Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2013 |
Accounting Policies [Abstract] | ' |
Nature of Operations | ' |
NATURE OF OPERATIONS |
BTU International, Inc. and its wholly owned subsidiaries (the “Company”) are primarily engaged in the design, manufacture, sale, and service of thermal processing systems, which are used as capital equipment in various manufacturing processes, primarily in the electronics and alternative energy industries. |
Comprehensive Income (Loss) | ' |
COMPREHENSIVE INCOME (LOSS) |
The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 220, Comprehensive Income (“ASC 220”) as amended by Accounting Standards Update (ASU) 2011-05, Presentation of Comprehensive Income. ASC 220 requires companies to report all changes in equity during a period, resulting from net income (loss) and transactions from non-owner sources, in a financial statement in the period in which they are recognized. On January 1, 2012, the date of adoption of ASU 2011-05, we had the option to report total comprehensive income, including components of net income and components of other comprehensive income, as a single continuous statement or in two separate but consecutive statements. We elected to present comprehensive income in two separate but consecutive statements as part of the consolidated financial statements. Other than a change in presentation, the implementation of this accounting pronouncement did not have a material impact on our consolidated financial statements. |
Principles of Consolidation and the Use of Estimates | ' |
PRINCIPLES OF CONSOLIDATION AND THE USE OF ESTIMATES |
The accompanying consolidated financial statements include the accounts of the Company. All material inter-company balances and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The primary estimates used in the consolidated financial statements include the percentage of completion revenue method, inventory valuation, allowance for doubtful accounts, valuation of deferred income taxes, stock-based compensation and warranty reserves. |
Cash and Cash Equivalents | ' |
CASH AND CASH EQUIVALENTS |
The Company has classified certain highly liquid financial instruments, with original maturities of three months or less, as cash equivalents. |
Accounts Receivable | ' |
ACCOUNTS RECEIVABLE |
Accounts receivable are stated at the amount management expects to collect from outstanding balances. An allowance for doubtful accounts is provided for those accounts receivable considered to be uncollectible based upon historical experience and management’s evaluation of outstanding accounts receivable at the end of the year. Uncollectible accounts are written off against the allowance when identified. Bad debt expense (recovery) was ($280,000), $1,345,000, and ($49,000) for 2013, 2012 and 2011, respectively. |
Inventories | ' |
INVENTORIES |
Our inventories consist of material, labor and manufacturing overhead costs. We determine the cost of inventory based on a first-in, first-out method. We regularly review the quantity of inventories on hand and compare these quantities to the expected usage of each applicable product or product line. Our inventories are adjusted in value to the lower of cost or net realizable value and a new cost basis is established. Since the value of our inventories depends in part on our estimates of each product’s net realizable value, adjustments may be needed to reflect changes in valuation. Any adjustments we are required to make to lower the value of the inventories are recorded as a charge to cost of sales. |
Inventories consist of the following (in thousands): |
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| | Years Ended December 31, | | | | | |
| | 2013 | | | 2012 | | | | | |
Raw materials and manufactured components | | $ | 6,010 | | | $ | 4,772 | | | | | |
Work-in-process | | | 2,459 | | | | 1,905 | | | | | |
Finished goods | | | 1,362 | | | | 2,870 | | | | | |
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Total inventory | | $ | 9,831 | | | $ | 9,547 | | | | | |
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The Company recorded inventory write-downs of $1,868,000, $5,261,000, and $2,294,000, for the years ended 2013, 2012 and 2011, respectively. The write-downs recorded are net of recoveries of sold inventory that had previously been written-down in the amounts of approximately $250,000, $60,000, and $485,000 for the years ended 2013, 2012 and 2011, respectively. |
Property Plant and Equipment | ' |
PROPERTY, PLANT AND EQUIPMENT |
The Company provides for depreciation using the straight-line method over the assets’ useful lives. Leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful life of the asset or the lease term. The estimated useful lives for depreciation purposes are as follows: |
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Buildings and improvements | | | 8-25 years | | | | | | | | | |
Machinery and equipment | | | 2-8 years | | | | | | | | | |
Software | | | 3-10 years | | | | | | | | | |
Furniture and fixtures | | | 3-8 years | | | | | | | | | |
Leasehold improvements | | | 3 years | | | | | | | | | |
Depreciation expense was approximately $1,603,000, $1,641,000, and $1,624,000 for the years ended December 31, 2013, 2012, and 2011, respectively. |
Maintenance and repairs are charged to operations as incurred. When equipment and improvements are sold or otherwise disposed of, the asset cost and accumulated depreciation are removed from the accounts, and the resulting gain or loss, if any, is included in the results of operations. |
The Company evaluates long-lived assets such as intangible assets and property, plant and equipment under FASB ASC 360-10-35-15, Impairment or Disposal of Long-Lived Assets. This statement requires that long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to future undiscounted net cash flows expected to be generated by the asset or asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets were identified during the years ended December 31, 2013, 2012 and 2011. |
Other Assets | ' |
OTHER ASSETS |
Other assets consist of the following (in thousands): |
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| | 2013 | | | 2012 | | | | | |
Deferred financing costs, net of amortization | | $ | 73 | | | $ | 23 | | | | | |
Intellectual property, net of amortization | | | — | | | | 23 | | | | | |
Deferred tax asset—non-current | | | — | | | | 143 | | | | | |
Long term assets | | | 553 | | | | 292 | | | | | |
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Total | | $ | 626 | | | $ | 481 | | | | | |
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Deferred financing costs, capitalized in 2013, are being amortized over ten years, the term of the mortgage note. Amortization on deferred financing costs was approximately $7,000, $7,000 and $7,000 in 2013, 2012 and 2011, respectively. Amortization on intellectual property was approximately $23,000, $54,000, and $169,000 in 2013, 2012 and 2011, respectively. |
Income Taxes | ' |
INCOME TAXES |
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. The amounts of deferred tax assets or liabilities are based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided if, based on the weight of the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. |
We assess tax positions taken on tax returns, including recognition of potential interest and penalties, in accordance with the recognition thresholds and measurement attributes outlined in ASC 740. Interest and penalties recognized, if any, would be classified as a component of income tax expense |
Translation of Foreign Currencies | ' |
TRANSLATION OF FOREIGN CURRENCIES |
Assets and liabilities of the Company’s foreign operations are translated from their functional currency into U.S. dollars at year end exchange rates. Revenue and expense items are translated at weighted average rates of exchange prevailing during the year. Gains and losses arising from translation are accumulated as a separate component of stockholders’ equity, as the functional currency of the subsidiaries is their local currency, and the reporting currency of the Company is the U.S. dollar. Exchange gains and losses arising from transactions denominated in foreign currencies are included in income as incurred. |
Patents | ' |
PATENTS |
The Company has patents in the U.S. and certain foreign countries for some of its products and processes. No value has been assigned to these patents in the accompanying consolidated financial statements. |
Revenue Recognition | ' |
REVENUE RECOGNITION |
The Company recognizes revenue in accordance with FASB ASC Topic 605, Revenue Recognition (“ASC 605”). Under these guidelines, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services rendered, the price is fixed or determinable and payment is reasonably assured. Under these requirements, when the terms of sale include customer acceptance provisions, and compliance with those provisions has not been demonstrated, revenues are recognized upon acceptance. |
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Applying the requirements of ASC 605 to future sales arrangements used in the Company’s equipment sales may result in the deferral of the revenue for some equipment sales. Products shipped to customers that do not meet the threshold requirements for revenue recognition as outlined above remain in the Company’s inventory on the Consolidated Balance Sheet until revenue is recognized. Any cash collected from customers for products for which revenue has been deferred is recorded as Deferred Revenue on the Consolidated Balance Sheet. |
The Company also has certain sales transactions for products, which are not completed within the normal operating cycle of the business. It is the Company’s policy to account for these transactions using the percentage of completion method for revenue recognition purposes when all of the following criteria exist: (1) The Company has received the customer’s purchase order or entered into a legally binding contract, (2) The customer is credit worthy and collection is probable or customer prepayments are required at product completion milestones or specific dates, (3) The sales value of the product to be delivered is significant in amount when compared to the Company’s other products, and (4) Product costs can be reasonably estimated, there is no major technological uncertainty and the total engineering, material procurement, product assembly and test cycle time extend over a period of six months or longer. |
Under the percentage of completion method, revenues and gross margins to date are recognized based upon the ratio of costs incurred to date compared to the latest estimate of total costs to complete the product as a percentage of the total contract revenue for the product. Revisions in costs and gross margin percentage estimates are reflected in the period in which the facts causing the revision become known. Provisions for total estimated losses on uncompleted contracts, if any, are made in the period in which such losses are determined. For the years ended December 31, 2013, 2012 and 2011, $0, $1,731,686, and $2,406,714, respectively, were recognized as revenue using the percentage of completion method. |
The Company accounts for shipping and handling costs billed to customers in accordance with FASB ASC 605-45, Shipping and Handling Fees and Costs. Amounts billed to customers for shipping and handling costs are recorded as revenues with the associated costs reported as cost of goods sold. |
Research Development and Engineering | ' |
RESEARCH, DEVELOPMENT AND ENGINEERING |
Research, development and engineering costs are charged to expense as incurred. |
Earnings Per Share Information | ' |
EARNINGS PER SHARE INFORMATION |
Basic earnings per share (EPS) is computed by dividing net income (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed using the weighted-average number of common and potentially dilutive securities outstanding during the period, using the treasury stock method. Potentially dilutive securities include outstanding stock options and unvested restricted stock units (RSUs). Due to their antidilutive effect, approximately 1,454,292, 1,376,041, and 1,299,358 options to purchase common stock were excluded from the calculation of diluted loss per share for the years ended December 31, 2013, 2012 and 2011, respectively. However, these potentially dilutive securities could become dilutive in future periods. |
The weighted average number of common shares used to compute basic and diluted earnings per share consists of the following classification: |
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| | Years Ended December 31, | |
| | 2013 | | | 2012 | | | 2011 | |
| | (In thousands) | |
Basic shares | | | 9,539 | | | | 9,509 | | | | 9,434 | |
Effect of dilutive options | | | — | | | | — | | | | — | |
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Diluted shares | | | 9,539 | | | | 9,509 | | | | 9,434 | |
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Recent Accounting Pronouncements | ' |
RECENT ACCOUNTING PRONOUNCEMENTS |
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income, that requires entities to disclose items reclassified out of accumulated other Comprehensive Income (AOCI) and into net income in their entirety, the effect of the reclassification on each affected net income line item and for AOCI reclassification items that are not reclassified in their entirety into net income, a cross reference to other required U.S. GAAP disclosures. This consolidated standard is effective for annual periods beginning after December 15, 2012 and interim periods within those years. The application of this standard did not have material impact on the Company’s consolidated financial statements. |
Subsequent Events | ' |
SUBSEQUENT EVENTS |
For the fiscal year ended December 31, 2013, the Company has evaluated subsequent events for potential recognition and disclosure in the financial statements through the date these financial statements were filed with the Securities and Exchange Commission. |