. Units give the holder a right to receive a cash payment equal to the appreciation in book value per share of common stock from the base date, as defined, to the redemption date. Unit redemption payments under this plan shall be paid in cash within 90 days after we determine the book value of the Units as of the calendar year immediately preceding the redemption date. The Units are adjusted to each reporting period based on the expected appreciation of the Units as defined in the Plan. During the year ended December 31, 2016, we granted 31,666 Units with a base date of January 1, 2016 and a vesting date of January 1, 2019. During the year-ended December 31, 2017, we granted a total of 100,000 Units with a vesting date of December 31, 2019. Total compensation expense (income) related to the vested outstanding Units based on the estimated appreciation over their remaining terms was approximately $0 and ($22) for the years ended December 31, 2018 and 2017, respectively. The expense (income) for the years ended December 31, 2018 and 2017 was the result of a change in the estimate of the appreciation of book value per share of common stock. A summary of the liability as of December 31 and changes during the years then ended, is as follows: (in thousands) 2018 2017 Beginning Balance $ — $ 45 Reductions — (22) Payments — (23) Ending Balance $ — $ — |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 8. COMMITMENTS AND CONTINGENCIES Operating Leases We have various operating leases for production and office equipment, office space, and buildings under non‑cancelable lease agreements expiring on various dates through 2029. Rent expense for the years ended December 31, 2018 and 2017 totaled approximately $1,376 and $1,271 respectively. On February 21, 2018, we entered into a ten-year lease agreement for a 77,000 square foot manufacturing facility in Nuevo Leon, Mexico which we took occupancy during the fourth quarter of 2018. The Lease Agreement provides for monthly rent payments of approximately $43. This facility replaced the Monterrey, Mexico facility lease which expired January 31, 2019. Approximate future minimum lease payments under non‑cancelable leases are as follows: Years Ending December 31, Amount 2019 $ 1,024 2020 858 2021 722 2022 726 2023 738 Thereafter 3,380 Total $ 7,448 Litigation We are subject to various legal proceedings and claims that arise in the ordinary course of business. In our opinion, the amount of any ultimate liability with respect to these actions will not materially affect our consolidated financial statements or results of operations. Executive Life Insurance Plan During 2002, we set up an Executive Bonus Life Insurance Plan (the Plan) for our key employees (participants). Pursuant to the Plan, we will pay a bonus to officer participants of 15% and a bonus to all other participants of 10% of the participants’ base annual salary, as well as an additional bonus to cover federal and state taxes incurred by the participants. The participants are required to purchase life insurance and retain ownership of the life insurance policy once it is purchased. The Plan provides a five‑year graded vesting schedule in which the participants vest at a rate of 20% each year. Should a participant terminate employment prior to the fifth year of vesting, that participant may be required to reimburse us for any unvested amounts, under certain circumstances. Expenses under the Plan were $0 and $207 for the years ended December 31, 2018 and 2017, respectively. On December 13, 2017, the Plan was terminated. Change of Control Agreements Since 2002, we entered into Change of Control Agreements (the Agreement(s)) with certain key executives (the Executive(s)). The Agreements provide an inducement for each Executive to remain as an employee in the event of any proposed or anticipated change of control in the organization, including facilitating an orderly transition, and to provide economic security for the Executive after a change in control has occurred. In the event of an involuntarily termination in connection with a change of control as defined in the agreements, each Executive would receive their base salary, annual bonus at time of termination, and continued participation in health, disability and life insurance plans for a period of three years for officers and two years for all other participants. Participants would also receive professional outplacement services up to $10, if applicable. Each Agreement remains in full force until the Executive terminates employment or we terminate the employment of the Executive. Stock Repurchase Plan The $250 share repurchase program, authorized by our Board of Directors in August 2017, expired in July 2018 with no authorized repurchases remaining under this program. Under this repurchase program, we repurchased 55,199 shares totaling $201 during the year ended December 31, 2018. In August 2018, the Board of Directors approved an additional $250 share repurchase program. Under this repurchase program, we repurchased 21,002 shares totaling $81 during the year ended December 31, 2018. As of December 31, 2017, we had a $250 share repurchase program which was authorized by our Board of Directors in August 2017. Under this repurchase program, we repurchased 8,581 shares in open market transactions totaling $30, during the year ended December 31, 2017. As of December 31, 2017, we had a $220 authorized balance remaining under this share repurchase program. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted from additional paid-in capital. Executive Separation Agreement The Company entered into a Separation Agreement with Matt Mahmood, our former Chief Operating Officer, effective October 5, 2018. In connection with the Separation Agreement, the Company recognized approximately $235 in expense during the year ended December 31, 2018 related to separation payments. As of December 31, 2018, approximately $177 is included in accrued payroll and commissions on the consolidated balance sheet which is expected to be paid in full during 2019. |
PLANT CLOSURE
PLANT CLOSURE | 12 Months Ended |
Dec. 31, 2018 | |
PLANT CLOSURE | |
PLANT CLOSURE | NOTE 9. PLANT CLOSURE On January 31, 2017, the Company closed its manufacturing operations in Augusta, Wisconsin. The Company operated a facility in Augusta since 1992, serving mainly an industrial customer base and defense overflow production that aligned with their custom cable capabilities. The Company consolidated its Augusta operations with its other facilities, continuing to serve customers without interruption. This consolidation increased the Company’s overall asset utilization and cost leveraging. On March 31, 2017, the Company closed on the sale of the Augusta building and building improvements for $715. The Augusta building and building improvements had a net book value of $314, recognizing a gain on the sale, net of related expenses, of $354, and applied the net proceeds of $668 towards the outstanding real estate term note. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2018 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 10. RELATED PARTY TRANSACTIONS During 2016, the Company entered into a consulting arrangement with a company co-owned by Matt Mahmood, who became the Chief Operating Officer of the Company on May 20, 2017 and who resigned from the Company on October 5, 2018. For the years ended December 31, 2018 and 2017, expenses were incurred in the amounts of $50, and $97, respectively. On February 22, 2018, the Company entered into a Consulting Agreement with Crosscourt Group, LLC, a limited liability company owned and managed by William Murray, formerly an independent director of the Company. Mr. Murray resigned from this position in May 2018. The term of the Consulting Agreement was three months and ended in the second quarter of 2018. For the year ended December 31, 2018, expenses were incurred in the amounts of $68. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | NOTE 11. SUBSEQUENT EVENTS Effective January 1, 2019, the Company entered into an employment agreement with Jay D. Miller as the Company’s Interim President. Effective February 27, 2019, the Company entered into an employment agreement with Jay D. Miller as the Company’s President and Chief Executive officer. In connection with the employment agreements, the Company granted 7,500 stock options that vested on January 1, 2019, 125,000 stock options that vest annually over five years, 100,000 equity appreciation rights units and 25,000 shares of the Company’s common stock. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Nortech Systems Incorporated and its wholly-owned subsidiaries, Manufacturing Assembly Solutions of Monterrey, Inc. and Nortech Systems Hong Kong Company, Limited and its subsidiary, Nortech Systems Suzhou Company, Limited. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our consolidated financial statements. Estimates also affect the reported amounts of revenue and expense during the reporting period. Significant items subject to estimates and assumptions include the valuation allowance for inventories, allowance for doubtful accounts, accrued warranties, realizability of deferred tax assets, goodwill impairment and long-lived asset impairment testing. Actual results could differ from those estimates. |
Restricted Cash | Restricted Cash Cash and cash equivalents classified as restricted cash on our consolidated balance sheets are restricted as to withdrawal or use under the terms of certain contractual agreements. The December 31, 2018 balance included cash collateral required to be held against our corporate employee purchasing card program and lockbox deposits that are temporarily restricted due to timing at the period end. The lockbox deposits are applied against our line of credit the next business day. As of December 31, 2018, we had no outstanding letters of credit. Restricted cash as of December 31, 2018 and December 31, 2017 was $467 and $306, respectively. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts We grant credit to customers in the normal course of business. Accounts receivable are unsecured and are presented net of an allowance for doubtful accounts. The allowance for doubtful accounts was $222 and $209 at December 31, 2018 and 2017, respectively. We determine our allowance by considering a number of factors, including the length of time accounts receivable are past due, our previous loss history, the customers’ current ability to pay their obligations to us, and the condition of the general economy and the industry as a whole. We write‑off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. |
Inventories | Inventories Inventories are stated at the lower of cost (first‑in, first‑out method) or market (based on the lower of replacement cost or net realizable value). Costs include material, labor, and overhead required in the production of our products. Inventory reserves are maintained for inventories that may have a lower value than stated or quantities in excess of future production needs. Inventories are as follows: (in thousands) 2018 2017 Raw materials $ 16,769 $ 13,870 Work in process 1,015 3,112 Finished goods 332 2,389 Reserves (1,112) (844) Total $ 17,004 $ 18,527 |
Property and Equipment | Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Additions, improvements and major renewals are capitalized, while maintenance and minor repairs are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in operations. Leasehold improvements are depreciated over the shorter of their estimated useful lives or their remaining lease terms. All other property and equipment are depreciated by the straight‑line method over their estimated useful lives, as follows: Buildings 39 Years Leasehold improvements 3-15 Years Manufacturing equipment 3-7 Years Office and other equipment 3-7 Years Property and equipment at December 31, 2018 and 2017: (in thousands) 2018 2017 Land $ 360 $ 360 Building and Leasehold Improvements 9,184 8,827 Manufacturing Equipment 21,260 21,267 Office and Other Equipment 7,074 6,035 Accumulated Depreciation (27,700) (26,313) Total Property and Equipment, net $ 10,178 $ 10,176 |
Other Intangible Assets | Other Intangible Assets Finite life intangible assets at December 31, 2018 and 2017 are as follows: December 31, 2018 Gross Accumulated Net Book Carrying Amortization Value (in thousands) Years Amount Amount Amount Customer Relationships 9 1,302 506 796 Intellectual Property 3 100 61 39 Trade Names 20 814 143 671 Other 7 17 — 17 Totals $ 2,233 $ 710 $ 1,523 December 31, 2017 Gross Accumulated Net Book Carrying Amortization Value Years Amount Amount Amount Customer Relationships 9 1,302 361 941 Intellectual Property 3 100 28 72 Trade Names 20 814 102 712 Other 7 14 — 14 Totals $ 2,230 $ 491 $ 1,739 Amortization of finite life intangible assets was $219 and $237 for the years ended December 31, 2018 and 2017, respectively. Estimated future annual amortization expense (except projects in process) related to these assets is approximately as follows: Year Amount 2019 $ 219 2020 191 2021 185 2022 185 2023 185 Thereafter 541 $ 1,506 |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets In accordance with ASC 350, Goodwill and Other Intangible Assets , goodwill is not amortized but is required to be reviewed for impairment at least annually or when events or circumstances indicate that carrying value may exceed fair value. We test impairment annually as of October 1 st . In testing goodwill for impairment we perform a quantitative impairment test, including computing the fair value of the reporting unit and comparing that value to its carrying value. If the fair value is less than its carrying value, then the goodwill is determined to be impaired. In the event that goodwill is impaired, an impairment charge to earnings would become necessary. Based upon our annual goodwill impairment test we concluded that goodwill was impaired due to a significant reduction of results from operations during the fourth quarter of 2017. We adopted Accounting Standards Update No, 2017-04, Simplifying the Test for Goodwill Impairment, and performed a single step in performing our impairment analysis, which is to determine the estimated fair value of our reporting unit and compare it to the carrying value of the reporting unit, including goodwill. To the extent the carrying amount of goodwill exceeds the implied goodwill, the difference is the amount of the goodwill impairment. Our annual impairment test as of October 1, 2017, resulted in $908 of impairment charges related to our goodwill. The impairment charge was based on a combined approach using both the income approach which is based on discounted cash flows and the market approach which is based on the guideline public company method. Discounted cash flow models include assumptions related to our product revenue, gross margins, operating margins and other assumptions. There was no impairment of goodwill recorded in 2018. We recognize the assets acquired and liabilities assumed in business combinations on the basis of their fair values at the date of acquisition. We assess the fair value of assets, including intangible assets, using a variety of methods and each asset is measured at fair value from the perspective of a market participant. The method used to estimate the fair values of intangible assets incorporates significant assumptions regarding the estimates a market participant would make in order to evaluate an asset, including a market participant’s use of the asset and the appropriate discount rates for a market participant. Any excess purchase price over the fair value of the net tangible and intangible assets acquired is allocated to goodwill. On July 1, 2015, we completed the acquisition of substantially all of the assets of Devicix, LLC upon the terms and conditions contained in an Asset Purchase Agreement entered into on June 17, 2015. The Devicix acquisition resulted in $3,200 of goodwill, which is deductible for tax purposes. We recorded an impairment charge of $908 on the goodwill related to the Devicix, LLC purchase as of December 31, 2017. There was no impairment of goodwill recorded in 2018. |
Long-Lived Asset Impairment | Long-Lived Asset Impairment We evaluate long‑lived assets, primarily property and equipment, as well as the related depreciation periods, whenever current events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability for assets to be held and used is based on our projection of the undiscounted future operating cash flows of the underlying assets or asset group. To the extent such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amounts of related assets, a charge might be required to reduce the carrying amount to equal estimated fair value. Assets held for sale are reported at the lower of the carrying amount or fair value less costs to dispose. We determined there was a triggering event during the fourth quarter of 2017 and determined the undiscounted cash flows exceeded the carrying amounts of long-lived assets. We determined there were no triggering events in 2018. |
Preferred Stock | Preferred Stock Preferred stock issued is non‑cumulative and nonconvertible. The holders of the preferred stock are entitled to a non‑cumulative dividend of 12% when and if declared. In liquidation, holders of preferred stock have preference to the extent of $1.00 per share plus dividends accrued but unpaid. No preferred stock dividends were declared or paid during the years ended December 31, 2018 and 2017. |
Revenue Recognition | Revenue Recognition Our revenue is comprised of product, engineering services and repair services. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our revenue being recognized over time including goods produced under contract manufacturing agreements and services revenue. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of our contracts have a single performance obligation. Revenue is recorded net of returns, allowances and customer discounts. Our net sales for services were less than 10% of our total sales for all periods presented, and accordingly, are included in net sales in the Consolidated Statements of Operations and Comprehensive Income (Loss). Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs charged to our customers are included in net sales, while the corresponding shipping expenses are included in cost of goods sold. Effective January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition.” ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract.The Company adopted the provisions of ASU 2014-09 using the modified retrospective approach with application to contracts that were not completed as of January 1, 2018. The adoption of ASU 2014-09 had a significant impact to the Company’s results of operations, cash flow and financial position, and as a result we now recognize the majority of our revenue over time rather than upon shipment resulting in an adjustment to retained earnings of $1,381 on January 1, 2018. The Company has presented the disclosures required by this new standard, refer to Note 3. |
Product Warranties | Product Warranties We provide limited warranty for the replacement or repair of defective product within a specified time period after the sale at no cost to our customers. We make no other guarantees or warranties, expressed or implied, of any nature whatsoever as to the goods including, without limitation, warranties to merchantability, fit for a particular purpose or non‑infringement of patent or the like unless agreed upon in writing. We estimate the costs that may be incurred under our limited warranty and provide a reserve based on actual historical warranty claims coupled with an analysis of unfulfilled claims at the balance sheet date. Our warranty claim costs are not material given the nature of our products and services. |
Advertising | Advertising Advertising costs are charged to operations as incurred. The total amount charged to expense was $132 and $68 for the years ended December 31, 2018 and 2017, respectively. |
Income Taxes | Income Taxes We account for income taxes under the asset and liability method. Deferred income tax assets and liabilities are recognized annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The company recognizes interest and penalties accrued on any unrecognized tax benefits as a component on income tax expense. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Management must also assess whether uncertain tax positions as filed could result in the recognition of a liability for possible interest and penalties if any. Our estimates are based on the information available to us at the time we prepare the income tax provisions. Our income tax returns are subject to audit by federal, state, and local governments, generally three years after the returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws. |
Incentive Compensation | Incentive Compensation We use a Black-Scholes option-pricing model to determine the grant date fair value of our incentive awards and recognize the expense on a straight-line basis over the vesting period less awards expected to be forfeited using estimated forfeiture rates. See Note 7 for additional information. |
Net Income (Loss) Per Common Share | Net Income (Loss) Per Common Share Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding. Dilutive net income (loss) per common share assumes the exercise and issuance of all potential common stock equivalents in computing the weighted-average number of common shares outstanding, unless their effect is antidilutive. A reconciliation of basic and diluted share amounts for the years ended December 31, 2018 and 2017 is as follows: 2018 2017 Basic weighted average common shares outstanding 2,692,382 2,745,602 Weighted average common stock equivalents from assumed exercise of stock options 7,232 — Diluted weighted average common shares outstanding 2,699,614 2,745,602 |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of all financial instruments approximate their fair values. The carrying amounts for cash and cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short maturity of these instruments. Based on the borrowing rates currently available to us for bank loans with similar terms and average maturities, the carrying value of our long-term debt and line of credit approximates its fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value framework requires the categorization of assets and liabilities into one of three levels based on the assumptions (inputs) used in valuing the asset or liability. Level 1 provides the most reliable measure of fair value, while Level 3 generally requires significant management judgment. The three levels are defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability, reflecting the reporting entity’s own assumptions about the assumptions that market participants would use in pricing Our assessment of the significance of a particular input to the fair value measurements requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. We endeavor to use the best available information in measuring fair value. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. |
Acquisition-Related Contingent Consideration | Acquisition-Related Contingent Consideration The Company acquired Devicix on July 1, 2015. The aggregate consideration paid to Devicix shareholders includes up to $2,500 of contingent consideration to be paid based on the achievement of certain performance-based milestones. The fair value of the contingent consideration was measured using an expected present value approach to estimate an expected value. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of this Level 3 measured liability was $34 and $70 at December 31, 2018 and 2017, respectively. |
Goodwill | Goodwill The changes in the carrying amount of goodwill for the years presented are as follows: Carrying amount at December 31, 2016 $ 3,283 Impairment of goodwill (908) Carrying amount at December 31, 2017 2,375 Impairment of goodwill — Carrying amount at December 31,2018 $ 2,375 In determining the nonrecurring fair value measurements of impairment of goodwill we utilized a blend of the market value and discounted cash flow approach. We determined there was no impairment of goodwill during the year ended December 31, 2018. During the year ended December 31, 2017, we determined fair values for the identified assets and recorded an impairment charge of goodwill, set forth in the table below: Quoted Prices Significant Fair value as in active other Significant of markets for observable unobservable measurement identical assets inputs inputs Impairment date (Level 1) (Level 2) (Level 3) Charge December 31, 2017 Goodwill $ 2,375 — — $ 2,375 $ 908 |
Enterprise-Wide Disclosures | Enterprise‑Wide Disclosures Our results of operations for the years ended December 31, 2018 and 2017 represent a single operating and reporting segment referred to as Contract Manufacturing within the EMS industry. We strategically direct production between our various manufacturing facilities based on a number of considerations to best meet our customers’ requirements. We share resources for sales, marketing, engineering, supply chain, information services, human resources, payroll and all corporate accounting functions. Consolidated financial information is available that is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources. Export sales from our domestic operations represent approximately 4.8% and 4.5% of consolidated net sales for the years ended December 31, 2018 and 2017, respectively. Net sales by our major EMS industry markets for the years ended December 31, 2018 and 2017 are as follows: (in thousands) 2018 2017 Aerospace and Defense $ 18,314 $ 15,683 Medical 45,082 51,449 Industrial 49,974 45,203 Total Net Sales $ 113,370 $ 112,335 Noncurrent assets, excluding deferred taxes, by country are as follows: (in thousands) United States Mexico China Total December 31, 2018 Property and equipment, net $ 8,687 $ 821 $ 670 $ 10,178 Other assets 3,898 8 — 3,906 December 31, 2017 Property and equipment, net $ 8,713 $ 1,003 $ 460 $ 10,176 Other assets 4,114 8 — 4,122 |
Foreign Currency Transactions | Foreign Currency Transactions The functional currency for our Mexico subsidiary is the US dollar. Foreign exchange transaction gains and losses attributable to exchange rate movements related to transactions made in the local currency and on intercompany receivables and payables not deemed to be of a long-term investment nature are recorded in other income (expense). The functional currency for our China subsidiary is the Renminbi (“RMB”). Assets and liabilities of the China operation are translated from RMB into U.S. dollars at period-end rates, while income and expense are translated at the weighted-average exchange rates for the period. The related translation adjustments are reflected as a foreign currency translation adjustment in accumulated other comprehensive income (loss) within shareholders’ equity. The total foreign currency translation adjustment decreased shareholders’ equity by $132, from an accumulated foreign currency translation loss of $101 as of December 31, 2017 to an accumulated foreign currency translation loss of $233 as of December 31, 2018. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the consolidated statements of income. Net foreign currency transaction losses included in the determination of net earnings was $170 and $192 for the years ended December 31, 2018 and 2017, respectively. |
Recently Issued and Adopted Accounting Standards | Recently Issued and Adopted Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, "Leases" (Topic 842), which supersedes the existing guidance for lease accounting, "Leases" (Topic 840). ASU No. 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases that extend beyond one year. The amendments in this ASU will be effective for us for interim and annual periods beginning after December 15, 2018. The original guidance required application on a modified retrospective basis with the earliest period presented in the financial statements. In August 2018, the FASB issued ASU 2018-11, "Targeted Improvements" to ASC 842, which includes an option to not restate comparative periods in transition and instead to elect to use the effective date of ASC 842, "Leases", as the date of initial application of transition. Based on the effective date, this guidance will apply and the Company will adopt this ASU beginning on January 1, 2019, and the Company plans to elect the transition option provided under ASU 2018-11. We have completed the qualitative analysis from the lessee perspective. As part of our process, we elected to utilize certain practical expedients that were provided for transition relief. Accordingly, we are not reassessing expired or existing contracts, lease classifications or related initial direct costs as part of our assessment process. Additionally, we elected the practical expedient to treat lease and non-lease components of fixed payments due to the lessor as one, and therefore no separate allocation is required on the initial implementation date of January 1, 2019, and thereafter. We anticipate the adoption of this standard will result in an increase in our right of use assets and lease liabilities in the range of $5,500 to $6,500 recorded on our consolidated balance sheets on January 1, 2019; however, these estimates are subject to change as the Company finalizes its implementation. In 2019, the Company will also implement additional internal controls to comply with the requirements of the standard. The Company does not believe the adoption of this guidance will have a material impact on its consolidated results of operations or cash flows. In March 2018, we adopted FASB ASU 2018-05 , Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 , which updates the income tax accounting in U.S. GAAP to reflect the Securities and Exchange Commission (“SEC”) interpretive guidance released on December 22, 2017, when the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. Additional information regarding the adoption of this standard is contained in Note 5 , 'Income Taxes '. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of inventories | (in thousands) 2018 2017 Raw materials $ 16,769 $ 13,870 Work in process 1,015 3,112 Finished goods 332 2,389 Reserves (1,112) (844) Total $ 17,004 $ 18,527 |
Schedule of estimated useful lives of property and equipment | Buildings 39 Years Leasehold improvements 3-15 Years Manufacturing equipment 3-7 Years Office and other equipment 3-7 Years |
Schedule of property and equipment | (in thousands) 2018 2017 Land $ 360 $ 360 Building and Leasehold Improvements 9,184 8,827 Manufacturing Equipment 21,260 21,267 Office and Other Equipment 7,074 6,035 Accumulated Depreciation (27,700) (26,313) Total Property and Equipment, net $ 10,178 $ 10,176 |
Schedule of other intangible assets | December 31, 2018 Gross Accumulated Net Book Carrying Amortization Value (in thousands) Years Amount Amount Amount Customer Relationships 9 1,302 506 796 Intellectual Property 3 100 61 39 Trade Names 20 814 143 671 Other 7 17 — 17 Totals $ 2,233 $ 710 $ 1,523 December 31, 2017 Gross Accumulated Net Book Carrying Amortization Value Years Amount Amount Amount Customer Relationships 9 1,302 361 941 Intellectual Property 3 100 28 72 Trade Names 20 814 102 712 Other 7 14 — 14 Totals $ 2,230 $ 491 $ 1,739 |
Schedule of estimated future annual amortization expense | Year Amount 2019 $ 219 2020 191 2021 185 2022 185 2023 185 Thereafter 541 $ 1,506 |
Schedule of reconciliation of basic and diluted share amounts | 2018 2017 Basic weighted average common shares outstanding 2,692,382 2,745,602 Weighted average common stock equivalents from assumed exercise of stock options 7,232 — Diluted weighted average common shares outstanding 2,699,614 2,745,602 |
Schedule of goodwill | Carrying amount at December 31, 2016 $ 3,283 Impairment of goodwill (908) Carrying amount at December 31, 2017 2,375 Impairment of goodwill — Carrying amount at December 31,2018 $ 2,375 Quoted Prices Significant Fair value as in active other Significant of markets for observable unobservable measurement identical assets inputs inputs Impairment date (Level 1) (Level 2) (Level 3) Charge December 31, 2017 Goodwill $ 2,375 — — $ 2,375 $ 908 |
Schedule of net sales by markets | (in thousands) 2018 2017 Aerospace and Defense $ 18,314 $ 15,683 Medical 45,082 51,449 Industrial 49,974 45,203 Total Net Sales $ 113,370 $ 112,335 |
Schedule of noncurrent assets, excluding deferred taxes, by country | (in thousands) United States Mexico China Total December 31, 2018 Property and equipment, net $ 8,687 $ 821 $ 670 $ 10,178 Other assets 3,898 8 — 3,906 December 31, 2017 Property and equipment, net $ 8,713 $ 1,003 $ 460 $ 10,176 Other assets 4,114 8 — 4,122 |
REVENUE (Tables)
REVENUE (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
REVENUE | |
Schedule of significant changes in the contract assets | Significant changes in the contract assets balance during the year ended December 31, 2018 was as follows: Year Ended December 31, 2018 Outstanding at January 1, 2018 $ 6,459 Increase (decrease) attributed to: Transferred to receivables from contract assets recognized Product transferred over time Outstanding at December 31, 2018 $ 6,431 |
Schedule of net sales by market | Year Ending December 31, 2018 Product/ Service Product Transferred Over Transferred at Noncash Total Net Sales (in thousands) Time Point in Time Consideration by Market Aerospace and Defense $ 17,263 $ 232 $ 819 $ 18,314 Medical 39,071 4,157 1,854 45,082 Industrial 46,950 821 2,203 49,974 Total net sales $ 103,284 $ 5,210 $ 4,876 $ 113,370 |
Schedule of consolidated statement of operations and comprehensive income, balance sheet and cash flows, to the pro-forma amounts had the previous guidance been in effect | The following table compares the reported consolidated statement of operations and comprehensive loss, balance sheet and cash flows, as of and for the year ended December 31, 2018, to the pro-forma amounts had the previous guidance been in effect: Year Ending December 31, 2018 Pro forma as if the previous accounting guidance was in Consolidated Statement of Operations As Reported effect Net Sales $ 113,370 $ 108,522 Cost of Goods Sold 100,059 95,249 Gross Profit 13,311 13,273 Income from Operations 1,249 1,211 Income Before Income Taxes 492 454 Income Tax Expense 326 326 Net Income $ 166 $ 128 Net Income Per Common Share - Diluted $ 0.06 $ 0.05 As of December 31, 2018 Pro forma as if the previous accounting guidance was in Consolidated Balance Sheet As Reported effect Assets Inventories $ 17,004 $ 22,015 Contract Assets $ 6,431 $ — Shareholders' Equity Retained Earnings $ 21,090 $ 19,671 Year Ending December 31, 2018 Pro forma as if the previous accounting guidance was in Consolidated Statement of Cash Flows As Reported effect Net Income $ 166 $ 128 Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities Change in Current Operating Items Inventories (3,875) (3,809) Contract Asset 28 — Net Cash Provided by Operating Activities $ 2,444 $ 2,444 |
FINANCING ARRANGEMENTS (Tables)
FINANCING ARRANGEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
FINANCING ARRANGEMENTS | |
Summary of long-term debt balances | Long-term debt balances at December 31, 2018 and 2017 consisted of the following (in thousands): December 31, December 31, (in thousands) 2018 2017 Term note payable - Bank of America Real estate term note bearing interest at one-month LIBOR + 2.25% (4.8% and 4.5% as of December 31, 2018 and 2017, respectively) maturing June 15, 2022 with monthly payments of approximately $41,000 plus interest secured by substantially all assets. $ 4,253 $ 4,751 Devicix Acquistion Note 1 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019. 156 394 Devicix Acquistion Note 2 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019. 203 512 4,612 5,657 Discount on Devicix Notes Payable (23) (63) Debt issuance Costs (185) (238) Total long-term debt 4,404 5,356 Current maturities of long-term debt (780) (1,003) Long-term debt - net of current maturities $ 3,624 $ 4,353 |
Schedule of future maturity requirements for long-term debt | Years Ending December 31, Amount 2019 $ 857 2020 498 2021 498 2022 2,759 $ 4,612 |
Schedule of future minimum non-cancelable capital leases | Approximate future minimum lease payments under non-cancelable capital leases subsequent to December 31, 2018 are as follows: Years Ending December 31, Amount 2019 $ 398 2020 398 2021 398 2022 211 2023 2 Total noncancelable future lease commitments $ 1,407 Less: interest (119) Present value of obligations under capital leases $ 1,288 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INCOME TAXES | |
Schedule of income tax expense (benefit) | (in thousands) 2018 2017 Current taxes - Federal $ (38) $ (124) Current taxes - State 10 10 Current taxes - Foreign 334 49 Deferred taxes - Federal — 176 Deferred taxes - State — 239 Deferred taxes - Foreign 20 25 Income tax expense $ 326 $ 375 |
Schedule of statutory rate reconciliation | (in thousands) 2018 2017 Statutory federal tax provision (benefit) $ 107 $ (704) State income tax benefit (36) (117) Effect of foreign operations 52 (88) Uncertain tax positions (19) — Income tax credits — (112) Valuation allowance (199) 1,011 Permanent differences 15 8 Global Intangile Low-Taxed Income Effect 296 — Return to Provision - Credits and NOL 176 — Deferred adjustments (62) — Loss of Section 199 due to carryback claim — 46 Effects of tax reform — 280 Other (4) 51 Income tax expense $ 326 $ 375 |
Schedule of income (loss) from operations before income taxes | (in thousands) 2018 2017 Domestic $ (1,090) $ (2,831) Foreign 1,582 760 Total $ 492 $ (2,071) |
Schedule of deferred tax assets (liabilities) | (in thousands) 2018 2017 Deferred Tax Allowance for uncollectable accounts $ 53 $ 49 Inventories reserve 267 198 Accrued vacation 145 194 Amortization — 191 Stock-based compensation and equity appreciation rights 54 23 Net operating loss carryforwards 175 359 Tax credit carryforwards 449 613 Other 76 24 1,219 1,651 Valuation allowance (614) (1,146) Deferred tax assets 605 505 Prepaid expenses (40) (165) Section 481(a) adjustment (249) — Property and equipment (316) (319) Deferred tax liabilities (605) (484) Net deferred tax assets $ — $ 21 |
Schedule of changes in total gross unrecognized tax benefit liabilities, excluding accrued interest | Balance as of December 31, 2016 $ 52 Tax positions related to 2017: Additions based on tax positions related to the current year 22 Statute of limitations (22) Balance as of December 31, 2017 $ 52 Tax positions related to current year: Additions based on tax positions related to the current year — Statute of limitations (19) Balance as of December 31, 2018 $ 33 |
INCENTIVE PLANS (Tables)
INCENTIVE PLANS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
INCENTIVE PLANS | |
Summary of option activity | Weighted- Average Weighted- Remaining Average Contractual Exercise Price Term Aggregate Shares Per Share (in years) Intrinsic Value Outstanding-January 1, 2017 37,750 $ 4.75 Granted 150,000 3.43 Exercised — — Cancelled — — Outstanding-December 31, 2017 187,750 $ 3.70 8.13 $ 74,070 Granted 134,000 3.36 Exercised — — Cancelled (97,000) (3.84) Outstanding-December 31, 2018 224,750 $ 3.44 8.60 $ 52,715 Exercisable on December 31, 2018 44,750 $ 3.65 6.59 $ 8,075 |
Summary of the liability and changes during the years | (in thousands) 2018 2017 Beginning Balance $ — $ 45 Reductions — (22) Payments — (23) Ending Balance $ — $ — |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of future minimum lease payments under non-cancelable leases | Years Ending December 31, Amount 2019 $ 1,024 2020 858 2021 722 2022 726 2023 738 Thereafter 3,380 Total $ 7,448 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Restricted Cash, A/R, Inventories, Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property and Equipment | ||
Accumulated Depreciation | $ (27,700) | $ (26,313) |
Total Property and Equipment, net | 10,178 | 10,176 |
Restricted Cash | ||
Outstanding letters of credit | 0 | |
Restricted cash | 467 | 306 |
Accounts Receivable and Allowance for Doubtful Accounts | ||
Accounts Receivable Allowances | 222 | 209 |
Inventories | ||
Raw Materials | 16,769 | 13,870 |
Work in Process | 1,015 | 3,112 |
Finished Goods | 332 | 2,389 |
Reserves | (1,112) | (844) |
Total | 17,004 | 18,527 |
Land | ||
Property and Equipment | ||
Property and equipment | 360 | 360 |
Building and Leasehold Improvements | ||
Property and Equipment | ||
Property and equipment | $ 9,184 | 8,827 |
Buildings | ||
Property and Equipment | ||
Estimated useful lives | 39 years | |
Leasehold improvements | Minimum | ||
Property and Equipment | ||
Estimated useful lives | 3 years | |
Leasehold improvements | Maximum | ||
Property and Equipment | ||
Estimated useful lives | 15 years | |
Manufacturing equipment | ||
Property and Equipment | ||
Property and equipment | $ 21,260 | 21,267 |
Manufacturing equipment | Minimum | ||
Property and Equipment | ||
Estimated useful lives | 3 years | |
Manufacturing equipment | Maximum | ||
Property and Equipment | ||
Estimated useful lives | 7 years | |
Office and other equipment | ||
Property and Equipment | ||
Property and equipment | $ 7,074 | $ 6,035 |
Office and other equipment | Minimum | ||
Property and Equipment | ||
Estimated useful lives | 3 years | |
Office and other equipment | Maximum | ||
Property and Equipment | ||
Estimated useful lives | 7 years |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill, Other Intangible Assets (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Jul. 01, 2015 | |
Finite-Lived Intangible Assets | ||||
Gross Carrying Amount | $ 2,233 | $ 2,230 | ||
Accumulated Amortization Amount | 710 | 491 | ||
Net Book Value Amount | 1,523 | 1,739 | ||
Amortization expense | 219 | 237 | ||
Estimated future annual amortization expense | ||||
2019 | 219 | |||
2020 | 191 | |||
2021 | 185 | |||
2022 | 185 | |||
2023 | 185 | |||
Thereafter | 541 | |||
Total | 1,506 | |||
Goodwill and Other Intangible Assets | ||||
Impairment of Goodwill | 0 | 908 | ||
Goodwill | 2,375 | 2,375 | $ 3,283 | |
Devicix, LLC | ||||
Goodwill and Other Intangible Assets | ||||
Impairment of Goodwill | $ 0 | $ 908 | ||
Goodwill | $ 3,200 | |||
Customer Relationships | ||||
Finite-Lived Intangible Assets | ||||
Remaining lives | 9 years | 9 years | ||
Gross Carrying Amount | $ 1,302 | $ 1,302 | ||
Accumulated Amortization Amount | 506 | 361 | ||
Net Book Value Amount | $ 796 | $ 941 | ||
Intellectual Property | ||||
Finite-Lived Intangible Assets | ||||
Remaining lives | 3 years | 3 years | ||
Gross Carrying Amount | $ 100 | $ 100 | ||
Accumulated Amortization Amount | 61 | 28 | ||
Net Book Value Amount | $ 39 | $ 72 | ||
Trade Names | ||||
Finite-Lived Intangible Assets | ||||
Remaining lives | 20 years | 20 years | ||
Gross Carrying Amount | $ 814 | $ 814 | ||
Accumulated Amortization Amount | 143 | 102 | ||
Net Book Value Amount | $ 671 | $ 712 | ||
Other | ||||
Finite-Lived Intangible Assets | ||||
Remaining lives | 7 years | 7 years | ||
Gross Carrying Amount | $ 17 | $ 14 | ||
Net Book Value Amount | $ 17 | $ 14 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Preferred Stock, Revenue Recognition, Product Warranties, Advertising, Net Income (Loss) Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Jan. 01, 2018 | |
Preferred Stock | |||
Non-cumulative dividend rate (as a percent) | 12.00% | ||
Liquidation preference (in dollars per share) | $ 1 | ||
Preferred stock dividends declared (in dollars per share) | $ 0 | $ 0 | |
Revenues | |||
Retained Earnings | $ 5,436 | $ 3,889 | |
Advertising | |||
Advertising expense charged | $ 132 | $ 68 | |
Reconciliation of basic and diluted share amounts | |||
Basic weighted average common shares outstanding | 2,692,382 | 2,745,602 | |
Weighted average common stock equivalents from assumed exercise of stock options (in shares) | 7,232 | ||
Diluted weighted average common shares outstanding | 2,699,614 | 2,745,602 | |
Maximum | |||
Revenues | |||
Percentage of sales (as a percent) | 10.00% | 10.00% | |
Difference between Revenue Guidance in Effect before and after Topic 606 | ASU 2014-09 | |||
Revenues | |||
Retained Earnings | $ 1,381 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Acquisition-Related Contingent Consideration (Details) - Devicix, LLC - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Jul. 01, 2015 |
Acquisition-Related Contingent Consideration | |||
Contingent consideration paid | $ 2,500 | ||
Significant unobservable inputs (Level 3) | |||
Acquisition-Related Contingent Consideration | |||
Fair value of contingent liability | $ 34 | $ 70 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill | ||
Goodwill, Beginning Balance | $ 2,375 | $ 3,283 |
Impairment of Goodwill | 0 | (908) |
Goodwill, Ending Balance | 2,375 | 2,375 |
Fair Value of Goodwill | ||
Impairment of Goodwill | $ 0 | 908 |
Nonrecurring fair value | ||
Goodwill | ||
Impairment of Goodwill | (908) | |
Fair Value of Goodwill | ||
Goodwill | 2,375 | |
Impairment of Goodwill | 908 | |
Nonrecurring fair value | Significant unobservable inputs (Level 3) | ||
Fair Value of Goodwill | ||
Goodwill | $ 2,375 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Enterprise Wide Disclosures and Foreign Currency Transactions (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Jan. 01, 2019 | |
Enterprise-Wide Disclosures | |||
Property and equipment, net | $ 10,178 | $ 10,176 | |
Other assets | 3,906 | 4,122 | |
Foreign Currency Transactions | |||
Foreign currency translation adjustment | 233 | 101 | |
Foreign currency translation adjustment | (132) | (57) | |
Net foreign currency transaction gains (losses) | (170) | (192) | |
Net Sales | $ 113,370 | $ 112,335 | |
Maximum | |||
Enterprise-Wide Disclosures | |||
Percentage of sales (as a percent) | 10.00% | 10.00% | |
ASU 2016-02 | Restatement Adjustment | Minimum | |||
Recently Issued and Adopted Accounting Pronouncements | |||
Lease assets | $ 5,500 | ||
Lease liabilities | 5,500 | ||
ASU 2016-02 | Restatement Adjustment | Maximum | |||
Recently Issued and Adopted Accounting Pronouncements | |||
Lease assets | 6,500 | ||
Lease liabilities | $ 6,500 | ||
United States | |||
Enterprise-Wide Disclosures | |||
Property and equipment, net | $ 8,687 | $ 8,713 | |
Other assets | 3,898 | 4,114 | |
Mexico | |||
Enterprise-Wide Disclosures | |||
Property and equipment, net | 821 | 1,003 | |
Other assets | 8 | 8 | |
China | |||
Enterprise-Wide Disclosures | |||
Property and equipment, net | $ 670 | $ 460 | |
Export sales | Domestic | |||
Enterprise-Wide Disclosures | |||
Percentage of sales (as a percent) | 4.80% | 4.50% | |
Aerospace and Defense | |||
Foreign Currency Transactions | |||
Net Sales | $ 18,314 | $ 15,683 | |
Medical | |||
Foreign Currency Transactions | |||
Net Sales | 45,082 | 51,449 | |
Industrial | |||
Foreign Currency Transactions | |||
Net Sales | $ 49,974 | $ 45,203 |
CONCENTRATION OF CREDIT RISK _2
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS (Details) | 12 Months Ended | |
Dec. 31, 2018itemdivision | Dec. 31, 2017 | |
Largest customer | ||
Major customers and concentration of credit risk | ||
Number of divisions | division | 2 | |
Credit concentration risk | ||
Major customers and concentration of credit risk | ||
Excess cash balance, number of high credit quality financial institutions | item | 2 | |
Net sales | Customer concentration risk | Division one of largest customer | ||
Major customers and concentration of credit risk | ||
Percentage of concentration risk (as a percent) | 20.80% | 23.50% |
Net sales | Customer concentration risk | Division two of largest customer | ||
Major customers and concentration of credit risk | ||
Percentage of concentration risk (as a percent) | 2.40% | 1.40% |
Net sales | Customer concentration risk | Divisions one & two | ||
Major customers and concentration of credit risk | ||
Percentage of concentration risk (as a percent) | 23.20% | 24.90% |
Net sales | Customer concentration risk | Minimum | Largest customer | ||
Major customers and concentration of credit risk | ||
Percentage of concentration risk (as a percent) | 10.00% | 10.00% |
Accounts receivable | Customer concentration risk | Largest customer | ||
Major customers and concentration of credit risk | ||
Percentage of concentration risk (as a percent) | 16.30% | 16.40% |
REVENUE - Contract Assets (Deta
REVENUE - Contract Assets (Details) $ in Thousands | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Increase (decrease) contract assets | |
Outstanding at the end of year | $ 6,431 |
Revenue under contract manufacturing agreements (as percentage) | 91.00% |
Remaining performance obligations customers upon shipment with payment terms | 120 days |
ASU 2014-09 | |
Increase (decrease) contract assets | |
Outstanding at the beginning of year | $ 6,459 |
Transferred to receivables from contract assets recognized | (5,932) |
Product transferred over time | 5,904 |
Outstanding at the end of year | $ 6,431 |
REVENUE - Remaining Performance
REVENUE - Remaining Performance Obligations (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01 | 12 Months Ended |
Dec. 31, 2018 | |
Remaining performance obligations | |
Remaining performance obligations for the contract assets term | 90 days |
Remaining performance obligations for the Remaining Amounts Transferred term | 180 days |
REVENUE - Net sales by market (
REVENUE - Net sales by market (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Total Net Sales by Market | $ 113,370 | $ 112,335 |
Noncash Consideration | ||
Total Net Sales by Market | 4,876 | |
Product/Service Transferred Over Time | ||
Total Net Sales by Market | 103,284 | |
Product Transferred at Point in Time | ||
Total Net Sales by Market | 5,210 | |
Aerospace and Defense | ||
Total Net Sales by Market | 18,314 | 15,683 |
Aerospace and Defense | Noncash Consideration | ||
Total Net Sales by Market | 819 | |
Aerospace and Defense | Product/Service Transferred Over Time | ||
Total Net Sales by Market | 17,263 | |
Aerospace and Defense | Product Transferred at Point in Time | ||
Total Net Sales by Market | 232 | |
Medical | ||
Total Net Sales by Market | 45,082 | 51,449 |
Medical | Noncash Consideration | ||
Total Net Sales by Market | 1,854 | |
Medical | Product/Service Transferred Over Time | ||
Total Net Sales by Market | 39,071 | |
Medical | Product Transferred at Point in Time | ||
Total Net Sales by Market | 4,157 | |
Industrial | ||
Total Net Sales by Market | 49,974 | $ 45,203 |
Industrial | Noncash Consideration | ||
Total Net Sales by Market | 2,203 | |
Industrial | Product/Service Transferred Over Time | ||
Total Net Sales by Market | 46,950 | |
Industrial | Product Transferred at Point in Time | ||
Total Net Sales by Market | $ 821 |
REVENUE - Impact of New Revenue
REVENUE - Impact of New Revenue Guidance on Financial Statement Line Items (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | |||
Net Sales | $ 113,370 | $ 112,335 | |
Cost of Goods Sold | 100,059 | 100,217 | |
Gross Profit | 13,311 | 12,118 | |
Income (Loss) from Operations | 1,249 | (1,268) | |
Income Before Income Taxes | 492 | (2,071) | |
Income Tax Expense | 326 | 375 | |
Net Income (Loss) | $ 166 | $ (2,446) | |
Net Income Per Common Share - Diluted | $ 0.06 | $ (0.89) | |
Assets | |||
Inventories | $ 17,004 | $ 18,527 | |
Contract Assets | 6,431 | ||
Shareholders' Equity | |||
Retained Earnings | 21,090 | 19,825 | $ 22,315 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
Net Income | 166 | (2,446) | |
Change in Current Operating Items | |||
Inventories | (3,875) | ||
Contract Assets | 28 | ||
Net Cash Provided by Operating Activities | 2,444 | $ 806 | |
Pro-forma as of the previous accounting guidance was in effect | |||
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) | |||
Net Sales | 108,522 | ||
Cost of Goods Sold | 95,249 | ||
Gross Profit | 13,273 | ||
Income (Loss) from Operations | 1,211 | ||
Income Before Income Taxes | 454 | ||
Income Tax Expense | 326 | ||
Net Income (Loss) | $ 128 | ||
Net Income Per Common Share - Diluted | $ 0.05 | ||
Assets | |||
Inventories | $ 22,015 | ||
Shareholders' Equity | |||
Retained Earnings | 19,671 | ||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
Net Income | 128 | ||
Change in Current Operating Items | |||
Inventories | (3,809) | ||
Net Cash Provided by Operating Activities | $ 2,444 |
FINANCING ARRANGEMENTS (Details
FINANCING ARRANGEMENTS (Details) | Jul. 01, 2015USD ($)item | Sep. 30, 2017USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Jun. 15, 2017USD ($) |
Financing arrangements | |||||
Loss on Extinguishment of Debt | $ 175,000 | ||||
Total long-term debt | $ 4,612,000 | 5,657,000 | |||
Discount on Devicix Notes Payable | (23,000) | (63,000) | |||
Debt Issuance Costs | (185,000) | (238,000) | |||
Long-term Debt | 4,404,000 | 5,356,000 | |||
Current maturities of long-term debt | (780,000) | (1,003,000) | |||
Long-term debt - net of current maturities | 3,624,000 | 4,353,000 | |||
Future maturity requirements for long-term debt | |||||
2019 | 857,000 | ||||
2020 | 498,000 | ||||
2021 | 498,000 | ||||
2022 | 2,759,000 | ||||
Total long-term debt | $ 4,612,000 | 5,657,000 | |||
Devicix, LLC | |||||
Financing arrangements | |||||
Number of promissory notes | item | 2 | ||||
Line of credit | |||||
Financing arrangements | |||||
Weighted-average interest rate (as a percent) | 4.80% | ||||
Outstanding balance | $ 9,264,000 | 8,503,000 | |||
Unused availability supported by entity's borrowing base | $ 6,137,000 | 4,231,000 | |||
Devicix Acq Note 1, subordinate debt, due July 1, 2019 | |||||
Financing arrangements | |||||
Interest rate (as a percent) | 4.00% | ||||
Long-term Debt | $ 156,000 | 394,000 | |||
Devicix Acq Note 2, subordinate debt, due July 1, 2019 | |||||
Financing arrangements | |||||
Interest rate (as a percent) | 4.00% | ||||
Long-term Debt | $ 203,000 | $ 512,000 | |||
Promissory note subject to offsets | Devicix, LLC | |||||
Financing arrangements | |||||
Promissory note liability | $ 1,000,000 | ||||
Term of promissory note | 4 years | ||||
Interest rate per annum | 4.00% | ||||
Principal and interest payments | $ 23,000 | ||||
Promissory note not subject to offsets | Devicix, LLC | |||||
Financing arrangements | |||||
Promissory note liability | $ 1,300,000 | ||||
Term of promissory note | 4 years | ||||
Interest rate per annum | 4.00% | ||||
Principal and interest payments | $ 29,000 | ||||
Bank of America | Line of credit | |||||
Financing arrangements | |||||
Maximum borrowing capacity | $ 16,000,000 | ||||
Bank of America | Real estate term notes | |||||
Financing arrangements | |||||
Debt instrument, face amount | $ 5,000,000 | ||||
Variable rate basis | one-month LIBOR | ||||
Interest rate margin on variable rate basis (as a percent) | 2.25% | ||||
Interest rate (as a percent) | 4.80% | 4.50% | |||
Long-term Debt | $ 4,253,000 | $ 4,751,000 | |||
Principal and interest payments | $ 41,000 | ||||
Bank of America | Credit Agreement | |||||
Financing arrangements | |||||
Minimum fixed charge coverage ratio | 1 | ||||
Minimum level of cumulative EBITDA | $ 1,970,000 | ||||
Wells Fargo Bank, N.A. | |||||
Financing arrangements | |||||
Loss on Extinguishment of Debt | $ 175,000 |
FINANCING ARRANGEMENTS - Capita
FINANCING ARRANGEMENTS - Capital Leases (Details) - USD ($) | 1 Months Ended | 3 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Capital Leases | ||||
Total cost of the leased equipment | $ 1,624,000 | $ 1,524,000 | ||
Current maturities of capital leases | 337,000 | 295,000 | ||
Interest expense related to the leased assets | 91,000 | 9,000 | ||
Depreciation expense related to the leased assets | 201,000 | 0 | ||
Future minimum lease payments under non-cancelable capital leases | ||||
2019 | 398,000 | |||
2020 | 398,000 | |||
2021 | 398,000 | |||
2022 | 211,000 | |||
2023 | 2,000 | |||
Total noncancelable future lease commitments | 1,407,000 | |||
Less interest | (119,000) | |||
Present value obligations under capital leases | 1,288,000 | |||
Five-year lease | ||||
Capital Leases | ||||
Capital lease, term of contract | 5 years | |||
Debt instrument, face amount | $ 1,096,000 | $ 1,096,000 | ||
Effective interest rate | 4.97% | 4.97% | ||
Property held under capital lease | 1,103,000 | |||
Four year and six month lease | ||||
Capital Leases | ||||
Capital lease, term of contract | 4 years 6 months | |||
Debt instrument, face amount | $ 502,000 | $ 502,000 | ||
Effective interest rate | 6.22% | 6.22% | ||
Property held under capital lease | $ 421,000 | |||
Interest expense related to the leased assets | $ 0 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Components of income tax expense | ||
Effective corporate tax rate | 21.00% | 34.00% |
Tax impact due to U.S.Tax reform | $ 223 | |
Current taxes - Federal | (38) | $ (124) |
Current taxes - State | 10 | 10 |
Current taxes - Foreign | 334 | 49 |
Deferred taxes - Federal | 176 | |
Deferred taxes - State | 239 | |
Deferred taxes - Foreign | 20 | 25 |
Income tax expense | 326 | 375 |
Reconciliation of federal income taxes and reported income taxes | ||
Statutory federal tax provision (benefit) | 107 | (704) |
State income tax benefit | (36) | (117) |
Effect of foreign operations | 52 | (88) |
Uncertain tax positions | (19) | |
Income tax credits | (112) | |
Valuation allowance | (199) | 1,011 |
Permanent differences | 15 | 8 |
Global Intangible Low-Taxed Income Effect | 296 | |
Return to Provision - Credits and NOL | 176 | |
Deferred adjustments | (62) | |
Loss of Section 199 due to carryback claim | 46 | |
Effects of tax reform | 280 | |
Other | (4) | 51 |
Income tax expense | 326 | 375 |
Income (loss) from operations before income taxes | ||
Domestic | (1,090) | (2,831) |
Foreign | 1,582 | 760 |
Income (Loss) before income taxes | 492 | (2,071) |
Components of deferred tax assets (liabilities) | ||
Allowance for uncollectable accounts | 53 | 49 |
Inventories reserve | 267 | 198 |
Accrued vacation | 145 | 194 |
Amortization | 191 | |
Stock-based compensation and equity appreciation rights | 54 | 23 |
Net operating loss carryforwards | 175 | 359 |
Tax credit carryforwards | 449 | 613 |
Other | 76 | 24 |
Deferred tax assets before valuation allowance | 1,219 | 1,651 |
Valuation allowance | (614) | (1,146) |
Deferred tax assets | 605 | 505 |
Prepaid expenses | (40) | (165) |
Section 481(a) adjustment | (249) | |
Property and equipment | (316) | (319) |
Deferred tax liabilities | (605) | (484) |
Net deferred tax assets | 21 | |
Valuation allowance on foreign assets | 0 | |
Changes in total gross unrecognized tax benefit liabilities, excluding accrued interest | ||
Balance at the beginning of the year | 52 | 52 |
Additions based on tax positions related to the current year | 22 | |
Statute of limitations | (19) | (22) |
Balance at the end of the year | 33 | $ 52 |
Federal | ||
Operating loss carryforwards | ||
Net operating loss carryforwards | 23 | |
Federal | General business | ||
Tax credit carryforwards | ||
Tax credit carryforwards | 284 | |
Minnesota | State | ||
Operating loss carryforwards | ||
Net operating loss carryforwards | 1,168 | |
Minnesota | State | R&D | ||
Tax credit carryforwards | ||
Tax credit carryforwards | 198 | |
Iowa | State | ||
Operating loss carryforwards | ||
Net operating loss carryforwards | 400 | |
Montana | State | ||
Operating loss carryforwards | ||
Net operating loss carryforwards | 4 | |
Wisconsin | State | ||
Operating loss carryforwards | ||
Net operating loss carryforwards | $ 662 |
401(K) RETIREMENT PLAN (Details
401(K) RETIREMENT PLAN (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
401(K) RETIREMENT PLAN | ||
Requisite service period for employees to be eligible for the defined contribution plan | 3 months | |
Requisite age for employees to be eligible for the defined contribution plan | 18 years | |
Employee contributions limit as a percentage of wages, maximum | 60.00% | |
Employer match of employee contributions for 6% of eligible compensation (as a percent) | 25.00% | |
Maximum percentage of covered compensation matched 25% by employer | 6.00% | |
Contributions made | $ 286 | $ 287 |
INCENTIVE PLANS (Details)
INCENTIVE PLANS (Details) - USD ($) | 12 Months Ended | |||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | May 31, 2017 | Nov. 30, 2010 | May 03, 2005 | |
Stock Options | ||||||
Incentive plans | ||||||
Compensation expense (income) | $ 126,000 | $ 43,000 | ||||
Unrecognized compensation related to unvested awards | $ 160,000 | |||||
Unrecognized compensation, vesting period | 4 years 18 days | |||||
Options | ||||||
Balance at the beginning of the period(in shares) | 187,750 | 37,750 | ||||
Granted (in shares) | 134,000 | 150,000 | ||||
Cancelled (in shares) | (97,000) | |||||
Balance at the end of the period (in shares) | 224,750 | 187,750 | 37,750 | |||
Exercisable at the end of the period (in shares) | 44,750 | |||||
Weighted-Average Exercise Price Per Share | ||||||
Outstanding at the beginning of the period (in dollars per share) | $ 3.70 | $ 4.75 | ||||
Granted (in dollars per share) | 3.36 | 3.43 | ||||
Cancelled (in dollars per share) | (3.84) | |||||
Outstanding at the end of the period (in dollars per share) | 3.44 | $ 3.70 | $ 4.75 | |||
Exercisable at the end of the period (in dollars per share) | $ 3.65 | |||||
Weighted- Average Remaining Contractual Term (in years) | ||||||
Outstanding at the end of the period | 8 years 7 months 6 days | 8 years 1 month 17 days | ||||
Exercisable at the end of the period | 6 years 7 months 2 days | |||||
Aggregate Intrinsic Value | ||||||
Outstanding at the end of the period | $ 52,715 | $ 74,070 | ||||
Exercisable at the end of the period | 8,075 | |||||
Additional disclosures | ||||||
Intrinsic value of options exercised | $ 0 | $ 0 | ||||
Stock Options | Minimum | ||||||
Incentive plans | ||||||
Purchase price as a percentage of market value | 100.00% | |||||
Exercisable period | 1 year | |||||
Stock Options | Maximum | ||||||
Incentive plans | ||||||
Expiration term | 10 years | |||||
2003 Plan | Stock Options | ||||||
Incentive plans | ||||||
Number of shares eliminated | 172,500 | |||||
2005 Plan | Stock Options | ||||||
Incentive plans | ||||||
Shares available for grant | 0 | 200,000 | ||||
Options | ||||||
Granted (in shares) | 0 | 0 | ||||
2010 Plan | Equity Appreciation Rights Plan | ||||||
Incentive plans | ||||||
Compensation expense (income) | $ 0 | $ (22,000) | ||||
Equity Appreciation Rights Plan | ||||||
Vesting period from the base date | 3 years | |||||
Shares granted (in units) | 100,000 | 31,666 | ||||
Accrued compensation liability | ||||||
Beginning Balance | $ 45,000 | |||||
Reductions | (22,000) | |||||
Payments | $ (23,000) | |||||
Ending Balance | $ 45,000 | |||||
2010 Plan | Equity Appreciation Rights Plan | Maximum | ||||||
Incentive plans | ||||||
Number of common shares authorized | 1,000,000 | |||||
Equity Appreciation Rights Plan | ||||||
Redemption cash payment period | 90 days | |||||
2017 Plan | Stock Options | ||||||
Incentive plans | ||||||
Number of common shares authorized | 350,000 | |||||
Options | ||||||
Granted (in shares) | 134,000 | 150,000 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Lease payments (Details) $ in Thousands | Feb. 21, 2018USD ($)ft² | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) |
COMMITMENTS AND CONTINGENCIES | |||
Rent expense | $ 1,376 | $ 1,271 | |
Lease term | 10 years | ||
Area of land | ft² | 77,000 | ||
Monthly rentals payable | $ 43 | ||
Operating Leases | |||
2019 | 1,024 | ||
2020 | 858 | ||
2021 | 722 | ||
2022 | 726 | ||
2023 | 738 | ||
Thereafter | 3,380 | ||
Total | $ 7,448 |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Life Insurance and Control Agreements (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Share Repurchase Program | ||
Stock repurchased | $ 276 | $ 30 |
Restructuring Charges [Abstract] | ||
Accrued payroll and commissions | 2,747 | 2,900 |
Matt Mahmood | ||
Restructuring Charges [Abstract] | ||
Expense related to separation payments | 235 | |
Accrued payroll and commissions | $ 177 | |
August 2017 repurchase program | ||
Share Repurchase Program | ||
Share repurchase program authorized amount | $ 250 | |
Stock repurchased (in shares) | 55,199 | 8,581 |
Stock repurchased | $ 201 | $ 30 |
Authorized balance remaining under share repurchase program | 0 | 220 |
August 2018 repurchase program | ||
Share Repurchase Program | ||
Share repurchase program authorized amount | $ 250 | |
Stock repurchased (in shares) | 21,002 | |
Stock repurchased | $ 81 | |
Maximum | ||
Commitment and contingencies | ||
Professional outplacement services that would be received by the participants | $ 10 | |
2002 Plan | ||
Commitment and contingencies | ||
Period of graded vesting schedule | 5 years | |
Annual vesting by the participants (as a percent) | 20.00% | |
Expenses incurred | $ 0 | $ 207 |
2002 Plan | Officer participants | ||
Commitment and contingencies | ||
Bonus to be paid as a percentage of the participants base annual salary | 15.00% | |
2002 Plan | Other participants | ||
Commitment and contingencies | ||
Bonus to be paid as a percentage of the participants base annual salary | 10.00% | |
Agreement(s) | Officer participants | ||
Commitment and contingencies | ||
Period of continued participation in health, disability and life insurance plans after involuntary termination | 3 years | |
Agreement(s) | Other participants | ||
Commitment and contingencies | ||
Period of continued participation in health, disability and life insurance plans after involuntary termination | 2 years |
PLANT CLOSURE (Details)
PLANT CLOSURE (Details) - Building and Building Improvements - Augusta - Discontinued Operations, Disposed of by Sale - Plant closing $ in Thousands | 1 Months Ended |
Mar. 31, 2017USD ($) | |
PLANT CLOSURE | |
Sale of property | $ 715 |
Net book value | 314 |
Gain on the sale, net of related expenses | 354 |
Net proceeds used to pay outstanding real estate term note | $ 668 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - Consulting arrangement - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Matt Mahmood | |||
RELATED PARTY TRANSACTIONS | |||
Expenses incurred | $ 50 | $ 97 | |
William Murray | |||
RELATED PARTY TRANSACTIONS | |||
Term of consulting agreement | 3 months | ||
Expenses incurred | $ 68 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Employment agreements - Subsequent Event | Jan. 01, 2019shares |
Common Stock | |
SUBSEQUENT EVENTS | |
Share based compensation, grants in period | 25,000 |
Stock Options | |
SUBSEQUENT EVENTS | |
Stock options vested during the period | 7,500 |
Stock options granted | 125,000 |
Vesting period | 5 years |
Equity Appreciation Rights Plan | |
SUBSEQUENT EVENTS | |
Share based compensation, grants in period | 100,000 |