Company Quick10K Filing
Cyberoptics
Price16.54 EPS0
Shares7 P/E67
MCap120 P/FCF131
Net Debt-8 EBIT2
TEV112 TEV/EBIT59
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-03-12
10-Q 2019-09-30 Filed 2019-11-06
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-08
10-K 2018-12-31 Filed 2019-03-12
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-03-09
10-Q 2017-09-30 Filed 2017-11-06
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-05-08
10-K 2016-12-31 Filed 2017-03-14
10-Q 2016-09-30 Filed 2016-11-08
10-Q 2016-06-30 Filed 2016-08-08
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-03-09
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-03-12
10-Q 2014-09-30 Filed 2014-11-12
10-Q 2014-06-30 Filed 2014-08-13
10-Q 2014-03-31 Filed 2014-05-13
10-K 2013-12-31 Filed 2014-03-28
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-13
10-K 2012-12-31 Filed 2013-03-13
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-10
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-03-15
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-10
10-Q 2011-03-31 Filed 2011-05-11
10-K 2010-12-31 Filed 2011-03-10
10-Q 2010-09-30 Filed 2010-11-08
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-11
8-K 2020-07-23 Earnings, Exhibits
8-K 2020-05-14
8-K 2020-04-23
8-K 2020-02-19
8-K 2020-02-14
8-K 2019-10-23
8-K 2019-07-24
8-K 2019-07-02
8-K 2019-06-18
8-K 2019-05-16
8-K 2019-04-24
8-K 2019-02-19
8-K 2018-10-24
8-K 2018-07-25
8-K 2018-05-10
8-K 2018-04-24
8-K 2018-02-15

CYBE 10Q Quarterly Report

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 2020-03-31

Balance SheetIncome StatementCash Flow
756045301502012201420172020
Assets, Equity
201482-4-102012201420172020
Rev, G Profit, Net Income
10.07.34.72.0-0.6-3.32012201420172020
Ops, Inv, Fin

cybe-20200331.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, 2020

 

 

  

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, 2020, there were 7,177,154 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,
2020

 

December 31,
2019

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,069

 

 

$

5,836

 

Marketable securities

 

7,593

 

 

8,295

 

Accounts receivable, less allowances of $299 at March 31, 2020 and $322 at December 31, 2019

 

14,327

 

 

16,059

 

Inventories

 

17,050

 

 

15,580

 

Prepaid expenses
569

559

Other current assets

 

1,060

 

 

1,020

 

Total current assets

 

46,668

 

 

47,349

 




Marketable securities, long-term 

 

15,187

 

 

12,168

 

Equipment and leasehold improvements, net

 

3,063

 

 

3,341

 

Intangible assets, net

 

280

 

 

310

 

Goodwill

 

1,366

 

 

1,366

 

Right-of-use assets (operating leases)
2,850

2,111


Trade notes receivable, long-term
876

962

Deferred tax assets

 

4,892

 

 

4,992

 

Total assets

 

$

75,182



$

72,599

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Accounts payable

 

$

8,192

 

 

$

7,023

 

Advance customer payments

 

548

 

 

499

 

Accrued expenses

 

2,559

 

 

2,572

 

Current operating lease liabilities
736

688

Total current liabilities

 

12,035

 

 

10,782

 

 

Other liabilities

 

204

 

 

202

 

Long-term operating lease liabilities
3,758

3,141

Reserve for income taxes

 

150

 

 

150

 

Total liabilities

 

16,147

 

 

14,275

 

 

 

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, 7,164,654 shares issued and outstanding at March 31, 2020 and 7,154,591 shares issued and outstanding at December 31, 2019

 

37,016

 

 

36,659

 

Accumulated other comprehensive loss

 

(1,896

)

 

(1,406

)

Retained earnings

 

23,915

 

 

23,071

 

Total stockholders’ equity

 

59,035

 

 

58,324

 

Total liabilities and stockholders’ equity

 

$

75,182

 

 

$

72,599

 

 

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)


2020
2019

Revenues


$ 16,429

$ 14,976

Cost of revenues



9,146


7,950

 









Gross margin



7,283


7,026

 









Research and development expenses



2,395


2,293

Selling, general and administrative expenses



4,159



4,163

 









Income from operations



729

570

 









Interest income and other



264


59

 









Income before income taxes



993

629

 









Income tax expense



149

134

 









Net income


$ 844
$ 495

 









Net income per share – Basic


$ 0.12
$ 0.07

Net income per share – Diluted


$ 0.11

$ 0.07

 









Weighted average shares outstanding – Basic



7,157


7,100

Weighted average shares outstanding – Diluted



7,367



7,322

 

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

 

3


 

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CYBEROPTICS CORPORATION  

(Unaudited)










 


Three Months Ended March 31,

(In thousands)


2020
2019

Net income 


$ 844
$ 495

 









Other comprehensive income (loss) before income taxes:









Foreign currency translation adjustments

(600 )

87

 









Unrealized gains on available-for-sale securities



140


58

 









Total other comprehensive income (loss) before income taxes



(460 )

145









Income tax provision



(30 )

(12 )









Total other comprehensive income (loss) after income taxes



(490 )

133









Total comprehensive income 


$ 354
$ 628

 

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)

 

2020



2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:


 



 

 

Net income

 

$

844



$

495


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

 

 



 

 

Depreciation and amortization

 

664



663

 

Non-cash operating lease expense
137

236

Recovery for doubtful accounts

 

(23

)

(44

)

Deferred taxes

 

64



71

Foreign currency transaction losses (gains)

 

(381

)

70

Share-based compensation

 

272



244

 

Unrealized loss on available-for-sale equity security

 

18



1

 

Changes in operating assets and liabilities:

 

 



 

 

Accounts receivable

 

1,841



2,866


Inventories

 

(2,086

)

(1,625

)

Prepaid expenses and other assets

 

(111

)

445


Accounts payable

 

1,348


(2,353

)

Advance customer payments and other

 

51


207

Accrued expenses

 

14


(802

)
Operating lease liabilities
(200 )
(34 )

Net cash provided by operating activities 

 

2,452



440


 


 



 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:


 



 

 

Proceeds from maturities of available-for-sale marketable securities 


3,106



1,052

 

Purchases of available-for-sale marketable securities


(5,294

)

(1,263

)

Additions to equipment and leasehold improvements


(129

)

(183

)

Additions to patents


(17

)

(32

)

Net cash used in investing activities


(2,334

)

(426

)

 

 

 



 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:


 



 

 

Proceeds from exercise of stock options


85



59

 

Net cash provided by financing activities


85



59

 

 

 

 



 

 

 

Effects of exchange rate changes on cash and cash equivalents


30



(6

)

 


 



 

 

 

Net increase in cash and cash equivalents


233

 


67

 

 


 



 

 

 

Cash and cash equivalents – beginning of period


5,836



9,248

 

Cash and cash equivalents – end of period


$

6,069



$

9,315

 

 

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 and its wholly-owned subsidiaries ("we", "us" or "our") presented herein as of March 31, 2020, and for the three month periods ended March 31, 2020 and 2019, 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, 2020 do not necessarily indicate the results to be expected for the full year. The December 31, 2019 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 ("U.S. GAAP"). 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, 2019.


2. COVID-19 PANDEMIC:


In December 2019, a novel strain of coronavirus ("Covid-19") was first identified, and in March 2020, the World Health Organization categorized Covid-19 as a pandemic. The Covid-19 pandemic is affecting our customers, suppliers, service providers and employees, and the ultimate impacts of Covid-19 on our business, results of operations, liquidity and prospects are not fully known at this time. The Covid-19 outbreak has had a minimal impact on our business to date. However, the following risks and uncertainties are impacting our business:

 

·        Our key factories are located in Minnesota and Singapore. Both of these locations are subject to government mandated shelter-in-place orders. Because our operations have been deemed essential, we have been able to keep our factories up and running while the shelter-in-place mandates are in effect. We have implemented split-shifts for our factory operations to minimize the number of employees in our facilities at any given time, however, this has not affected our production capacity. Our non-factory employees are required to work remotely. To date, the shelter-in-place mandates have had a minimal impact to operations, but that could change if the pandemic worsens and is more than temporary.

 

·        Sales of some products, mainly our SQ3000 Multi-Function inspection and measurement systems and MX memory module inspection products, require customer acceptance due to performance or other criteria that is considered more than a formality. Many of our customer’s factories have remained open during the Covid-19 pandemic because they are deemed to be essential under most government shelter-in-place mandates. However, this could change if the pandemic worsens and continuing global travel restrictions could hinder our ability to obtain customer acceptances in a timely manner, and therefore impact the timing of revenue recognition.

 

·        We have experienced some supply disruptions due to the Covid-19 pandemic, mainly from suppliers not deemed essential by shelter-in-place mandates in certain countries. Key supply chain disruptions have mostly been resolved currently, but that could change significantly if the pandemic worsens and is more than temporary. To date, our on-hand inventories have been sufficient to enable us to work through any supply disruptions. 

 

Although we cannot estimate the length or gravity of the impact of the Covid-19 outbreak at this time, if the pandemic continues, it may have an adverse effect on our results of future operations, financial position and liquidity in fiscal year 2020.


CARES Act

On March 27, 2020, the "Coronavirus Aid, Relief and Economic Security (CARES) Act" was signed into law in the United States. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods and alternative tax credit refunds. It also appropriated funds for the SBA Paycheck Protection Program loans that are forgivable in certain circumstances to promote continued employment. We have analyzed the provisions of the CARES Act and presently do not believe it will have a material impact on our financial condition, results of operations or liquidity. However, we will continue to monitor the impact the CARES Act may have on our business.

 

6



3. RECENT ACCOUNTING DEVELOPMENTS: 


In January 2017, the Financial Accounting Standards Board 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 is 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 eliminated 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 was effective for impairment tests beginning January 1, 2020. Our adoption of ASU 2017-04 did not have any impact on our consolidated financial statements. 


There are no other new accounting pronouncements that are expected to have a significant impact on our consolidated financial statements.  


4. REVENUE RECOGNITION:


Our revenue performance obligations are primarily satisfied at a point in time and limited revenue streams are satisfied over time as work progresses.


The following is a summary of our revenue performance obligations:








Three Months Ended March 31, 2020
Three Months Ended March 31, 2019

(In thousands except percentages)


Revenues
Percent of Revenues

Revenues

Percent of Revenues

Revenue recognized over time


$ 193
1

%

$

346


2

%

Revenue recognized at a point in time



16,236
99 %

14,630

98

%


$ 16,429
100 %

$

14,976

100

%


See Note 11 for additional information regarding disaggregation of revenue.  


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 and trade notes 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,

2020


December 31,

2019

Contract assets, included in other current assets


$

27

 


$

 2

 

Contract liabilities - advance customer payments


$

406

 


$

389

 

Contract liabilities - deferred warranty revenue 
$ 309

$ 275


Changes in contract assets in the three months ended March 31, 2020 and 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 9 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, 2020 or the three months ended March 31, 2019.


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





Three Months Ended March 31,
(In thousands)
2020
2019

Amounts reclassified from beginning contract liabilities to revenue


$ 76

$ 30
Amounts reclassified from deferred warranty revenue

100


114
Total  $ 176 $ 144


7



5. MARKETABLE SECURITIES:


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

(In thousands)

 

Cost

 

Unrealized
Gains

 

Unrealized
Losses

 

Fair Value

Short-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

5,386

 

 

$

60

 

 

$


 

$

5,446

 

Corporate debt securities and certificates of deposit

 

1,170

 

 

2

 

 

(1

)

 

1,171

 

Asset backed securities

 

975

 

 

1

 

 

 

976

 

Marketable securities – short-term

 

$

7,531

 

 

$

63

 

 

$

(1

)

 

$

7,593

 

Long-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

7,349

 

 

$

141

 

 

$

 

$

7,490

 

Corporate debt securities and certificates of deposit

 

4,760

 

 

21

 

 

(12

)

 

4,769

 

Asset backed securities

 

2,886

 

 

17

 

 

(5

)

 

2,898

 

Equity security

 

42

 

 

 

 

(12

)

 

30

 

Marketable securities – long-term

 

$

15,037

 

 

$

179

 

 

$

(29

)

 

$

15,187

 





 

December 31, 2019

(In thousands)

 

Cost

 

Unrealized
Gains

 

Unrealized
Losses

 

Fair Value

Short-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

5,766

 

 

$

22

 

 

$

 

$

5,788

 

Corporate debt securities and certificates of deposit

 

1,085

 

 

1

 

 

 

1,086

 

Asset backed securities

 

1,417

 

 

4

 

 

 

 

1,421

 

  Marketable securities – short-term

 

$

8,268

 

 

$

27

 

 

$

 

$

8,295

 

Long-Term

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agency obligations

 

$

6,524

 

 

$

30

 

 

$

(1

)

 

$

6,553

 

Corporate debt securities and certificates of deposit

 

3,004

 

 

14

 

 

 

3,018

 

Asset backed securities

 

2,535

 

 

15

 

 

(1

)

 

2,549

 

Equity security

 

42

 

 

6

 

 

 

 

48

 

Marketable securities – long-term

 

$

12,105

 

 

$

65

 

 

$

(2

)

 

$

12,168

 


Our investments in marketable debt securities all have maturities of less than five years. Net pre-tax unrealized gains for marketable debt securities of $224,000 at March 31, 2020 and $84,000 at December 31, 2019 have been recorded as a component of accumulated other comprehensive loss in stockholders’ equity. We have determined that the net pre-tax unrealized gains and losses for marketable debt securities at March 31, 2020 and December 31, 2019 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 fair value has been less than the cost basis, credit quality 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, 2020 or the three months ended March 31, 2019. See Note 6 for additional information regarding the fair value of our investments in marketable securities. 


8



Investments in marketable securities in an unrealized loss position are as follows:

 
 
 
 

 
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, 2020
 
 

 
 

 
 

 
 

Corporate debt securities and certificates of deposit
 
$
2,045

 
$ (13 )
 
$
 
$
Asset backed securities
 
1,140

 
(5
)
 

 
Marketable securities
 
$
3,185

 
$
(18
)
 
$
 
$
December 31, 2019
 
 

 
 

 
 

 
 

U.S. government and agency obligations
 
$
149

 
$
(1
)
 
$
 
$
Asset backed securities
 
684

 
(1
)
 
 

Marketable securities
 
$
833

 
$
(2
)
 
$
 
$


Investments in marketable securities classified as cash equivalents totaled $2.0 million at March 31, 2020 and $2.6 million at December 31, 2019 and consist of corporate debt securities and certificates of deposit. There were no unrealized gains or losses associated with any of these securities at March 31, 2020 or December 31, 2019.


Cash and marketable securities held by foreign subsidiaries totaled $853,000 at March 31, 2020 and $327,000 at December 31, 2019.


6. 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, 2020 and December 31, 2019 according to the three-level fair value hierarchy:

 

 

 

Fair Value Measurements at
March 31, 2020 Using

(In thousands)

 

Balance

March 31, 
2020

 

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

 

$

12,936

 

 

$

 

 

$

12,936

 

 

$

 

Corporate debt securities and certificates of deposit 

 

5,940

 

 

 

 

5,940

 

 

 

Asset backed securities

 

3,874

 

 

 

 

3,874

 

 

 

Equity security

 

30

 

 

30

 

 

 

 

 

Total marketable securities 

 

$

22,780

 

 

$

30

 

 

$

22,750

 

 

$

 


9


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at
December 31, 2019 Using

(In thousands)

 

Balance

December 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

 

$

12,341

 

 

$

 

 

$

12,341

 

 

$

 

Corporate debt securities and certificates of deposit

 

4,104

 

 

 

 

4,104

 

 

 

Asset backed securities

 

3,970

 

 

 

 

3,970

 

 

 

Equity security

 

48

 

 

48

 

 

 

 

 

Total marketable securities

 

$

20,463

 

 

$

48

 

 

$

20,415

 

 

$

 


During the three months ended March 31, 2020 and the year ended December 31, 2019, 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 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 who obtain them 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 included in cash equivalents approximate their related fair values due to the short-term maturities of those instruments. See Note 5 for additional information regarding our investments in marketable securities.


Non-financial assets such as equipment and leasehold improvements, goodwill and intangible assets and right-of-use assets for operating leases 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, 2020 or the three months ended March 31, 2019. See Note 10 for our analysis regarding potential impairment of goodwill, other long-lived assets and intangibles. 

The fair value for trade notes receivable is based on discounted future cash flows using current interest rates that would be offered for a similar transaction to a similarly situated customer. The difference between the carrying amount and estimated fair value for trade notes receivable is immaterial. If measured at fair value in the financial statements, these financial instruments would be classified as Level 3 in the fair value hierarchy. At March 31, 2020, our trade notes receivable were deemed to be fully collectible, and no trade notes receivable were past due more than 90 days or in a non-accrual status with respect to interest income.

7. SHARE-BASED COMPENSATION:


We have three share-based compensation plans that are administered by the Compensation Committee of the Board of Directors. We have (a) 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, (b) an Employee Stock Purchase Plan under which shares of our common stock may be acquired by employees at discounted prices, and (c) 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, 2020, there were 185,351 shares of common stock reserved in the aggregate for issuance pursuant to future awards under our Employee Stock Incentive Plan and 558,654 shares of common stock reserved in the aggregate for issuance pursuant to outstanding awards under such 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.


10



Non-Employee Director Stock Plan

 

As of March 31, 2020, there were 52,000 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 2019 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 granted at the 2019 annual meeting had an aggregate fair market value on the date of grant equal to $138,000 (grant date fair value of $17.26 per share). As of March 31, 2020, 6,000 of these shares were vested. The aggregate fair value of the 2,000 unvested shares based on the closing price of our common stock on March 31, 2020 was $34,000


Stock Option Activity


The following is a summary of stock option activity in the three months ended March 31, 2020:

 

 

 

 

 

 

 

 

Options Outstanding

 

Weighted Average Exercise
Price Per Share

Outstanding, December 31, 2019

520,513

 

 

$

12.25

 

Granted

 

 

 

Exercised

(10,063

)

 

8.44

 

Expired

 

 

Forfeited

 

 

Outstanding, March 31, 2020

510,450

 

 

$

12.33

 


 

 

 

Exercisable, March 31, 2020

370,876

 

 

$

10.39

 

 

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, 2020, the weighted average remaining contractual term of all outstanding options was 3.4 years and their aggregate intrinsic value was $2.9 million. At March 31, 2020, the weighted average remaining contractual term of options that were exercisable was 2.5 years and their aggregate intrinsic value was $2.8 million. The aggregate intrinsic value of stock options exercised was $140,000 in the three months ended March 31, 2020 and $57,000 in the three months ended March 31, 2019. We received proceeds from stock option exercises of $85,000 in the three months ended March 31, 2020 and $59,000 in the three months ended March 31, 2019. No stock options vested in the three months ended March 31, 2020. 


Restricted Shares and Restricted Stock Units

Restricted shares are granted under our Non-Employee Director Stock Plan. Restricted stock units are granted under our Employee Stock Incentive Plan. No restricted shares or restricted stock units were granted in the three months ended March 31, 2020. 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, 2020 was $1.1 million. 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 $45,000 in the three months ended March 31, 2020 and $43,000 in the three months ended March 31, 2019.

 

The following is a summary of activity in restricted shares and restricted stock units in the three months ended March 31, 2020:

Restricted shares and restricted stock units

 

Shares

 

Weighted Average  Grant Date Fair Value

Non-vested at December 31, 2019

 

68,204

 

 

$

17.39

 

Granted

 

 

 

 

Vested

 

(2,000

)

 

17.26

 

Forfeited

 


 

 

Non-vested at March 31, 2020

 

66,204

 

 

$

17.39

 

 

11



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, 2020 or the three months ended March 31, 2019. As of March 31, 2020, 156,688 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 statements 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 as of the date of grant 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. 

Pre-tax share-based compensation expense in the three months ended March 31, 2020 totaled $272,000, and included $114,000 for stock options, $23,000 for our Employee Stock Purchase Plan, $101,000 for restricted stock units and $34,000 for restricted shares.

 

Pre-tax 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 restricted stock units and $32,000 for restricted shares. 

 

At March 31, 2020, the total unrecognized compensation cost related to non-vested share-based compensation arrangements was $2.1 million and the related weighted average period over which such cost is expected to be recognized is 2.79 years.


8CHANGES IN STOCKHOLDERS’ EQUITY:

 

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


Three months ended March 31, 2020:

  Common Stock

Accumulated

Other Comprehensive

Loss

 

Retained

Earnings

Total Stockholders’

Equity

(In thousands) Shares    Amount   
Balance, December 31, 2019  7,155   $  36,659   $  (1,406 )   $ 23,071   $ 58,324  

Exercise of stock options

 10     85                85  
Share-based compensation        272                272  
Other comprehensive loss, net of tax             (490 )         (490 )
Net income                   844   844
Balance, March 31, 2020  7,165   $ 37,016   $ (1,896 )   $ 23,915   $ 59,035  


Three months ended March 31, 2019:

  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


12


9. OTHER FINANCIAL STATEMENT DATA:


Inventories consist of the following:

 

 

 

 

 

 

 

 

 

(In thousands)

 

March 31, 2020

 

December 31, 2019

Raw materials and purchased parts

 

$

10,556

 

 

$

9,845

 

Work in process

 

2,055

 

 

1,837

 

Finished goods

 

3,055

 

 

2,373

 

Demonstration inventories, net
1,384

1,525

Total inventories

 

$

17,050

 

 

$

15,580

 


Excess and obsolete inventories were written down by $656,000 at March 31, 2020 and $649,000 at December 31, 2019. Demonstration inventories are stated at cost less accumulated amortization, generally based on a 36 month useful life. Accumulated amortization for demonstration inventories totaled $2.4 million at both March 31, 2020 and December 31, 2019.


Accrued expenses consist of the following:

 

 

 

 

 

 

 

 

 

(In thousands)

 

March 31, 2020

 

December 31, 2019

Wages and benefits 

 

$

1,487

 

 

$

1,319

 

Warranty liability

 

748

 

 

761

 

Income taxes payable
219

333

Other

 

105

 

 

159

 

 

 

$

2,559

 

 

$

2,572

 


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 cost of materials used in correcting product failures and service delivery expenses incurred to make these corrections. 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. 

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

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

(In thousands)

 

2020

 

2019

Balance at beginning of period

 

$

798

 

 

$

789

 

Accrual for warranties

 

230

 

 

174

 

Warranty revision

 

1

 

17

Settlements made during the period

 

(244

)

 

(154

)

Balance at end of period

 

785

 

 

826

 

Current portion of estimated warranty liability

 

(748

)

 

(795

)

Long-term estimated warranty liability

 

$

37

 

 

$

31

 


13



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)

 

2020

 

2019

Balance at beginning of period

 

$

275

 

 

$

218

 

Revenue deferrals

 

134

 

 

87

 

Amortization of deferred revenue

 

(100

)

 

(114

)

Total deferred warranty revenue

 

309

 

 

191

 

Current portion of deferred warranty revenue

 

(227

)

 

(186

)

Long-term deferred warranty revenue

 

$

82

 

 

$

5

  


10. INTANGIBLE ASSETS: 


Impairment Considerations (goodwill and intangibles)


The current Covid-19 pandemic has caused a significant deterioration in global economic conditions, including high levels of unemployment and a significant contraction in economic activity. The global economy may be in the midst of an economic recession or depression. We evaluate the carrying value of goodwill and intangibles for impairment whenever management believes indicators of impairment might exist. A significant deterioration in macroeconomic conditions is a key indicator of possible impairment. In addition to macroeconomic conditions, management considered the factors in ASC 350 when analyzing goodwill and intangibles for possible impairment, including the following:

  • Conditions in the global SMT and semiconductor capital equipment markets;
  • Our revenue and profitability in the three months ended March 31, 2020; 
  • Our backlog at March 31, 2020, which stood at $24.8 million; 
  • Our forecasts for revenue and profitability for the remainder of 2020;
  • The manner of use and applicability of our intangibles, which is not expected to change; and
  • Our stock market capitalization, which is significantly greater than our net book value. 

After carefully considering the factors outlined above, among others, we determined that it is more likely than not that our goodwill and intangibles were not impaired as of March 31, 2020.


Intangible assets consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

December 31, 2019

(In thousands)

 

Gross
Carrying
Amount


Accumulated
Amortization


Net


Gross
Carrying
Amount


Accumulated
Amortization


Net

Patents

 

$

2,916

 

 

$

(2,700

)

 

$

216

 

 

$

2,898

 

 

$

(2,662

)

 

$

236

 

Software

 

206

 

 

(178

)

 

28

 

 

206

 

 

(170

)

 

36

 

Marketing assets and customer relationships

 

101

 

 

(65

)

 

36

 

 

101

 

 

(63

)

 

38

 

 

 

$

3,223

 

 

$

(2,943

)

 

$

280

 

 

$

3,205