Company Quick10K Filing
Quick10K
Cyberoptics
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$17.30 7 $123
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-07-02 Earnings, Exhibits
8-K 2019-06-18 Accountant, Exhibits
8-K 2019-05-16 Shareholder Vote
8-K 2019-04-24 Earnings, Exhibits
8-K 2019-02-19 Earnings, Exhibits
8-K 2018-10-24 Earnings, Exhibits
8-K 2018-07-25 Earnings, Exhibits
8-K 2018-05-10 Officers, Shareholder Vote, Exhibits
8-K 2018-04-24 Earnings, Exhibits
8-K 2018-02-15 Earnings, Officers, Exhibits
SQM Chemical & Mining Co of Chile 9,100
CBT Cabot 2,760
TISI Team 486
RNET Rignet 192
ACTG Acacia Research 156
IMH Impac Mortgage Holdings 72
AQXP Aquinox Pharmaceuticals 65
GG Goldcorp 0
DREM Dream Homes & Development 0
GMTA Gander Mountain 0
CYBE 2019-03-31
Part I. Financial Information
Item 1. Interim Condensed Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Item 4 - Controls and Procedures
Part II. Other Information
Item 1 - Legal Proceedings
Item 1A - Risk Factors
Item 2 - Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
Item 3 - Defaults Upon Senior Securities
Item 4 - Mine Safety Disclosures
Item 5 - Other Information
Item 6 - Exhibits
EX-31.1 ex311_1.htm
EX-31.2 ex312_2.htm
EX-32 ex32_3.htm

Cyberoptics Earnings 2019-03-31

CYBE 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

cybe-20190331.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 


FORM 10-Q

 

 

 

 

(Check One)

 

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended March 31, 2019

 

 

  

o TRANSITION PURSUANT TO SECTION 13 OR 15(D)

OF THE SECURITIES EXCHANGE ACT


 

 

For the transition period from ______ to ______

 

 

 


COMMISSION FILE NO. (0-16577)

 

 

 

CYBEROPTICS CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

 

Minnesota 

 

41-1472057

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

5900 Golden Hills Drive

 

 

MINNEAPOLIS, MINNESOTA

 

55416

(Address of principal executive offices)

 

(Zip Code)

 


(763) 542-5000

 

(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, no par value CYBE  NASDAQ Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

 

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, "smaller reporting company", and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

 Large Accelerated Filer

 

Accelerated Filer

 Non-Accelerated Filer

☐ 

  Smaller Reporting Company

 

 

  Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. At April 30, 2019, there were 7,106,675 shares of the registrant’s Common Stock, no par value, issued and outstanding.

1


PART I. FINANCIAL INFORMATION


ITEM 1. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

CYBEROPTICS CORPORATION 

(Unaudited)

   

 

 

 

 

 

 

 

 

(In thousands, except share information)

 

March 31,
2019

 

December 31,
2018

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,315

 

 

$

9,248

 

Marketable securities

 

7,684

 

 

5,771

 

Accounts receivable, less allowances of $270 at March 31, 2019 and $314 at December 31, 2018

 

13,037

 

 

15,859

 

Inventories

 

17,582

 

 

16,163

 

Other current assets

 

1,652

 

 

2,096

 

Total current assets

 

49,270

 

 

49,137

 




Marketable securities, long-term 

 

8,688

 

 

10,322

 

Equipment and leasehold improvements, net

 

3,362

 

 

2,861

 

Intangible assets, net

 

324

 

 

333

 

Goodwill

 

1,366

 

 

1,366

 

Right-of-use assets (operating leases)
2,338


Other assets

 

252

 

 

259

 

Deferred tax assets

 

5,332

 

 

5,422

 

Total assets

 

$

70,932



$

69,700

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Accounts payable

 

$

6,180

 

 

$

8,513

 

Advance customer payments

 

843

 

 

636

 

Accrued expenses

 

2,643

 

 

3,568

 

Current operating lease liabilities
254


Total current liabilities

 

9,920

 

 

12,717

 

 

Other liabilities

 

103

 

 

629

 

Long-term operating lease liabilities
3,591


Reserve for income taxes

 

143

 

 

143

 

Total liabilities

 

13,757

 

 

13,489

 

 

 

Commitments and contingencies

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, no par value, 5,000,000 shares authorized, none outstanding

 

 

 

 

Common stock, no par value, 25,000,000 shares authorized, 7,106,675 shares issued and outstanding at March 31, 2019 and 7,100,825 shares issued and outstanding at December 31, 2018

 

35,940

 

 

35,637

 

Accumulated other comprehensive loss

 

(1,557

)

 

(1,690

)

Retained earnings

 

22,792

 

 

22,264

 

Total stockholders’ equity

 

57,175

 

 

56,211

 

Total liabilities and stockholders’ equity

 

$

70,932

 

 

$

69,700

 

 

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

2


 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CYBEROPTICS CORPORATION

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

(In thousands, except per share amounts)

 

2019

 

2018

Revenues

 

$

14,976

 

 

$

14,120

 

Cost of revenues

 

 

7,950

 

 

 

7,901

 

 

 

 

 

 

 

 


 

Gross margin

 

 

7,026

 

 

 

6,219

 

 

 

 


 

 

 


 

Research and development expenses

 

 

2,293

 

 

 

2,180

 

Selling, general and administrative expenses

 

 

4,163

 

 

 

4,357

 

 

 

 


 

 

 


 

Income (loss) from operations

 

 

570

 

 

(318

)

 

 

 


 

 

 


 

Interest income and other

 

 

59

 

 

62

 

 

 


 

 

 


 

Income (loss) before income taxes

 

 

629

 

 

(256

)

 

 

 


 

 

 


 

Income tax expense (benefit)

 

 

134

 

 

(83

)

 

 

 


 

 

 


 

Net income (loss)

 

$

495

 

$

(173

)

 

 

 


 

 

 


 

Net income (loss) per share – Basic

 

$

0.07

 

$

(0.02

)

Net income (loss) per share – Diluted

 

$

0.07

 

$

(0.02

)

 

 

 


 

 

 


 

Weighted average shares outstanding – Basic

 

 

7,100

 

 

 

6,986

 

Weighted average shares outstanding – Diluted

 

 

7,322

 

 

 

6,986

 

 

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

3


 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CYBEROPTICS CORPORATION

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

(In thousands)

 

2019

 

2018

Net income (loss)

 

$

495


 

$

(173

)

 

 

 


 

 

 


 

Other comprehensive income, before tax:

 

 


 

 

 


 

Foreign currency translation adjustments

 

 

87

 

 

220

 

 

 


 

 

 


 

Unrealized gains (losses) on available-for-sale securities:

 

 


 

 

 


 

Unrealized gains (losses)

 

 

58

 

 

(40

)

Reclassification adjustment for gains included in net income 

 

 

 

 

 

Total unrealized gains (losses) on available-for-sale securities

 

 

58

 

 

(40

)

 

 

 


 

 

 


 

Other comprehensive income before income taxes

 

 

145

 

 

180

Income tax provision (benefit)

 

(12

)

 

 

9

Other comprehensive income after income taxes

 

 

133

 

 

189

Total comprehensive income

$

628

 

 

$

16

 

 

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

4


 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CYBEROPTICS CORPORATION

(Unaudited)

 


 

 



 

 

 

 


Three Months Ended March 31,

(In thousands)


2019



2018


CASH FLOWS FROM OPERATING ACTIVITIES:


 



 

 

Net income (loss)


$

495


$

(173

)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:


 



 


Depreciation and amortization


663



625

 

Provision (recovery) for doubtful accounts


(44

)

17

Deferred taxes


71


(139

)

Foreign currency transaction (gains) losses 


70


(34

)

Share-based compensation


244



259

 

Unrealized loss on available-for-sale equity security

 

1

   

14

 

Changes in operating assets and liabilities:


 



 


Accounts receivable


2,866


(1,357

)

Inventories


(1,625

)

 

(239

)

Other assets


445

 

(229

)

Accounts payable


(2,353

)  

1,579

Advance customer payments


207

 

130

Accrued expenses


(600

)

 

36

Net cash provided by operating activities


440

 

489

 


 


 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:


 


 

 

 

Proceeds from maturities of available-for-sale marketable securities


1,052


 

2,162

 

Proceeds from sales of available-for-sale marketable securities




 

70

 

Purchases of available-for-sale marketable securities


(1,263

)

 

(2,621

)

Additions to equipment and leasehold improvements


(183

)

 

(348

)

Additions to patents


(32

)

 

(22

)

Net cash used in investing activities


(426

)

 

(759

 


 


 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:


 


 

 

 

Proceeds from exercise of stock options


59


 

182

 

Net cash provided by financing activities


59


 

182

 

 

 

 


 

 

 

 

Effects of exchange rate changes on cash and cash equivalents


(6

)  

(8

)

 


 


 

 

 

 

Net increase (decrease) in cash and cash equivalents


67

 

(96

)

 


 


 

 

 

 

Cash and cash equivalents – beginning of period


9,248


 

6,944

 

Cash and cash equivalents – end of period


$

9,315


 

$

6,848

 

 

SEE THE ACCOMPANYING NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

5


 

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CYBEROPTICS CORPORATION


1. INTERIM REPORTING:


The interim condensed consolidated financial statements of CyberOptics Corporation ("we", "us" or "our") presented herein as of March 31, 2019, and for the three month periods ended March 31, 2019 and 2018, are unaudited but, in the opinion of management, include all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of financial position, results of operations and cash flows for the periods presented.


The results of operations for the three month periods ended March 31, 2019 do not necessarily indicate the results to be expected for the full year. The December 31, 2018 consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited interim condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2018.


2. RECENT ACCOUNTING DEVELOPMENTS: 


In February 2016, the Financial Accounting Standards Board (the "FASB") issued new lease accounting guidance, ASU 2016-02, Leases (also referred to as Topic 842) which we adopted on January 1, 2019. Under Topic 842, at the commencement date, lessees are required (a) to recognize a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and (b) to record a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which gave companies the option of applying the new standard at the adoption date, rather than retrospectively to the earliest period presented in the financial statements, with recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We choose the option to apply the new standard at the adoption date, and therefore we were not required to restate the financial statements for prior periods, nor are we required to provide the disclosures required by Topic 842 for prior periods. Upon adoption, we recognized an approximate $2.6 million right-of-use asset, and an approximate $3.2 million lease liability. Our previously recognized liability for lease incentives recorded under prior accounting standards was eliminated. The cumulative-effect adjustment to the opening balance of retained earnings related to our adoption of Topic 842 was inconsequential. Our adoption of Topic 842 did not impact our cash flows or have a material impact on our results of operations. We have expanded our consolidated financial statement disclosures to comply with the requirements of Topic 842.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02"), which allows an entity to elect an option to reclassify the stranded tax effects related to the application of the Tax Cuts and Jobs Act (the TCJA) from accumulated other comprehensive loss to retained earnings. ASU 2018-02 was effective January 1, 2019 and can be applied either in the period of adoption or retrospectively to all applicable periods. We did not elect to reclassify the stranded tax effects related to the application of the TCJA from accumulated other comprehensive loss to retained earnings.

In January 2017, the FASB issued guidance on simplifying the test for goodwill impairment, ASU 2017-04Simplifying the Test for Goodwill Impairment ("ASU 2017-04"). Under ASU 2017-04, goodwill impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, but not in an amount in excess of the carrying value of goodwill. The new standard eliminates the requirement to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. ASU 2017-04 is to be applied prospectively to impairment tests beginning January 1, 2020, with early adoption permitted. We are currently evaluating when we will adopt ASU 2017-04 and do not expect the adoption to have a material impact on our consolidated financial statements.


3. REVENUE RECOGNITION:


Our revenue performance obligations are satisfied at a point in time or over time as work progresses.


The following is a summary of our revenue performance obligations in the three months ended March 31, 2019 and the three months ended March 31, 2018:








Three Months Ended March 31, 2019
Three Months Ended March 31, 2018

(In thousands except percentages)


Revenues
Percent of Revenues

Revenues

Percent of Revenues

Revenue recognized over time


$ 346
2

%

$

894

6

%

Revenue recognized at a point in time



14,630
98 %

13,226

94

%


$ 14,976
100 %

$

14,120

100

%


See Note 10 for additional information regarding disaggregation of revenue. 

6



Contract Balances


Contract assets consist of unbilled amounts from sales where we recognize the revenue over time and the revenue recognized exceeds the amount billed to the customer at a point in time. Accounts receivable are recorded when the right to payment becomes unconditional. Contract liabilities consist of payments received in advance of performance under the contract. Contract liabilities are recognized as revenue when we perform under the contract.

The following summarizes our contract assets and contract liabilities:    






(In thousands)


March 31,

2019


December 31,

2018

Contract assets, included in other current assets


$

123

 


$

 

 

Contract liabilities, included in advance customer payments/other liabilities


$

336

 


$

366

 


Changes in contract assets in the three months ended March 31, 2019 resulted from unbilled amounts under sensor product arrangements and longer duration 3D scanning service projects in which revenue is recognized over time. Changes in contract liabilities primarily resulted from reclassification of beginning contract liabilities to revenue as performance obligations were satisfied or from cash received in advance and not recognized as revenue. See Note 8 for changes in contractual obligations related to deferred warranty revenue. Unsatisfied performance obligations are generally expected to be recognized as revenue over the next one to three years. There were no impairment losses for contract assets in the three months ended March 31, 2019 and 2018.


The following summarizes the amounts reclassified from beginning contract liabilities to revenue:





Three Months Ended March 31,

(In thousands)

 

2019

2018

Amounts reclassified from beginning contract liabilities to revenue

 

$

30

 

 

$

 57

 

Amounts reclassified from deferred warranty revenue
114


120

Total
$ 144

$ 177


4. MARKETABLE SECURITIES:


Our investments in marketable securities are classified as available-for-sale and consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

(In thousands)

 

Cost

 

Unrealized
Gains

 

Unrealized
Losses

 

Fair Value

Short-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

4,358

 

 

$

2

 

 

$

(14

)

 

$

4,346

 

Corporate debt securities and certificates of deposit

 

2,265

 

 

6

 

 

(3

)

 

2,268

 

Asset backed securities

 

1,073

 

 

 

 

(3

)

 

1,070

 

Marketable securities – short-term

 

$

7,696

 

 

$

8

 

 

$

(20

)

 

$

7,684

 

Long-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

5,004

 

 

$

19

 

 

$

(8

)

 

$

5,015

 

Corporate debt securities and certificates of deposit

 

389

 

 

1

 

 

 

390

 

Asset backed securities

 

3,220

 

 

10

 

 

(6

)

 

3,224

 

Equity security

 

42

 

 

17

 

 

 

 

59

 

Marketable securities – long-term

 

$

8,655

 

 

$

47

 

 

$

(14

)

 

$

8,688

 


7


 





 

December 31, 2018

(In thousands)

 

Cost

 

Unrealized
Gains

 

Unrealized
Losses

 

Fair Value

Short-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

3,377

 

 

$

 

 

$

(20

)

 

$

3,357

 

Corporate debt securities and certificates of deposit

 

1,787

 

 

3

 

 

(5

)

 

1,785

 

Asset backed securities

 

633

 

 

 

 

(4

 

629

 

  Marketable securities – short-term

 

$

5,797

 

 

$

3

 

 

$

(29

)

 

$

5,771

 

Long-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

6,114

 

 

$

10

 

 

$

(23

)

 

$

6,101

 

Corporate debt securities and certificates of deposit

 

754

 

 

1

 

 

(3

)

 

752

 

Asset backed securities

 

3,422

 

 

2

 

 

(15

)

 

3,409

 

Equity security

 

42

 

 

18

 

 

 

 

60

 

Marketable securities – long-term

 

$

10,332

 

 

$

31

 

 

$

(41

)

 

$

10,322

 

 
 
 
 

 
In Unrealized Loss Position For
Less Than 12 Months 
 
 In Unrealized Loss Position For
Greater Than 12 Months
(In thousands) 
 
Fair Value
 
Gross Unrealized
Losses
 
Fair Value
 
Gross Unrealized
Losses
March 31, 2019
 
 

 
 

 
 

 
 

U.S. government and agency obligations
 
$
149

 
$
 
$
4,618
 
$
(22
)
Corporate debt securities and certificates of deposit
 

 
 
932
 
(3
)
Asset backed securities
 

 
 
2,112

 
(9
)
Marketable securities
 
$
149

 
$
 
$
7,662
 
$
(34
)
December 31, 2018
 
 

 
 

 
 

 
 

U.S. government and agency obligations
 
$
1,548

 
$
(4
)
 
$
4,608
 
$
(39
)
Corporate debt securities and certificates of deposit
 
250

 
 
1,178
 
(8
)
Asset backed securities
 
1,023

 
(3
)
 
2,137
 
(16
)
Marketable securities
 
$
2,821

 
$
(7
)
 
$
7,923
 
$
(63
)

Our investments in marketable debt securities all have maturities of less than five yearsNet pre-tax unrealized gains for marketable debt securities of $4,000 at March 31, 2019 and net pre-tax losses for marketable debt securities of $54,000 at December 31, 2018 have been recorded as a component of accumulated other comprehensive loss in stockholders’ equity. We have determined that the net pre-tax unrealized losses for marketable debt securities at March 31, 2019 and December 31, 2018 were caused by fluctuations in interest rates and are temporary in nature. We review our marketable debt securities to identify and evaluate investments that have indications of possible impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which the fair value of the investment has been less than the cost basis, the credit quality of the investment and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. No marketable securities were sold in the three months ended March 31, 2019. We received proceeds from sales of marketable securities of $70,000 in the three months ended March 31, 2018. No gains or losses were recognized on any of these sales.


Investments in marketable securities classified as cash equivalents of $4.9 million at March 31, 2019 and $2.5 million at December 31, 2018 consist of corporate debt securities and certificates of deposit. There were no unrealized gains or losses with respect to any of these securities at March 31, 2019 or December 31, 2018.


Cash and marketable securities held by foreign subsidiaries totaled $345,000 at March 31, 2019 and $362,000 at December 31, 2018.


8



5. FAIR VALUE MEASUREMENTS:


We determine the fair value of our assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. We use a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last is considered unobservable, to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1). The next highest priority is based on quoted prices for similar assets or liabilities in active markets or quoted prices for identical or similar assets or liabilities in non-active markets or other observable inputs (Level 2). The lowest priority is given to unobservable inputs (Level 3). The following provides information regarding fair value measurements for our marketable securities as of March 31, 2019 and December 31, 2018 according to the three-level fair value hierarchy:


 

 

Fair Value Measurements at
March 31, 2019 Using

(In thousands)

 

Balance

March 31, 
2019

 

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

9,361

 

 

$

 

 

$

9,361

 

 

$

 

Corporate debt securities and certificates of deposit

 

2,658

 

 

 

 

2,658

 

 

 

Asset backed securities

 

4,294

 

 

 

 

4,294

 

 

 

Equity security

 

59

 

 

59

 

 

 

 

 

Total marketable securities

 

$

16,372

 

 

$

59

 

 

$

16,313

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at
December 31, 2018 Using

(In thousands)

 

Balance

December 31,

2018

 

Quoted Prices
in Active
Markets for
Identical
Assets
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

9,458

 

 

$

 

 

$

9,458

 

 

$

 

Corporate debt securities and certificates of deposit

 

2,537

 

 

 

 

2,537

 

 

 

Asset backed securities

 

4,038

 

 

 

 

4,038

 

 

 

Equity security

 

60

 

 

60

 

 

 

 

 

Total marketable securities

 

$

16,093

 

 

$

60

 

 

$

16,033

 

 

$

 


During the three months ended March 31, 2019 and the year ended December 31, 2018, we owned no Level 3 securities, and there were no transfers within the three level hierarchy. A significant transfer is recognized when the inputs used to value a security have been changed which merit a transfer between the disclosed levels of the valuation hierarchy. 


The fair value for our U.S. government and agency obligations, corporate debt securities and certificates of deposit and asset backed securities are determined based on valuations provided by external investment managers, which obtain the valuations from a variety of industry standard data providers. The fair value for our equity security is based on a quoted market price obtained from an active market. 


The carrying amounts of financial instruments such as cash equivalents, accounts receivable, other assets, accounts payable, advance customer payments, accrued expenses and other liabilities are approximately equal to their related fair values due to their short-term maturities. Non-financial assets such as equipment and leasehold improvements, goodwill and intangible assets are subject to non-recurring fair value measurements if they are deemed impaired. We had no re-measurements of non-financial assets to fair value in the three months ended March 31, 2019 or the three months ended March 31, 2018.


9


 

6. SHARE-BASED COMPENSATION:


We have three share-based compensation plans that are administered by the Compensation Committee of the Board of Directors. We have an Employee Stock Incentive Plan for officers, other employees, consultants and independent contractors under which we have granted options and restricted stock units to officers and other employees, an Employee Stock Purchase Plan under which shares of our common stock may be acquired by employees at discounted prices, and a Non-Employee Director Stock Plan that provides for automatic grants of restricted shares of our common stock to non-employee directors. New shares of our common stock are issued upon stock option exercises, vesting of restricted stock units, issuances of shares to board members and issuances of shares under the Employee Stock Purchase Plan. 

Employee Stock Incentive Plan

 

As of March 31, 2019, there were 273,014 shares of common stock reserved in the aggregate for issuance pursuant to future awards under our Employee Stock Incentive Plan and 540,378 shares of common stock reserved in the aggregate for issuance pursuant to outstanding awards under our Employee Stock Incentive Plan. Although our Compensation Committee has authority to issue options, restricted stock, restricted stock units, share grants and other share-based benefits under our Employee Stock Incentive Plan, to date only restricted stock units and stock options have been granted under the plan. Options have been granted at an option price per share equal to the market value of our common stock on the date of grant, vest over a four year period and expire seven years after the date of grant. Restricted stock units vest over a four year period and entitle the holders to one share of our common stock for each restricted stock unit. Reserved shares underlying outstanding awards, including options and restricted stock units, that are forfeited are available under the Employee Stock Incentive Plan for future grant. 


Non-Employee Director Stock Plan

 

As of March 31, 2019, there were 60,000 shares of common stock reserved in the aggregate for issuance pursuant to future restricted share grants under our Non-Employee Director Stock Plan and 16,000 shares of common stock reserved in the aggregate for issuance pursuant to outstanding stock option awards under our Non-Employee Director Stock Plan (which previously authorized the granting of stock options to non-employee directors). Under the terms of the plan, each non-employee director receives annual restricted share grants of 2,000 shares of our common stock on the date of each annual meeting at which such director is elected to serve on the board. The annual restricted share grants of common stock vest in four equal quarterly installments during the year after the grant date, provided the non-employee director is still serving as a director on the applicable vesting date. 


On the date of our 2018 annual meeting, we issued a total of 8,000 shares of our common stock to our non-employee directors, which were restricted as specified in the Non-Employee Director Stock Plan. The shares had an aggregate fair market value on the date of grant equal to $130,000 (grant date fair value of $16.25 per share). As of March 31, 2019, 6,000 of these shares were vested. The aggregate fair value of the outstanding unvested shares based on the closing price of our common stock on March 31, 2019 was $34,000

 

Stock Option Activity


The following is a summary of stock option activity in the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

Options Outstanding

 

Weighted Average Exercise
Price Per Share

Outstanding, December 31, 2018

523,042

 

 

$

11.48

 

Granted

 

 

 

Exercised

(5,850

)

 

9.92

 

Expired

(5,000

)

 

8.50

 

Forfeited

(7,350

)

 

16.67

 

Outstanding, March 31, 2019

504,842

 

 

$

11.45

 


 

 

 

Exercisable, March 31, 2019

350,718

 

 

$

9.40

 

 

The intrinsic value of an option is the amount by which the market price of the underlying common stock exceeds the option's exercise price. For options outstanding at March 31, 2019, the weighted average remaining contractual term of all outstanding options was 3.8 years and their aggregate intrinsic value was $3.3 million. At March 31, 2019, the weighted average remaining contractual term of options that were exercisable was 3.0 years and their aggregate intrinsic value was $2.9 million. The aggregate intrinsic value of stock options exercised in the three months ended March 31, 2019 was $57,000. We received proceeds from stock option exercises of $59,000 in the three months ended March 31, 2019 and $182,000 in the three months ended March 31, 2018. The aggregate fair value of options that vested in the three months ended March 31, 2019 was $5,000.


10



Restricted Shares and Restricted Stock Units

 

Restricted shares are granted under our Non-Employee Director Stock Plan. There were no restricted shares granted in the three months ended March 31, 2019. Restricted stock units are granted under our Employee Stock Incentive Plan. No restricted stock units were granted in the three months ended March 31, 2019. The aggregate fair value of outstanding restricted shares and restricted stock units based on the closing share price of our common stock as of March 31, 2019 was $915,000. The aggregate fair value of restricted shares and restricted stock units that vested, based on the closing price of our common stock on the vesting date, was $43,000 in the three months ended March 31, 2019.

 

The following is a summary of activity in non-vested restricted shares and restricted stock units in the three months ended March 31, 2019:

 

 

 

 

 

 

 

 

Non-vested restricted stock units and restricted shares

 

Shares

 

Weighted Average  Grant Date Fair Value

Non-vested at December 31, 2018

 

56,411

 

 

$

17.59

 

Granted

 

 

 

 

Vested

 

(2,000

)

 

16.25

 

Forfeited

 

(875

)

 

16.19

 

Non-vested at March 31, 2019

 

53,536

 

 

$

17.66

 

 

Employee Stock Purchase Plan

 

We have an Employee Stock Purchase Plan available to eligible U.S. employees. Under the terms of the plan, eligible employees may designate from 1% to 10% of their compensation to be withheld through payroll deductions, up to a maximum of $6,500 in each plan year, for the purchase of common stock at 85% of the lower of the market price on the first or last day of the offering period (which begins on August 1st and ends on July 31st of each year). No shares were purchased under this plan in the three months ended March 31, 2019. As of March 31, 2019, 174,469 shares remain available for future purchase under the Employee Stock Purchase Plan. 


Share-Based Compensation Information

 

All share-based compensation awarded to our employees and non-employee directors, including grants of stock options, restricted stock units and restricted shares, are required to be recognized as an expense in our consolidated statement of operations based on the grant date fair value of the award. We utilize the straight-line method of expense recognition over the award's service period for our graded vesting options. The fair value of stock options has been determined using the Black-Scholes model. We have classified employee share-based compensation within our statements of operations in the same manner as our cash based employee compensation costs.

 

Share-based compensation expense in the three months ended March 31, 2019 totaled $244,000, and included $107,000 for stock options, $29,000 for our Employee Stock Purchase Plan, $76,000 for unvested restricted stock units and $32,000 for unvested restricted shares.

 

Share-based compensation expense in the three months ended March 31, 2018 totaled $259,000, and included $125,000 for stock options, $34,000 for our Employee Stock Purchase Plan, $59,000 for unvested restricted stock units and $41,000 for unvested restricted shares.

 

At March 31, 2019, the total unrecognized compensation cost related to non-vested share-based compensation arrangements was $1.9 million and the related weighted average period over which such cost is expected to be recognized is 2.84 years.

 

7CHANGES IN STOCKHOLDERS’ EQUITY:

 

A reconciliation of the changes in our stockholders' equity is as follows:

 

  Common Stock

Accumulated

Other Comprehensive

Loss

 

Retained

Earnings

Total Stockholders’

Equity

(In thousands) Shares    Amount   
Balance, December 31, 2018  7,101   $  35,637   $  (1,690 )   $ 22,264   $ 56,211  
Increase related to adoption of ASU 2016-02               33      33  

Exercise of stock options

 6     59                59  
Share-based compensation       244                244  
Other comprehensive income, net of tax             133         133
Net income                   495   495
Balance, March 31, 2019  7,107   $ 35,940   $ (1,557 )   $ 22,792   $ 57,175  


11


 

  Common Stock

Accumulated

Other Comprehensive

Loss

Retained

Earnings

Total Stockholders’

Equity

(In thousands) Shares
Amount
Balance December 31, 2017 6,980 $ 34,080 $ (1,409 ) $ 19,611 $ 52,282
Increase related to adoption of ASU 2016-01 (44 ) 44
Decrease related to adoption of ASU 2014-09 (218 ) (218 )
Exercise of stock options, vesting of restricted stock units and grants of restricted shares, net of shares exchanged as payment 26 182 182
Stock-based compensation 259 259
Other comprehensive income, net of tax 189 189
Net loss (173 ) (173 )
Balance, March 31, 2018 7,006 $ 34,521 $ (1,264 ) $ 19,264 $ 52,521


8. OTHER FINANCIAL STATEMENT DATA:


Inventories consist of the following:

 

 

 

 

 

 

 

 

 

(In thousands)

 

March 31, 2019

 

December 31, 2018

Raw materials and purchased parts

 

$

9,114

 

 

$

8,821

 

Work in process

 

2,489

 

 

2,446

 

Finished goods

 

5,979

 

 

4,896

 

Total inventories

 

$

17,582

 

 

$

16,163

 


Accrued expenses consist of the following:

 

 

 

 

 

 

 

 

 

(In thousands)

 

March 31, 2019

 

December 31, 2018

Wages and benefits

 

$

1,174

 

 

$

2,166

 

Warranty liability

 

795

 

 

758

 

Income tax payable
459

393

Other

 

215

 

 

251

 

 

 

$

2,643

 

 

$

3,568

 


Warranty costs:


We provide for the estimated cost of product warranties, which cover products for periods ranging from one to three years, at the time revenue is recognized. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of components provided by suppliers, warranty obligations do arise. These obligations are affected by product failure rates, the costs of materials used and service delivery expenses incurred in correcting a product failure. If actual product failure rates and material or service delivery costs differ from our estimates, revisions to the estimated warranty liability are required and could be material. At the end of each reporting period, we revise our estimated warranty liability based on these factors. The current portion of our warranty liability is included as a component of accrued expenses. The long-term portion of our warranty liability is included as a component of other liabilities. 

12



A reconciliation of the changes in our estimated warranty liability is as follows:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

(In thousands)

 

2019

 

2018

Balance at beginning of period

 

$

789

 

 

$

767

 

Accrual for warranties

 

174

 

 

103

 

Warranty revision

 

17

 

(26

)

Settlements made during the period

 

(154

)

 

(101

)

Balance at end of period

 

826

 

 

743

 

Current portion of estimated warranty liability

 

(795

)

 

(690

)

Long-term estimated warranty liability

 

$

31

 

 

$

53

 


Deferred warranty revenue:


The current portion of our deferred warranty revenue is included as a component of advance customer payments. The long-term portion of our deferred warranty revenue is included as a component of other liabilities. A reconciliation of the changes in our deferred warranty revenue is as follows:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

(In thousands)

 

2019

 

2018

Balance at beginning of period

 

$

218

 

 

$

259

 

Revenue deferrals

 

87

 

 

111

 

Amortization of deferred revenue

 

(114

)

 

(120

)

Total deferred warranty revenue

 

191

 

 

250

 

Current portion of deferred warranty revenue

 

(186

)

 

(231

)

Long-term deferred warranty revenue

 

$

5

 

 

$

19

  


9. INTANGIBLE ASSETS: 


Intangible assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

December 31, 2018

(In thousands)

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net

 

Gross
Carrying
Amount

 

Accumulated
Amortization

 

Net

Patents

 

$

2,785

 

 

$

(2,564

)

 

$

221

 

 

$

2,754

 

 

$

(2,533

)

 

$

221

 

Software

 

206

 

 

(148

)

 

58

 

 

206

 

 

(141

)

 

65

 

Marketing assets and customer relationships

 

101

 

 

(56

)

 

45

 

 

101

 

 

(54

)

 

47

 

Non-compete agreements

 

101

 

 

(101

)

 

 

 

101

 

 

(101

)

 

 

 

 

$

3,193

 

 

$

(2,869

)

 

$

324

 

 

$

3,162

 

 

$

(2,829

)

 

$

333

 


Amortization expense for our intangible assets in the three months ended March 31, 2019 and the three months ended March 31, 2018 was as follows:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

(In thousands)

 

2019

 

2018

Patents

 

$

31

 

 

$

28

 

Software

 

 

7

 

 

 

8

 

Marketing assets and customer relationships

 

 

2

 

 

 

4

 

Non-compete agreements

 

 

 

 

 

5

 

 

 

$

40

 

 

$

45

 


13


Amortization of patents has been classified as research and development expense in the accompanying consolidated statements of operations. Estimated aggregate future amortization expense based on current intangible assets is expected to be as follows: $118,000 for the remainder of 2019; $130,000 in 2020; $55,000 in 2021; $10,000 in 2022; $9,000 in 2023; and $2,000 in 2024.


Intangible and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when future undiscounted cash flows expected to result from use of the asset and its eventual disposition are less than the carrying amount.

 

10. REVENUE CONCENTRATIONS, SIGNIFICANT CUSTOMERS AND GEOGRAPHIC AREAS:


The following summarizes our revenue by product line:  


  Three Months Ended March 31,
(In thousands)   2019   2018

 High Precision 3D and 2D Sensors

  $ 3,749     $ 5,055  

 Semiconductor Sensors

    4,136       3,161  

 Inspection and Metrology Systems  

    7,091       5,904  
Total   $
14,976     $ 14,120  


Export sales as a percentage of total sales in the three months ended March 31, 2019 were 71%. Export sales as a percentage of total sales in the three months ended March 31, 2018 were 72%. Virtually all of our export sales are negotiated, invoiced and paid in U.S. dollars. Export sales by geographic area are summarized below:

 

  Three Months Ended March 31,

(In thousands)

 

2019

 

2018

Americas

 

$

371


 

$

71

 

Europe

 

 

2,658


 

 

2,580

 

Asia

 

 

7,532