Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 13, 2018 | |
Document and Entity Information | ||
Entity Registrant Name | NORTECH SYSTEMS INC | |
Entity Central Index Key | 722,313 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 2,673,435 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q3 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | ||||
Net Sales | $ 29,558 | $ 28,310 | $ 84,543 | $ 86,762 |
Cost of Goods Sold | 26,171 | 24,794 | 74,311 | 76,789 |
Gross Profit | 3,387 | 3,516 | 10,232 | 9,973 |
Operating Expenses | ||||
Selling Expenses | 717 | 1,144 | 2,792 | 3,676 |
General and Administrative Expenses | 2,021 | 2,088 | 6,177 | 6,152 |
Gain on Sale of Property and Equipment | (355) | |||
Total Operating Expenses | 2,738 | 3,232 | 8,969 | 9,473 |
Income From Operations | 649 | 284 | 1,263 | 500 |
Other Expense | ||||
Loss on Extinguishment of Debt | (175) | |||
Interest Expense | (170) | (172) | (551) | (453) |
Income (Loss) Before Income Taxes | 479 | 112 | 712 | (128) |
Income Tax Expense (Benefit) | 115 | 69 | 350 | (141) |
Net Income | $ 364 | $ 43 | $ 362 | $ 13 |
Net Income Per Common Share: | ||||
Basic (in dollars per share) | $ 0.14 | $ 0.02 | $ 0.13 | $ 0 |
Weighted Average Number of Common Shares Outstanding - Basic (in shares) | 2,680,684 | 2,747,168 | 2,698,950 | 2,747,608 |
Diluted (in dollars per share) | $ 0.14 | $ 0.02 | $ 0.13 | $ 0 |
Weighted Average Number of Common Shares Outstanding - Dilutive (in shares) | 2,682,091 | 2,748,533 | 2,702,503 | 2,748,973 |
Other comprehensive income (loss) | ||||
Foreign currency translation | $ (83) | $ (137) | $ (3) | |
Comprehensive income, net of tax | $ 281 | $ 43 | $ 225 | $ 10 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 | [1] |
Current Assets | |||
Cash | $ 397 | $ 473 | |
Restricted Cash | 236 | 306 | |
Accounts Receivable, less allowances of $204 and $209 | 18,979 | 17,417 | |
Inventories | 15,236 | 18,527 | |
Contract Assets | 7,076 | ||
Prepaid Expenses and Other Current Assets | 1,380 | 1,044 | |
Total Current Assets | 43,304 | 37,767 | |
Property and Equipment, Net | 10,097 | 10,176 | |
Goodwill | 2,375 | 2,375 | |
Other Intangible Assets, Net | 1,578 | 1,739 | |
Other Non Current Assets | 27 | 28 | |
Total Assets | 57,381 | 52,085 | |
Current Liabilities | |||
Current Maturities of Long-Term Debt | 871 | 1,003 | |
Current Portion of Capital Lease Obligation | 350 | 295 | |
Accounts Payable | 16,887 | 11,699 | |
Accrued Payroll and Commissions | 2,526 | 2,900 | |
Other Accrued Liabilities | 2,475 | 2,148 | |
Total Current Liabilities | 23,109 | 18,045 | |
Long-Term Liabilities | |||
Long-Term Line of Credit | 8,058 | 8,503 | |
Long-Term Debt, Net | 3,735 | 4,353 | |
Long-Term Capital Lease Obligation, Net | 1,037 | 1,222 | |
Other Long-Term Liabilities | 159 | 137 | |
Total Long-Term Liabilities | 12,989 | 14,215 | |
Total Liabilities | 36,098 | 32,260 | |
Commitments and Contingencies | |||
Shareholders' Equity | |||
Preferred Stock, $1 par value; 1,000,000 Shares Authorized: 250,000 Shares Issued and Outstanding | 250 | 250 | |
Common Stock - $0.01 par value; 9,000,000 Shares Authorized: 2,675,411 and 2,739,250 Shares Issued and Outstanding, respectively | 27 | 27 | |
Additional Paid-In Capital | 15,612 | 15,760 | |
Accumulated Other Comprehensive Loss | (238) | (101) | |
Retained Earnings | 5,632 | 3,889 | |
Total Shareholders' Equity | 21,283 | 19,825 | |
Total Liabilities and Shareholders' Equity | $ 57,381 | $ 52,085 | |
[1] | The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
CONDENSED CONSOLIDATED BALANCE SHEETS | ||
Accounts Receivable Allowances | $ 204 | $ 209 |
Preferred Stock, par value (in dollars per share) | $ 1 | $ 1 |
Preferred Stock, Shares Authorized | 1,000,000 | 1,000,000 |
Preferred Stock, Shares Issued | 250,000 | 250,000 |
Preferred Stock, Shares Outstanding | 250,000 | 250,000 |
Common Stock - par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common Stock - Shares Authorized | 9,000,000 | 9,000,000 |
Common Stock - Shares Issued | 2,675,411 | 2,739,250 |
Common Stock - Shares Outstanding | 2,675,411 | 2,739,250 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash Flows From Operating Activities | ||
Net Income | $ 362 | $ 13 |
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities | ||
Depreciation and Amortization | 1,655 | 1,873 |
Compensation on Stock-Based Awards and Equity Appreciation Rights | 80 | 22 |
Loss on Extinguishment of Debt | 17 | |
Deferred Taxes | 1 | 15 |
Change in Contingent Consideration | (300) | |
Change in Accounts Receivable Allowance | (5) | (720) |
Change in Inventory Reserves | 118 | 272 |
Gain on Disposal of Property and Equipment | (355) | |
Changes in Current Operating Items | ||
Accounts Receivable | (1,619) | (272) |
Inventories | (1,959) | (686) |
Contract Assets | (617) | |
Prepaid Expenses and Other Current Assets | (278) | (115) |
Accounts Payable | 4,913 | 824 |
Accrued Payroll and Commissions | (374) | (882) |
Other Accrued Liabilities | 287 | 909 |
Net Cash Provided by Operating Activities | 2,564 | 615 |
Cash Flows from Investing Activities | ||
Proceeds from Sale of Property and Equipment | 17 | 669 |
Purchase of Intangible Asset | (3) | (100) |
Purchases of Property and Equipment | (999) | (574) |
Net Cash Used in Investing Activities | (985) | (5) |
Cash Flows from Financing Activities | ||
Net Change in Line of Credit | (445) | 1,166 |
Proceeds from Long-Term Debt | 5,123 | |
Principal Payments on Long-Term Debt | (819) | (5,623) |
Principal Payments on Capital Leases | (231) | |
Loss on Extinguishment of Debt | (158) | |
Debt Issuance Costs | (268) | |
Share Repurchases | (229) | (16) |
Net Cash (Used in) Provided by Financing Activities | (1,724) | 224 |
Effect of Exchange Rate Changes on Cash | (1) | (29) |
Net Change in Cash | (146) | 805 |
Cash - Beginning of Period | 779 | 268 |
Cash - Ending of Period | 633 | 1,073 |
Reconciliation of cash and restricted cash reported within the condensed consolidated balance sheets | ||
Cash | 397 | 531 |
Restricted Cash | 236 | 542 |
Cash - Ending of Period | 633 | 1,073 |
Supplemental Disclosure of Cash Flow Information: | ||
Cash Paid During the Period for Interest | 507 | 383 |
Cash Paid (Refunded) During the Period for Income Taxes | 167 | (22) |
Supplemental Noncash Investing and Financing Activities: | ||
Property and Equipment Purchases in Accounts Payable | 304 | 193 |
Equipment Acquired under Capital Lease | $ 100 | $ 972 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements for the interim periods have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the financial information and footnotes required by GAAP for complete financial statements, although we believe the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year or for any other interim period. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In preparing these condensed consolidated financial statements, we have made our best estimates and judgments of certain amounts included in the condensed consolidated financial statements, giving due consideration to materiality. Changes in the estimates and assumptions used by us could have a significant impact on our financial results, since actual results could differ from those estimates. Principles of Consolidation The condensed consolidated financial statements include the accounts of Nortech Systems Incorporated and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Revenue Recognition Our revenue is comprised of product, engineering services and repair services. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our revenue being recognized over time including goods produced under contract manufacturing agreements and services revenue. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of our contracts have a single performance obligation. Revenue is recorded net of returns, allowances and customer discounts. Our net sales for services were less than 10% of our total sales for all periods presented, and accordingly, are included in net sales in the Condensed Consolidated Statements of Operations and Comprehensive Income. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs charged to our customers are included in net sales, while the corresponding shipping expenses are included in cost of goods sold. Effective January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition.” ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company adopted the provisions of ASU 2014-09 using the modified retrospective approach with application to contracts that were not completed as of January 1, 2018. The adoption of ASU 2014-09 had a significant impact to the Company’s results of operations, cash flow and financial position, and as a result we now recognize the majority of our revenue over time rather than upon shipment resulting in an adjustment to retained earnings of $1,381 on January 1, 2018. The Company has presented the disclosures required by this new standard, refer to Note 3. Stock-Based Awards Following is the status of all stock options as of September 30, 2018: Shares Weighted- Weighted- Aggregate Outstanding - January 1, 2018 $ Granted Exercised — — Cancelled ) Outstanding - September 30, 2018 $ $ Exercisable - September 30, 2018 $ $ The 2005 Plan has not been renewed, and therefore no further grants may be made under the 2005 Plan. In May 2017, the shareholders approved the 2017 Stock Incentive Plan which authorized the issuance of 350,000 shares. There were no stock options granted during the three months ended September 30, 2018. There were 134,000 stock options granted during the nine months ended September 30, 2018. Total compensation expense related to stock options for the three months ended September 30, 2018 and 2017 was $35 and $17, respectively and $80 and $26 for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, there was $275 of unrecognized compensation which will vest over the next 3.28 years. In November 2010, the Board of Directors adopted the Nortech Systems Incorporated Equity Appreciation Rights Plan (“2010 Plan”). The total number of Equity Appreciation Right Units (“Units”) that can be issued under the 2010 Plan shall not exceed an aggregate of 1,000,000 Units as amended and restated on March 11, 2015. The 2010 Plan provides that Units issued shall fully vest three years from the base date as defined in the agreement unless terminated earlier. Units give the holder a right to receive a cash payment equal to the appreciation in book value per share of common stock from the base date, as defined, to the redemption date. Unit redemption payments under the 2010 Plan shall be paid in cash within 90 days after we determine the book value of the Units as of the calendar year immediately preceding the redemption date. The Units are adjusted to market value for each reporting period. During the three and nine months ended September 30, 2018, no additional Units were granted. There were no Units granted during the three months ended September 30, 2017. During the nine months ended September 30, 2017, a total of 100,000 Units were granted. Total compensation expense (income) related to the vested outstanding Units based on the estimated appreciation over their remaining terms was $0 and ($4) for the three months ended September 30, 2018 and 2017, respectively and $0 and ($4) for the nine months ended September 30, 2018 and 2017, respectively. As of both September 30, 2018 and December 31, 2017, no amounts were accrued under this plan. Net Income per Common Share For both the three months and nine months ended September 30, 2018 and 2017 all stock options are deemed to be antidilutive and, therefore, were not included in the computation of loss per common share amount. Share Repurchase Program As of September 30, 2018, we had a $250 share repurchase program which was authorized by our Board of Directors in August 2017 and expired in July 2018 with no authorized repurchases remaining under this program. Under this repurchase program, we repurchased 2,277 and 55,199 shares in the open market transactions totaling $8 and $200 for the three and nine months ended September 30, 2018, respectively and 4,824 shares in open market transactions totaling $16,909 for the three and nine months ended September 30, 2017. In August 2018, the Board of Directors approved an additional $250 share repurchase program. Under this repurchase program, we repurchased 8,640 shares in the open market transactions totaling $35 for the three and nine months ended September 30, 2018. As of September 30, 2018, we had $215 remaining under this authorization. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted from additional paid-in capital. Segment Reporting Information All of our operations fall under the contract manufacturing segment within the electronic manufacturing Services industry. We strategically direct production between our various manufacturing facilities based on a number of considerations to best meet our customers’ requirements. We share resources for sales, marketing, engineering, supply chain, information services, human resources, payroll, and all corporate accounting functions. Consolidated financial information is available that is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources. Restricted Cash Cash and cash equivalents classified as restricted cash on our condensed consolidated balance sheets are restricted as to withdrawal or use under the terms of certain contractual agreements. The September 30, 2018 balance included lockbox deposits that are temporarily restricted due to timing at the period end. The lockbox deposits are applied against our line of credit the next business day. As of September 30, 2018, we had no outstanding letters of credit. Accounts Receivable and Allowance for Doubtful Accounts Credit is extended based upon an evaluation of the customer’s financial condition and, while collateral is not required, the Company periodically receives surety bonds that guarantee payment. Credit terms are consistent with industry standards and practices. The amounts of trade accounts receivable have been reduced by an allowance for doubtful accounts of $204 at September 30, 2018 and $209 at December 31, 2017. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Costs include material, labor, and overhead required in the warehousing and production of our products. Inventory reserves are maintained for the estimated value of the inventories that may have a lower value than stated or quantities in excess of future production needs. Inventories are as follows (in thousands): September 30, December 31, 2018 2017 Raw Materials $ $ Work in Process Finished Goods Reserves ) ) Total $ $ The primary decrease in work in process and finished goods inventory as of September 30, 2018 as compared to December 31, 2017 primarily relates to the adoption of ASU 2014-09 and the recognition of revenue over time rather than upon shipment of inventory. Refer to Note 3 for further information. Other Intangible Assets Other intangible assets at September 30, 2018 and December 31, 2017 are as follows (in thousands): September 30, 2018 Gross Carrying Accumulated Net Book Years Amount Amortization Value Customer Relationships $ $ $ Trade Names Intellectual Property Patents — Totals $ $ $ December 31, 2017 Gross Carrying Accumulated Net Book Years Amount Amortization Value Customer Relationships $ $ $ Intellectual Property Trade Names Patents — Totals $ $ $ Amortization expense for the three and nine months ended September 30, 2018 was $55 and $164, respectively. Amortization expense for the three and nine months ended September 30, 2017 was $76 and $182, respectively. Estimated future annual amortization expense (not including projects in process) related to these assets is approximately as follows (in thousands): Year Amount Remainder of 2018 $ 2019 2020 2021 2022 Thereafter Total $ Impairment of Goodwill and Other Intangible Assets In accordance with ASC 350, Goodwill and Other Intangible Assets , goodwill is not amortized but is required to be reviewed for impairment at least annually or when events or circumstances indicate that carrying value may exceed fair value. We test impairment annually as of October 1 st . No events were identified during the nine months ended September 30, 2018 that would require us to test for impairment. In testing goodwill for impairment we perform a quantitative impairment test, including computing the fair value of the reporting unit and comparing that value to its carrying value. If the fair value is less than its carrying value, then the goodwill is determined to be impaired. In the event that goodwill is impaired, an impairment charge to earnings would become necessary. Impairment Analysis We evaluate long-lived assets, primarily property and equipment and intangible assets, as well as the related depreciation periods, whenever current events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability for assets to be held and used is based on our projection of the undiscounted future operating cash flows of the underlying assets. To the extent such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amounts of related assets, a charge might be required to reduce the carrying amount to equal estimated fair value. No impairment expense was recorded during the three and nine months ended September 30, 2018 and 2017, respectively. Recently Issued and Adopted Accounting Standards In February 2016, the FASB issued ASU 2016-02, “Leases” to improve financial reporting about leasing transactions. This guidance will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued new guidance which includes an option to not restate comparative periods in transition. This guidance is effective for the Company’s annual and quarterly periods beginning January 1, 2019. The Company is in the process of evaluating the impact that the adoption of this standard will have on its consolidated financial statements and is currently assessing its leases. The Company expects that the adoption of this guidance will result in a material increase in the assets and liabilities recorded on its consolidated balance sheets and additional qualitative and quantitative disclosures. The Company expects to use the effective date of this standard as the date of initial application, with no retrospective adjustments to prior comparative periods. In March 2018, we adopted FASB ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 , which updates the income tax accounting in U.S. GAAP to reflect the Securities and Exchange Commission (‘SEC’) interpretive guidance released on December 22, 2017, when the Tax Cuts and Jobs Act (the ‘Tax Act’) was signed into law. Additional information regarding the adoption of this standard is contained in Note 5, ‘Income Taxes’ . |
CONCENTRATION OF CREDIT RISK AN
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS | 9 Months Ended |
Sep. 30, 2018 | |
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS | |
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS | NOTE 2. CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and accounts receivable. With regard to cash, we maintain our excess cash balances in checking accounts at primarily two financial institutions, one in the United States and one in China. The account in the United States may at times exceed federally insured limits. Of the $397 in cash at September 30, 2018, approximately $395 was held at banks located in China. We grant credit to customers in the normal course of business and do not require collateral on our accounts receivable. Our largest customer has two divisions that together accounted for 10% or more of our net sales during the three and nine months ended September 30, 2018 and 2017. One division accounted for approximately 20% of net sales for both the three and nine months ended September 30, 2018, and approximately 23% and 20% for the three and nine months ended September 30, 2017, respectively. The other division accounted for approximately 1% of net sales for both the three months and nine ended September 30, 2018, respectively, and approximately 1% and 2% of net sales for the three and nine months ended September 30, 2017, respectively. Together they accounted for approximately 21% of net sales for both the three and nine months ended September 30, 2018, respectively, and approximately 24% and 26% for the three and nine months ended September 30, 2017. Accounts receivable from the customer at September 30, 2018 and December 31, 2017 represented approximately 21% and 16% of our total accounts receivable, respectively. Export sales represented approximately 20% and 18% of net sales for the three months ended September 30, 2018 and 2017, respectively. Export sales represented 19% and 16% of net sales for the nine months ended September 30, 2018 and 2017, respectively. |
REVENUE
REVENUE | 9 Months Ended |
Sep. 30, 2018 | |
REVENUE | |
REVENUE | NOTE 3. REVENUE Revenue recognition Our revenue is comprised of product, engineering services and repair services. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our revenue being recognized over time including goods produced under contract manufacturing agreements and services revenue. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of our contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or providing services. As such, revenue is recorded net of returns, allowances and customer discounts. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs are included in cost of goods sold. The majority of our revenue is derived from the transfer of goods produced under contract manufacturing agreements which have no alternative use and we have an enforceable right to payment for our performance completed to date. Our performance obligations within our contract manufacturing agreements are generally satisfied over time as the goods are produced based on customer specifications and we have an enforceable right to payment for the goods produced. If these requirements are not met, the revenue is recognized at a point in time, generally upon shipment. Revenue under contract manufacturing agreements that was recognized over time accounted for approximately 91% of our revenue for both the three and nine months ended September 30, 2018. Revenues under these agreements are generally recognized over time using an input measure based upon the proportion of actual costs incurred. Accounting for contract manufacturing agreements involves the use of various techniques to estimate total revenue and costs. We estimate profit on these agreements as the difference between total estimated revenue and expected costs to complete the performance obligation within the terms of the agreement and recognize the respective profit as the goods are produced. The estimates to determine the profit earned on the performance obligation are based on anticipated selling prices and historical cost of goods sold and represent our best judgement at the time. Changes in judgements on these above estimates could impact the timing and amount of revenue recognized with a resulting impact on the timing and amount of associated profit. On occasion our customers provide materials to be used in the manufacturing process and the fair value of the materials is included in revenue as noncash consideration at the point in time when the manufacturing process commences along with the same corresponding amount recorded as cost of goods sold. The inclusion of noncash consideration has no impact on overall profitability. Contract Assets Contract assets, recorded as such in the Condensed Consolidated Balance Sheets, consist of unbilled amounts related to revenue recognized over time. Significant changes in the contract assets balance during the nine months ended September 30, 2018 was as follows (in thousands): Nine Months Ended September 30, 2018 Outstanding at January 1, 2018 $ Increase (decrease) attributed to: Transferred to receivables from contract assets recognized ) Product transferred over time Outstanding at September 30, 2018 $ We expect substantially all of the remaining performance obligations for the contract assets recorded as of September 30, 2018, to be transferred to receivables within 90 days, with any remaining amounts to be transferred within 180 days. We bill our customers upon shipment with payment terms of up to 120 days. The following tables summarize our net sales by market for the three and nine months ended September 30, 2018 (in thousands): Three Months Ended September 30, 2018 Product/ Service Product Noncash Total Net Sales Aerospace and Defense $ $ $ $ Medical Industrial Total net sales $ $ $ $ Nine Months Ended September 30, 2018 Product/ Service Product Noncash Total Net Sales Aerospace and Defense $ $ $ $ Medical Industrial Total net sales $ $ $ $ Impact of New Revenue Guidance on Financial Statement Line Items The following table compares the reported condensed consolidated statement of operations and comprehensive income, balance sheets and cash flows, as of and for the three and nine months ended September 30, 2018, to the pro-forma amounts had the previous guidance been in effect (in thousands): Three Months Ended Nine Months Ended As Reported Pro forma as if the As Reported Pro forma as if the Condensed Consolidated Statement of Operations Net Sales $ $ $ $ Cost of Goods Sold Gross Profit Income from Operations Income Before Income Taxes Income Tax Expense Net Income $ $ $ $ Net Income Per Common Share - Diluted $ $ $ $ As of September 30, 2018 As Reported Pro forma as if the Condensed Consolidated Balance Sheet Assets Inventories $ $ Contract Assets $ $ — Shareholders’ Equity Retained Earnings $ $ Nine Months Ended As Reported Pro forma as if the Condensed Consolidated Statement of Cash Flows Net Income $ $ Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Change in Current Operating Items Inventories ) ) Contract Asset ) — Net Cash Provided by Operating Activities $ $ |
FINANCING ARRANGEMENTS
FINANCING ARRANGEMENTS | 9 Months Ended |
Sep. 30, 2018 | |
FINANCING ARRANGEMENTS | |
FINANCING ARRANGEMENTS | NOTE 4. FINANCING ARRANGEMENTS We have a credit agreement with Bank of America which was entered into on June 15, 2017 and amended effective December 29, 2017 and provides for a line of credit arrangement of $16,000 that expires on June 15, 2022. The credit arrangement also has a $5,000 real estate term note outstanding with a maturity date of June 15, 2022. The Bank of America credit agreement replaced our previous credit agreement with Wells Fargo Bank which terminated on June 20, 2017 and resulted in a loss on the extinguishment of debt of $175 primarily related to legal and terminations fees. Under the Bank of America credit agreement, both the line of credit and real estate term notes are subject to variations in the LIBOR rate. Our line of credit bears interest at a weighted-average interest rate of 4.3% as of September 30, 2018. We had borrowings on our line of credit of $8,058 and $8,503 outstanding as of September 30, 2018 and December 31, 2017, respectively. There are no subjective acceleration clauses under the credit agreement that would accelerate the maturity of our outstanding borrowings. The line of credit and real estate term notes with Bank of America contain certain covenants which, among other things, require us to adhere to regular reporting requirements, abide by annual shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual capital expenditures. The availability under our line is subject to borrowing base requirements, and advances are at the discretion of the lender. The line of credit is secured by substantially all of our assets. The Bank of America credit agreement as amended provides for, among other things, a fixed charge coverage ratio of not less than (i) 1.0 to 1.0 for each period of four fiscal quarters, commencing with the period of four fiscal quarters ending December 31, 2018. In addition, the agreement requires that the Company comply with certain minimum levels of cumulative EBITDA for measurement periods during fiscal 2018, including cumulative EBITDA of $1,970 for the twelve months ending December 31, 2018. The availability under the line is subject to borrowing base requirements, and advances are at the discretion of the lender. At September 30, 2018, we had unused availability under our line of credit of $4,797, supported by our borrowing base. The line is secured by substantially all of our assets. As part of the July 1, 2015 Devicix acquisition we entered into two unsecured subordinated promissory notes payable to the seller in the principal amounts of $1,000 and $1,300. The $1,000 promissory note has a four-year term, bearing interest at 4% per annum, requiring monthly principal and interest payments of $23 and is subject to offsets if certain revenue levels are not met. The $1,300 promissory note has a four-year term and bears interest at 4% per annum, requiring monthly principal and interest payments of $29 and is not subject to offset. Long-term debt at September 30, 2018 and December 31, 2017 consisted of the following (in thousands): September 30, December 31, 2018 2017 Real estate term notes bearing interest at one-month LIBOR + 2.25% (4.5% as of September 30, 2018) maturing June 15, 2022 with monthly payments of approximately $41 plus interest secured by substantially all assets. $ $ Devicix Acquistion Note 1 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019 Devicix Acquistion Note 2 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019 Discount on Devicix Notes Payable ) ) Debt issuance Costs ) ) Total long-term debt Current maturities of long-term debt ) ) Long-term debt - net of current maturities $ $ The Company has lease financing facilities for property and equipment. The obligations are collateralized by the property underlying the lease. Total cost of the leased equipment was $1,624 at September 30, 2018 and $1,524 at December 31, 2017. Current maturities of capital leases were $350 at September 30, 2018 and $295 at December 31, 2017. Interest expense related to the leased assets was $19 and $0 for the three months ended September 30, 2018 and 2017, respectively and $70 and $0 for the nine months ended September 30, 2018 and 2017, respectively. Depreciation expense related to the leased assets was $41 and $0 for the three months ended September 30, 2018 and 2017, respectively and $122 and $0 for the nine months ended September 30, 2018 and 2017, respectively. Approximate future minimum lease payments under non-cancelable capital leases subsequent to September 30, 2018 are as follows (in thousands): Year Amount Remainder of 2018 $ 2019 2020 2021 2022 Thereafter Total noncancelable future lease commitments $ Less: interest ) Present value of obligations under capital leases $ |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2018 | |
INCOME TAXES | |
INCOME TAXES | NOTE 5. INCOME TAXES On a quarterly basis, we estimate what our effective tax rate will be for the full fiscal year and record a quarterly income tax provision based on the anticipated rate. As the year progresses, we refine our estimate based on the facts and circumstances, including discrete events, by each tax jurisdiction. Our effective tax rate for the three and nine months ended September 30, 2018 was 24% and 49%, respectively. Our effective tax rate for the three and nine months ended September 30, 2017 was 61.5% and 110.2%, respectively. Our effective tax rate for the year ended December 31, 2018 is expected to be 51% compared to (18%) for the year ended December 31, 2017. The increase is due mainly to the effects of the tax reform changes that were enacted on December 22, 2017, and the increase in the effective tax rate expected in China. There was no unrecognized tax benefit as of September 30, 2018 and the $52 of unrecognized tax benefits as of December 31, 2017, included amounts which, if ultimately recognized, will reduce our annual effective tax rate. The amount has been netted against the applicable deferred tax asset as any adjustment would reduce the recorded asset. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | NOTE 6. COMMITMENTS AND CONTINGENCIES We have various operating leases for production and office equipment, office space, and buildings under non-cancelable lease agreements expiring on various dates through 2028. Rent expense for the three months ended September 30, 2018 and 2017 amounted to approximately $297 and $299 respectively and $951 and $948 for the nine months ended September 2018 and 2017, respectively. Approximate future minimum lease payments under non-cancelable leases subsequent to September 30, 2018 are as follows (in thousands): Years Ending December 31, Amount 2018 $ 2019 2020 2021 2022 Thereafter Total $ |
PLANT CLOSURE
PLANT CLOSURE | 9 Months Ended |
Sep. 30, 2018 | |
PLANT CLOSURE | |
PLANT CLOSURE | NOTE 7. PLANT CLOSURE On January 31, 2017 the Company closed its manufacturing operations in Augusta, Wisconsin. On March 31, 2017, the Company closed on the sale of the Augusta building and building improvements for $715. The Augusta building and building improvements had a net book value of $314, recognizing a gain on the sale, net of related expenses, of $354, and applied the net proceeds of $668 towards the outstanding real estate term note. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended |
Sep. 30, 2018 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | NOTE 8. RELATED PARTY TRANSACTIONS During 2016, the Company entered into a consulting arrangement with a company co-owned by Matt Mahmood, who became the Chief Operating Officer of the Company on May 20, 2017 and as noted below resigned from the Company on October 5, 2018. For the three months ended September 30, 2018 and 2017, expenses were incurred in the amounts of $25, and $22 respectively and $54 and $97 for the nine months ended September 30, 2018 and 2017, respectively. On February 22, 2018, the Company entered into a Consulting Agreement with Crosscourt Group, LLC, a limited liability company owned and managed by William Murray, formerly an independent director of the Company. Mr. Murray resigned from this position in May 2018. The term of the Consulting Agreement was three months and ended in the second quarter of 2018. For the three and nine months ended September 30, 2018, expenses were incurred in the amount of $0 and $68, respectively. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 9 Months Ended |
Sep. 30, 2018 | |
SUBSEQUENT EVENT | |
SUBSEQUENT EVENT | NOTE 9. SUBSEQUENT EVENT Effective October 5, 2018, Matt Mahmood resigned as the Company’s Chief Operating Officer. The Company will pay severance benefits per his employment and separation agreements of $235 over the next 12 months, which will be fully expensed in the fourth quarter of 2018. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements for the interim periods have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the financial information and footnotes required by GAAP for complete financial statements, although we believe the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017. The operating results for the interim periods presented are not necessarily indicative of the results expected for the full year or for any other interim period. In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In preparing these condensed consolidated financial statements, we have made our best estimates and judgments of certain amounts included in the condensed consolidated financial statements, giving due consideration to materiality. Changes in the estimates and assumptions used by us could have a significant impact on our financial results, since actual results could differ from those estimates. |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of Nortech Systems Incorporated and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. |
Revenue Recognition | Revenue Recognition Our revenue is comprised of product, engineering services and repair services. All revenue is recognized when the Company satisfies its performance obligation(s) under the contract by transferring the promised product or service to our customer either when (or as) our customer obtains control of the product or service, with the majority of our revenue being recognized over time including goods produced under contract manufacturing agreements and services revenue. A performance obligation is a promise in a contract to transfer a distinct product or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation. The majority of our contracts have a single performance obligation. Revenue is recorded net of returns, allowances and customer discounts. Our net sales for services were less than 10% of our total sales for all periods presented, and accordingly, are included in net sales in the Condensed Consolidated Statements of Operations and Comprehensive Income. Sales, value add, and other taxes collected from customers and remitted to governmental authorities are accounted for on a net (excluded from revenues) basis. Shipping and handling costs charged to our customers are included in net sales, while the corresponding shipping expenses are included in cost of goods sold. Effective January 1, 2018, we adopted the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which supersedes the revenue recognition requirements in ASC 605, “Revenue Recognition.” ASU 2014-09 is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue, cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. The Company adopted the provisions of ASU 2014-09 using the modified retrospective approach with application to contracts that were not completed as of January 1, 2018. The adoption of ASU 2014-09 had a significant impact to the Company’s results of operations, cash flow and financial position, and as a result we now recognize the majority of our revenue over time rather than upon shipment resulting in an adjustment to retained earnings of $1,381 on January 1, 2018. The Company has presented the disclosures required by this new standard, refer to Note 3. |
Stock-Based Awards | Stock-Based Awards Following is the status of all stock options as of September 30, 2018: Shares Weighted- Weighted- Aggregate Outstanding - January 1, 2018 $ Granted Exercised — — Cancelled ) Outstanding - September 30, 2018 $ $ Exercisable - September 30, 2018 $ $ The 2005 Plan has not been renewed, and therefore no further grants may be made under the 2005 Plan. In May 2017, the shareholders approved the 2017 Stock Incentive Plan which authorized the issuance of 350,000 shares. There were no stock options granted during the three months ended September 30, 2018. There were 134,000 stock options granted during the nine months ended September 30, 2018. Total compensation expense related to stock options for the three months ended September 30, 2018 and 2017 was $35 and $17, respectively and $80 and $26 for the nine months ended September 30, 2018 and 2017, respectively. As of September 30, 2018, there was $275 of unrecognized compensation which will vest over the next 3.28 years. In November 2010, the Board of Directors adopted the Nortech Systems Incorporated Equity Appreciation Rights Plan (“2010 Plan”). The total number of Equity Appreciation Right Units (“Units”) that can be issued under the 2010 Plan shall not exceed an aggregate of 1,000,000 Units as amended and restated on March 11, 2015. The 2010 Plan provides that Units issued shall fully vest three years from the base date as defined in the agreement unless terminated earlier. Units give the holder a right to receive a cash payment equal to the appreciation in book value per share of common stock from the base date, as defined, to the redemption date. Unit redemption payments under the 2010 Plan shall be paid in cash within 90 days after we determine the book value of the Units as of the calendar year immediately preceding the redemption date. The Units are adjusted to market value for each reporting period. During the three and nine months ended September 30, 2018, no additional Units were granted. There were no Units granted during the three months ended September 30, 2017. During the nine months ended September 30, 2017, a total of 100,000 Units were granted. Total compensation expense (income) related to the vested outstanding Units based on the estimated appreciation over their remaining terms was $0 and ($4) for the three months ended September 30, 2018 and 2017, respectively and $0 and ($4) for the nine months ended September 30, 2018 and 2017, respectively. As of both September 30, 2018 and December 31, 2017, no amounts were accrued under this plan. |
Net Income per Common Share | Net Income per Common Share For both the three months and nine months ended September 30, 2018 and 2017 all stock options are deemed to be antidilutive and, therefore, were not included in the computation of loss per common share amount. |
Share Repurchase Program | Share Repurchase Program As of September 30, 2018, we had a $250 share repurchase program which was authorized by our Board of Directors in August 2017 and expired in July 2018 with no authorized repurchases remaining under this program. Under this repurchase program, we repurchased 2,277 and 55,199 shares in the open market transactions totaling $8 and $200 for the three and nine months ended September 30, 2018, respectively and 4,824 shares in open market transactions totaling $16,909 for the three and nine months ended September 30, 2017. In August 2018, the Board of Directors approved an additional $250 share repurchase program. Under this repurchase program, we repurchased 8,640 shares in the open market transactions totaling $35 for the three and nine months ended September 30, 2018. As of September 30, 2018, we had $215 remaining under this authorization. The par value of repurchased shares is deducted from common stock and the excess repurchase price over par value is deducted from additional paid-in capital. |
Segment Reporting Information | Segment Reporting Information All of our operations fall under the contract manufacturing segment within the electronic manufacturing Services industry. We strategically direct production between our various manufacturing facilities based on a number of considerations to best meet our customers’ requirements. We share resources for sales, marketing, engineering, supply chain, information services, human resources, payroll, and all corporate accounting functions. Consolidated financial information is available that is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources. |
Restricted Cash | Restricted Cash Cash and cash equivalents classified as restricted cash on our condensed consolidated balance sheets are restricted as to withdrawal or use under the terms of certain contractual agreements. The September 30, 2018 balance included lockbox deposits that are temporarily restricted due to timing at the period end. The lockbox deposits are applied against our line of credit the next business day. As of September 30, 2018, we had no outstanding letters of credit. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Credit is extended based upon an evaluation of the customer’s financial condition and, while collateral is not required, the Company periodically receives surety bonds that guarantee payment. Credit terms are consistent with industry standards and practices. The amounts of trade accounts receivable have been reduced by an allowance for doubtful accounts of $204 at September 30, 2018 and $209 at December 31, 2017. |
Inventories | Inventories Inventories are stated at the lower of cost (first-in, first-out method) or net realizable value. Costs include material, labor, and overhead required in the warehousing and production of our products. Inventory reserves are maintained for the estimated value of the inventories that may have a lower value than stated or quantities in excess of future production needs. Inventories are as follows (in thousands): September 30, December 31, 2018 2017 Raw Materials $ $ Work in Process Finished Goods Reserves ) ) Total $ $ The primary decrease in work in process and finished goods inventory as of September 30, 2018 as compared to December 31, 2017 primarily relates to the adoption of ASU 2014-09 and the recognition of revenue over time rather than upon shipment of inventory. Refer to Note 3 for further information. |
Other Intangible Assets | Other Intangible Assets Other intangible assets at September 30, 2018 and December 31, 2017 are as follows (in thousands): September 30, 2018 Gross Carrying Accumulated Net Book Years Amount Amortization Value Customer Relationships $ $ $ Trade Names Intellectual Property Patents — Totals $ $ $ December 31, 2017 Gross Carrying Accumulated Net Book Years Amount Amortization Value Customer Relationships $ $ $ Intellectual Property Trade Names Patents — Totals $ $ $ Amortization expense for the three and nine months ended September 30, 2018 was $55 and $164, respectively. Amortization expense for the three and nine months ended September 30, 2017 was $76 and $182, respectively. Estimated future annual amortization expense (not including projects in process) related to these assets is approximately as follows (in thousands): Year Amount Remainder of 2018 $ 2019 2020 2021 2022 Thereafter Total $ |
Impairment of Goodwill and Other Intangible Assets | Impairment of Goodwill and Other Intangible Assets In accordance with ASC 350, Goodwill and Other Intangible Assets , goodwill is not amortized but is required to be reviewed for impairment at least annually or when events or circumstances indicate that carrying value may exceed fair value. We test impairment annually as of October 1 st . No events were identified during the nine months ended September 30, 2018 that would require us to test for impairment. In testing goodwill for impairment we perform a quantitative impairment test, including computing the fair value of the reporting unit and comparing that value to its carrying value. If the fair value is less than its carrying value, then the goodwill is determined to be impaired. In the event that goodwill is impaired, an impairment charge to earnings would become necessary. |
Impairment Analysis | Impairment Analysis We evaluate long-lived assets, primarily property and equipment and intangible assets, as well as the related depreciation periods, whenever current events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability for assets to be held and used is based on our projection of the undiscounted future operating cash flows of the underlying assets. To the extent such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amounts of related assets, a charge might be required to reduce the carrying amount to equal estimated fair value. No impairment expense was recorded during the three and nine months ended September 30, 2018 and 2017, respectively. |
Recently Issued and Adopted Accounting Standards | Recently Issued and Adopted Accounting Standards In February 2016, the FASB issued ASU 2016-02, “Leases” to improve financial reporting about leasing transactions. This guidance will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The original guidance required application on a modified retrospective basis with the earliest period presented. In August 2018, the FASB issued new guidance which includes an option to not restate comparative periods in transition. This guidance is effective for the Company’s annual and quarterly periods beginning January 1, 2019. The Company is in the process of evaluating the impact that the adoption of this standard will have on its consolidated financial statements and is currently assessing its leases. The Company expects that the adoption of this guidance will result in a material increase in the assets and liabilities recorded on its consolidated balance sheets and additional qualitative and quantitative disclosures. The Company expects to use the effective date of this standard as the date of initial application, with no retrospective adjustments to prior comparative periods. In March 2018, we adopted FASB ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 , which updates the income tax accounting in U.S. GAAP to reflect the Securities and Exchange Commission (‘SEC’) interpretive guidance released on December 22, 2017, when the Tax Cuts and Jobs Act (the ‘Tax Act’) was signed into law. Additional information regarding the adoption of this standard is contained in Note 5, ‘Income Taxes’ . |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Summary of option activity | Shares Weighted- Weighted- Aggregate Outstanding - January 1, 2018 $ Granted Exercised — — Cancelled ) Outstanding - September 30, 2018 $ $ Exercisable - September 30, 2018 $ $ |
Schedule of inventories | Inventories are as follows (in thousands): September 30, December 31, 2018 2017 Raw Materials $ $ Work in Process Finished Goods Reserves ) ) Total $ $ |
Schedule of other intangible assets | Other intangible assets at September 30, 2018 and December 31, 2017 are as follows (in thousands): September 30, 2018 Gross Carrying Accumulated Net Book Years Amount Amortization Value Customer Relationships $ $ $ Trade Names Intellectual Property Patents — Totals $ $ $ December 31, 2017 Gross Carrying Accumulated Net Book Years Amount Amortization Value Customer Relationships $ $ $ Intellectual Property Trade Names Patents — Totals $ $ $ |
Schedule of estimated future annual amortization expense | Estimated future annual amortization expense (not including projects in process) related to these assets is approximately as follows (in thousands): Year Amount Remainder of 2018 $ 2019 2020 2021 2022 Thereafter Total $ |
REVENUE (Tables)
REVENUE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
REVENUE | |
Schedule of significant changes in the contract assets | Significant changes in the contract assets balance during the nine months ended September 30, 2018 was as follows (in thousands): Nine Months Ended September 30, 2018 Outstanding at January 1, 2018 $ Increase (decrease) attributed to: Transferred to receivables from contract assets recognized ) Product transferred over time Outstanding at September 30, 2018 $ |
Schedule of net sales by market | The following tables summarize our net sales by market for the three and nine months ended September 30, 2018 (in thousands): Three Months Ended September 30, 2018 Product/ Service Product Noncash Total Net Sales Aerospace and Defense $ $ $ $ Medical Industrial Total net sales $ $ $ $ Nine Months Ended September 30, 2018 Product/ Service Product Noncash Total Net Sales Aerospace and Defense $ $ $ $ Medical Industrial Total net sales $ $ $ $ |
Schedule of consolidated statement of operations and comprehensive income, balance sheet and cash flows, to the pro-forma amounts had the previous guidance been in effect | The following table compares the reported condensed consolidated statement of operations and comprehensive income, balance sheets and cash flows, as of and for the three and nine months ended September 30, 2018, to the pro-forma amounts had the previous guidance been in effect (in thousands): Three Months Ended Nine Months Ended As Reported Pro forma as if the As Reported Pro forma as if the Condensed Consolidated Statement of Operations Net Sales $ $ $ $ Cost of Goods Sold Gross Profit Income from Operations Income Before Income Taxes Income Tax Expense Net Income $ $ $ $ Net Income Per Common Share - Diluted $ $ $ $ As of September 30, 2018 As Reported Pro forma as if the Condensed Consolidated Balance Sheet Assets Inventories $ $ Contract Assets $ $ — Shareholders’ Equity Retained Earnings $ $ Nine Months Ended As Reported Pro forma as if the Condensed Consolidated Statement of Cash Flows Net Income $ $ Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities Change in Current Operating Items Inventories ) ) Contract Asset ) — Net Cash Provided by Operating Activities $ $ |
FINANCING ARRANGEMENTS (Tables)
FINANCING ARRANGEMENTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
FINANCING ARRANGEMENTS | |
Summary of long-term debt balances | Long-term debt at September 30, 2018 and December 31, 2017 consisted of the following (in thousands): September 30, December 31, 2018 2017 Real estate term notes bearing interest at one-month LIBOR + 2.25% (4.5% as of September 30, 2018) maturing June 15, 2022 with monthly payments of approximately $41 plus interest secured by substantially all assets. $ $ Devicix Acquistion Note 1 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019 Devicix Acquistion Note 2 payable to DeLange Holdings bears interest rate of 4.0% per annum, maturing July 1, 2019 Discount on Devicix Notes Payable ) ) Debt issuance Costs ) ) Total long-term debt Current maturities of long-term debt ) ) Long-term debt - net of current maturities $ $ |
Schedule of future minimum non-cancelable capital leases | Approximate future minimum lease payments under non-cancelable capital leases subsequent to September 30, 2018 are as follows (in thousands): Year Amount Remainder of 2018 $ 2019 2020 2021 2022 Thereafter Total noncancelable future lease commitments $ Less: interest ) Present value of obligations under capital leases $ |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
COMMITMENTS AND CONTINGENCIES | |
Schedule of future minimum lease payments under non-cancelable leases | Approximate future minimum lease payments under non-cancelable leases subsequent to September 30, 2018 are as follows (in thousands): Years Ending December 31, Amount 2018 $ 2019 2020 2021 2022 Thereafter Total $ |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Reclassifications, Share based Compensation, Earnings per Common Share, Share Repurchase Program & Restricted Cash (Details) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||||||
Nov. 30, 2010 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Aug. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | May 31, 2017 | ||
Retained Earnings | $ 5,632 | $ 5,632 | $ 3,889 | [1] | ||||||
Equity Appreciation Rights Plan | ||||||||||
Shares granted (in units) | 0 | |||||||||
Restricted Cash | ||||||||||
Outstanding letters of credit | 0 | 0 | ||||||||
August 2017, Share Repurchase Program | ||||||||||
Share Repurchase Program | ||||||||||
Share repurchase program authorized amount | $ 250 | $ 250 | ||||||||
Stock repurchased in open market transactions (in shares) | 2,277 | 4,824 | 55,199 | 4,824 | ||||||
Stock repurchased in open market transactions | $ 8 | $ 16,909 | $ 200 | $ 16,909 | ||||||
August 2018, Share Repurchase Program | ||||||||||
Share Repurchase Program | ||||||||||
Share repurchase program authorized amount | $ 250 | |||||||||
Stock repurchased in open market transactions (in shares) | 8,640 | 8,640 | ||||||||
Stock repurchased in open market transactions | $ 35 | $ 35 | ||||||||
Authorized balance remaining under share repurchase program | 215 | 215 | ||||||||
ASU 2014-09 | ||||||||||
Retained Earnings | $ 5,632 | $ 5,632 | $ 1,381 | |||||||
Stock Options | ||||||||||
Options | ||||||||||
Balance at the beginning of the period(in shares) | 187,750 | |||||||||
Granted (in shares) | 0 | 134,000 | ||||||||
Cancelled (in shares) | (3,000) | |||||||||
Balance at the end of the period (in shares) | 318,750 | 318,750 | ||||||||
Exercisable at the end of the period (in shares) | 87,750 | 87,750 | ||||||||
Weighted-Average Exercise Price Per Share | ||||||||||
Outstanding at the beginning of the period (in dollars per share) | $ 3.70 | |||||||||
Granted (in dollars per share) | 3.36 | |||||||||
Cancelled (in dollars per share) | 3.29 | |||||||||
Outstanding at the end of the period (in dollars per share) | $ 3.62 | 3.62 | ||||||||
Exercisable at the end of the period (in dollars per share) | $ 4 | $ 4 | ||||||||
Weighted- Average Remaining Contractual Term (in years) | ||||||||||
Outstanding at the end of the period | 8 years 3 months 7 days | |||||||||
Exercisable at the end of the period | 5 years 11 months 19 days | |||||||||
Aggregate Intrinsic Value | ||||||||||
Outstanding at the end of the period | $ 210 | $ 210 | ||||||||
Exercisable at the end of the period | 54 | 54 | ||||||||
Additional disclosures | ||||||||||
Compensation expense (income) | 35 | 17 | 80 | 26 | ||||||
Unrecognized compensation related to unvested awards | 275 | $ 275 | ||||||||
Unrecognized compensation, vesting period | 3 years 3 months 11 days | |||||||||
2005 Plan | ||||||||||
Equity Appreciation Rights Plan | ||||||||||
Shares granted (in units) | 0 | |||||||||
2017 Plan | Stock Options | ||||||||||
Additional disclosures | ||||||||||
Number of common shares authorized | 350,000 | |||||||||
2010 Plan | Equity Appreciation Rights Plan | ||||||||||
Additional disclosures | ||||||||||
Compensation expense (income) | $ 0 | $ (4) | $ 0 | $ (4) | ||||||
Equity Appreciation Rights Plan | ||||||||||
Vesting period from the base date | 3 years | |||||||||
Shares granted (in units) | 0 | 0 | 100,000 | |||||||
Accrued compensation | $ 0 | $ 0 | $ 0 | |||||||
2010 Plan | Equity Appreciation Rights Plan | Maximum | ||||||||||
Additional disclosures | ||||||||||
Number of common shares authorized | 1,000,000 | |||||||||
Equity Appreciation Rights Plan | ||||||||||
Redemption cash payment period | 90 days | |||||||||
[1] | The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - A/R, Inventories, and Intangibles (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | ||
Accounts Receivable and Allowance for Doubtful Accounts | ||||||
Accounts Receivable Allowances | $ 204 | $ 204 | $ 209 | |||
Inventories | ||||||
Raw Materials | 15,595 | 15,595 | 13,870 | |||
Work in Process | 437 | 437 | 3,112 | |||
Finished Goods | 166 | 166 | 2,389 | |||
Reserves | (962) | (962) | (844) | |||
Total | 15,236 | 15,236 | 18,527 | [1] | ||
Impairment Analysis | ||||||
Impairment charges recognized | 0 | $ 0 | 0 | $ 0 | ||
Finite-Lived Intangible Assets | ||||||
Gross Carrying Amount | 2,233 | 2,233 | 2,230 | |||
Accumulated Amortization Amount | 655 | 655 | 491 | |||
Net Book Value Amount | 1,578 | 1,578 | $ 1,739 | [1] | ||
Amortization expense | 55 | $ 76 | 164 | $ 182 | ||
Estimated future annual amortization expense | ||||||
Remainder of 2018 | 164 | 164 | ||||
2,019 | 208 | 208 | ||||
2,020 | 185 | 185 | ||||
2,021 | 185 | 185 | ||||
2,022 | 185 | 185 | ||||
Thereafter | 634 | 634 | ||||
Total | 1,561 | $ 1,561 | ||||
Customer Relationships | ||||||
Finite-Lived Intangible Assets | ||||||
Remaining lives | 9 years | 9 years | ||||
Gross Carrying Amount | 1,302 | $ 1,302 | $ 1,302 | |||
Accumulated Amortization Amount | 470 | 470 | 361 | |||
Net Book Value Amount | 832 | $ 832 | $ 941 | |||
Trade Names | ||||||
Finite-Lived Intangible Assets | ||||||
Remaining lives | 3 years | 20 years | ||||
Gross Carrying Amount | 100 | $ 100 | $ 814 | |||
Accumulated Amortization Amount | 53 | 53 | 102 | |||
Net Book Value Amount | 47 | $ 47 | $ 712 | |||
Intellectual Property | ||||||
Finite-Lived Intangible Assets | ||||||
Remaining lives | 20 years | 3 years | ||||
Gross Carrying Amount | 814 | $ 814 | $ 100 | |||
Accumulated Amortization Amount | 132 | 132 | 28 | |||
Net Book Value Amount | 682 | $ 682 | $ 72 | |||
Patents | ||||||
Finite-Lived Intangible Assets | ||||||
Remaining lives | 7 years | 7 years | ||||
Gross Carrying Amount | 17 | $ 17 | $ 14 | |||
Net Book Value Amount | $ 17 | $ 17 | $ 14 | |||
[1] | The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date |
CONCENTRATION OF CREDIT RISK _2
CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018USD ($) | Sep. 30, 2017 | Sep. 30, 2018USD ($)item | Sep. 30, 2017 | Dec. 31, 2017 | |
Major customers and concentration of credit risk | |||||
Cash | $ | $ 397 | $ 397 | |||
Largest customer | |||||
Major customers and concentration of credit risk | |||||
Number of divisions | item | 2 | ||||
China | |||||
Major customers and concentration of credit risk | |||||
Cash | $ | $ 395 | $ 395 | |||
Credit concentration risk | |||||
Major customers and concentration of credit risk | |||||
Excess cash balance, number of high credit quality financial institutions | item | 2 | ||||
Net sales | Customer concentration risk | |||||
Major customers and concentration of credit risk | |||||
Percentage of export sales to consolidated net sales | 20.00% | 18.00% | 19.00% | 16.00% | |
Net sales | Customer concentration risk | Largest customer | |||||
Major customers and concentration of credit risk | |||||
Percentage of concentration risk (as a percent) | 10.00% | 10.00% | 10.00% | 10.00% | |
Net sales | Customer concentration risk | Division one of largest customer | |||||
Major customers and concentration of credit risk | |||||
Percentage of concentration risk (as a percent) | 20.00% | 23.00% | 20.00% | 20.00% | |
Net sales | Customer concentration risk | Other division of largest customer | |||||
Major customers and concentration of credit risk | |||||
Percentage of concentration risk (as a percent) | 1.00% | 1.00% | 1.00% | 2.00% | |
Net sales | Customer concentration risk | Divisions one & other | |||||
Major customers and concentration of credit risk | |||||
Percentage of concentration risk (as a percent) | 21.00% | 24.00% | 21.00% | 26.00% | |
Accounts receivable | Customer concentration risk | Largest customer | |||||
Major customers and concentration of credit risk | |||||
Percentage of concentration risk (as a percent) | 21.00% | 16.00% |
REVENUE - Contract Assets (Deta
REVENUE - Contract Assets (Details) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2018 | |
Increase (decrease) contract assets | ||
Outstanding at the end of period | $ 7,076 | $ 7,076 |
Revenue under contract manufacturing agreements (as percentage) | 91.00% | |
Remaining performance obligations customers upon shipment with payment terms | 120 days | |
ASU 2014-09 | ||
Increase (decrease) contract assets | ||
Outstanding at the beginning of period | 6,459 | |
Transferred to receivables from contract assets recognized | (5,727) | |
Product transferred over time | 6,344 | |
Outstanding at the end of period | $ 7,076 | $ 7,076 |
REVENUE - Remaining Performance
REVENUE - Remaining Performance Obligations (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-10-01 | 9 Months Ended |
Sep. 30, 2018 | |
Remaining performance obligations | |
Remaining performance obligations for the contract assets term | 90 days |
Remaining performance obligations for the Remaining Amounts Transferred term | 180 days |
REVENUE - Net sales by market (
REVENUE - Net sales by market (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Product/Service Transferred Over Time | $ 26,878 | $ 76,886 | ||
Product Transferred at Point in Time | 1,317 | 4,055 | ||
Noncash Consideration | 1,363 | 3,602 | ||
Total Net Sales by Market | 29,558 | $ 28,310 | 84,543 | $ 86,762 |
Aerospace and Defense | ||||
Product/Service Transferred Over Time | 3,931 | 12,675 | ||
Product Transferred at Point in Time | 50 | 170 | ||
Noncash Consideration | 203 | 599 | ||
Total Net Sales by Market | 4,184 | 13,444 | ||
Medical | ||||
Product/Service Transferred Over Time | 13,461 | 34,513 | ||
Product Transferred at Point in Time | 151 | 720 | ||
Noncash Consideration | 668 | 1,605 | ||
Total Net Sales by Market | 14,280 | 36,838 | ||
Industrial | ||||
Product/Service Transferred Over Time | 9,486 | 29,698 | ||
Product Transferred at Point in Time | 1,116 | 3,165 | ||
Noncash Consideration | 492 | 1,398 | ||
Total Net Sales by Market | $ 11,094 | $ 34,261 |
REVENUE - Impact of New Revenue
REVENUE - Impact of New Revenue Guidance on Financial Statement Line Items (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | |||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Jan. 01, 2018 | Dec. 31, 2017 | [1] | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | |||||||
Net Sales | $ 29,558 | $ 28,310 | $ 84,543 | $ 86,762 | |||
Cost of Goods Sold | 26,171 | 24,794 | 74,311 | 76,789 | |||
Gross Profit | 3,387 | 3,516 | 10,232 | 9,973 | |||
Income from Operations | 649 | 284 | 1,263 | 500 | |||
Income Before Income Taxes | 479 | 112 | 712 | (128) | |||
Income Tax Expense | 115 | 69 | 350 | (141) | |||
Net Income | $ 364 | $ 43 | $ 362 | $ 13 | |||
Net Income Per Common Share - Diluted | $ 0.14 | $ 0.02 | $ 0.13 | $ 0 | |||
Assets | |||||||
Inventories | $ 15,236 | $ 15,236 | $ 18,527 | ||||
Contract Assets | 7,076 | 7,076 | |||||
Shareholders' Equity | |||||||
Retained Earnings | 5,632 | 5,632 | $ 3,889 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
Net Income | 362 | $ 13 | |||||
Change in Current Operating Items | |||||||
Inventories | (1,959) | (686) | |||||
Contract Assets | (617) | ||||||
Net Cash Provided by Operating Activities | 2,564 | $ 615 | |||||
ASU 2014-09 | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | |||||||
Net Sales | 29,558 | 84,543 | |||||
Cost of Goods Sold | 26,171 | 74,311 | |||||
Gross Profit | 3,387 | 10,232 | |||||
Income from Operations | 649 | 1,263 | |||||
Income Before Income Taxes | 479 | 712 | |||||
Income Tax Expense | 115 | 350 | |||||
Net Income | $ 364 | $ 362 | |||||
Net Income Per Common Share - Diluted | $ 0.14 | $ 0.13 | |||||
Assets | |||||||
Inventories | $ 15,236 | $ 15,236 | |||||
Contract Assets | 7,076 | 7,076 | $ 6,459 | ||||
Shareholders' Equity | |||||||
Retained Earnings | 5,632 | 5,632 | $ 1,381 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
Net Income | 362 | ||||||
Change in Current Operating Items | |||||||
Inventories | (1,959) | ||||||
Contract Assets | (617) | ||||||
Net Cash Provided by Operating Activities | 2,564 | ||||||
Pro-forma as of the previous accounting guidance was in effect | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME | |||||||
Net Sales | 27,665 | 80,323 | |||||
Cost of Goods Sold | 24,454 | 70,291 | |||||
Gross Profit | 3,211 | 10,032 | |||||
Income from Operations | 472 | 1,063 | |||||
Income Before Income Taxes | 303 | 512 | |||||
Income Tax Expense | 115 | 350 | |||||
Net Income | $ 188 | $ 162 | |||||
Net Income Per Common Share - Diluted | $ 0.07 | $ 0.06 | |||||
Assets | |||||||
Inventories | $ 20,732 | $ 20,732 | |||||
Shareholders' Equity | |||||||
Retained Earnings | $ 4,051 | 4,051 | |||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
Net Income | 162 | ||||||
Change in Current Operating Items | |||||||
Inventories | (2,376) | ||||||
Net Cash Provided by Operating Activities | $ 2,564 | ||||||
[1] | The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date |
FINANCING ARRANGEMENTS (Details
FINANCING ARRANGEMENTS (Details) $ in Thousands | Jul. 01, 2015USD ($)item | Sep. 30, 2018USD ($) | Sep. 30, 2017USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | Jun. 15, 2017USD ($) | |
Financing arrangements | |||||||
Loss on Extinguishment of Debt | $ 175 | ||||||
Total long-term debt | $ 4,837 | $ 5,657 | |||||
Discount on Devicix Notes Payable | (33) | (63) | |||||
Debt Issuance Costs | (198) | (238) | |||||
Long-term Debt | 4,606 | 5,356 | |||||
Current maturities of long-term debt | (871) | (1,003) | [1] | ||||
Long-term debt - net of current maturities | $ 3,735 | 4,353 | [1] | ||||
Devicix, LLC | |||||||
Financing arrangements | |||||||
Number of promissory notes | item | 2 | ||||||
Line of credit | |||||||
Financing arrangements | |||||||
Weighted-average interest rate (as a percent) | 4.30% | ||||||
Outstanding balance | $ 8,058 | 8,503 | |||||
Unused availability supported by entity's borrowing base | $ 4,797 | ||||||
Devicix Acq Note 1, subordinate debt, due July 1, 2019 | |||||||
Financing arrangements | |||||||
Interest rate (as a percent) | 4.00% | ||||||
Long-term Debt | $ 200 | 394 | |||||
Devicix Acq Note 2, subordinate debt, due July 1, 2019 | |||||||
Financing arrangements | |||||||
Interest rate (as a percent) | 4.00% | ||||||
Long-term Debt | $ 260 | 512 | |||||
Promissory note subject to offsets | Devicix, LLC | |||||||
Financing arrangements | |||||||
Promissory note liability | $ 1,000 | ||||||
Term of promissory note | 4 years | ||||||
Interest rate per annum | 4.00% | ||||||
Principal and interest payments | $ 23 | ||||||
Promissory note not subject to offsets | Devicix, LLC | |||||||
Financing arrangements | |||||||
Promissory note liability | $ 1,300 | ||||||
Term of promissory note | 4 years | ||||||
Interest rate per annum | 4.00% | ||||||
Principal and interest payments | $ 29 | ||||||
Bank of America | Line of credit | |||||||
Financing arrangements | |||||||
Maximum borrowing capacity | $ 16,000 | ||||||
Bank of America | Real estate term notes | |||||||
Financing arrangements | |||||||
Debt instrument, face amount | $ 5,000 | ||||||
Variable rate basis | one-month LIBOR | ||||||
Interest rate margin on variable rate basis (as a percent) | 2.25% | ||||||
Interest rate (as a percent) | 4.50% | ||||||
Long-term Debt | $ 4,377 | $ 4,751 | |||||
Principal and interest payments | $ 41 | ||||||
Bank of America | Credit Agreement | |||||||
Financing arrangements | |||||||
Minimum fixed charge coverage ratio | 1 | ||||||
Minimum level of cumulative EBITDA | $ 1,970 | ||||||
Wells Fargo Bank, N.A. | |||||||
Financing arrangements | |||||||
Loss on Extinguishment of Debt | $ 175 | ||||||
[1] | The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date |
FINANCING ARRANGEMENTS - Capita
FINANCING ARRANGEMENTS - Capital Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | ||
Capital Leases | ||||||
Total cost of the leased equipment | $ 1,624 | $ 1,624 | $ 1,524 | |||
Current maturities of capital leases | 350 | 350 | $ 295 | [1] | ||
Interest expense related to the leased assets | 19 | $ 0 | 70 | $ 0 | ||
Depreciation expense related to the leased assets | 41 | $ 0 | 122 | $ 0 | ||
Future minimum lease payments under non-cancelable capital leases | ||||||
Remainder of 2018 | 121 | 121 | ||||
2,019 | 398 | 398 | ||||
2,020 | 398 | 398 | ||||
2,021 | 398 | 398 | ||||
2,022 | 223 | 223 | ||||
Thereafter | 2 | 2 | ||||
Total noncancelable future lease commitments | 1,540 | 1,540 | ||||
Less interest | (153) | (153) | ||||
Present value obligations under capital leases | $ 1,387 | $ 1,387 | ||||
[1] | The balance sheet at December 31, 2017 has been derived from the audited financial statements at that date |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | |
Effective income tax rate (as a percent) | 24.00% | 61.50% | 49.00% | 110.20% | (18.00%) | |
Unrecognized tax benefits | ||||||
Net uncertain tax benefit positions that would increase (reduce) effective income tax rate, if recognized | $ 0 | $ 0 | $ 52 | |||
Forecast | ||||||
Effective income tax rate (as a percent) | 51.00% |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Lease payments (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
COMMITMENTS AND CONTINGENCIES | ||||
Rent expense | $ 297 | $ 299 | $ 951 | $ 948 |
Operating Leases | ||||
2,018 | 208 | 208 | ||
2,019 | 935 | 935 | ||
2,020 | 768 | 768 | ||
2,021 | 622 | 622 | ||
2,022 | 676 | 676 | ||
Thereafter | 4,118 | 4,118 | ||
Total | $ 7,327 | $ 7,327 |
PLANT CLOSURE (Details)
PLANT CLOSURE (Details) - Building and Building Improvements - Augusta - Discontinued Operations, Disposed of by Sale - Plant closing $ in Thousands | Mar. 31, 2017USD ($) |
PLANT CLOSURE | |
Sale of property | $ 715 |
Net book value | 314 |
Gain on the sale, net of related expenses | 354 |
Net proceeds used to pay outstanding real estate term note | $ 668 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - Consulting arrangement - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Jun. 30, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | |
Matt Mahmood | |||||
RELATED PARTY TRANSACTIONS | |||||
Expenses incurred | $ 25 | $ 22 | $ 54 | $ 97 | |
William Murray | |||||
RELATED PARTY TRANSACTIONS | |||||
Term of consulting agreement | 3 months | ||||
Expenses incurred | $ 0 | $ 68 |
SUBSEQUENT EVENT (Details)
SUBSEQUENT EVENT (Details) - Employment and separation agreements - Matt Mahmood - Subsequent Event $ in Thousands | Oct. 05, 2018USD ($) |
SUBSEQUENT EVENT | |
Severance benefits | $ 235 |
Term of benefit | 12 months |