Georgia | 58-1035424 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer ID Number) |
660 Engineering Drive, Norcross, Georgia | 30092 | |
(Address of principal executive offices) | (Zip Code) |
Title of Class | Exchange on Which Registered | |
Common Stock, $.10 par value | Nasdaq Global Select Market |
2. | statements about anticipated technological developments or anticipated market response to or impact of current or future technological developments or product offerings, |
5. | statements implying that the Company’s technology or products are well-suited for particular markets, and | ||
Item 1. | Business |
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Segment | Primary Operations | Percentage of Net Sales | ||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||||||||||||||||
Percentage of Net Sales | ||||||||||||||||||||||||||||||||
Segment | Primary Operations | 2008 | 2007 | 2006 | ||||||||||||||||||||||||||||
Communications & Tracking | Satellite communications antennas, terminals and networking equipment for aircraft, rugged data storage, data recording/replay, end-to-end tracking and mapping equipment and services, and ground-based vehicles and satellite ground stations for search and rescue operations (majority commercial) | 44.2 | 33.6 | 31.3 | ||||||||||||||||||||||||||||
LXE | Rugged mobile terminals and related equipment for wireless data collection (predominantly commercial) | 30.4 | 43.5 | 48.2 | ||||||||||||||||||||||||||||
Defense & Space | Engineered hardware for satellites, defense and electronics applications (primarily defense) | 22.9 | 20.5 | 20.1 | Engineered hardware for satellites, defense and electronics applications (primarily defense) | 25.4 | 22.9 | 20.5 | ||||||||||||||||||||||||
LXE | Rugged mobile terminals and related equipment for wireless data collection (predominantly commercial) | 43.5 | 48.2 | 52.8 | ||||||||||||||||||||||||||||
Satellite Communications | Satellite communications antennas, terminals and networking equipment for aircraft, and ground-based vehicles and satellite ground stations for search and rescue operations (majority commercial) | 33.6 | 31.3 | 27.1 |
New Segment | Primary Operations | Percentage of Net Sales | ||||||||||||||||
2009 | 2008 | 2007 | ||||||||||||||||
Aviation | Connectivity and in-cabin infrastructure equipment for a broad range of commercial and military aircraft, including satellite communications antennas, terminals and networking equipment, rugged data storage and data recording/replay | 34.5 | 27.7 | 24.6 | ||||||||||||||
Global Tracking | End-to-end tracking and mapping equipment and services for security, land tracking, and maritime markets, as well as, satellite ground stations for search and rescue operations | 9.7 | 5.9 | 6.7 | ||||||||||||||
Products/Services | Key Features/Benefits | Selected Applications | Customers | ||||||
Aeronautical Antennas | Mechanically and electronically-steered antennas for two-way communications connected to an aircraft’s Satcom, steerable antenna systems for live television from broadcast satellites | Corporate aircraft, government and military aircraft, commercial airlines | Gulfstream, Bombardier, Honeywell, Dassault, Thales, L3 Communications, Boeing, Panasonic Avionics | ||||||
Aeronautical Tracking | Lightweight, autonomous tracking terminals provide GPS-based location and status reporting from anywhere on or in-flight over the globe. | Off-shore Oil, Air Medical Transport, Fire Patrol and Suppression, Paramilitary Drug Interdiction, Pipeline Patrol | Bristow, Air Methods, Chevron, U.S. Forest Service, U.S. State Department, Military | ||||||
Aeronautical Telephony and E-mail Services | Narrowband telephony provides in-flight voice and e-mail access to cabin telephones and cockpit interface devices | Corporate aircraft, Commercial airlines, helicopters, general aviation | El Al, Qantas, Pfizer, ALCOA, Merrill Lynch, Omniflight | ||||||
Aeronautical Terminals | Provide aircraft operators with two-way high-speed data (broadband) capability | Corporate aircraft, government and military aircraft, commercial airlines | Corporate aircraft modification centers, U.S. Department of Defense, Northrop Grumman, L3 Communications, Boeing, Rockwell Collins, Honeywell, Thales | ||||||
Avionics Data Networking Products | Data servers, routers, switches, and storage devices to manage Internet, entertainment and operational data aboard aircraft | Corporate aircraft, government and military aircraft, commercial airlines | Airbus, Boeing, Rockwell Collins, AirCell, Row44, Northrop Grumman, L3 | ||||||
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Products/Services | Key Features/Benefits | Selected Applications | Customers | ||||||
Very Low Data Rate: | |||||||||
SAT202 | Fourth-generation IsatM2M terminal, smaller, lighter, engineered in-house Near global operation | Tracking, M2M communications, fleet management, rapid alerting, ship ID and position | Maritime commercial and private trucking fleets, tuna fishing fleets, logistics security | ||||||
“Osprey” Personnel Tracking Terminal | Cost effective messaging for small data payloads | Lone worker, Corporate Duty of Care, Personnel Security | NGO’s, Private Security Firms, Risk Management, Government, Military | ||||||
Low Data Rate: | |||||||||
Satellite Packet Data Terminals | Iridium, Skyterra, and Inmarsat-based, two-way messaging, micro telemetry, geo fencing, security/panic alarm, Both regional and global services available | Transportation, Public Safety, Workforce Automation, Oil and Gas Remote Monitoring and Control, Force Tracking | NGOs, Long-Haul Trucking Companies, NATO, EU, U.S. Department of Defense | ||||||
Emergency Management Products | Hardware and software for search and rescue (SAR) systems | Rescue and Mission Control Centers | Over 18 Governments Worldwide | ||||||
Services and Support | 24/7 global operations in 5 countries, lifecycle support maintenance, in-field subject-matter consulting expertise, network and airtime services | ||||||||
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Products/Services | Key Features/Benefits | Selected Applications | Customers | ||||||
Handheld Terminals | |||||||||
Small, lightweight and rugged, providing true mobility | Warehousing, Logistics | ||||||||
Vehicle-Mounted Terminals | Heavier-duty design for use on forklifts, cranes, and other material handling vehicles | Consumer product manufacturers, | |||||||
Third-party logistics providers, Retailers, | |||||||||
Wearable Terminals | Very small and lightweight with ergonomic schemes for mounting on operators | Warehouse order picking | Container port operators | ||||||
Wireless Networks | Communications link between mobile computers and local network, primarily based on 802.11 standard | ||||||||
Host connectivity software; accessory products; maintenance services | Industry-standard connectivity to various host computers; enhanced system functionality; extended service on either a contract or pay-as-you-go basis | ||||||||
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Products/Services | Key Features/Benefits | Selected Applications | Programs | ||||||
Communications- On-The-Move Data Link and Satcom Antenna Systems | Low weight, low profile, low radar signature (stealth), high performance and agile beam antennas, RF electronics, and positioning systems | Military tactical communications (airborne, ship, ground mobile, and soldier) | F-22 Intra-Flight Data Link, High Altitude Long Endurance (HALE) Datalink, Hawklink MH-60 Datalink, WIN-T Army Mobile DataLinks, Navy Airborne Data Links, Panasonic. | ||||||
Military and | Manpack Portable GBS Suite | ||||||||
Radar Microwave Systems | Low loss, high power ferrite components and electronic systems, and RF front end RADAR panels and conformal millimeter wave radar antenna systems that allow for | Defense electronic surveillance and | EW - F-16, AQL-211 Radar - Phalanx, JSTARS, TPQ-37 and Joint Air to Ground Missile (JAGM), Small Diameter Bomb II | ||||||
Space Hardware | Microwave subsystems capable of high-frequency, low noise, high-power and fast switching, facilitating jam-resistant, secure mobile communications | High-rate commercial and secure military communications | Wideband Global SATCOM (WGS), Advanced EHF (AEHF), National Security Programs, W2A, Skynet 5, Hylas 2, Yahsat | ||||||
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• | to perform those functions for which we have special capabilities and that are most critical to quality and timely | ||
• | to equip ourselves with the modern tools we need to perform our manufacturing functions | ||
• | to use outside sources for functions requiring special skills that we do not have, or that do not offer attractive potential returns, or to perform standard tasks at a competitive price leaving our internal resources to focus on providing |
• | to further improve the cost-effectiveness andtime-to-market of our manufacturing operations. |
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Item 1A. | Risk Factors |
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• | actual or anticipated operating | ||
• | the limited average trading volume and public float for our stock, which means that orders from a relatively few investors can significantly impact the price of our stock, independently of our operating results, | ||
• | announcements of technological innovations, new products or new contracts by us, our customers, our competitors or our customers’ | ||
• | government regulatory | ||
• | developments with respect to wireless and satellite | ||
• | general market conditions. |
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• | allow our shareholders the right to acquire common stock from us at discounted prices in the event a person acquires 20% or more of our common stock, or announces an attempt to do so, without our Board of Directors’ prior consent; | ||
• | authorize the issuance of up to 10,000,000 shares of “blank check” preferred stock by our Board of Directors without shareholder approval, which stock could have terms that could discourage or thwart a takeover attempt; | ||
• | limit who may call a special meeting of shareholders; | ||
• | require unanimous written consent for shareholder action without a meeting; | ||
• | establish advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted upon at shareholder meetings; | ||
• | adopt the fair price requirements and rules regarding business combinations with interested shareholders set forth in Article 11, Parts 2 and 3 of the Georgia Business Corporation Code; and | ||
• | require approval by the holders of at least 75% of the outstanding common stock to amend any of the foregoing provisions. |
Item 1B. | Unresolved Staff Comments |
Item 2. | Properties |
Item 3. | Legal Proceedings |
Item 4. | [Reserved] |
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2008 Price Range | 2007 Price Range | 2009 Price Range | 2008 Price Range | |||||||||||||||||||||||||||||
High | Low | High | Low | High | Low | High | Low | |||||||||||||||||||||||||
First Quarter | $ | 27.71 | 27.18 | $ | 21.65 | 18.72 | $ | 26.48 | 17.07 | $ | 27.71 | 27.18 | ||||||||||||||||||||
Second Quarter | 22.29 | 21.63 | 22.89 | 18.00 | 21.45 | 16.93 | 22.29 | 21.63 | ||||||||||||||||||||||||
Third Quarter | 22.04 | 21.50 | 25.89 | 19.62 | 23.17 | 17.55 | 22.04 | 21.50 | ||||||||||||||||||||||||
Fourth Quarter | 26.72 | 25.00 | 33.23 | 23.85 | 20.37 | 12.00 | 26.72 | 25.00 |
(c) Total Number | (d) Maximum Number | |||||||||||||||
of Shares | (or Approxmiate | |||||||||||||||
Purchased as | Dollar Value) of | |||||||||||||||
Part of Publicly | Shares that May Yet | |||||||||||||||
(a) Total Number | (b) Average | Announced | Be Purchased | |||||||||||||
of Shares | Price Paid | Plans or | Under the Plans or | |||||||||||||
Period | Purchased (1) | Per Share | Program (2) | Programs (3) | ||||||||||||
January 2008 (January 1 to January 26) | 980 | — | ||||||||||||||
June 2008 (May 25 to June 28) | 2,645 | — | ||||||||||||||
August 2008 (July 27 to August 23) | 37,758 | $ | 21.41 | 36,700 | ||||||||||||
September 2008 (August 24 to September 27) | 181,335 | 22.30 | 180,885 | |||||||||||||
October 2008 (September 28 to October 25) | 257,041 | 19.42 | 256,891 | |||||||||||||
Total | 479,759 | 20.67 | 474,476 | $10.2 million | ||||||||||||
(c) Total Number | (d) Maximum Number | |||||||||||||||
of Shares | ( or Approximate | |||||||||||||||
Purchased as | Dollar Value) of | |||||||||||||||
Part of Publicly | Shares that May Yet | |||||||||||||||
(a) Total Number | (b) Average | Announced | Be Purchased | |||||||||||||
of Shares | Price Paid | Plans or | Under the Plans or | |||||||||||||
Period | Purchased | Per Share | Program(1) | Programs(2) | ||||||||||||
October 2009 (October 4 to October 31) | - | - | ||||||||||||||
November 2009 (November 1 to November 28) | - | - | - | |||||||||||||
December 2009 (November 29 to December 31) | 20,600 | 12.13 | 20,600 | |||||||||||||
Total | 20,600 | $ | 12.13 | 20,600 | $ | 9.9 million | ||||||||||
(1) | ||
This balance represents the number of shares that were repurchased under | ||
This balance represents the value of shares that could be repurchased in the future under the Program as of December 31, |
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Item 6. | Selected Financial Data |
Years Ended December 31 | Years Ended December 31 | |||||||||||||||||||||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||||||||
Net sales | $ | 335,045 | 287,879 | 261,119 | 225,887 | 201,100 | $ | 359,972 | 335,045 | 287,879 | 261,119 | 225,887 | ||||||||||||||||||||||||||||
Cost of sales | 213,654 | 175,278 | 164,611 | 146,965 | 130,623 | 241,124 | 213,885 | 175,278 | 164,611 | 146,965 | ||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 82,368 | 74,561 | 66,335 | 56,944 | 49,346 | 87,722 | 81,426 | 74,561 | 66,335 | 56,944 | ||||||||||||||||||||||||||||||
Research and development expenses | 19,399 | 18,773 | 15,816 | 11,754 | 12,034 | 18,662 | 20,110 | 18,773 | 15,816 | 11,754 | ||||||||||||||||||||||||||||||
Impairment loss on goodwill | 19,891 | - | - | - | - | |||||||||||||||||||||||||||||||||||
Acquistion-related items | 7,206 | - | - | - | - | |||||||||||||||||||||||||||||||||||
Operating income | 19,624 | 19,267 | 14,357 | 10,224 | 9,097 | |||||||||||||||||||||||||||||||||||
Interest income and other | 2,430 | 5,403 | 2,254 | 588 | 1,085 | |||||||||||||||||||||||||||||||||||
Operating (loss) income | (14,633 | ) | 19,624 | 19,267 | 14,357 | 10,224 | ||||||||||||||||||||||||||||||||||
Interest income | 207 | 2,430 | 5,403 | 2,254 | 588 | |||||||||||||||||||||||||||||||||||
Interest expense | (1,679 | ) | (1,953 | ) | (1,921 | ) | (3,304 | ) | (1,791 | ) | (2,181 | ) | (1,679 | ) | (1,953 | ) | (1,921 | ) | (3,304 | ) | ||||||||||||||||||||
Foreign exchange loss, net | (586 | ) | (1,390 | ) | (710 | ) | (288 | ) | (187 | ) | (808 | ) | (586 | ) | (1,390 | ) | (710 | ) | (288 | ) | ||||||||||||||||||||
Earnings from continuing operations before income taxes | 19,789 | 21,327 | 13,980 | 7,220 | 8,204 | |||||||||||||||||||||||||||||||||||
(Loss) earnings from continuing operations before income taxes | (17,415 | ) | 19,789 | 21,327 | 13,980 | 7,220 | ||||||||||||||||||||||||||||||||||
Income tax benefit (expense) | 682 | (2,080 | ) | 1,823 | (2,094 | ) | (2,134 | ) | 4,266 | 682 | (2,080 | ) | 1,823 | (2,094 | ) | |||||||||||||||||||||||||
Earnings from continuing operations | 20,471 | 19,247 | 15,803 | 5,126 | 6,070 | |||||||||||||||||||||||||||||||||||
(Loss) earnings from continuing operations | (13,149 | ) | 20,471 | 19,247 | 15,803 | 5,126 | ||||||||||||||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||||||||||
(Loss) earnings from discontinued operations before income taxes | — | (585 | ) | 24,427 | (13,971 | ) | (6,016 | ) | (10,917 | ) | - | (585 | ) | 24,427 | (13,971 | ) | ||||||||||||||||||||||||
Income tax benefit (expense) | — | 82 | (7,222 | ) | (2,598 | ) | 138 | 4,001 | - | 82 | (7,222 | ) | (2,598 | ) | ||||||||||||||||||||||||||
(Loss) earnings from discontinued operations | — | (503 | ) | 17,205 | (16,569 | ) | (5,878 | ) | (6,916 | ) | - | (503 | ) | 17,205 | (16,569 | ) | ||||||||||||||||||||||||
Net (loss) earnings | $ | (20,065 | ) | 20,471 | 18,744 | 33,008 | (11,443 | ) | ||||||||||||||||||||||||||||||||
Net earnings (loss) | $ | 20,471 | 18,744 | 33,008 | (11,443 | ) | 192 | |||||||||||||||||||||||||||||||||
Net earnings (loss) per share: | ||||||||||||||||||||||||||||||||||||||||
Net (loss) earnings per share: | ||||||||||||||||||||||||||||||||||||||||
Basic: | ||||||||||||||||||||||||||||||||||||||||
From continuing operations | $ | 1.32 | 1.25 | 1.08 | 0.46 | 0.55 | $ | (0.87 | ) | 1.32 | 1.25 | 1.08 | 0.46 | |||||||||||||||||||||||||||
From discontinued operations | — | (0.03 | ) | 1.18 | (1.48 | ) | (0.53 | ) | (0.45 | ) | - | (0.03 | ) | 1.18 | (1.48 | ) | ||||||||||||||||||||||||
Net earnings (loss) | $ | 1.32 | 1.22 | 2.26 | (1.02 | ) | 0.02 | |||||||||||||||||||||||||||||||||
Net (loss) earnings | $ | (1.32 | ) | 1.32 | 1.22 | 2.26 | (1.02 | ) | ||||||||||||||||||||||||||||||||
Diluted: | ||||||||||||||||||||||||||||||||||||||||
From continuing operations | $ | 1.31 | 1.24 | 1.08 | 0.46 | 0.54 | $ | (0.87 | ) | 1.31 | 1.24 | 1.08 | 0.46 | |||||||||||||||||||||||||||
From discontinued operations | — | (0.03 | ) | 1.17 | (1.48 | ) | (0.52 | ) | (0.45 | ) | - | (0.03 | ) | 1.17 | (1.48 | ) | ||||||||||||||||||||||||
Net earnings (loss) | $ | 1.31 | 1.21 | 2.25 | (1.02 | ) | 0.02 | |||||||||||||||||||||||||||||||||
Net (loss) earnings | $ | (1.32 | ) | 1.31 | 1.21 | 2.25 | (1.02 | ) | ||||||||||||||||||||||||||||||||
Weighted-average number of common shares outstanding: | ||||||||||||||||||||||||||||||||||||||||
Basic | 15,169 | 15,452 | 15,354 | 14,621 | 11,179 | |||||||||||||||||||||||||||||||||||
Diluted | 15,169 | 15,628 | 15,482 | 14,679 | 11,225 | |||||||||||||||||||||||||||||||||||
As of December 31 | ||||||||||||||||||||||||||||||||||||||||
Weighted average number of shares outstanding: | ||||||||||||||||||||||||||||||||||||||||
Basic | 15,452 | 15,354 | 14,621 | 11,179 | 11,094 | |||||||||||||||||||||||||||||||||||
Diluted | 15,628 | 15,482 | 14,679 | 11,225 | 11,237 | |||||||||||||||||||||||||||||||||||
2009 | 2008 | 2007 | 2006 | 2005 | ||||||||||||||||||||||||||||||||||||
Working capital related to continuing operations | $ | 98,147 | 165,419 | 198,491 | 176,570 | 67,580 | ||||||||||||||||||||||||||||||||||
Total assets | 374,145 | 327,365 | 323,800 | 291,684 | 225,341 | |||||||||||||||||||||||||||||||||||
Long-term debt, including current installments | 27,750 | 10,552 | 13,720 | 14,857 | 43,408 | |||||||||||||||||||||||||||||||||||
Shareholders’ equity | 237,091 | 242,742 | 247,126 | 213,083 | 113,656 |
As of December 31 | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
Working capital related to continuing operations | $ | 165,419 | 198,491 | 176,570 | 67,580 | 68,835 | ||||||||||||||
Total assets | 327,365 | 323,800 | 291,684 | 225,341 | 256,953 | |||||||||||||||
Long-term debt, including current installments | 10,552 | 13,720 | 14,857 | 43,408 | 61,454 | |||||||||||||||
Shareholders’ equity | 242,742 | 247,126 | 213,083 | 113,656 | 126,021 |
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Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Communications & Tracking – Supplies a broad array of terminals and antennas that enable end-users in aircraft and other mobile platforms to communicate over satellite andair-to-ground links. This segment includes the previously reported Satellite Communications segment, and the newly acquired Formation, Inc. (“Formation”) and Satamatics Global Limited (“Satamatics”) product lines which include aeronautical wi-fi communications and data storage, aeronautical voice and tracking, and satellite-basedmachine-to-machine mobile communications (refer to “Acquisitions Completed in 2009” in Item 1 of this Annual Report and Note 2 to the Consolidated Financial Statements for additional information); | |
• | LXE – Provides rugged mobile terminals and wireless data networks used for logistics applications such as distribution centers, warehouses and container ports. LXE operates mainly in two markets: the Americas market, which is comprised of North, South and Central America; and the International market, which is comprised of all other geographic areas, with the highest concentration in Europe; and | |
• | Defense & Space (“D&S”) |
• | |||
• | Global Tracking- Includes the asset tracking and emergency management |
• | |||
• | |||
• | Our pre-tax loss from continuing operations of $17.4 million included a $19.9 million impairment loss on goodwill at LXE, $7.2 million of acquisition-related charges that are required to be reported as a current expense under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141(R),Business Combinations (which is now included in Financial Accounting Standards Board (“FASB”) Accounting Standards Codificationtm (“ASC”) Topic 805,Business Combinations), $7.8 million of amortization of intangible assets related to our new acquisitions, and approximately $3.9 million of severance costs. | ||
• | Our markets continue to see the unfavorable impact of the | ||
• | Our discontinued operations reported a loss before income taxes of $10.9 million in 2009. The loss was mainly a result of |
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Years Ended December 31 | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Product net sales | 78.1 | % | 81.6 | % | 86.0 | % | ||||||
Service net sales | 21.9 | 18.4 | 14.0 | |||||||||
Net sales | 100.0 | 100.0 | 100.0 | |||||||||
Product cost of sales as a percentage of product net sales | 69.0 | 64.4 | 61.3 | |||||||||
Service cost of sales as a percentage of service net sales | 59.9 | 61.2 | 58.6 | |||||||||
Cost of sales | 67.0 | 63.8 | 60.9 | |||||||||
Selling, general and administrative expenses | 24.4 | 24.3 | 25.9 | |||||||||
Research and development expenses | 5.2 | 6.0 | 6.5 | |||||||||
Impairment loss on goodwill | 5.5 | - | - | |||||||||
Acquisition-related charges | 2.0 | - | - | |||||||||
Operating (loss) income | (4.1 | ) | 5.9 | 6.7 | ||||||||
Interest income | 0.1 | 0.7 | 1.9 | |||||||||
Interest expense | (0.6 | ) | (0.5 | ) | (0.7 | ) | ||||||
Foreign exchange loss, net | (0.2 | ) | (0.2 | ) | (0.5 | ) | ||||||
(Loss) earnings from continuing operations before income taxes | (4.8 | ) | 5.9 | 7.4 | ||||||||
Income tax benefit (expense) | 1.1 | 0.2 | (0.7 | ) | ||||||||
Net (loss) earnings from continuing operations | (3.7 | ) | 6.1 | 6.7 | ||||||||
Discontinued operations: | ||||||||||||
Loss from discontinued operations before income taxes | (3.0 | ) | - | (0.2 | ) | |||||||
Income tax benefit | 1.1 | - | - | |||||||||
Loss from discontinued operations | (1.9 | ) | - | (0.2 | ) | |||||||
Net (loss) earnings | (5.6 | ) % | 6.1 | % | 6.5 | % | ||||||
Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Product net sales | 81.6 | % | 86.0 | % | 85.6 | % | ||||||
Service net sales | 18.4 | 14.0 | 14.4 | |||||||||
Net sales | 100.0 | 100.0 | 100.0 | |||||||||
Product cost of sales, as a percentage of product net sales | 64.3 | 61.3 | 62.4 | |||||||||
Service cost of sales, as a percentage of service net sales | 61.2 | 58.6 | 66.7 | |||||||||
Cost of sales | 63.8 | 60.9 | 63.0 | |||||||||
Selling, general and administrative expenses | 24.5 | 25.9 | 25.4 | |||||||||
Research and development expenses | 5.8 | 6.5 | 6.1 | |||||||||
Operating income | 5.9 | 6.7 | 5.5 | |||||||||
Interest income and other | 0.7 | 1.9 | 0.9 | |||||||||
Interest expense | (0.5 | ) | (0.7 | ) | (0.7 | ) | ||||||
Foreign exchange loss, net | (0.2 | ) | (0.5 | ) | (0.3 | ) | ||||||
Earnings from continuing operations before income taxes | 5.9 | 7.4 | 5.4 | |||||||||
Income tax benefit (expense) | 0.2 | (0.7 | ) | 0.7 | ||||||||
Earnings from continuing operations | 6.1 | 6.7 | 6.1 | |||||||||
Discontinued operations: | ||||||||||||
Loss (earnings) from discontinued operations before income taxes | — | (0.2 | ) | 9.3 | ||||||||
Income tax benefit (expense) | — | — | (2.8 | ) | ||||||||
(Loss) earnings from discontinued operations | — | (0.2 | ) | 6.5 | ||||||||
Net earnings | 6.1 | % | 6.5 | % | 12.6 | % | ||||||
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Years Ended December 31 | ||||||||||||||||||||||||
Years Ended December 31 | 2009 | 2008 | 2007 | |||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Net sales: | ||||||||||||||||||||||||
Communications & Tracking | $ | 158,952 | 112,517 | 89,968 | ||||||||||||||||||||
LXE | 109,441 | 145,885 | 138,821 | |||||||||||||||||||||
Defense & Space | $ | 76,643 | 59,090 | 52,416 | 91,579 | 76,643 | 59,090 | |||||||||||||||||
LXE | 145,885 | 138,821 | 138,001 | |||||||||||||||||||||
Satellite Communications | 112,517 | 89,968 | 70,702 | |||||||||||||||||||||
Total | $ | 335,045 | 287,879 | 261,119 | $ | 359,972 | 335,045 | 287,879 | ||||||||||||||||
Cost of sales percentage: | ||||||||||||||||||||||||
Communications & Tracking | 61.7 | % | 58.6 | % | 55.9 | % | ||||||||||||||||||
LXE | 63.6 | 60.3 | 58.0 | |||||||||||||||||||||
Defense & Space | 80.1 | 77.0 | 75.4 | |||||||||||||||||||||
Cost-of-sales percentage: | ||||||||||||||||||||||||
Defense & Space | 77.0 | % | 75.4 | % | 79.1 | % | ||||||||||||||||||
LXE | 60.3 | 58.0 | 58.5 | |||||||||||||||||||||
Satellite Communications | 58.4 | 55.9 | 59.4 | |||||||||||||||||||||
Total | 63.8 | 60.9 | 63.0 | 67.0 | 63.8 | 60.9 | ||||||||||||||||||
Operating income (loss): | ||||||||||||||||||||||||
Communications & Tracking | $ | 11,383 | 14,187 | 12,189 | ||||||||||||||||||||
LXE | (26,531 | ) | 2,861 | 7,067 | ||||||||||||||||||||
Defense & Space | $ | 6,381 | 4,876 | 2,572 | 7,314 | 6,381 | 4,876 | |||||||||||||||||
LXE | 2,861 | 7,067 | 11,043 | |||||||||||||||||||||
Satellite Communications | 14,187 | 12,189 | 6,170 | |||||||||||||||||||||
Corporate | (3,805 | ) | (4,865 | ) | (5,428 | ) | ||||||||||||||||||
Corporate & Other | (6,799 | ) | (3,805 | ) | (4,865 | ) | ||||||||||||||||||
Total | $ | 19,624 | 19,267 | 14,357 | $ | (14,633 | ) | 19,624 | 19,267 | |||||||||||||||
Adjusted EBITDA(1) | ||||||||||||||||||||||||
Communications and Tracking | $ | 24,326 | 19,122 | 15,244 | ||||||||||||||||||||
LXE | (3,379 | ) | 6,724 | 9,508 | ||||||||||||||||||||
Defense & Space | 10,682 | 9,410 | 7,503 | |||||||||||||||||||||
Corporate & Other | 1,623 | (1,290 | ) | 691 | ||||||||||||||||||||
Total | $ | 33,252 | 33,966 | 32,946 | ||||||||||||||||||||
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Corp & | ||||||||||||||||||||
C&T | LXE | D&S | Other | Total | ||||||||||||||||
Year Ended December 31, 2009 | ||||||||||||||||||||
Net loss | $ | (20,065 | ) | |||||||||||||||||
Loss from discontinued operations | 6,916 | |||||||||||||||||||
Income tax benefit from continuing operations | (4,266 | ) | ||||||||||||||||||
Earnings (loss) from continuing operations before income taxes | $ | 12,141 | (26,708 | ) | 7,315 | (10,163 | ) | (17,415 | ) | |||||||||||
Interest expense | 68 | 93 | - | 2,020 | 2,181 | |||||||||||||||
Depreciation and amortization | 12,117 | 3,345 | 3,367 | 1,160 | 19,989 | |||||||||||||||
Impairment loss on goodwill | - | 19,891 | - | - | 19,891 | |||||||||||||||
Acquisition-related items | - | - | - | 7,206 | 7,206 | |||||||||||||||
Acquisition-related foreign exchange adjustment | - | - | - | 1,400 | 1,400 | |||||||||||||||
Adjusted EBITDA | $ | 24,326 | (3,379 | ) | 10,682 | 1,623 | $ | 33,252 | ||||||||||||
Year Ended December 31, 2008 | ||||||||||||||||||||
Net earnings | $ | 20,471 | ||||||||||||||||||
Income tax benefit from continuing operations | (682 | ) | ||||||||||||||||||
Earnings (loss) from continuing operations before income taxes | $ | 13,971 | 2,955 | 6,347 | (3,485 | ) | 19,789 | |||||||||||||
Interest expense | 62 | 406 | 40 | 1,171 | 1,679 | |||||||||||||||
Depreciation and amortization | 5,089 | 3,363 | 3,023 | 1,023 | 12,498 | |||||||||||||||
Adjusted EBITDA | $ | 19,122 | 6,724 | 9,410 | (1,291 | ) | $ | 33,966 | ||||||||||||
Year Ended December 31, 2007 | ||||||||||||||||||||
Net earnings | $ | 18,744 | ||||||||||||||||||
Loss from discontinued operations | 503 | |||||||||||||||||||
Income tax expense from continuing operations | 2,080 | |||||||||||||||||||
Earnings (loss) from continuing operations before income taxes | $ | 11,504 | 6,955 | 4,742 | (1,874 | ) | 21,327 | |||||||||||||
Interest expense | 121 | 348 | 141 | 1,343 | 1,953 | |||||||||||||||
Depreciation and amortization | 3,619 | 2,205 | 2,620 | 1,222 | 9,666 | |||||||||||||||
Adjusted EBITDA | $ | 15,244 | 9,508 | 7,503 | 691 | $ | 32,946 | |||||||||||||
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December 31 | ||||||||
2009 | 2008 | |||||||
Communications & Tracking | $ | 66.6 | 58.4 | |||||
LXE | 22.0 | 12.6 | ||||||
Defense & Space | 89.6 | 114.9 | ||||||
Total | $ | 178.2 | 185.9 | |||||
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342009. This liability represents our estimated loss under an agreement to acquire a license from the purchaser for $8 million in payments over a seven-year period for the rights to a certain satellite territory and a corresponding sublicense agreement that granted the territory rights back to the purchaser, under which we will receive a portion of 82
Payments due by period | Payments due by period | |||||||||||||||||||||||||||||||||||||||
Less than | 1-3 | 4-5 | After 5 | Less than | 1-3 | 4-5 | After 5 | |||||||||||||||||||||||||||||||||
Total | 1 year | years | years | years | Total | 1 year | years | years | years | |||||||||||||||||||||||||||||||
Long-term debt, excluding capital lease obligations (1) | $ | 10,542 | 1,294 | 2,830 | 3,363 | 3,055 | ||||||||||||||||||||||||||||||||||
Capital lease obligations | 10 | 8 | 2 | — | — | |||||||||||||||||||||||||||||||||||
Purchase commitments (1) | $ | 34,028 | 33,946 | 82 | - | - | ||||||||||||||||||||||||||||||||||
Long-term debt, excluding capital lease obligations (2) | 27,748 | 1,396 | 3,052 | 21,359 | 1,941 | |||||||||||||||||||||||||||||||||||
Operating lease obligations | 21,978 | 4,142 | 6,605 | 4,315 | 6,916 | 24,963 | 5,160 | 8,281 | 5,630 | 5,892 | ||||||||||||||||||||||||||||||
Acquisition costs for earn-out provisions | 1,500 | 1,500 | — | — | — | 13,729 | 13,729 | - | - | - | ||||||||||||||||||||||||||||||
License to acquire satellite service | 8,000 | 2,000 | 2,000 | 2,000 | 2,000 | |||||||||||||||||||||||||||||||||||
FIN 48-Uncertain tax positions | 2,019 | 2,019 | - | - | - | |||||||||||||||||||||||||||||||||||
Deferred compensation agreements | 584 | 122 | 281 | 81 | 100 | 709 | 156 | 198 | 34 | 321 | ||||||||||||||||||||||||||||||
FIN 48-Uncertain tax positions | 2,949 | 2,949 | — | — | — | |||||||||||||||||||||||||||||||||||
License to acquire satellite service | 8,000 | 1,000 | 2,000 | 2,000 | 3,000 | |||||||||||||||||||||||||||||||||||
Purchase commitments (2) | 45,534 | 40,495 | 5,039 | — | — |
(1) | ||
Purchase commitments primarily represent existing commitments under purchase orders or contracts to purchase inventory and raw materials for our products. Most of these purchase orders and contracts can be terminated for a fee that is either fixed or based on when termination occurs. | ||
(2) | Excludes interest payments on long-term debt. Future interest expense is unpredictable and varies depending on the level of borrowings outstanding, and the timing of repayments, and therefore has not been included in the above table. Interest payments in 2009 were approximately $1.5 million. There was no accrued interest as of December 31, 2009. |
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• | Level 1 – Observable inputs consisting of quoted prices in active markets; |
• | Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and | |
• | Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
36 During 2009, we changed the annual impairment testing date from December 31 to the first day of 82
Estimated | ||||||||
Fair Value in | ||||||||
Reported | Excess of | |||||||
Goodwill | Carrying Amount | |||||||
Formation | $ | 24,060 | 5.9 | % | ||||
Satamatics | 23,429 | 2.5 | ||||||
Sky Connect | 11,048 | 11.0 |
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38our employees and directors. We estimate the fair value of 82
• | economic conditions in the U.S. and abroad and their effect on capital spending in | ||
• | difficulty predicting the timing of receipt of major customer orders, and the effect of customer timing decisions on | ||
• | our successful completion of technological development programs | ||
• | U.S. defense budget pressures on near-term spending priorities; | ||
• | uncertainties inherent in the process of converting contract awards into firm contractual orders in the future; | ||
• | volatility of foreign currency exchange rates relative to the U.S. dollar and their effect on purchasing power by international customers, and on the cost structure of our operations outside the | ||
• | successful resolution of technical problems, proposed scope changes, or proposed funding changes that may be encountered on contracts; | ||
• | changes in | ||
• | successful transition of products from development stages to an efficient manufacturing environment; | ||
• | changes in the rate at which | ||
• | customer response to new products and services, and general conditions in | ||
• | the increased potential for asset impairment charges as unfavorable economic or financial market conditions, or other developments might affect the estimated fair value of one or more of our business units; | ||
• | the success of certain of | ||
• | the continued availability of financing for | ||
• | risk that the | ||
• | development of successful working relationships with local business and government personnel in connection with the distribution and manufacture of products in foreign countries; |
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• | the demand growth for various mobile and high-speed data communications services; | ||
• | |||
• | our ability to |
not perform as expected, are subject to undisclosed or unanticipated liabilities, or are otherwise dilutive to our earnings; |
• | the potential effects, on cash and results of discontinued operations, of final resolution of potential liabilities under warranties and representations that we made, | ||
• | the availability, capabilities and performance of suppliers of basic materials, electronic components and sophisticated subsystems on which | ||
• | uncertainties associated with U.S. export controls and the export license process, which restrict |
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• | Eliminates the requirement for objective evidence of fair value of an undelivered item for treatment of the delivered item as a separate unit of accounting; | |
• | Requires use of the relative selling price method for allocating total consideration to elements of the arrangement instead of the relative-fair-value method or the residual method; | |
• | Allows the use of an estimated selling price for any element within the arrangement to allocate consideration to individual elements when vendor-specific objective evidence or other third party evidence of selling price do not exist; and | |
• | Expands the required disclosures. |
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Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
Government-obligations money market funds, other money market instruments, and interest-bearing deposits, with maturity dates of less than 3 months, interest payable month at variable rates (a weighted-average rate of 1.05% as of December 31, 2008) | $ | 78,937 |
Government-obligations money market funds, other money market instruments, and interest-bearing time deposits, with maturity dates of less than 3 months interest payable monthly at variable rates (a weighted-average rate of 0.2% at December 31, 2009) | $ | 18,165 | ||
Revolving credit agreement with U.S. and Canadian banks, maturing in February 2013, interest payable quarterly at a variable rate (3.75% at December 31, 2009) | $ | 18,500 |
Exchange Rate | $U.S. | |||||||
($U.S. per unit of | in thousands | |||||||
local currency) | (reporting currency) | |||||||
Sweden | 0.1278 /Krona | $ | 1,063 | |||||
Australia | 0.7114 /Dollar | 937 | ||||||
Canada | 0.8210 /Dollar | 418 | ||||||
Netherlands | 1.3969 /Euro | 245 | ||||||
United Kingdom | 1.4593 /Pound | 135 | ||||||
France | 1.3969 /Euro | 84 | ||||||
Belgium | 1.3969 /Euro | 74 | ||||||
Italy | 1.3969 /Euro | 61 | ||||||
Germany | 1.3969 /Euro | 39 | ||||||
Total intercompany payable subject to foreign currency risk | $ | 3,056 | ||||||
42 Exchange Rate USD (USD per unit of in thousands local currency) (reporting currency) Australia 0.8983 /AUD $ 2,246 Canada 0.9515 /CAD 1,482 Sweden 0.1397 /SEK 1,382 France 1.4316 /EUR 375 Italy 1.4316 /EUR 272 Netherlands 1.4316 /EUR 224 Total amount subject to foreign currency risk $ 5,981
Exchange Rate | ||||||||||||
Functional | ||||||||||||
Currency per | USD | |||||||||||
Currency | Functional | Denominated | Equivalent | |||||||||
Denomination | Currency | Currency | (in thousands) | |||||||||
Accounts Receivable | ||||||||||||
USD | CAD | 1.0510 | $ | 14,951 | ||||||||
USD | EUR | 0.6985 | 634 | |||||||||
EUR | SEK | 10.2529 | 173 | |||||||||
EUR | GBP | 0.8866 | 150 | |||||||||
Other currencies | 205 | |||||||||||
$ | 16,113 | |||||||||||
Accounts Payable | ||||||||||||
GBP | CAD | 1.6918 | $ | 1,154 | ||||||||
USD | CAD | 1.0510 | 847 | |||||||||
EUR | SEK | 10.2529 | 686 | |||||||||
EUR | GBP | 0.8866 | 531 | |||||||||
GBP | USD | 1.6163 | 284 | |||||||||
AUD | CAD | 0.9395 | 142 | |||||||||
Other currencies | 268 | |||||||||||
$ | 3,912 | |||||||||||
Average | ($U.S.) | |||||||||||
Notional | Contract | Fair | ||||||||||
Amount | Rate | Value | ||||||||||
Foreign currency forward contracts | ||||||||||||
U.S. dollars (sell for Canadian dollars) | 19,000 | USD | 1.1603 | $ | (1,143 | ) | ||||||
Swedish Krona (sell for U.S. dollars) | 3,200 | SEK | 0.1229 | (16 | ) | |||||||
$ | (1,159 | ) | ||||||||||
Exchange Rate | ||||||||||||
Functional | ||||||||||||
Currency per | USD | |||||||||||
Currency | Functional | Denominated | Equivalent | |||||||||
Denomination | Currency | Currency | (in thousands) | |||||||||
USD | CAD | 1.0510 | $ | 2,876 | ||||||||
GBP | CAD | 1.6918 | 1,909 | |||||||||
GBP | USD | 1.6163 | 1,787 | |||||||||
EUR | SEK | 10.2529 | 504 | |||||||||
AUD | CAD | 0.9395 | 292 | |||||||||
Other currencies | 566 | |||||||||||
$ | 7,934 | |||||||||||
Average | Fair | |||||||||||
Notional | Contract | Value | ||||||||||
Amount | Rate | (USD) | ||||||||||
Foreign currency forward contracts: | ||||||||||||
U.S. dollars (sell for Canadian dollars) | 15,000 USD | 1.0509 | $ | 40 | ||||||||
Euros (sell for U.S. dollars) | 250 EUR | 1.4259 | (1 | ) | ||||||||
$ | 39 | |||||||||||
Item 8. | Financial Statements and Supplementary Data |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
(a) | Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures |
(b) | Management’s Annual Report on Internal Control Over Financial Reporting |
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(c) | Changes in Internal Control Over Financial Reporting |
(d) | Report of Independent Registered Public Accounting Firm |
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45
Item 9B. | Other Information. |
Item 10. | Directors, Executive Officers, and Corporate Governance |
Item 11. | Executive Compensation |
46
(c) | (c) | |||||||||||||||||||||||
(a) | Number of securities | (a) | Number of securities | |||||||||||||||||||||
Number of securities | (b) | remaining available for | Number of securities | (b) | remaining available for | |||||||||||||||||||
to be issued upon | Weighted average | future issuance under | to be issued upon | Weighted average | future issuance under | |||||||||||||||||||
exercise of | exercise price of | equity compensation plans | exercise of | exercise price of | equity compensation plans | |||||||||||||||||||
outstanding options, | outstanding options, | (excluding securities | outstanding options, | outstanding options, | (excluding securities | |||||||||||||||||||
Plan Category | warrants and rights | warrants and rights | reflected in column(a)) | warrants and rights | warrants and rights | reflected in column(a)) | ||||||||||||||||||
Equity compensation plans approved by security holders | 732,754 | $ | 20.13 | 1,801,000 | 832,761 | $ | 20.82 | 1,631,600 | ||||||||||||||||
Equity compensation plans not approved by security holders | 175,325 | $ | 19.55 | 74,732 | 161,525 | 19.64 | 201,517 | (i) | ||||||||||||||||
Total | 908,079 | $ | 20.02 | 1,875,732 | 994,286 | $ | 20.63 | 1,833,117 | ||||||||||||||||
Item 13. | Certain Relationships and Related Transactions and Director Independence |
Item 14. | Principal Accountant Fees and Services |
Item 15. | Exhibits, Financial Statement Schedules |
47
Years Ended December 31, 2008, 2007 and 2006 | ||||||||||||||||||||
Additions | ||||||||||||||||||||
Balance at | charged to | Balance | ||||||||||||||||||
beginning | costs and | at end | ||||||||||||||||||
Classification | of year | expenses | Deductions | Other | of year | |||||||||||||||
Allowance for Doubtful Accounts: | ||||||||||||||||||||
2006 | $ | 588 | 500 | (347 | )(a) | — | 741 | |||||||||||||
2007 | 741 | 1,404 | (1,041 | )(a) | — | 1,104 | ||||||||||||||
2008 | 1,104 | 278 | (587 | )(a) | 61 | (b) | 856 | |||||||||||||
Valuation Allowance for Deferred Tax Assets: | ||||||||||||||||||||
2006 | $ | 46,969 | 307 | (c) | (14,355 | )(d) | — | 32,921 | ||||||||||||
2007 | 32,921 | 16,222 | (c) | (49 | ) | — | 49,094 | |||||||||||||
2008 | 49,094 | — | (20,545 | )(e) | — | 28,549 | ||||||||||||||
Valuation Allowance for Assets Held for Sale: | ||||||||||||||||||||
2006 | $ | 6,200 | — | (6,200 | )(f) | — | — |
Years Ended December 31, 2009, 2008 and 2007 | ||||||||||||||||||||
Additions | ||||||||||||||||||||
Balance at | charged to | Balance | ||||||||||||||||||
beginning | costs and | at end | ||||||||||||||||||
Classification | of year | expenses | Deductions | Other | of year | |||||||||||||||
Allowance for Doubtful Accounts: | ||||||||||||||||||||
2007 | $ | 741 | 1,404 | (1,041 | )(a) | - | 1,104 | |||||||||||||
2008 | 1,104 | 333 | (653 | )(a) | 72 | (b) | 856 | |||||||||||||
2009 | 856 | 921 | (679 | )(a) | 110 | (b) | 1,208 | |||||||||||||
Valuation Allowance for Deferred Tax Assets: | ||||||||||||||||||||
2007 | $ | 32,921 | 16,222 | (c) | (49 | ) | - | 49,094 | ||||||||||||
2008 | 49,094 | - | (20,545 | )(d) | - | 28,549 | ||||||||||||||
2009 | 28,549 | - | - | 9,302 | (e) | 37,851 |
(a) Deductions represent receivables that were charged off to the allowance or recovered during the year. (b) Includes the balances at the date | ||
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52
EMS TECHNOLOGIES, INC. | ||||
By: | ||||
/s/ Neilson A. Mackay President and Chief Executive Officer | Date: 3/31/10 |
Signature | Title | Date | ||||
/s/ | President and Chief Executive Officer | 3/ | ||||
/s/ Gary B. Shell Gary B. Shell | Senior Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer) | 3/ | ||||
/s/ David M. Sheffield David M. Sheffield | Vice President, Finance and Chief Accounting Officer | 3/ | ||||
/s/ John R. Bolton John R. Bolton | Director | 3/31/10 | ||||
/s/ Hermann Buerger Hermann Buerger | Director | 3/ | ||||
/s/ Francis J. Erbrick Francis J. Erbrick | Director | 3/ | ||||
/s/ John R. Kreick John R. Kreick | Director | 3/ | ||||
/s/ John B. Mowell John B. Mowell | Director, Chairman of the Board | 3/ | ||||
/s/ Thomas W. O’Connell Thomas W. O’Connell | Director | 3/ | ||||
/s/ Bradford W. Parkinson Bradford W. Parkinson | Director | 3/ | ||||
/s/ Norman E. Thagard Norman E. Thagard | Director | 3/ | ||||
/s/ John L. Woodward, Jr. John L. Woodward, Jr. | Director | 3/ |
53
55
Years Ended December 31 | Years Ended December 31 | |||||||||||||||||||||||
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
Product net sales | $ | 273,268 | 247,504 | 223,512 | $ | 281,153 | 273,268 | 247,504 | ||||||||||||||||
Service net sales | 61,777 | 40,375 | 37,607 | 78,819 | 61,777 | 40,375 | ||||||||||||||||||
Net sales | 335,045 | 287,879 | 261,119 | 359,972 | 335,045 | 287,879 | ||||||||||||||||||
Product cost of sales | 175,836 | 151,611 | 139,517 | 193,888 | 175,837 | 151,611 | ||||||||||||||||||
Service cost of sales | 37,818 | 23,667 | 25,094 | 47,236 | 38,048 | 23,667 | ||||||||||||||||||
Cost of sales | 213,654 | 175,278 | 164,611 | 241,124 | 213,885 | 175,278 | ||||||||||||||||||
Selling, general and administrative expenses | 82,368 | 74,561 | 66,335 | 87,722 | 81,426 | 74,561 | ||||||||||||||||||
Research and development expenses | 19,399 | 18,773 | 15,816 | 18,662 | 20,110 | 18,773 | ||||||||||||||||||
Impairment loss on goodwill | 19,891 | - | - | |||||||||||||||||||||
Acquistion-related items | 7,206 | - | - | |||||||||||||||||||||
Operating income | 19,624 | 19,267 | 14,357 | |||||||||||||||||||||
Interest income and other | 2,430 | 5,403 | 2,254 | |||||||||||||||||||||
Operating (loss) income | (14,633 | ) | 19,624 | 19,267 | ||||||||||||||||||||
Interest income | 207 | 2,430 | 5,403 | |||||||||||||||||||||
Interest expense | (1,679 | ) | (1,953 | ) | (1,921 | ) | (2,181 | ) | (1,679 | ) | (1,953 | ) | ||||||||||||
Foreign exchange loss, net | (586 | ) | (1,390 | ) | (710 | ) | (808 | ) | (586 | ) | (1,390 | ) | ||||||||||||
Earnings from continuing operations before income taxes | 19,789 | 21,327 | 13,980 | |||||||||||||||||||||
(Loss) earnings from continuing operations before income taxes | (17,415 | ) | 19,789 | 21,327 | ||||||||||||||||||||
Income tax benefit (expense) | 682 | (2,080 | ) | 1,823 | 4,266 | 682 | (2,080 | ) | ||||||||||||||||
Earnings from continuing operations | 20,471 | 19,247 | 15,803 | |||||||||||||||||||||
(Loss) earnings from continuing operations | (13,149 | ) | 20,471 | 19,247 | ||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||
Loss from discontinued operations before income taxes | (10,917 | ) | - | (585 | ) | |||||||||||||||||||
Income tax benefit | 4,001 | - | 82 | |||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||
(Loss) earnings from discontinued operations before income taxes | — | (585 | ) | 24,427 | ||||||||||||||||||||
Income tax benefit (expense) | — | 82 | (7,222 | ) | ||||||||||||||||||||
Loss from discontinued operations | (6,916 | ) | - | (503 | ) | |||||||||||||||||||
(Loss) earnings from discontinued operations | — | (503 | ) | 17,205 | ||||||||||||||||||||
Net (loss) earnings | $ | (20,065 | ) | 20,471 | 18,744 | |||||||||||||||||||
Net earnings | $ | 20,471 | 18,744 | 33,008 | ||||||||||||||||||||
Net earnings (loss) per share: | ||||||||||||||||||||||||
Net (loss) earnings per share: | ||||||||||||||||||||||||
Basic: | ||||||||||||||||||||||||
From continuing operations | $ | 1.32 | 1.25 | 1.08 | $ | (0.87 | ) | 1.32 | 1.25 | |||||||||||||||
From discontinued operations | — | (0.03 | ) | 1.18 | (0.45 | ) | - | (0.03 | ) | |||||||||||||||
Net earnings | $ | 1.32 | 1.22 | 2.26 | ||||||||||||||||||||
Net (loss) earnings | $ | (1.32 | ) | 1.32 | 1.22 | |||||||||||||||||||
Diluted: | ||||||||||||||||||||||||
From continuing operations | $ | 1.31 | 1.24 | 1.08 | $ | (0.87 | ) | 1.31 | 1.24 | |||||||||||||||
From discontinued operations | — | (0.03 | ) | 1.17 | (0.45 | ) | - | (0.03 | ) | |||||||||||||||
Net earnings | $ | 1.31 | 1.21 | 2.25 | $ | (1.32 | ) | 1.31 | 1.21 | |||||||||||||||
Weighted-average number of shares: | ||||||||||||||||||||||||
Weighted-average number of common shares outstanding: | ||||||||||||||||||||||||
Basic | 15,452 | 15,354 | 14,621 | 15,169 | 15,452 | 15,354 | ||||||||||||||||||
Diluted | 15,628 | 15,482 | 14,679 | 15,169 | 15,628 | 15,482 |
56
December 31 | ||||||||||||||||
December 31 | 2009 | 2008 | ||||||||||||||
2008 | 2007 | |||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 86,979 | 133,959 | $ | 47,174 | 86,979 | ||||||||||
Trade accounts receivable, net of allowance for doubtful account of $856 in 2008 and $1,104 in 2007 | 65,831 | 61,084 | ||||||||||||||
Costs and estimated earnings in excess of billings | 30,485 | 24,001 | ||||||||||||||
Trade accounts receivable, net of allowance for doubtful account of | ||||||||||||||||
$1,208 in 2009 and $856 in 2008 | 60,959 | 65,831 | ||||||||||||||
Costs and estimated earnings in excess of billings on long-term contracts | 25,290 | 30,485 | ||||||||||||||
Inventories | 35,670 | 28,949 | 40,655 | 35,670 | ||||||||||||
Deferred income taxes | 1,632 | 1,868 | 4,306 | 1,632 | ||||||||||||
Other current assets | 12,184 | 7,196 | 19,117 | 12,184 | ||||||||||||
Total current assets | 232,781 | 257,057 | 197,501 | 232,781 | ||||||||||||
Property, plant and equipment: | ||||||||||||||||
Land | 1,150 | 1,150 | 1,150 | 1,150 | ||||||||||||
Buildings and leasehold improvements | 16,238 | 15,954 | 18,792 | 16,238 | ||||||||||||
Machinery and equipment | 92,100 | 87,377 | 107,712 | 92,100 | ||||||||||||
Furniture and fixtures | 10,059 | 9,665 | 10,542 | 10,059 | ||||||||||||
Total property, plant and equipment | 119,547 | 114,146 | 138,196 | 119,547 | ||||||||||||
Less accumulated depreciation and amortization | 78,975 | 74,223 | ||||||||||||||
Less accumulated depreciation | 90,256 | 78,975 | ||||||||||||||
Net property, plant and equipment | 40,572 | 39,923 | 47,940 | 40,572 | ||||||||||||
Deferred income taxes | 7,318 | 5,490 | 9,421 | 7,318 | ||||||||||||
Goodwill | 31,402 | 9,982 | 60,336 | 31,402 | ||||||||||||
Other intangible assets, net of accumulated amortization of $8,219 in 2008 and $7,256 in 2007 | 11,166 | 5,837 | ||||||||||||||
Other intangible assets, net of accumulated amortization of $18,817 in 2009 and $8,219 in 2008 | 49,256 | 11,166 | ||||||||||||||
Other assets | 4,126 | 5,511 | 9,691 | 4,126 | ||||||||||||
Total assets | $ | 327,365 | 323,800 | $ | 374,145 | 327,365 | ||||||||||
57
December 31 | ||||||||||||||||
December 31 | 2009 | 2008 | ||||||||||||||
2008 | 2007 | |||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Current installments of long-term debt | $ | 1,302 | 3,174 | $ | 1,398 | 1,302 | ||||||||||
Accounts payable | 25,361 | 20,689 | 27,333 | 25,361 | ||||||||||||
Billings in excess of contract costs and estimated earnings | 8,172 | 6,643 | ||||||||||||||
Billings in excess of contract costs and estimated earnings on long-term contracts | 9,597 | 8,172 | ||||||||||||||
Accrued compensation and retirement costs | 14,456 | 13,725 | 13,946 | 14,456 | ||||||||||||
Deferred service revenue | 7,998 | 8,578 | 9,588 | 7,998 | ||||||||||||
Acquisition costs for earn-out provisions | 13,729 | - | ||||||||||||||
Other current liabilities | 10,073 | 5,757 | 23,763 | 10,073 | ||||||||||||
Total current liabilities | 67,362 | 58,566 | 99,354 | 67,362 | ||||||||||||
Long-term debt, excluding current installments | 9,250 | 10,546 | 26,352 | 9,250 | ||||||||||||
Deferred income taxes | 5,757 | 461 | ||||||||||||||
Other liabilities | 8,011 | 7,562 | 5,591 | 7,550 | ||||||||||||
Total liabilities | 84,623 | 76,674 | 137,054 | 84,623 | ||||||||||||
Shareholders’ equity: | ||||||||||||||||
Preferred stock of $1.00 par value per share; Authorized 10,000 shares; none issued | — | — | - | - | ||||||||||||
Common stock of $.10 par value per share; Authorized 75,000 shares, issued and outstanding 15,188 in 2008 and 15,581 in 2007 | 1,519 | 1,558 | ||||||||||||||
Common stock of $.10 par value per share; Authorized 75,000 shares, issued and outstanding 15,249 in 2009 and 15,188 in 2008 | 1,525 | 1,519 | ||||||||||||||
Additional paid-in capital | 133,270 | 139,727 | 136,112 | 133,270 | ||||||||||||
Accumulated other comprehensive (loss) income — foreign currency translation adjustment | (5,500 | ) | 12,859 | |||||||||||||
Accumulated other comprehensive income (loss) - foreign currency translation adjustment | 6,066 | (5,500 | ) | |||||||||||||
Retained earnings | 113,453 | 92,982 | 93,388 | 113,453 | ||||||||||||
Total shareholders’ equity | 242,742 | 247,126 | 237,091 | 242,742 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Total liabilities and shareholders’ equity | $ | 327,365 | 323,800 | $ | 374,145 | 327,365 | ||||||||||
58
Years Ended December 31 | Years Ended December 31 | |||||||||||||||||||||||
(in thousands) | 2009 | 2008 | 2007 | |||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Net earnings | $ | 20,471 | 18,744 | 33,008 | ||||||||||||||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||||||||||||||||||
Net (loss) earnings | $ | (20,065 | ) | 20,471 | 18,744 | |||||||||||||||||||
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | 12,498 | 9,666 | 8,864 | 19,989 | 12,498 | 9,666 | ||||||||||||||||||
Impairment loss on goodwill | 19,891 | - | - | |||||||||||||||||||||
Deferred income taxes | (2,400 | ) | 887 | (3,178 | ) | (4,629 | ) | (2,400 | ) | 887 | ||||||||||||||
Gain on sale of assets | (64 | ) | (1 | ) | (352 | ) | ||||||||||||||||||
Loss (gain) from discontinued operations | — | 503 | (17,205 | ) | ||||||||||||||||||||
Gain (loss) on sale of assets | 78 | (64 | ) | (1 | ) | |||||||||||||||||||
Loss from discontinued operations | 6,916 | - | 503 | |||||||||||||||||||||
Stock-based compensation expense | 2,339 | 1,727 | 987 | 2,470 | 2,339 | 1,727 | ||||||||||||||||||
Tax benefit for exercise of stock options | 203 | 643 | 213 | 133 | 203 | 643 | ||||||||||||||||||
Change in fair value of contingent consideration liability | 3,229 | - | - | |||||||||||||||||||||
Excess tax benefits from stock-based compensation | (75 | ) | (24 | ) | — | (23 | ) | (75 | ) | (24 | ) | |||||||||||||
Changes in operating assets and liabilities, net of effects of acquisitions: | ||||||||||||||||||||||||
Trade accounts receivable, net of allowance for doubtful accounts | (5,584 | ) | 14,259 | (14,638 | ) | |||||||||||||||||||
Costs and estimated earnings in excess of billings | (7,991 | ) | (989 | ) | 4,288 | |||||||||||||||||||
Trade accounts receivable | 12,575 | (5,584 | ) | 14,259 | ||||||||||||||||||||
Costs and estimated earnings in excess of billings on long-term contracts | 1,628 | (7,991 | ) | (989 | ) | |||||||||||||||||||
Inventories | (7,801 | ) | (904 | ) | (4,880 | ) | 6,957 | (7,801 | ) | (904 | ) | |||||||||||||
Accounts payable | 1,076 | (7,113 | ) | 2,029 | (5,026 | ) | 1,076 | (7,113 | ) | |||||||||||||||
Accrued compensation and retirement costs | (1,994 | ) | 819 | 1,167 | ||||||||||||||||||||
Other | 3,779 | 4,665 | 512 | 138 | 2,960 | 3,498 | ||||||||||||||||||
Net cash provided by operating activities in continuing operations | 16,451 | 42,063 | 9,648 | 42,267 | 16,451 | 42,063 | ||||||||||||||||||
Net cash (used in) provided by operating activities in discontinued operations | — | (3,329 | ) | 657 | ||||||||||||||||||||
Net cash used in operating activities in discontinued operations | (555 | ) | - | (3,329 | ) | |||||||||||||||||||
Net cash provided by operating activities | 16,451 | 38,734 | 10,305 | 41,712 | 16,451 | 38,734 | ||||||||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Purchases of property, plant and equipment | (13,869 | ) | (14,579 | ) | (8,502 | ) | (13,433 | ) | (13,869 | ) | (14,579 | ) | ||||||||||||
Payments for acquisitions of businesses | (32,354 | ) | (5,000 | ) | (188 | ) | ||||||||||||||||||
Payments for acquisitions of businesses, net of cash acquired | (87,264 | ) | (32,354 | ) | (5,000 | ) | ||||||||||||||||||
Proceeds from sales of assets | 1,371 | 907 | 59,521 | 58 | 1,371 | 907 | ||||||||||||||||||
Net cash (used in) provided by investing activities in continuing operations | (44,852 | ) | (18,672 | ) | 50,831 | |||||||||||||||||||
Net cash used in investing activities in discontinued operations | — | — | (480 | ) | ||||||||||||||||||||
Net cash (used in) provided by investing activities | (44,852 | ) | (18,672 | ) | 50,351 | |||||||||||||||||||
Net cash used in investing activities | (100,639 | ) | (44,852 | ) | (18,672 | ) | ||||||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Repayment of debt | (3,159 | ) | (1,281 | ) | (27,990 | ) | ||||||||||||||||||
Net borrowings under revolving credit facility | 18,500 | - | - | |||||||||||||||||||||
Repayment of other debt | (1,294 | ) | (3,159 | ) | (1,281 | ) | ||||||||||||||||||
Change in restricted cash | — | 81 | 2,458 | - | - | 81 | ||||||||||||||||||
Deferred financing costs paid | (1,254 | ) | — | (85 | ) | (251 | ) | (1,254 | ) | - | ||||||||||||||
Payments for repurchase and retirement of common shares | (9,963 | ) | — | — | (374 | ) | (9,963 | ) | - | |||||||||||||||
Excess tax benefits from stock-based compensation | 75 | 24 | — | 23 | 75 | 24 | ||||||||||||||||||
Proceeds from stock offering, net of expenses | — | — | 58,736 | |||||||||||||||||||||
Proceeds from exercise of stock options | 925 | 4,332 | 2,124 | 620 | 925 | 4,332 | ||||||||||||||||||
Net cash (used in) provided by financing activities | (13,376 | ) | 3,156 | 35,243 | ||||||||||||||||||||
Net cash provided by (used in) financing activities | 17,224 | (13,376 | ) | 3,156 | ||||||||||||||||||||
Effect of exchange rates on cash and cash equivalents | (5,203 | ) | 1,310 | 737 | ||||||||||||||||||||
Effect of changes in exchange rates on cash and cash equivalents | 1,898 | (5,203 | ) | 1,310 | ||||||||||||||||||||
Net change in cash and cash equivalents | (46,980 | ) | 24,528 | 96,636 | (39,805 | ) | (46,980 | ) | 24,528 | |||||||||||||||
Cash and cash equivalents at January 1 | 133,959 | 109,431 | 12,795 | |||||||||||||||||||||
Cash and cash equivalents at beginning of period | 86,979 | 133,959 | 109,431 | |||||||||||||||||||||
Cash and cash equivalents at December 31 | $ | 86,979 | 133,959 | 109,431 | ||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 47,174 | 86,979 | 133,959 | ||||||||||||||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||||||||||
Cash paid for interest | $ | 1,094 | 1,147 | 1,483 | $ | 1,839 | 1,094 | 1,147 | ||||||||||||||||
Cash paid for income taxes | 2,289 | 357 | 9,357 | 983 | 2,289 | 357 |
59
Three years ended December 31, 2008 | Three Years Ended December 31, 2009 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accum- | Accum- | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
ulated | ulated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
other | other | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
compre- | Total | Compre- | compre- | Total | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional | Compre- | hensive | share- | Additional | hensive | hensive | share- | |||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | paid-in | hensive | income | Retained | holders’ | Common Stock | paid-in | income | income | Retained | holders’ | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | capital | income | (loss) | earnings | equity | Shares | Amount | capital | (loss) | (loss) | earnings | equity | |||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2005 | 11,343 | $ | 1,134 | 71,389 | (97 | ) | 41,230 | 113,656 | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2006 | 15,327 | $ | 1,533 | 133,050 | 4,262 | 74,238 | 213,083 | |||||||||||||||||||||||||||||||||||||||||||||||||
Net earnings | — | — | — | 33,008 | — | 33,008 | 33,008 | - | - | - | 18,744 | - | 18,744 | 18,744 | ||||||||||||||||||||||||||||||||||||||||||
Income tax benefit from exercise of non-qualified stock options | — | — | 213 | — | — | — | 213 | |||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit for exercise of stock options | - | - | 643 | - | - | - | 643 | |||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock options | 215 | 21 | 3,387 | — | — | — | 3,408 | 311 | 31 | 5,758 | - | - | - | 5,789 | ||||||||||||||||||||||||||||||||||||||||||
Redemption of shares upon exercise of common stock options | (64 | ) | (6 | ) | (1,248 | ) | — | — | — | (1,254 | ) | (58 | ) | (6 | ) | (1,427 | ) | - | - | - | (1,433 | ) | ||||||||||||||||||||||||||||||||||
Repurchases of stock | (2 | ) | — | (30 | ) | — | — | — | (30 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | 3,795 | 380 | 58,356 | — | — | — | 58,740 | |||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 40 | 4 | 983 | — | — | — | 987 | |||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 2,540 | 2,540 | — | 2,540 | |||||||||||||||||||||||||||||||||||||||||||||||||
Reclassification due to sale of discontinued operations | — | — | — | 1,819 | 1,819 | — | 1,819 | |||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income for 2006 | 37,367 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2006 | 15,327 | 1,533 | 133,050 | 4,262 | 74,238 | 213,083 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net earnings | — | — | — | 18,744 | — | 18,744 | 18,744 | |||||||||||||||||||||||||||||||||||||||||||||||||
Income tax benefit from exercise of non-qualified stock options | — | — | 643 | — | — | — | 643 | |||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock options | 311 | 31 | 5,758 | — | — | — | 5,789 | |||||||||||||||||||||||||||||||||||||||||||||||||
Redemption of shares upon exercise of common stock options | (58 | ) | (6 | ) | (1,427 | ) | — | — | — | (1,433 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Repurchases of stock | (1 | ) | — | (24 | ) | — | — | — | (24 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Repurchases of common stock | (1 | ) | - | (24 | ) | - | - | - | (24 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 2 | — | 1,727 | — | — | — | 1,727 | 2 | - | 1,727 | - | - | - | 1,727 | ||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | 8,597 | 8,597 | — | 8,597 | - | - | - | 8,597 | 8,597 | - | 8,597 | ||||||||||||||||||||||||||||||||||||||||||
Comprehensive income for 2007 | 27,341 | 27,341 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2007 | 15,581 | 1,558 | 139,727 | 12,859 | 92,982 | 247,126 | 15,581 | 1,558 | 139,727 | 12,859 | 92,982 | 247,126 | ||||||||||||||||||||||||||||||||||||||||||||
Net earnings | — | — | — | 20,471 | — | 20,471 | 20,471 | - | - | - | 20,471 | - | 20,471 | 20,471 | ||||||||||||||||||||||||||||||||||||||||||
Income tax benefit from exercise of non-qualified stock options | — | — | 203 | — | — | — | 203 | |||||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit for exercise of stock options | - | - | 203 | - | - | - | 203 | |||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock options | 56 | 6 | 989 | — | — | — | 995 | 56 | 6 | 989 | - | - | - | 995 | ||||||||||||||||||||||||||||||||||||||||||
Redemption of shares upon exercise of common stock options | (3 | ) | — | (70 | ) | — | — | — | (70 | ) | (3 | ) | - | (70 | ) | - | - | - | (70 | ) | ||||||||||||||||||||||||||||||||||||
Repurchases of stock | (480 | ) | (48 | ) | (9,915 | ) | — | — | — | (9,963 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Repurchases of common stock | (480 | ) | (48 | ) | (9,915 | ) | - | - | - | (9,963 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 34 | 3 | 2,336 | — | — | — | 2,339 | 34 | 3 | 2,336 | - | - | - | 2,339 | ||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | — | — | — | (18,359 | ) | (18,359 | ) | — | (18,359 | ) | - | - | - | (18,359 | ) | (18,359 | ) | - | (18,359 | ) | ||||||||||||||||||||||||||||||||||||
Comprehensive income for 2008 | 2,112 | 2,112 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2008 | 15,188 | $ | 1,519 | 133,270 | (5,500 | ) | 113,453 | 242,742 | 15,188 | 1,519 | 133,270 | (5,500 | ) | 113,453 | 242,742 | |||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | (20,065 | ) | - | (20,065 | ) | (20,065 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Tax benefit for exercise of stock options | - | - | 133 | - | - | - | 133 | |||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of common stock options | 48 | 5 | 663 | - | - | - | 668 | |||||||||||||||||||||||||||||||||||||||||||||||||
Redemption of shares upon exercise of common stock options | (2 | ) | - | (47 | ) | - | - | - | (47 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Repurchases of common stock | (27 | ) | (3 | ) | (373 | ) | - | - | - | (376 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | 42 | 4 | 2,466 | - | - | - | 2,470 | |||||||||||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustment | - | - | - | 11,566 | 11,566 | - | 11,566 | |||||||||||||||||||||||||||||||||||||||||||||||||
Comprehensive income (loss) for 2009 | (8,499 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2009 | 15,249 | $ | 1,525 | 136,112 | 6,066 | 93,388 | 237,091 | |||||||||||||||||||||||||||||||||||||||||||||||||
60
(1) | BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Buildings | 20 to 40 years | |
Machinery and equipment | 3 to 8 years | |
Furniture and fixtures | 4 to 10 years |
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2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
Basic weighted-average number of common shares outstanding | 15,452 | 15,354 | 14,621 | 15,169 | 15,452 | 15,354 | ||||||||||||||||||
Dilutive potential shares using the treasury stock method | 176 | 128 | 58 | |||||||||||||||||||||
Dilutive potential shares using the treasury share method | - | 176 | 128 | |||||||||||||||||||||
Diluted weighted-average number of common shares outstanding | 15,628 | 15,482 | 14,679 | 15,169 | 15,628 | 15,482 | ||||||||||||||||||
Shares that were not included in computation of diluted earnings per share that could potentially dilute future basic earnings per share because their effect on the periods were antidilutive | 1,045 | 341 | 44 | |||||||||||||||||||||
Shares that were not included in dilutive earnings per share that could potentially dilute future basic earnings per share because their effect on the periods were antidilutive | 341 | 44 | 504 | |||||||||||||||||||||
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• | An acquiring entity must recognize all the assets acquired and liabilities assumed in a business combination at the acquisition-date fair value, as determined under the provisions in ASC Topic 820; | |
• | Transaction costs are expensed as incurred, and are classified within cash flows from operating activities in the consolidated statement of cash flows. Such costs were previously capitalized as part |
of the cost of an acquisition, and were classified within cash flows from investing activities in the consolidated statement of cash flows; |
• | Contingent consideration is recognized at fair value at the acquisition date as a liability or as equity. Subsequent adjustments of an amount recognized as a liability are recognized in the statement of operations. Contingent consideration was previously accounted for as an adjustment to the cost of the acquisition when the results of the contingency were determined; | |
• | Subsequent changes to valuation allowances against deferred tax assets after the measurement period are recognized as an adjustment to income tax expense. Such changes were previously reflected as an adjustment to goodwill. This provision of SFAS No. 141(R) also applies to acquisitions completed prior to the effective date; | |
• | Acquired in-process research and development (“IPR&D”) is recognized as an asset at fair value at the acquisition date, with the fair value recognized as an expense as the asset is realized or abandoned. IPR&D was previously expensed at the acquisition date; and | |
• | Costs associated with restructuring or exit activities of an acquired entity are expensed when incurred. Previously, such costs were recorded as liabilities at the acquisition date if specified criteria were met. |
• | Eliminates the requirement for objective evidence of fair value of an undelivered item for treatment of the delivered item as a separate unit of accounting; | |
• | Requires use of the relative selling price method for allocating total consideration to elements of the arrangement instead of the relative-fair-value method or the residual method; | |
• | Allows the use of an estimated selling price for any element within the arrangement to allocate consideration to individual elements when vendor-specific objective evidence or other third party evidence of selling price do not exist; and | |
• | Expands the required disclosures. |
(2) | BUSINESS COMBINATIONS |
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2008 | 2007 | 2006 | ||||||||||
Net sales | $ | — | — | 46,294 | ||||||||
Expenses | — | — | (45,499 | ) | ||||||||
Gain on sale of assets | — | — | 26,856 | |||||||||
Loss on sale of assets | — | — | (3,224 | ) | ||||||||
Estimated loss on disposal | — | (585 | ) | — | ||||||||
Earnings (loss) before income taxes | — | (585 | ) | 24,427 | ||||||||
Income tax benefit (expense) | — | 82 | (7,222 | ) | ||||||||
Earnings (loss) from discontinued operations | $ | — | (503 | ) | 17,205 | |||||||
Acquisition Date Fair Value Measurements | ||||||||||||
Measurement | As of | |||||||||||
As of | Period | December 31, | ||||||||||
April 4, 2009 | Adjustments | 2009 | ||||||||||
Cash | $ | 5.0 | - | 5.0 | ||||||||
Receivables | 4.7 | - | 4.7 | |||||||||
Inventories | 10.4 | (0.1 | ) | 10.3 | ||||||||
Developed technology | 21.2 | 2.1 | 23.3 | |||||||||
Customer relationships | 11.8 | 3.7 | 15.5 | |||||||||
Other identifiable intangible assets | 8.2 | (0.6 | ) | 7.6 | ||||||||
Other assets | 4.1 | 0.7 | 4.8 | |||||||||
Payables and accrued expenses | (8.5 | ) | (0.3 | ) | (8.8 | ) | ||||||
Deferred tax liabilities | (9.9 | ) | 1.2 | (8.7 | ) | |||||||
47.0 | 6.7 | 53.7 | ||||||||||
Goodwill | 54.2 | (6.7 | ) | 47.5 | ||||||||
$ | 101.2 | - | 101.2 | |||||||||
• | Cash and cash equivalents, trade accounts receivable, accounts payable and accrued expenses – The carrying amounts of each of these items approximated fair value because of the short-term maturity of these instruments. | |
• | Inventorieswere valued on the basis of estimated selling prices less the sum of (a) costs of disposal and (b) reasonable profit allowances on the selling effort. The inventory values were established separately for raw materials,work-in-process, and finished goods. The fair value of materials was based on the carrying amounts at current replacement cost. The fair value ofwork-in-process and finished goods was determined so that the Company would not generate a profit on the ultimate disposition of the acquired inventory based on value added in the manufacturing process prior to the acquisition date. | |
• | Property, plant and equipment assets(included in the other assets category above) were valued based on a cost and market approach. The cost approach quantifies value by examining either the historical cost to reproduce it or the estimated current cost to replace it at a given level of functionality and estimated physical deterioration. A physical deterioration factor was considered for the loss in value brought about by wear and tear of the elements, disintegration, use in service, and all physical factors that reduce the life and serviceability of the property. An obsolescence factor was considered to adjust for the economic and functional obsolescence created by the passage of time. The market approach measures the value of an asset through an analysis of recent sales or offerings of comparable property. Once the cost and market approaches were completed, an analysis of the overall validity of each approach was performed based on the resources used to arrive at a fair value of each asset. | |
• | Developed technology assetscan be defined as proprietary knowledge or processes that have been developed or purchased and are recognized as providing or having the potential to provide, significant competitive advantages or product differentiation. A developed technology intangible asset can be identified as the end product, such as in high-tech companies, or can be an internally developed system or software package that enhances the process of producing other products, delivering a |
service, or facilitates general business management. The developed technology acquired is inclusive of patented technology, proprietary software and trade secrets. For a portion of the developed technology acquired, a variation of the income approach known as the excess earnings method was used to value this developed technology. The income approach measures the future economic income that can be attributed to the developed technology based on its expected remaining useful life. The excess earnings method requires an analysis of the following two key inputs: 1) the average remaining useful lives of the developed technologies, and 2) the debt-free net cash flow expected to be generated by the developed technology over its average remaining useful life after deducting charges for contributory assets. Key assumptions and inputs used to develop the debt-free cash flow for developed technologies were projected revenue growth, the average remaining useful life and decay curve, the base earnings before income tax, depreciation, and amortization (“EBITDA”) margin, an adjustment to account for the R&D expenses related to maintenance of the existing developed technology, an estimated income tax rate, required return for the use of other contributory assets, an appropriate discount rate, and the incremental value of the tax savings generated by the amortization of intangible assets. The Relief from Royalty (“RFR”) method under the income approach was used to value the remaining portion of the developed technology acquired. This approach provides an estimate of the value of the developed technology based on the present value of the projected cost savings attributable to the ownership of the developed technology. This method is based on the theory that the owner of the developed technology is relieved of paying a royalty for license fee for the use of the developed technology. The method is a function of: 1) projected sales from products or services attributable to the developed technology, 2) a reasonable market royalty rate that would otherwise be charged to a licensor of the developed technology to a licensee of the developed technology, and 3) an appropriate discount rate to reflect the risk of achieving the projected royalty savings attributable to the developed technology. Key assumptions and inputs used to develop the debt-free cash flow for developed technologies value using the RFR method were projected revenue growth, the average remaining useful life and decay curve, a royalty rate, an estimated income tax rate and an appropriate discount rate. |
• | A customer relationshipexists between an entity and its customer if the following conditions are met: 1) the entity has information about the customer and has regular contact with the customer; and 2) the customer has the ability to make direct contact with the entity. Relationships may arise from contracts, such as supplier contracts and service contracts. However, customer relationships may arise through means other than contracts, such as through regular contact by sales or service representatives. The income approach known as the excess earnings method was used to value customer relationships. The income approach measures the future economic income that can be attributed to the customer relationships based on their expected remaining useful lives. The income approach requires an analysis of the following two key inputs: 1) the remaining useful lives of the customer relationships, considering current contracted terms and renewal probabilities based on historical customer attrition analysis; and 2) the debt-free net cash flow expected to be generated by the customer relationships over their remaining useful lives. Key assumptions and inputs used to develop the debt-free cash flow for developed technologies were projected revenue growth, the average remaining useful life and decay curve, the base EBITDA margin, a sales and marketing adjustment to account for expenses related to attracting new customers, an estimated income tax rate, required return for the use of other contributory assets, and an appropriate discount rate. | |
• | The other identifiable intangible assetsinclude trade names and trademarks, order backlog, noncompete agreements, and in-process research and development assets, the most significant of which are the trade names and trademarks. Trade names and trademarks are developed through years of advertising, consistent packaging, promotional campaigns, and customer satisfaction. A recognized trade name or trademark leads to a positive pre-existing disposition on the part of potential purchasers toward purchasing goods and services. A trade name is the name of a business, association or other organization used to identify it. Trade names and trademarks have three basic values to an owner. First is the publicizing value, which is the impact on a customer, a retailer or an industrial |
user, based on exposure, advertising, etc. Second is the educational value, implying product attributes, etc. Third is the psychological or heritage value, which implies comfort and induces sales. The RFR method under the income approach was used to estimate the value of the acquired trade names and trademarks. The key assumptions and inputs used are listed above underdeveloped technology assets. |
• | Deferred tax assets and liabilitieswere determined in accordance with ASC Topic 740,Income Taxes. Since both of these business combinations were nontaxable transactions, the assets are not adjusted to fair value for income tax reporting purposes. Therefore, deferred tax liabilities are reflected for the tax effects of the difference in bases for financial reporting and income tax purposes that result from applying the acquisition method of accounting for financial reporting purposes. |
Years Ended | ||||||||
December 31 | December 31 | |||||||
2009 | 2008 | |||||||
Net sales | $ | 362,970 | 383,584 | |||||
(Loss) earnings from continuing operations | (19,475 | ) | 6,397 |
(3) | GOODWILL AND OTHER INTANGIBLE ASSETS |
68amounts from acquisitions of 82
Satellite | ||||||||||||
LXE | Communications | Total | ||||||||||
Balance as of January 1, 2008 | $ | 9,982 | — | 9,982 | ||||||||
Goodwill acquired during year | 12,395 | 11,007 | 23,402 | |||||||||
Foreign currency translation adjustment | (1,982 | ) | — | (1,982 | ) | |||||||
Impairment losses | — | — | — | |||||||||
Balance as of December 31, 2008 | $ | 20,395 | 11,007 | 31,402 | ||||||||
Communication | ||||||||||||
& Tracking | LXE | Total | ||||||||||
Balance as of December 31, 2007 | $ | - | 9,982 | 9,982 | ||||||||
Goodwill acquired during year | 11,007 | 12,395 | 23,402 | |||||||||
Foreign currency translation adjustment | - | (1,982 | ) | (1,982 | ) | |||||||
Balance as of December 31, 2008 | 11,007 | 20,395 | 31,402 | |||||||||
Goodwill acquired during year | 47,530 | - | 47,530 | |||||||||
Foreign currency translation adjustment | - | 1,295 | 1,295 | |||||||||
Impairment loss | - | (19,891 | ) | (19,891 | ) | |||||||
Balance as of December 31, 2009 | $ | 58,537 | 1,799 | 60,336 | ||||||||
Estimated | ||||||||
Fair Value in | ||||||||
Reported | Excess of | |||||||
Goodwill | Carrying Amount | |||||||
Formation | $ | 24,060 | 5.9 | % | ||||
Satamatics | 23,429 | 2.5 | ||||||
Sky Connect | 11,048 | 11.0 |
As of December 31, 2009 | ||||||||||||
Gross | Net | |||||||||||
Carrying | Accumulated | Carrying | ||||||||||
Amount | Amortization | Amount | ||||||||||
Developed technology | $ | 40,385 | 13,460 | 26,925 | ||||||||
Customer relationships | 19,052 | 2,493 | 16,559 | |||||||||
Trade names and trademarks | 6,208 | 1,052 | 5,156 | |||||||||
Other | 2,428 | 1,812 | 616 | |||||||||
$ | 68,073 | 18,817 | 49,256 | |||||||||
As of December 31, 2008 | ||||||||||||
Gross | Net | |||||||||||
Carrying | Accumulated | Carrying | ||||||||||
Amount | Amortization | Amount | ||||||||||
Developed technology | $ | 15,002 | 7,621 | 7,381 | ||||||||
Customer relationships | 3,405 | 351 | 3,054 | |||||||||
Trade names and trademarks | 830 | 217 | 613 | |||||||||
Other | 148 | 30 | 118 | |||||||||
$ | 19,385 | 8,219 | 11,166 | |||||||||
(4) | FAIR VALUE MEASUREMENTS |
• | Level 1 – Observable inputs consisting of quoted prices in active markets; | |
• | Level 2 – Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and | |
• | Level 3 – Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. |
Year Ended | ||||
December 31, 2009 | ||||
Balance at the beginning of the period | $ | - | ||
Acquisitions | 10,500 | |||
Fair value adjustment, including accretion | 3,229 | |||
Balance at the end of the period | $ | 13,729 | ||
(5) | BUSINESS SEGMENT AND GEOGRAPHIC AREA INFORMATION |
Years Ended December 31 | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Net sales: | ||||||||||||
Communications & Tracking | $ | 158,952 | 112,517 | 89,968 | ||||||||
LXE | 109,441 | 145,885 | 138,821 | |||||||||
Defense & Space | 91,579 | 76,643 | 59,090 | |||||||||
Total | $ | 359,972 | 335,045 | 287,879 | ||||||||
Operating (loss) income: | ||||||||||||
Communications & Tracking | $ | 11,383 | 14,187 | 12,189 | ||||||||
LXE | (26,531 | ) | 2,861 | 7,067 | ||||||||
Defense & Space | 7,314 | 6,381 | 4,876 | |||||||||
Corporate & Other | (6,799 | ) | (3,805 | ) | (4,865 | ) | ||||||
Total | $ | (14,633 | ) | 19,624 | 19,267 | |||||||
Interest income, net of foreign exchange losses: | ||||||||||||
Communications & Tracking | $ | 826 | (154 | ) | (564 | ) | ||||||
LXE | (84 | ) | 500 | 236 | ||||||||
Defense & Space | 1 | 6 | 7 | |||||||||
Corporate & Other | (1,344 | ) | 1,492 | 4,334 | ||||||||
Total | $ | (601 | ) | 1,844 | 4,013 | |||||||
Interest expense: | ||||||||||||
Communications & Tracking | $ | 68 | 62 | 121 | ||||||||
LXE | 93 | 406 | 348 | |||||||||
Defense & Space | - | 40 | 141 | |||||||||
Corporate & Other | 2,020 | 1,171 | 1,343 | |||||||||
Total | $ | 2,181 | 1,679 | 1,953 | ||||||||
(Loss) earnings from continuing operations before income taxes: | ||||||||||||
Communications & Tracking | $ | 12,141 | 13,971 | 11,504 | ||||||||
LXE | (26,708 | ) | 2,955 | 6,955 | ||||||||
Defense & Space | 7,315 | 6,347 | 4,742 | |||||||||
Corporate & Other | (10,163 | ) | (3,484 | ) | (1,874 | ) | ||||||
Total | $ | (17,415 | ) | 19,789 | 21,327 | |||||||
Years Ended December 31 | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Capital expenditures: | ||||||||||||
Communications & Tracking | $ | 3,076 | 4,385 | 6,589 | ||||||||
LXE | 3,726 | 2,957 | 3,364 | |||||||||
Defense & Space | 5,966 | 6,105 | 3,684 | |||||||||
Corporate & Other | 665 | 422 | 942 | |||||||||
Total | $ | 13,433 | 13,869 | 14,579 | ||||||||
Depreciation and amortization: | ||||||||||||
Communications & Tracking | $ | 12,117 | 5,089 | 3,619 | ||||||||
LXE | 3,345 | 3,363 | 2,205 | |||||||||
Defense & Space | 3,367 | 3,023 | 2,620 | |||||||||
Corporate & Other | 1,160 | 1,023 | 1,222 | |||||||||
Total | $ | 19,989 | 12,498 | 9,666 | ||||||||
December 31 | ||||||||
2009 | 2008 | |||||||
Assets: | ||||||||
Communications & Tracking | $ | 220,405 | 99,323 | |||||
LXE | 71,632 | 107,230 | ||||||
Defense & Space | 53,883 | 47,417 | ||||||
Corporate & Other | 28,225 | 73,395 | ||||||
Total | $ | 374,145 | 327,365 | |||||
Years Ended December 31 | ||||||||||||
2009 | 2008 | 2007 | ||||||||||
Net sales to customers in the following countries: | ||||||||||||
United States | $ | 252,749 | 202,520 | 176,209 | ||||||||
Other foreign countries | 107,223 | 132,525 | 111,670 | |||||||||
Total | $ | 359,972 | 335,045 | 287,879 | ||||||||
December 31 | ||||||||
2009 | 2008 | |||||||
Long-lived assets (excluding goodwill) are located in the following countries: | ||||||||
United States | $ | 54,372 | 32,831 | |||||
United Kingdom | 24,442 | 2,050 | ||||||
Canada | 8,820 | 7,609 | ||||||
Other foreign countries | 9,562 | 9,248 | ||||||
Total | $ | 97,196 | 51,738 | |||||
Concentration of net assets by geographic region: | ||||||||
United States | $ | 72,826 | 128,692 | |||||
Canada | 62,239 | 53,252 | ||||||
Europe | 97,216 | 53,801 | ||||||
Other | 4,810 | 6,997 | ||||||
Total | $ | 237,091 | 242,742 | |||||
(6) | INVENTORIES |
December 31 | December 31 | December 31 | ||||||||||||||
2008 | 2007 | 2009 | 2008 | |||||||||||||
Parts and materials | $ | 26,730 | 18,864 | $ | 25,221 | 26,730 | ||||||||||
Work-in-process | 2,404 | 3,733 | 5,142 | 2,404 | ||||||||||||
Finished goods | 6,536 | 6,352 | 10,292 | 6,536 | ||||||||||||
$ | 35,670 | 28,949 | $ | 40,655 | 35,670 | |||||||||||
69 of 82
(7) | LONG-TERM DEBT |
2008 | 2007 | 2009 | 2008 | |||||||||||||
Revolving credit loan with a syndicate of banks in the U. S., which matures in February 2013, interest payable monthly at a variable rate (3.75% at the end of 2009) | $ | 18,500 | -- | |||||||||||||
Promissory note, secured by a first mortgage on the Company’s headquarters facility, maturing in 2016, principal and interest payable in equal monthly installments of $104 with a fixed interest rate of 8.0% | $ | 7,076 | 7,730 | 6,370 | 7,076 | |||||||||||
Term loan with an insurance company, secured by a U.S. building, maturing in February 2014, principal and interest payable in equal monthly installments of $68 with a fixed interest rate of 7.1% | 3,466 | 4,012 | 2,878 | 3,466 | ||||||||||||
Capital lease agreements, secured by machinery and equipment, computer hardware, software and peripherals, with various terms through 2010, due in quarterly installments with implicit interest rates of 3.0% to 4.2% | 10 | 16 | 2 | 10 | ||||||||||||
Revolving credit loan with a bank in the United Kingdom, which matured on April 2008, interest payable monthly at a variable rate (6.5% at the end of 2007) | — | 1,962 | ||||||||||||||
Total long-term debt | 10,552 | 13,720 | 27,750 | 10,552 | ||||||||||||
Less current installments of long-term debt | 1,302 | 3,174 | 1,398 | 1,302 | ||||||||||||
Long-term debt, excluding current installments | $ | 9,250 | 10,546 | $ | 26,352 | 9,250 | ||||||||||
70
2009 | $ | 1,302 | ||||||||||
2010 | 1,332 | $ | 1,398 | |||||||||
2011 | 1,500 | 1,434 | ||||||||||
2012 | 1,618 | 1,618 | ||||||||||
2013 | 1,745 | 20,245 | ||||||||||
2014 | 1,114 | |||||||||||
Thereafter | 3,055 | 1,941 | ||||||||||
Total principal maturities | $ | 10,552 | $ | 27,750 | ||||||||
8) | STOCK-BASED COMPENSATION |
Outstanding | Exercisable | |||||||||||||||||||||||
Number | Weighted | Weighted Average | Number | Weighted | Weighted Average | |||||||||||||||||||
Range of | of | Average | Remaining | of | Average | Remaining | ||||||||||||||||||
Exercise Prices | Shares | Exercise Price | Contractual Life | Shares | Exercise Price | Contractual Life | ||||||||||||||||||
$11.63 - 13.89 | 76 | $ | 13.00 | 70 | $ | 12.98 | ||||||||||||||||||
13.90 - 14.93 | 69 | 14.22 | 69 | 14.22 | ||||||||||||||||||||
14.94 - 15.80 | 62 | 15.63 | 57 | 15.63 | ||||||||||||||||||||
15.81 - 18.98 | 130 | 18.13 | 93 | 18.14 | ||||||||||||||||||||
18.99 - 20.00 | 180 | 19.35 | 82 | 19.19 | ||||||||||||||||||||
20.01 - 22.74 | 191 | 21.08 | 142 | 21.28 | ||||||||||||||||||||
22.75 - 28.67 | 200 | 26.85 | 96 | 25.80 | ||||||||||||||||||||
11.63 - 28.67 | 908 | 20.02 | 3.9 years | 609 | 18.95 | 3.7 years | ||||||||||||||||||
Outstanding | Exercisable | |||||||||||||||||||||||
Number | Weighted | Weighted Average | Number | Weighted | Weighted Average | |||||||||||||||||||
Range of | of | Average | Remaining | of | Average | Remaining | ||||||||||||||||||
Exercise Prices | Shares | Exercise Price | Contractual Life | Shares | Exercise Price | Contractual Life | ||||||||||||||||||
$ | 11.63 - 13.89 | 51 | $ | 13.14 | 51 | $ | 13.14 | |||||||||||||||||
13.90 - 14.93 | 49 | 14.22 | 49 | 14.22 | ||||||||||||||||||||
14.94 - 15.80 | 62 | 15.63 | 62 | 15.63 | ||||||||||||||||||||
15.81 - 18.98 | 161 | 18.22 | 142 | 18.23 | ||||||||||||||||||||
18.99 - 20.00 | 171 | 19.34 | 127 | 19.27 | ||||||||||||||||||||
20.01 - 22.74 | 201 | 21.15 | 178 | 21.04 | ||||||||||||||||||||
22.75 - 28.67 | 299 | 25.67 | 180 | 25.97 | ||||||||||||||||||||
$ | 11.63 - 28.67 | 994 | $ | 20.63 | 3.4 years | 789 | $ | 20.02 | 3.1 years | |||||||||||||||
71 of 82
Weighted | Weighted | |||||||||||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||||||||||
Weighted | Remaining | Weighted | Remaining | |||||||||||||||||||||||||||||
Number | Average | Contractual | Aggregate | Number | Average | Contractual | Aggregate | |||||||||||||||||||||||||
of | Exercise | Life | Intrinsic | of | Exercise | Life | Intrinsic | |||||||||||||||||||||||||
Shares | Price | (in years) | Value | Shares | Price | (in years) | Value | |||||||||||||||||||||||||
Options outstanding at December 31, 2007 | 680 | $ | 18.22 | |||||||||||||||||||||||||||||
Options outstanding at December 31, 2008 | 774 | $ | 20.16 | |||||||||||||||||||||||||||||
Granted | 144 | 28.06 | 188 | 22.43 | ||||||||||||||||||||||||||||
Exercised | (56 | ) | 17.75 | (48 | ) | 13.80 | ||||||||||||||||||||||||||
Forfeited or expired | 6 | 29.17 | (46 | ) | 23.67 | |||||||||||||||||||||||||||
Options outstanding at December 31, 2008 | 774 | 20.16 | 4.0 | $ | 2,502 | |||||||||||||||||||||||||||
Options outstanding at December 31, 2009 | 868 | 20.82 | 3.5 | $ | 163 | |||||||||||||||||||||||||||
Options exercisable at December 31, 2008 | 546 | 18.91 | 3.7 | 2,137 | ||||||||||||||||||||||||||||
Options exercisable at December 31, 2009 | 677 | 20.11 | 2.9 | 163 | ||||||||||||||||||||||||||||
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||
Expected volitility | 45% - 46 | % | 53% - 59 | % | 54% - 61 | % | 47% | 45% - 46% | 53% - 59% | |||||||||
Expected term (in years) | 4.8 - 5.0 | 4.7 - 8.3 | 5.0 - 8.3 | 4.6 | 4.8 - 5.0 | 4.7 - 8.3 | ||||||||||||
Risk-free rate | 2.9% - 3.0 | % | 4.5% - 4.9 | % | 4.7% - 5.1 | % | 1.5% - 2.1% | 2.9% - 3.0% | 4.5% - 4.9% | |||||||||
Expected dividend yield | None | None | None | None | None | None |
72 of 82
Weighted | Weighted | |||||||||||||||||||||||||||||||
Average | Average | |||||||||||||||||||||||||||||||
Weighted | Remaining | Weighted | Remaining | |||||||||||||||||||||||||||||
Number | Average | Contractual | Aggregate | Number | Average | Contractual | Aggregate | |||||||||||||||||||||||||
of | Exercise | Life | Intrinsic | of | Exercise | Life | Intrinsic | |||||||||||||||||||||||||
Shares | Price | (in years) | Value | Shares | Price | (in years) | Value | |||||||||||||||||||||||||
Options outstanding at December 31, 2007 | 154 | $ | 19.06 | |||||||||||||||||||||||||||||
Options outstanding at December 31, 2008 | 134 | $ | 19.21 | |||||||||||||||||||||||||||||
Granted | — | — | - | - | ||||||||||||||||||||||||||||
Exercised | — | 18.05 | - | - | ||||||||||||||||||||||||||||
Forfeited or expired | (20 | ) | 18.05 | (8 | ) | 18.05 | ||||||||||||||||||||||||||
Options outstanding at December 31, 2008 | 134 | 19.21 | 3.3 | $ | 399 | |||||||||||||||||||||||||||
Options outstanding at December 31, 2009 | 126 | 19.28 | 2.3 | $ | - | |||||||||||||||||||||||||||
Options exercisable at December 31, 2008 | 64 | 19.28 | 3.3 | 185 | ||||||||||||||||||||||||||||
Options exercisable at December 31, 2009 | 112 | 19.44 | 2.3 | - | ||||||||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||
Expected volitility | 40% | 55% - 56% | 56% | |||||||||
Expected term (in years) | 3.0 | 4.0 | 5.0 | |||||||||
Risk-free rate | 2.2% - 2.4% | 4.7% | 4.8% - 5.0% | |||||||||
Expected dividend yield | None | None | None |
73 of 82
Weighted | Weighted- | |||||||||||||||
Number | Average | Number | Average | |||||||||||||
of | Grant-Date | of | Grant-Date | |||||||||||||
Shares | Fair Value | Shares | Fair Value | |||||||||||||
Nonvested stock outstanding at December 31, 2007 | 39 | $ | 18.26 | |||||||||||||
Nonvested stock outstanding at December 31, 2008 | 55 | $ | 24.99 | |||||||||||||
Granted | 38 | 28.35 | 44 | 18.86 | ||||||||||||
Vested | (18 | ) | 19.49 | (25 | ) | 23.03 | ||||||||||
Forefeited | (4 | ) | 15.74 | (3 | ) | 28.00 | ||||||||||
Nonvested stock outstanding at December 31, 2008 | 55 | 24.99 | ||||||||||||||
Nonvested stock outstanding at December 31, 2009 | 71 | $ | 21.77 | |||||||||||||
9) | INCOME TAXES |
2009 | 2008 | 2007 | ||||||||||||||||||||||
2008 | 2007 | 2006 | ||||||||||||||||||||||
Income tax benefit (expense), continuing operations | $ | 682 | (2,080 | ) | 1,823 | $ | 4,266 | 682 | (2,080 | ) | ||||||||||||||
Income tax benefit (expense), discontinued operations | — | 82 | (7,222 | ) | ||||||||||||||||||||
Income tax benefit, discontinued operations | 4,001 | - | 82 | |||||||||||||||||||||
Income tax benefit resulting from exercise of stock options credited to shareholders’ equity | 203 | 643 | 213 | 133 | 203 | 643 | ||||||||||||||||||
Total | $ | 885 | (1,355 | ) | (5,186 | ) | $ | 8,400 | 885 | (1,355 | ) | |||||||||||||
2008 | 2007 | 2006 | 2009 | 2008 | 2007 | |||||||||||||||||||
Current: | ||||||||||||||||||||||||
Federal | $ | (1,460 | ) | (1,483 | ) | 395 | $ | (42 | ) | (1,460 | ) | (1,483 | ) | |||||||||||
State | (176 | ) | (332 | ) | (506 | ) | (128 | ) | (176 | ) | (332 | ) | ||||||||||||
Foreign | (689 | ) | (1,274 | ) | (1,806 | ) | (193 | ) | (689 | ) | (1,274 | ) | ||||||||||||
Total | (2,325 | ) | (3,089 | ) | (1,917 | ) | (363 | ) | (2,325 | ) | (3,089 | ) | ||||||||||||
Deferred: | ||||||||||||||||||||||||
Federal | 1,569 | 878 | 2,457 | 4,646 | 1,569 | 878 | ||||||||||||||||||
State | 9 | 35 | 42 | 5 | 9 | 35 | ||||||||||||||||||
Foreign | 1,429 | 96 | 1,241 | (22 | ) | 1,429 | 96 | |||||||||||||||||
Total | 3,007 | 1,009 | 3,740 | 4,629 | 3,007 | 1,009 | ||||||||||||||||||
Total income tax benefit (expense) | $ | 682 | (2,080 | ) | 1,823 | $ | 4,266 | 682 | (2,080 | ) | ||||||||||||||
74
2009 | 2008 | 2007 | ||||||||||
Benefit (expense) computed at the federal statutory rate Effect of: | $ | 5,921 | (6,728 | ) | (7,251 | ) | ||||||
State income taxes, net of federal income tax effects | (81 | ) | (110 | ) | (196 | ) | ||||||
Tax credits from research activities | 3,563 | 1,716 | 936 | |||||||||
Difference in effective foreign tax rates | 5,262 | 4,544 | 4,127 | |||||||||
Valuation allowance | (1,040 | ) | 1,195 | 49 | ||||||||
Foreign permanent differences | (215 | ) | (55 | ) | (177 | ) | ||||||
Nondeductible goodwill impairment | (6,763 | ) | — | — | ||||||||
Nondeductible acquisition-related items | (2,450 | ) | — | — | ||||||||
Other | 69 | 120 | 432 | |||||||||
Income tax benefit (expense) | $ | 4,266 | 682 | (2,080 | ) | |||||||
2008 | 2007 | 2006 | ||||||||||
Expense computed at the federal statutory rate | $ | (6,728 | ) | (7,251 | ) | (4,893 | ) | |||||
Effect of: | ||||||||||||
State income taxes, net of federal income tax effects | (110 | ) | (196 | ) | (321 | ) | ||||||
Tax credits from research activities | 1,716 | 936 | 4,181 | |||||||||
Difference in effective foreign tax rates | 4,544 | 4,127 | 1,494 | |||||||||
Valuation allowance | 1,195 | 49 | 1,881 | |||||||||
Foreign permanent differences | (55 | ) | (177 | ) | (366 | ) | ||||||
Other | 120 | 432 | (153 | ) | ||||||||
Income tax benefit (expense) | $ | 682 | (2,080 | ) | 1,823 | |||||||
2008 | 2007 | 2009 | 2008 | |||||||||||||
Deferred tax assets: | ||||||||||||||||
Inventories | $ | 602 | 892 | $ | 1,353 | 602 | ||||||||||
Accrued compensation costs | 769 | 835 | 2,499 | 769 | ||||||||||||
Accrued warranty costs | 779 | 821 | 1,278 | 779 | ||||||||||||
Foreign research expense and tax credit carry forward | 33,721 | 53,895 | ||||||||||||||
Foreign net operating loss carry forward | 1,272 | 575 | ||||||||||||||
Foreign research expense and tax credit carryforwards | 40,241 | 33,721 | ||||||||||||||
U.S. and foreign net operating loss carryforwards | 4,932 | 1,272 | ||||||||||||||
Credit for corporate minimum tax | 408 | 675 | 709 | 408 | ||||||||||||
Research and development credit carry forward | 1,427 | 387 | ||||||||||||||
U.S. research and development credit carryforwards | 7,714 | 1,427 | ||||||||||||||
Stock-based compensation | 1,594 | 721 | 2,283 | 1,594 | ||||||||||||
Other | 1,843 | 950 | 2,388 | 1,843 | ||||||||||||
Total gross deferred tax assets | 42,415 | 59,751 | 63,397 | 42,415 | ||||||||||||
Valuation allowance | (28,549 | ) | (49,094 | ) | (37,851 | ) | (28,549 | ) | ||||||||
13,866 | 10,657 | 25,546 | 13,866 | |||||||||||||
Deferred tax liabilities: | ||||||||||||||||
Property, plant and equipment | 3,993 | 3,079 | 3,715 | 3,993 | ||||||||||||
Intangible Assets | 13,132 | - | ||||||||||||||
Other | 923 | 220 | 729 | 923 | ||||||||||||
Total gross deferred tax liabilities | 4,916 | 3,299 | ||||||||||||||
17,576 | 4,916 | |||||||||||||||
Net deferred tax assets | $ | 8,950 | 7,358 | $ | 7,970 | 8,950 | ||||||||||
75 of 82
2008 | 2007 | 2009 | 2008 | |||||||||||||
Balance as of January 1 | $ | 2,591 | 2,714 | $ | 2,949 | 2,591 | ||||||||||
Increases related to current year tax positions | 194 | 472 | 917 | 194 | ||||||||||||
Increases related to prior year tax positions | 270 | 31 | 5 | 270 | ||||||||||||
Decreases related to lapsing of statute of limitations | (14 | ) | (23 | ) | (6 | ) | (14 | ) | ||||||||
Decreases related to settlements with taxing authorities | — | (788 | ) | (1,915 | ) | - | ||||||||||
Foreign exchange | (92 | ) | 185 | |||||||||||||
Changes in foreign currency exchange rate | 69 | (92 | ) | |||||||||||||
Balance as of December 31 | $ | 2,949 | 2,591 | $ | 2,019 | 2,949 | ||||||||||
76 of 82
(10) | DISCONTINUED OPERATIONS |
2009 | 2008 | 2007 | ||||||||||
Loss before income taxes | $ | (10,917 | ) | - | (585 | ) | ||||||
Income tax benefit | 4,001 | - | 82 | |||||||||
Loss from discontinued operations | $ | (6,916 | ) | - | (503 | ) | ||||||
(11) | RETIREMENT PLANS |
(12) | |||
77 of 82
Fair Value Measurements of Assets (Liabilities) Using | ||||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical Assets | Observable | Unobservable | ||||||||||||||
(Liabilities) | Inputs | Inputs | Carrying | |||||||||||||
(in thousands) | (Level 1) | (Level 2) | (Level 3) | Amount | ||||||||||||
Foreign currency forward contracts | $ | (1,159 | ) | — | — | (1,159 | ) | |||||||||
Mortgage debt | — | (10,672 | ) | — | (10,542 | ) |
78 of 82
Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net sales: | ||||||||||||
Defense & Space | $ | 76,643 | 59,090 | 52,431 | ||||||||
Less sales to discontinued operations | — | — | (15 | ) | ||||||||
Defense & Space external sales | 76,643 | 59,090 | 52,416 | |||||||||
LXE | 145,885 | 138,821 | 138,001 | |||||||||
Satellite Communications | 112,517 | 89,968 | 70,702 | |||||||||
Total | $ | 335,045 | 287,879 | 261,119 | ||||||||
Operating income (loss): | ||||||||||||
Defense & Space | $ | 6,381 | 4,876 | 2,572 | ||||||||
LXE | 2,861 | 7,067 | 11,043 | |||||||||
Satellite Communications | 14,187 | 12,189 | 6,170 | |||||||||
Corporate | (3,805 | ) | (4,865 | ) | (5,428 | ) | ||||||
Total | $ | 19,624 | 19,267 | 14,357 | ||||||||
Interest income and other, net of foreign exchange losses: | ||||||||||||
Defense & Space | $ | 6 | 7 | 28 | ||||||||
LXE | 500 | 236 | 8 | |||||||||
Satellite Communications | (154 | ) | (564 | ) | (66 | ) | ||||||
Corporate | 1,492 | 4,334 | 1,574 | |||||||||
Total | $ | 1,844 | 4,013 | 1,544 | ||||||||
Interest expense: | ||||||||||||
Defense & Space | $ | (40 | ) | (141 | ) | (444 | ) | |||||
LXE | (406 | ) | (348 | ) | (405 | ) | ||||||
Satellite Communications | (62 | ) | (121 | ) | (117 | ) | ||||||
Corporate | (1,171 | ) | (1,343 | ) | (955 | ) | ||||||
Total | $ | (1,679 | ) | (1,953 | ) | (1,921 | ) | |||||
Earnings (loss) from continuing operations before income taxes: | ||||||||||||
Defense & Space | $ | 6,347 | 4,742 | 2,156 | ||||||||
LXE | 2,955 | 6,955 | 10,646 | |||||||||
Satellite Communications | 13,971 | 11,504 | 5,987 | |||||||||
Corporate | (3,484 | ) | (1,874 | ) | (4,809 | ) | ||||||
Total | $ | 19,789 | 21,327 | 13,980 | ||||||||
Capital expenditures: | ||||||||||||
Defense & Space | $ | 6,105 | 3,684 | 2,391 | ||||||||
LXE | 2,957 | 3,364 | 2,467 | |||||||||
Satellite Communications | 4,573 | 6,589 | 3,227 | |||||||||
Corporate | 422 | 942 | 417 | |||||||||
Total | $ | 14,057 | 14,579 | 8,502 | ||||||||
Depreciation and amortization: | ||||||||||||
Defense & Space | $ | 3,023 | 2,620 | 2,558 | ||||||||
LXE | 3,363 | 2,205 | 2,246 | |||||||||
Satellite Communications | 5,089 | 3,619 | 2,851 | |||||||||
Corporate | 1,023 | 1,222 | 1,209 | |||||||||
Total | $ | 12,498 | 9,666 | 8,864 | ||||||||
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December 31 | ||||||||
2008 | 2007 | |||||||
Assets: | ||||||||
Defense & Space | $ | 47,417 | 42,017 | |||||
LXE | 107,230 | 94,613 | ||||||
Satellite Communications | 99,323 | 77,552 | ||||||
Corporate | 73,395 | 109,618 | ||||||
Total | $ | 327,365 | 323,800 | |||||
Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Net sales to customers in the following countries: | ||||||||||||
United States | $ | 202,520 | 176,209 | 178,662 | ||||||||
United Kingdom | 28,445 | 20,911 | 13,542 | |||||||||
Other foreign countries | 104,080 | 90,759 | 68,915 | |||||||||
Total | $ | 335,045 | 287,879 | 261,119 | ||||||||
December 31 | ||||||||
2008 | 2007 | |||||||
Long-lived assets are located in the following countries: | ||||||||
United States | $ | 32,831 | 24,032 | |||||
Canada | 7,609 | 10,621 | ||||||
Other foreign countries | 11,298 | 11,107 | ||||||
Total | $ | 51,738 | 45,760 | |||||
Concentration of net assets by geographic region: | ||||||||
United States | $ | 131,949 | 154,253 | |||||
Canada | 50,128 | 48,476 | ||||||
Europe | 49,511 | 32,198 | ||||||
Other | 11,154 | 12,199 | ||||||
Total | $ | 242,742 | 247,126 | |||||
80 of 82
(13) | COMMITMENTS AND CONTINGENCIES |
Years Ended December 31 | ||||||||||||
2008 | 2007 | 2006 | ||||||||||
Balance at beginning of the year | $ | 2,647 | 2,051 | 1,894 | ||||||||
Accruals for warranties issued during the year | 3,308 | 3,175 | 1,945 | |||||||||
Settlements made during the year | (3,166 | ) | (2,579 | ) | (1,788 | ) | ||||||
Balance at end of year | $ | 2,789 | 2,647 | 2,051 | ||||||||
81 Years Ended December 31 2009 2008 2007 Balance at beginning of the period $ 2,789 2,647 2,051 Additions at dates of acquisition for businesses acquired during period 464 - - Accruals for warranties issued during the period 3,866 3,308 3,175 Settlements made during the period (3,034 ) (3,166 ) (2,579 ) Balance at end of period $ 4,085 2,789 2,647
(14) | LITIGATION |
(15) | SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) |
2009 Quarters Ended | ||||||||||||||||||||||||||||||||
April 4 | July 4 | October 3 | December 31 | |||||||||||||||||||||||||||||
Net sales | $ | 92,278 | 96,938 | 85,731 | 85,025 | |||||||||||||||||||||||||||
Operating (loss) income | (1,942 | ) | 3,355 | 2,566 | (18,612 | ) | ||||||||||||||||||||||||||
(Loss) earnings from continuing operations | (2,968 | ) | 3,186 | 5,989 | (19,356 | ) | ||||||||||||||||||||||||||
Loss from discontinued operations | - | - | (709 | ) | (6,207 | ) | ||||||||||||||||||||||||||
Net (loss) earnings | (2,968 | ) | 3,186 | 5,280 | (25,563 | ) | ||||||||||||||||||||||||||
Net (loss) earnings per share: | ||||||||||||||||||||||||||||||||
Basic: | ||||||||||||||||||||||||||||||||
Continuing operations | $ | (0.20 | ) | 0.21 | 0.39 | (1.27 | ) | |||||||||||||||||||||||||
Discontinued operations | - | - | (0.05 | ) | (0.41 | ) | ||||||||||||||||||||||||||
Net (loss) earnings | $ | (0.20 | ) | 0.21 | 0.34 | (1.68 | ) | |||||||||||||||||||||||||
Diluted: | ||||||||||||||||||||||||||||||||
Continuing operations | $ | (0.20 | ) | 0.21 | 0.39 | (1.27 | ) | |||||||||||||||||||||||||
Discontinued operations | - | - | (0.05 | ) | (0.41 | ) | ||||||||||||||||||||||||||
Net (loss) earnings | $ | (0.20 | ) | 0.21 | 0.34 | (1.68 | ) | |||||||||||||||||||||||||
2008 Quarters Ended | 2008 Quarters Ended | |||||||||||||||||||||||||||||||
March 29 | June 28 | September 27 | December 31 | March 29 | June 28 | September 27 | December 31 | |||||||||||||||||||||||||
Net sales | $ | 75,494 | 81,279 | 87,842 | 90,430 | $ | 75,494 | 81,279 | 87,842 | 90,430 | ||||||||||||||||||||||
Operating income | 3,437 | 3,407 | 7,205 | 5,575 | 3,437 | 3,407 | 7,205 | 5,575 | ||||||||||||||||||||||||
Net earnings | 4,160 | 3,411 | 6,077 | 6,823 | 4,160 | 3,411 | 6,077 | 6,823 | ||||||||||||||||||||||||
Net earnings per share: | ||||||||||||||||||||||||||||||||
Basic: | ||||||||||||||||||||||||||||||||
Continuing operations | $ | 0.27 | 0.22 | 0.39 | 0.45 | $ | 0.27 | 0.22 | 0.39 | 0.45 | ||||||||||||||||||||||
Discontinued operations | — | — | — | — | - | - | - | - | ||||||||||||||||||||||||
Net earnings | $ | 0.27 | 0.22 | 0.39 | 0.45 | $ | 0.27 | 0.22 | 0.39 | 0.45 | ||||||||||||||||||||||
Diluted: | ||||||||||||||||||||||||||||||||
Continuing operations | $ | 0.26 | 0.22 | 0.39 | 0.44 | $ | 0.26 | 0.22 | 0.39 | 0.44 | ||||||||||||||||||||||
Discontinued operations | — | — | — | — | - | - | - | - | ||||||||||||||||||||||||
Net earnings | $ | 0.26 | 0.22 | 0.39 | 0.44 | $ | 0.26 | 0.22 | 0.39 | 0.44 | ||||||||||||||||||||||
2007 Quarters Ended | ||||||||||||||||
March 31 | June 30 | September 29 | December 31 | |||||||||||||
Net sales | $ | 66,574 | 72,147 | 73,145 | 76,013 | |||||||||||
Operating income | 3,078 | 3,980 | 5,242 | 6,967 | ||||||||||||
Earnings from continuing operations | 2,880 | 3,574 | 5,606 | 7,187 | ||||||||||||
(Loss) earnings from discontinued operations | (467 | ) | 3 | 11 | (50 | ) | ||||||||||
Net earnings | 2,413 | 3,577 | 5,617 | 7,137 | ||||||||||||
Net earnings (loss) per share: | ||||||||||||||||
Basic: | ||||||||||||||||
Continuing operations | $ | 0.19 | 0.23 | 0.37 | 0.46 | |||||||||||
Discontinued operations | (0.03 | ) | — | — | — | |||||||||||
Net earnings | $ | 0.16 | 0.23 | 0.37 | 0.46 | |||||||||||
Diluted: | ||||||||||||||||
Continuing operations | $ | 0.19 | 0.23 | 0.36 | 0.46 | |||||||||||
Discontinued operations | (0.03 | ) | — | — | — | |||||||||||
Net earnings | $ | 0.16 | 0.23 | 0.36 | 0.46 | |||||||||||
82