(Mark One) | |
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 05-0420589 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, $0.01 par value per share | The NASDAQ Stock Market LLC (NASDAQ Global Market) |
Large accelerated filer o | Accelerated filer x | |
Non-accelerated filer o | Smaller reporting company o | |
(Do not check if a smaller reporting company) |
Page | ||
Item 1. | ||
Item 1A. | ||
Item 1B. | ||
Item 2. | ||
Item 3. | ||
Item 4. | Mine Safety Disclosures | |
Item 5. | ||
Item 6. | ||
Item 7. | ||
Item 7A. | ||
Item 8. | ||
Item 9. | ||
Item 9A. | ||
Item 9B. | ||
Item 10. | ||
Item 11. | ||
Item 12. | ||
Item 13. | ||
Item 14. | ||
Item 15. | ||
ITEM 1. | Business |
• | TracVision - satellite television systems for vessels and vehicles |
• | TracPhone - two-way satellite communications systems |
• | mini-VSAT Broadband - mobile satellite communications network |
• | IP-MobileCast - content delivery service |
• | NEWSLink - maritime newspapers |
• | Videotel - maritime training content and services |
• | CommBox - network management hardware and software for maritime communications |
• | TACNAV - tactical navigation systems for military vehicles |
• | OneCare - services and support for the mini-VSAT Broadband solution |
• | In April 2015, we launched our new TracVision TV8 products designed to provide the tracking, reception and extended coverage area needed for yachts and merchant vessels calling in ports all around the world. |
• | In November 2015, we updated our IP-MobileCast content delivery service with subtitle languages for movies and more accessible menus and program guides on vessels' set-top boxes. |
• | In January 2016, we launched our GEO-FOG 3D and GEO-FOG 3D Dual inertial navigation systems, which combine KVH's FOG-based 1750 IMU's with GPS for demanding applications |
ITEM 1A. | Risk Factors |
• | many of our primary competitors are well-established companies that generally have substantially greater financial, managerial, technical, marketing, personnel and other resources than we do, which help them to compete more effectively in the market for mobile broadband solutions for larger fleets of vessels; |
• | product and service improvements, new product and service developments or price reductions by competitors may weaken customer acceptance of, and reduce demand for, our products and services; |
• | new technology or market trends may disrupt or displace a need for our products and services; |
• | our competitors may have access to a broader array of media content than we do, which may cause customers to prefer competitors’ media offerings; and |
• | our competitors may have lower production costs than we do, which may enable them to compete more aggressively in offering discounts and other promotions. |
• | increasing budgetary pressures, which may reduce or delay funding for military programs; |
• | changes in modernization plans for military equipment; |
• | changes in tactical navigation requirements; |
• | global conflicts impacting troop deployment, including troop withdrawals from the Middle East and Afghanistan; |
• | priorities for current battlefield operations; |
• | new military and operational doctrines that affect military equipment needs; |
• | sales cycles that are long and difficult to predict; |
• | shifting response time and/or delays in the approval process associated with the export licenses we must obtain prior to the international shipment of certain of our military products; |
• | delays in military procurement schedules; and |
• | delays in the testing and acceptance of our products, including delays resulting from changes in customer specifications. |
• | acquire other businesses or make investments; |
• | raise additional capital; |
• | incur additional debt or create liens on our assets; |
• | pay dividends or make distributions; |
• | prepay indebtedness; and |
• | merge, dissolve, liquidate, consolidate, or dispose of all or substantially all of our assets. |
• | technical challenges we may face in adapting our mobile communications products to function with different satellite services and technology in use in various regions around the world; |
• | satisfaction of international regulatory requirements and delays and costs associated with procurement of any necessary licenses or permits; |
• | the potential unavailability of content licenses covering international waters and foreign locations; |
• | restrictions on the sale of certain guidance and stabilization products to foreign military and government customers; |
• | increased costs of providing customer support in multiple languages; |
• | increased costs of managing operations that are international in scope; |
• | potentially adverse tax consequences, including restrictions on the repatriation of earnings; |
• | protectionist laws and business practices that favor local competitors, which could slow our growth in international markets; |
• | potentially longer sales cycles, which could slow our revenue growth from international sales; |
• | potentially longer accounts receivable payment cycles and difficulties in collecting accounts receivable; and |
• | economic and political instability in some international markets. |
• | entry into new and unfamiliar lines of business or markets, which may present challenges or risks that we did not anticipate; |
• | increased expenses associated with the amortization of acquired intangible assets; |
• | increased exposure to fluctuations in foreign currency exchange rates; |
• | charges related to any potential acquisition from which we may withdraw; |
• | diversion of our management’s time, attention, and resources; |
• | loss of key acquired personnel; |
• | increased costs to improve or coordinate managerial, operational, financial, and administrative systems, including compliance with the Sarbanes-Oxley Act of 2002; |
• | dilutive issuances of equity securities; |
• | the assumption of legal liabilities; and |
• | losses arising from impairment charges associated with goodwill or intangible assets. |
• | match our manufacturing facilities and capacity to demand for our products and services in a timely manner; |
• | secure appropriate satellite capacity to match changes in demand for airtime services in a timely manner; |
• | successfully attract, train, motivate and manage appropriate numbers of employees for manufacturing, sales, marketing and customer support activities; |
• | effectively manage our inventory and working capital; |
• | maintain the efficiencies within our operating, administrative, financial and accounting systems; and |
• | ensure that our procedures and internal controls are revised and updated to remain appropriate for the size and scale of our business operations. |
• | changes in demand for our mobile communications products and services and guidance and stabilization products and services; |
• | the timing and size of individual orders from military customers; |
• | the mix of products and services we sell, including the mix of fixed rate and metered contracts for airtime services; |
• | our ability to manufacture, test and deliver products in a timely and cost-effective manner, including the availability and timely delivery of components and subassemblies from our suppliers; |
• | our success in winning competitions for orders; |
• | the timing of new product introductions by us or our competitors; |
• | expenses incurred in pursuing acquisitions; |
• | expenses incurred in expanding our mini-VSAT Broadband network; |
• | market and competitive pricing pressures; |
• | unanticipated charges or expenses, such as increases in warranty claims; |
• | general economic climate; and |
• | seasonality of pleasure boat and recreational vehicle usage. |
• | variations in our quarterly results of operations; |
• | the introduction of new products and services by us or our competitors; |
• | changing needs of military customers; |
• | changes in estimates of our performance or recommendations by securities analysts; |
• | the hiring or departure of key personnel; |
• | acquisitions or strategic alliances involving us or our competitors; |
• | market conditions in our industries; and |
• | the global macroeconomic and geopolitical environment. |
• | the ability of our Board of Directors to issue preferred stock, and determine its terms, without a stockholder vote; |
• | the classification of our Board of Directors, which effectively prevents stockholders from electing a majority of the directors at any one annual meeting of stockholders; |
• | the limitation that directors may be removed only for cause by the affirmative vote of the holders of two-thirds of our shares of capital stock entitled to vote; |
• | the prohibition against stockholder actions by written consent; |
• | the inability of stockholders to call a special meeting of stockholders; and |
• | advance notice requirements for stockholder proposals and director nominations. |
ITEM 1B. | Unresolved Staff Comments |
ITEM 2. | Properties |
Location | Type | Principal Uses | Approximate Square Footage | Ownership | Lease Expiration | |||||
Middletown, Rhode Island | Office | Corporate headquarters, research and development, sales and service, marketing and administration | 75,000 | Owned | — | |||||
Middletown, Rhode Island | Plant and warehouse | Manufacturing and warehousing (mobile communications products) | 75,300 | Owned | — | |||||
Tinley Park, Illinois | Plant and warehouse | Manufacturing, warehousing, research and development (guidance and stabilization products) | 101,000 | Owned | — | |||||
Horten, Norway | Office | Research and development, sales, marketing and support | 4,400 | Leased | December 2018 | |||||
Singapore | Office | Asian headquarters and sales office | 2,000 | Leased | April 2016 | |||||
Kokkedal, Denmark | Office and warehouse | European headquarters, sales, marketing and support | 11,000 | Leased | 3 month notice | |||||
Leeds, UK | Office | Audio/video production, sales and support | 2,700 | Leased | April 2018 | |||||
Liverpool, UK | Office | Maritime sales, news production, marketing and support | 4,692 | Leased | June 2023 | |||||
London, UK | Office | Sales, production, dispatch, and general office | 7,309 | Leased | August 2019 | |||||
Leeds, UK | Media Lab | Audio/video production, Media distribution, sales and administration | 6,236 | Leased | January 2020 | |||||
Manila, Philippines | Office | News production, inside sales, support | 1,000 | Leased | month to month |
ITEM 3. | Legal Proceedings |
ITEM 4. | Mine Safety Disclosures |
ITEM 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
High | Low | ||||||
Year Ended December 31, 2015: | |||||||
First quarter | $ | 15.18 | $ | 11.62 | |||
Second quarter | 15.79 | 11.14 | |||||
Third quarter | 13.99 | 9.22 | |||||
Fourth quarter | 10.64 | 8.83 | |||||
Year Ended December 31, 2014: | |||||||
First quarter | $ | 14.42 | $ | 12.35 | |||
Second quarter | 13.79 | 12.70 | |||||
Third quarter | 14.25 | 11.28 | |||||
Fourth quarter | 13.44 | 10.87 |
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | ||||||||||||||||||
KVH Industries, Inc. | $ | 100 | $ | 65 | $ | 117 | $ | 109 | $ | 106 | $ | 79 | |||||||||||
NASDAQ Composite | 100 | 98 | 114 | 157 | 179 | 189 | |||||||||||||||||
NASDAQ Telecommunications | 100 | 87 | 89 | 111 | 120 | 111 |
ITEM 6. | Selected Financial Data |
Year Ended December 31, | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||
Consolidated Statement of Operations Data: | |||||||||||||||||||
Sales: | |||||||||||||||||||
Product | $ | 76,213 | $ | 81,143 | $ | 90,295 | $ | 90,677 | $ | 85,136 | |||||||||
Service | 108,421 | 91,448 | 71,993 | 46,435 | 27,400 | ||||||||||||||
Net sales | 184,634 | 172,591 | 162,288 | 137,112 | 112,536 | ||||||||||||||
Costs and expenses: | |||||||||||||||||||
Costs of product sales | 47,404 | 48,843 | 51,518 | 51,775 | 46,598 | ||||||||||||||
Costs of service sales | 54,816 | 50,301 | 45,058 | 30,363 | 20,970 | ||||||||||||||
Research and development | 14,039 | 14,101 | 12,987 | 12,147 | 11,548 | ||||||||||||||
Sales, marketing and support | 35,714 | 32,976 | 28,792 | 24,069 | 23,473 | ||||||||||||||
General and administrative | 29,453 | 24,448 | 17,764 | 12,188 | 10,555 | ||||||||||||||
Total costs and expenses | 181,426 | 170,669 | 156,119 | 130,542 | 113,144 | ||||||||||||||
Income (loss) from operations | 3,208 | 1,922 | 6,169 | 6,570 | (608 | ) | |||||||||||||
Interest income | 546 | 738 | 657 | 510 | 297 | ||||||||||||||
Interest expense | 1,460 | 1,296 | 637 | 323 | 223 | ||||||||||||||
Other income (expense), net | 372 | (39 | ) | 494 | 86 | 910 | |||||||||||||
Income before income taxes | 2,666 | 1,325 | 6,683 | 6,843 | 376 | ||||||||||||||
Income tax expense (benefit) | 413 | 1,284 | 2,150 | 3,263 | (484 | ) | |||||||||||||
Net income | $ | 2,253 | $ | 41 | $ | 4,533 | $ | 3,580 | $ | 860 | |||||||||
Per share information: | |||||||||||||||||||
Net income per common share, basic | $ | 0.14 | $ | 0.00 | $ | 0.30 | $ | 0.24 | $ | 0.06 | |||||||||
Net income per common share, diluted | $ | 0.14 | $ | 0.00 | $ | 0.30 | $ | 0.24 | $ | 0.06 | |||||||||
Number of shares used in per share calculation: | |||||||||||||||||||
Basic | 15,625 | 15,420 | 15,144 | 14,777 | 14,768 | ||||||||||||||
Diluted | 15,834 | 15,605 | 15,341 | 15,019 | 15,072 |
December 31, | |||||||||||||||||||
2015 | 2014 | 2013 | 2012 | 2011 | |||||||||||||||
(in thousands) | |||||||||||||||||||
Consolidated Balance Sheet Data: | |||||||||||||||||||
Cash, cash equivalents, and marketable securities | $ | 45,338 | $ | 49,802 | $ | 55,744 | $ | 38,285 | $ | 30,570 | |||||||||
Working capital | 71,534 | 65,200 | 78,933 | 65,242 | 59,778 | ||||||||||||||
Total assets | 226,277 | 235,837 | 183,849 | 137,568 | 128,556 | ||||||||||||||
Line of credit | — | — | 30,000 | 7,000 | 9,000 | ||||||||||||||
Long-term debt, excluding current portion | 58,054 | 64,687 | 7,094 | 3,414 | 3,553 | ||||||||||||||
Other long-term obligations | 1,391 | 1,459 | 204 | 140 | 135 | ||||||||||||||
Total stockholders’ equity | 118,176 | 116,540 | 116,467 | 105,704 | 96,668 |
ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
(in thousands) | |||||||||||
Mobile communications | $ | 145,444 | $ | 129,920 | $ | 108,151 | |||||
Guidance and stabilization | 39,190 | 42,671 | 54,137 | ||||||||
Net sales | $ | 184,634 | $ | 172,591 | $ | 162,288 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
(in thousands) | |||||||||||
Originating from the Americas locations | |||||||||||
United States | $ | 95,211 | $ | 99,477 | $ | 86,621 | |||||
Canada | 19,153 | 14,521 | 14,272 | ||||||||
Europe | 4,840 | 4,833 | 7,876 | ||||||||
Other | 12,434 | 15,107 | 28,610 | ||||||||
Total Americas | 131,638 | 133,938 | 137,379 | ||||||||
Originating from European and Asian locations | |||||||||||
United States | 1,598 | 1,527 | 1,099 | ||||||||
Canada | 84 | 66 | 39 | ||||||||
Europe | 23,135 | 21,698 | 18,571 | ||||||||
Other | 28,179 | 15,362 | 5,200 | ||||||||
Total Europe and Asia | 52,996 | 38,653 | 24,909 | ||||||||
Net sales | $ | 184,634 | $ | 172,591 | $ | 162,288 |
Year ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
(in thousands) | |||||||||||
Research and development expense presented on the statement of operations | $ | 14,039 | $ | 14,101 | $ | 12,987 | |||||
Costs of customer-funded research and development included in costs of service sales | 1,546 | 2,633 | 2,387 | ||||||||
Total consolidated statements of operations expenditures on research and development activities | $ | 15,585 | $ | 16,734 | $ | 15,374 |
Year Ended December 31, | ||||||||
2015 | 2014 | 2013 | ||||||
Sales: | ||||||||
Product | 41.3 | % | 47.0 | % | 55.6 | % | ||
Service | 58.7 | 53.0 | 44.4 | |||||
Net sales | 100.0 | 100.0 | 100.0 | |||||
Costs and expenses: | ||||||||
Costs of product sales | 25.7 | 28.3 | 31.7 | |||||
Costs of service sales | 29.6 | 29.1 | 27.8 | |||||
Research and development | 7.6 | 8.2 | 8.0 | |||||
Sales, marketing and support | 19.3 | 19.1 | 17.7 | |||||
General and administrative | 16.0 | 14.2 | 11.0 | |||||
Total costs and expenses | 98.2 | 98.9 | 96.2 | |||||
Income from operations | 1.8 | 1.1 | 3.8 | |||||
Interest income | 0.3 | 0.4 | 0.3 | |||||
Interest expense | 0.7 | 0.8 | 0.4 | |||||
Other income, net | 0.2 | — | 0.3 | |||||
Income before income taxes | 1.6 | 0.7 | 4.0 | |||||
Income tax expense | 0.2 | 0.7 | 1.3 | |||||
Net income | 1.4 | % | — | % | 2.7 | % |
• | All sales are final; |
• | Terms are generally Net 30; |
• | Shipments are tendered and shipped FOB (or as may be applicable, FCA or EXW) our plant or warehouse; and |
• | Title and risk of loss or damage passes to the dealer or distributor at the point of shipment when delivery is made to the possession of the carrier. |
Payment Due by Period | ||||||||||||||||||||
Contractual Obligations | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Term notes payable | $ | 58,906 | $ | 5,281 | $ | 13,000 | $ | 40,625 | $ | — | ||||||||||
Satellite service capacity and related equipment lease obligations | 31,492 | 13,530 | 14,265 | 3,697 | — | |||||||||||||||
Inventory, materials, and fixed asset purchase commitments | 21,678 | 21,678 | — | — | — | |||||||||||||||
Mortgage notes payable | 3,114 | 163 | 354 | 2,597 | — | |||||||||||||||
Equipment notes payable | 2,672 | 1,194 | 1,478 | — | — | |||||||||||||||
Facility lease obligations | 2,231 | 595 | 957 | 450 | 229 | |||||||||||||||
Total | $ | 120,093 | $ | 42,441 | $ | 30,054 | $ | 47,369 | $ | 229 |
ITEM 7A. | Quantitative and Qualitative Disclosure About Market Risk |
ITEM 8. | Financial Statements and Supplementary Data |
ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
ITEM 9A. | Controls and Procedures |
• | We enter into guidance and stabilization contracts that may contain bill and hold provisions. We have a control to identify and evaluate these types of transactions that have been recognized each quarter. However, the control did not operate effectively during 2014 because it did not identify a bill and hold transaction at December 31, 2014 for evaluation by the finance team in the quarter in which it was reported. |
• | We engage a third party to assist in the preparation of our quarterly and annual income tax provisions. However, our preliminary provision at December 31, 2014 did not properly identify changes in the Rhode Island tax rate and related impact on the realizability of the state tax asset carryforwards. We adjusted those amounts before filing our annual report on Form 10-K for the year ended December 31, 2014. As of December 31, 2014, we did not have sufficient controls over the review of the work performed by the third party to ensure accurate financial reporting. |
• | We lease our antenna products directly to certain end users and also enter into airtime service agreements with these customers. The pricing of the lease and airtime service agreement is negotiated with each individual customer. As of December 31, 2014, we did not have a control designed and implemented to evaluate these multi-element arrangements to ensure proper allocation of the transaction price among the elements. |
• | With respect to bill and hold arrangements, we revised the process of entering sales orders into our general ledger to facilitate identification of these arrangements at the time they are created. We instituted written procedures to document all material bill and hold arrangements, as well as other terms and conditions that may impact revenue recognition, such as multiple-element arrangements. We perform quarterly assessments of quantities of inventory on hand that are subject to bill and hold arrangements with customers. We also instituted enhancements to our existing review controls through the implementation of more detailed checklists and the involvement of additional personnel with knowledge of these arrangements. |
• | With respect to reliance on third parties to assist in the calculation of our provision for income taxes, we instituted a more formalized process to review the work completed by third parties, including detailed checklists to perform a proper evaluation of each element of the apportionment of state taxes and any related impact on our deferred tax assets. |
• | With respect to the allocation of revenue for multiple-element arrangements involving leased antennas and airtime service agreements, we instituted a new control in the first quarter of 2015 to review each lease at the time of execution in order to assess and document any lease discount arising from reasonably anticipated airtime service agreements. |
/s/ Grant Thornton LLP |
Boston, Massachusetts |
March 14, 2016 |
ITEM 9B. | Other Information |
ITEM 10. | Directors, Executive Officers and Corporate Governance |
ITEM 11. | Executive Compensation |
ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
ITEM 13. | Certain Relationships and Related Transactions and Director Independence |
ITEM 14. | Principal Accountant Fees and Services |
ITEM 15. | Exhibits and Financial Statement Schedules |
Page | |||
(a) | 1. | ||
Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2015, 2014 and 2013 | |||
(a) | 2. | Financial Statement Schedules | |
None. | |||
3. | Exhibits |
Exhibit No. | Description | Filed with this Form 10-K | Incorporated by Reference | |||||||||
Form | Filing Date | Exhibit No. | ||||||||||
2.1 | Share Purchase Agreement, dated as of May 11, 2013 by and among KVH Industries, Inc., Oakley Capital Private Equity L.P. and the other parties thereto | 8-K | May 14, 2013 | 2.1 | ||||||||
2.2 | Share Purchase Agreement, dated as of July 2, 2014, by and between KVH Media Group Limited and Nigel Cleave | 8-K | July 3, 2014 | 2.1 | ||||||||
3.1 | Amended and Restated Certificate of Incorporation, as amended | 10-Q | August 6, 2010 | 3.1 | ||||||||
3.2 | Amended and Restated Bylaws of KVH Industries, Inc. | 8-K | April 30, 2014 | 3.1 | ||||||||
4.1 | Specimen certificate for the common stock | S-1/A | March 22, 1996 | 4.1 | ||||||||
*10.1 | Amended and Restated 1996 Incentive and Nonqualified Stock Option Plan | 8-K | July 31, 2007 | 10.3 | ||||||||
*10.2 | Amended and Restated 1996 Employee Stock Purchase Plan | DEF 14A | April 25, 2013 | App. B | ||||||||
*10.3 | Second Amended and Restated 2003 Incentive and Nonqualified Stock Option Plan | 10-Q | May 6, 2009 | 10.21 | ||||||||
*10.4 | Fourth Amended and Restated 2006 Stock Incentive Plan | DEF 14A | April 25, 2013 | App. A | ||||||||
*10.5 | Form of Nonqualified Stock Option agreement granted under the Second Amended and Restated 2003 Incentive and Nonqualified Stock Option Plan | 10-K | March 15, 2005 | 10.14 | ||||||||
*10.6 | Form of Incentive Stock Option agreement granted under the Second Amended and Restated 2003 Incentive and Nonqualified Stock Option Plan | 10-K | March 15, 2005 | 10.15 |
Exhibit No. | Description | Filed with this Form 10-K | Incorporated by Reference | |||||||||
Form | Filing Date | Exhibit No. | ||||||||||
*10.7 | Form of Incentive Stock Option agreement granted under the Fourth Amended and Restated 2006 Stock Incentive Plan | 8-K | August 28, 2006 | 10.1 | ||||||||
*10.8 | Form of Non-Statutory Stock Option agreement granted under the Fourth Amended and Restated 2006 Stock Incentive Plan | 8-K | August 28, 2006 | 10.2 | ||||||||
*10.9 | Form of Restricted Stock Agreement granted under the Fourth Amended and Restated 2006 Stock Incentive Plan | 8-K | August 16, 2007 | 10.1 | ||||||||
*10.10 | Policy Regarding Automatic Grants to Non-Employee Directors | 10-Q | May 6, 2009 | 10.23 | ||||||||
10.11 | Loan Agreement dated April 6, 2009 by and among KVH Industries, Inc., and Bank of America, N.A. | 8-K | April 8, 2009 | 10.1 | ||||||||
10.12 | Second Amendment, dated June 9, 2011 by and between KVH Industries, Inc. and Bank of America, N.A., amending the Loan Agreement, dated April 6, 2009, as amended | 8-K | June 14, 2011 | 10.2 | ||||||||
10.13 | Master Loan and Security Agreement, dated as of January 30, 2013 by and between KVH Industries, Inc. and Banc of America Leasing & Capital, LLC | 8-K | February 5, 2013 | 10.1 | ||||||||
10.14 | Equipment Security Note, dated as of January 30, 2013 by and between KVH Industries, Inc. and Banc of America Leasing & Capital, LLC | 8-K | February 5, 2013 | 10.2 | ||||||||
10.15 | Credit Agreement, dated as of July 1, 2014, by and between Bank of America, N.A., The Washington Trust Company and KVH Industries, Inc. | 8-K | July 3, 2014 | 10.1 | ||||||||
10.16 | Term Notes, dated as of July 1, 2014, by and between KVH Industries, Inc. and each of Bank of America, N.A. and The Washington Trust Company | 8-K | July 3, 2014 | 10.2 | ||||||||
10.17 | Revolving Credit Notes, dated as of July 1, 2014, by and between KVH Industries, Inc. and each of Bank of America, N.A. and The Washington Trust Company | 8-K | July 3, 2014 | 10.3 | ||||||||
10.18 | Security Agreement, dated as of July 1, 2014, by and between Bank of America, N.A. and KVH Industries, Inc. | 8-K | July 3, 2014 | 10.4 | ||||||||
10.19 | Pledge Agreements, dated as of July 1, 2014, by and between Bank of America, N.A. and KVH Industries, Inc. with respect to KVH Industries A/S and KVH Industries U.K. Limited | 8-K | July 3, 2014 | 10.5 | ||||||||
10.20 | First Amendment to Credit Agreement, dated as of June 15, 2015, by and among Bank of America, N.A., The Washington Trust Company and KVH Industries, Inc. | 10-Q/A | August 13, 2015 | 10.1 | ||||||||
10.21 | Second Amendment to Credit Agreement, dated as of September 30, 2015, by and among Bank of America, N.A., The Washington Trust Company and KVH Industries, Inc. | 8-K | October 5, 2015 | 10.1 | ||||||||
21.1 | List of Subsidiaries | X | ||||||||||
23.1 | Consent of Grant Thornton LLP | X | ||||||||||
23.2 | Consent of KPMG LLP | X | ||||||||||
31.1 | Rule 13a-14(a)/15d-14(a) certification of principal executive officer | X | ||||||||||
31.2 | Rule 13a-14(a)/15d-14(a) certification of principal financial officer | X | ||||||||||
32.1 | Rule 1350 certification | X |
101.1 | Interactive Data File regarding (a) our Consolidated Balance Sheets as of December 31, 2015 and 2014, (b) our Consolidated Statements of Operations for the years ended December 31, 2015, 2014, and 2013, (c) our Consolidated Statements of Comprehensive (Loss) Income for the years ended December 31, 2015, 2014, and 2013, (d) our Consolidated Statements of Stockholders' Equity for the years ended December 31, 2015, 2014, and 2013, (e) our Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014, and 2013 and (e) the Notes to such Consolidated Financial Statements | X |
* | Management contract or compensatory plan. |
KVH Industries, Inc. | ||
Date: March 14, 2016 | By: | /S/ MARTIN A. KITS VAN HEYNINGEN |
Martin A. Kits van Heyningen President, Chief Executive Officer and Chairman of the Board |
Name | Title | Date | ||
/S/ MARTIN A. KITS VAN HEYNINGEN | President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer) | March 14, 2016 | ||
Martin A. Kits van Heyningen | ||||
/S/ PETER A. RENDALL | Chief Financial Officer (Principal Financial and Accounting Officer) | March 14, 2016 | ||
Peter A. Rendall | ||||
Director | March 14, 2016 | |||
Robert W.B. Kits van Heyningen | ||||
/S/ MARK S. AIN | Director | March 14, 2016 | ||
Mark S. Ain | ||||
/S/ STANLEY K. HONEY | Director | March 14, 2016 | ||
Stanley K. Honey | ||||
/S/ BRUCE J. RYAN | Director | March 14, 2016 | ||
Bruce J. Ryan | ||||
/S/ CHARLES R. TRIMBLE | Director | March 14, 2016 | ||
Charles R. Trimble |
/s/ Grant Thornton LLP |
Boston, Massachusetts |
March 14, 2016 |
/s/ KPMG LLP |
Providence, Rhode Island |
March 17, 2014 |
December 31, | |||||||
2015 | 2014 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 22,719 | $ | 25,289 | |||
Marketable securities | 22,619 | 24,513 | |||||
Accounts receivable, net of allowance for doubtful accounts of $3,534 as of December 31, 2015 and $2,723 as of December 31, 2014 | 43,895 | 39,936 | |||||
Inventories | 21,589 | 17,424 | |||||
Prepaid expenses and other assets | 4,271 | 2,953 | |||||
Current deferred tax asset | — | 2,772 | |||||
Total current assets | 115,093 | 112,887 | |||||
Property and equipment, less accumulated depreciation of $43,202 as of December 31, 2015 and $41,486 as of December 31, 2014 | 39,900 | 41,696 | |||||
Intangible assets, less accumulated amortization of $11,390 as of December 31, 2015 and $5,864 as of December 31, 2014 | 26,755 | 33,641 | |||||
Goodwill | 36,747 | 40,454 | |||||
Other non-current assets | 3,096 | 4,469 | |||||
Non-current deferred income tax asset | 4,686 | 2,690 | |||||
Total assets | $ | 226,277 | $ | 235,837 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 8,975 | $ | 12,460 | |||
Accrued compensation and employee-related expenses | 6,588 | 4,932 | |||||
Accrued other | 12,042 | 10,963 | |||||
Accrued product warranty costs | 1,880 | 1,853 | |||||
Deferred revenue | 5,962 | 7,791 | |||||
Current portion of long-term debt | 6,638 | 6,188 | |||||
Liability for uncertain tax positions | 1,474 | 3,500 | |||||
Total current liabilities | 43,559 | 47,687 | |||||
Other long-term liabilities | 1,391 | 1,459 | |||||
Long-term debt, excluding current portion | 58,054 | 64,687 | |||||
Non-current deferred income tax liability | 5,097 | 5,464 | |||||
Total liabilities | $ | 108,101 | $ | 119,297 | |||
Commitments and contingencies (Notes 1, 5, 6 and 17) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $0.01 par value. Authorized 1,000,000 shares; none issued | — | — | |||||
Common stock, $0.01 par value. Authorized 30,000,000 shares, 17,336,314 and 17,152,743 shares issued; 15,677,323 and 15,493,752 shares outstanding at December 31, 2015 and December 31, 2014, respectively | 173 | 172 | |||||
Additional paid-in capital | 124,619 | 121,084 | |||||
Accumulated earnings | 14,134 | 11,881 | |||||
Accumulated other comprehensive loss | (7,600 | ) | (3,447 | ) | |||
131,326 | 129,690 | ||||||
Less: treasury stock at cost, common stock, 1,658,991 shares as of December 31, 2015 and December 31, 2014, respectively | (13,150 | ) | (13,150 | ) | |||
Total stockholders’ equity | 118,176 | 116,540 | |||||
Total liabilities and stockholders’ equity | $ | 226,277 | $ | 235,837 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Sales: | |||||||||||
Product | $ | 76,213 | $ | 81,143 | $ | 90,295 | |||||
Service | 108,421 | 91,448 | 71,993 | ||||||||
Net sales | 184,634 | 172,591 | 162,288 | ||||||||
Costs and expenses: | |||||||||||
Costs of product sales | 47,404 | 48,843 | 51,518 | ||||||||
Costs of service sales | 54,816 | 50,301 | 45,058 | ||||||||
Research and development | 14,039 | 14,101 | 12,987 | ||||||||
Sales, marketing and support | 35,714 | 32,976 | 28,792 | ||||||||
General and administrative | 29,453 | 24,448 | 17,764 | ||||||||
Total costs and expenses | 181,426 | 170,669 | 156,119 | ||||||||
Income from operations | 3,208 | 1,922 | 6,169 | ||||||||
Interest income | 546 | 738 | 657 | ||||||||
Interest expense | 1,460 | 1,296 | 637 | ||||||||
Other income (expense) | 372 | (39 | ) | 494 | |||||||
Income before income tax expense | 2,666 | 1,325 | 6,683 | ||||||||
Income tax expense | 413 | 1,284 | 2,150 | ||||||||
Net income | $ | 2,253 | $ | 41 | $ | 4,533 | |||||
Per share information: | |||||||||||
Net income per share, basic | $ | 0.14 | $ | 0.00 | $ | 0.30 | |||||
Net income per share, diluted | $ | 0.14 | $ | 0.00 | $ | 0.30 | |||||
Number of shares used in per share calculation: | |||||||||||
Basic | 15,625 | 15,420 | 15,144 | ||||||||
Diluted | 15,834 | 15,605 | 15,341 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Net income | $ | 2,253 | $ | 41 | $ | 4,533 | |||||
Other comprehensive (loss) income, net of tax: | |||||||||||
Unrealized (loss) gain on marketable securities | (3 | ) | 8 | (4 | ) | ||||||
Foreign currency translation adjustment | (4,207 | ) | (3,953 | ) | 388 | ||||||
Unrealized gain on derivative instruments | 57 | 37 | 210 | ||||||||
Other comprehensive (loss) income, net of tax | (4,153 | ) | (3,908 | ) | 594 | ||||||
Total comprehensive (loss) income | $ | (1,900 | ) | $ | (3,867 | ) | $ | 5,127 |
Common Stock | Additional Paid-in Capital | Accumulated Earnings | Accumulated Other Comprehensive (Loss) Income | Treasury Stock | Total Stockholders’ Equity | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
Balance at December 31, 2012 | 14,905 | $ | 166 | $ | 111,514 | $ | 7,307 | $ | (133 | ) | $ | (13,150 | ) | $ | 105,704 | |||||||||||
Net income | — | — | — | 4,533 | — | — | 4,533 | |||||||||||||||||||
Other comprehensive income | — | — | — | — | 594 | — | 594 | |||||||||||||||||||
Stock-based compensation | — | — | 4,124 | — | — | — | 4,124 | |||||||||||||||||||
Tax benefit from exercise of stock options | — | — | 694 | — | — | — | 694 | |||||||||||||||||||
Common stock issued under benefit plan | 27 | — | 308 | — | — | — | 308 | |||||||||||||||||||
Payment of restricted stock tax withholdings | (61 | ) | (1 | ) | (833 | ) | — | — | — | (834 | ) | |||||||||||||||
Exercise of stock options, vesting of restricted stock awards | 406 | 4 | 1,340 | — | — | — | 1,344 | |||||||||||||||||||
Balance at December 31, 2013 | 15,277 | $ | 169 | $ | 117,147 | $ | 11,840 | $ | 461 | $ | (13,150 | ) | $ | 116,467 | ||||||||||||
Net income | — | — | — | 41 | — | — | 41 | |||||||||||||||||||
Other comprehensive loss | — | — | — | — | (3,908 | ) | — | (3,908 | ) | |||||||||||||||||
Stock-based compensation | — | — | 3,771 | — | — | — | 3,771 | |||||||||||||||||||
Tax benefit from exercise of stock options | — | — | (2 | ) | — | — | — | (2 | ) | |||||||||||||||||
Common stock issued under benefit plan | 12 | — | 138 | — | — | — | 138 | |||||||||||||||||||
Payment of restricted stock tax withholdings | (35 | ) | — | (481 | ) | — | — | — | (481 | ) | ||||||||||||||||
Exercise of stock options, vesting of restricted stock awards | 240 | 3 | 470 | — | — | — | 473 | |||||||||||||||||||
Balance at December 31, 2014 | 15,494 | $ | 172 | $ | 121,084 | $ | 11,881 | $ | (3,447 | ) | $ | (13,150 | ) | $ | 116,540 | |||||||||||
Net income | — | — | — | 2,253 | — | — | 2,253 | |||||||||||||||||||
Other comprehensive loss | — | — | — | — | (4,153 | ) | — | (4,153 | ) | |||||||||||||||||
Stock-based compensation | — | — | 3,734 | — | — | — | 3,734 | |||||||||||||||||||
Tax benefit from exercise of stock options | — | — | — | — | — | — | — | |||||||||||||||||||
Common stock issued under benefit plan | 28 | — | 291 | — | — | — | 291 | |||||||||||||||||||
Payment of restricted stock tax withholdings | (27 | ) | — | (578 | ) | — | — | — | (578 | ) | ||||||||||||||||
Exercise of stock options, vesting of restricted stock awards | 182 | 1 | 88 | — | — | — | 89 | |||||||||||||||||||
Balance at December 31, 2015 | 15,677 | $ | 173 | $ | 124,619 | $ | 14,134 | $ | (7,600 | ) | $ | (13,150 | ) | $ | 118,176 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 2,253 | $ | 41 | $ | 4,533 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Provision for doubtful accounts | 1,337 | 1,610 | 1,305 | ||||||||
Depreciation and amortization | 12,719 | 9,987 | 5,994 | ||||||||
Deferred income taxes | (411 | ) | (1,813 | ) | (713 | ) | |||||
(Gain) loss on sale of fixed assets | (4 | ) | 30 | — | |||||||
Loss (gain) on derivatives instruments | 57 | — | (222 | ) | |||||||
Compensation expense related to stock-based awards and employee stock purchase plan | 3,734 | 3,771 | 4,124 | ||||||||
Unrealized currency translation loss | 391 | — | — | ||||||||
Changes in operating assets and liabilities: | |||||||||||
Accounts receivable | (5,803 | ) | (8,235 | ) | 1,229 | ||||||
Inventories | (3,755 | ) | 867 | (1,967 | ) | ||||||
Prepaid expenses and other assets | (1,576 | ) | 1,141 | 619 | |||||||
Other non-current assets | 1,539 | 569 | (675 | ) | |||||||
Accounts payable | (3,390 | ) | 1,676 | 1,196 | |||||||
Deferred revenue | (1,643 | ) | 1,622 | (124 | ) | ||||||
Accrued expenses | 3,023 | (1,002 | ) | 891 | |||||||
Other long-term liabilities | (74 | ) | 106 | 65 | |||||||
Net cash provided by operating activities | $ | 8,397 | $ | 10,370 | $ | 16,255 | |||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (5,694 | ) | (5,118 | ) | (4,720 | ) | |||||
Proceeds from sale of fixed assets | — | — | — | ||||||||
Net cash paid for business acquired | — | (43,448 | ) | (22,944 | ) | ||||||
Purchases of marketable securities | (11,323 | ) | (12,270 | ) | (41,950 | ) | |||||
Maturities and sales of marketable securities | 13,217 | 34,150 | 24,867 | ||||||||
Net cash used in investing activities | $ | (3,800 | ) | $ | (26,686 | ) | $ | (44,747 | ) | ||
Cash flows from financing activities: | |||||||||||
Repayments of long-term debt | (1,307 | ) | (1,272 | ) | (1,030 | ) | |||||
Borrowings from long-term debt | — | — | 5,844 | ||||||||
Repayments of term note borrowings | (4,876 | ) | (1,219 | ) | — | ||||||
Proceeds from term note borrowings | — | 65,000 | — | ||||||||
Proceeds from stock options exercised and employee stock purchase plan | 432 | 608 | 2,344 | ||||||||
Payment of employee restricted stock withholdings | (578 | ) | (482 | ) | (828 | ) | |||||
Repayments of line of credit borrowings | — | (30,000 | ) | — | |||||||
Proceeds from line of credit borrowings | — | — | 23,000 | ||||||||
Payment of stock registration fee | — | 41 | (5 | ) | |||||||
Net cash (used in) provided by financing activities | (6,329 | ) | 32,676 | 29,325 | |||||||
Effect of exchange rate changes on cash and cash equivalents | (838 | ) | (429 | ) | (453 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (2,570 | ) | 15,931 | 380 | |||||||
Cash and cash equivalents at beginning of period | 25,289 | 9,358 | 8,978 | ||||||||
Cash and cash equivalents at end of period | $ | 22,719 | $ | 25,289 | $ | 9,358 | |||||
Supplemental disclosure of cash flow information: | |||||||||||
Cash paid for interest | $ | 1,467 | $ | 1,296 | $ | 601 | |||||
Cash paid for income taxes | $ | 2,182 | $ | 2,470 | $ | 1,248 |
(1) | Summary of Significant Accounting Policies |
(a) | Description of Business |
(b) | Principles of Consolidation |
(c) | Significant Estimates and Assumptions |
(d) | Concentration of Credit Risk and Single Source Suppliers |
2015 | 2014 | 2013 | |||||||||
Beginning balance | $ | 2,723 | $ | 1,705 | $ | 929 | |||||
Additions to sales allowance and bad debt expense | 1,342 | 1,610 | 1,305 | ||||||||
Deductions (write-offs/recoveries) from reserve | (531 | ) | (592 | ) | (529 | ) | |||||
Ending balance | $ | 3,534 | $ | 2,723 | $ | 1,705 |
(e) | Revenue Recognition |
• | All sales are final; |
• | Terms are generally Net 30; |
• | Shipments are tendered and shipped FOB (or as may be applicable, FCA, or EXW) the Company’s plant or warehouse; and |
• | Title and risk of loss or damage passes to the dealer or distributor at the point of shipment when delivery is made to the possession of the carrier. |
(f) | Fair Value of Financial Instruments |
(g) | Cash, Cash Equivalents, and Marketable Securities |
(h) | Inventories |
(i) | Property and Equipment |
(j) | Goodwill and Intangible Assets |
Estimated Useful Life | |
Virtek Communication (now KVH Industries Norway AS): | |
Intellectual property | 7 |
Headland Media Limited (now the KVH Media Group): | |
Subscriber relationships | 10 |
Distribution rights | 15 |
Internally developed software | 3 |
Proprietary content | 2 |
Videotel | |
Subscriber relationships | 8 |
Internally developed software | 4 |
Proprietary content | 5 |
Favorable lease | 5 |
(k) | Other Non-Current Assets |
(l) | Product Warranty |
2015 | 2014 | ||||||
Beginning balance | $ | 1,853 | $ | 1,269 | |||
Charges to expense | 1,431 | 2,048 | |||||
Costs incurred | (1,404 | ) | (1,464 | ) | |||
Ending balance | $ | 1,880 | $ | 1,853 |
(m) | Shipping and Handling Costs |
(n) | Research and Development |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Customer-funded service sales | $ | 3,002 | $ | 3,806 | $ | 10,302 | |||||
Customer-funded costs included in costs of service sales | 1,546 | 2,633 | 2,387 |
(o) | Advertising Costs |
(p) | Foreign Currency Translation |
(q) | Income Taxes |
(r) | Net Income per Common Share |
2015 | 2014 | 2013 | ||||||
Weighted average common shares outstanding—basic | 15,625 | 15,420 | 15,144 | |||||
Dilutive common shares issuable in connection with stock plans | 209 | 185 | 197 | |||||
Weighted average common shares outstanding—diluted | 15,834 | 15,605 | 15,341 |
(s) | Contingent Liabilities |
(t) | Operating Segments |
(2) | Marketable Securities |
December 31, 2015 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
Money market mutual funds | $ | 13,244 | $ | — | $ | — | $ | 13,244 | |||||||
United States treasuries | 1,002 | — | — | 1,002 | |||||||||||
Corporate notes | 2,283 | 1 | — | 2,284 | |||||||||||
Certificates of deposit | 6,089 | — | — | 6,089 | |||||||||||
Total marketable securities designated as available-for-sale | $ | 22,618 | $ | 1 | $ | — | $ | 22,619 |
December 31, 2014 | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||
Money market mutual funds | $ | 6,824 | $ | — | $ | — | $ | 6,824 | |||||||
Government agency bonds | 3,505 | — | (3 | ) | 3,502 | ||||||||||
United States treasuries | 4,002 | 4 | — | 4,006 | |||||||||||
Corporate notes | 4,665 | 2 | — | 4,667 | |||||||||||
Certificates of deposit | 4,155 | — | — | 4,155 | |||||||||||
Municipal bonds | $ | 1,358 | $ | 1 | $ | — | $ | 1,359 | |||||||
Total marketable securities designated as available-for-sale | $ | 24,509 | $ | 7 | $ | (3 | ) | $ | 24,513 |
December 31, 2015 | Amortized Cost | Fair Value | |||||
Due in less than one year | $ | 5,515 | $ | 5,516 | |||
Due after one year and within two years | 3,859 | 3,859 | |||||
$ | 9,374 | $ | 9,375 | ||||
December 31, 2014 | Amortized Cost | Fair Value | |||||
Due in less than one year | $ | 7,663 | $ | 7,668 | |||
Due after one year and within two years | 10,022 | 10,021 | |||||
$ | 17,685 | $ | 17,689 |
(3) | Inventories |
December 31, | |||||||
2015 | 2014 | ||||||
Raw materials | $ | 12,833 | $ | 8,619 | |||
Work in process | 2,778 | 2,896 | |||||
Finished goods | 5,978 | 5,909 | |||||
$ | 21,589 | $ | 17,424 |
(4) | Property and Equipment |
December 31, | |||||||
2015 | 2014 | ||||||
Land | $ | 3,828 | $ | 3,828 | |||
Building and improvements | 22,407 | 22,323 | |||||
Leasehold improvements | 299 | 351 | |||||
Machinery and equipment | 40,788 | 42,869 | |||||
Office and computer equipment | 15,729 | 13,760 | |||||
Motor vehicles | 51 | 51 | |||||
83,102 | 83,182 | ||||||
Less accumulated depreciation | (43,202 | ) | (41,486 | ) | |||
$ | 39,900 | $ | 41,696 |
(5) | Debt and Line of Credit |
December 31, | |||||||
2015 | 2014 | ||||||
Term notes | $ | 58,906 | $ | 63,781 | |||
Mortgage loan | 3,114 | 3,268 | |||||
Equipment loans | 2,672 | 3,826 | |||||
Total | 64,692 | 70,875 | |||||
Less amounts classified as current | 6,638 | 6,188 | |||||
Long-term debt, excluding current portion | $ | 58,054 | $ | 64,687 |
Year ending December 31, | Principal Payment | |||
2016 | $ | 6,638 | ||
2017 | 7,898 | |||
2018 | 6,931 | |||
2019 | 43,225 | |||
Thereafter | — | |||
Total outstanding at December 31, 2015 | $ | 64,692 |
(6) | Commitments and Contingencies |
Years ending December 31, | Operating Leases | ||
2016 | $ | 14,125 | |
2017 | 9,890 | ||
2018 | 5,332 | ||
2019 | 3,212 | ||
2020 | 935 | ||
Thereafter | 229 | ||
Total minimum lease payments | $ | 33,723 |
(7) | Stockholders’ Equity |
(a) | Employee Stock Options |
Year Ended December 31, | ||||||||
2015 | 2014 | 2013 | ||||||
Risk-free interest rate | 1.55 | % | 1.52 | % | 1.06 | % | ||
Expected volatility | 43.3 | % | 46.5 | % | 50.9 | % | ||
Expected life (in years) | 4.17 | 4.21 | 4.24 | |||||
Dividend yield | 0 | % | 0 | % | 0 | % |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value | |||||||||
Outstanding at December 31, 2014 | 1,205 | $ | 11.65 | |||||||||
Granted | 120 | $ | 12.04 | |||||||||
Exercised | (10 | ) | $ | 8.64 | ||||||||
Expired, canceled or forfeited | (138 | ) | $ | 12.59 | ||||||||
Outstanding at December 31, 2015 | 1,177 | $ | 11.60 | 2.04 | $ | 123 | ||||||
Exercisable at December 31, 2015 | 687 | $ | 11.60 | 2.00 | $ | 122 | ||||||
Options vested or expected to vest at December 31, 2015 | 1,154 | $ | 11.58 | 1.25 | $ | 111 |
(b) | Restricted Stock |
Number of Shares | Weighted- average grant date fair value | |||||
Outstanding at December 31, 2014, unvested | 427 | $ | 13.67 | |||
Granted | 203 | 12.43 | ||||
Vested | (171 | ) | 13.44 | |||
Forfeited | (2 | ) | 10.68 | |||
Outstanding at December 31, 2015, unvested | 458 | $ | 13.22 |
(c) | Employee Stock Purchase Plan |
(8) | Income Taxes |
Current | Deferred | Total | |||||||||
Year ended December 31, 2015 | |||||||||||
Federal | $ | (555 | ) | $ | (94 | ) | $ | (649 | ) | ||
State | 120 | 765 | 885 | ||||||||
Foreign | 295 | (118 | ) | 177 | |||||||
$ | (140 | ) | $ | 553 | $ | 413 | |||||
Year ended December 31, 2014 | |||||||||||
Federal | $ | 325 | $ | (623 | ) | $ | (298 | ) | |||
State | (2 | ) | 1,036 | 1,034 | |||||||
Foreign | 1,640 | (1,092 | ) | 548 | |||||||
$ | 1,963 | $ | (679 | ) | $ | 1,284 | |||||
Year ended December 31, 2013 | |||||||||||
Federal | $ | 1,793 | $ | (497 | ) | $ | 1,296 | ||||
State | 242 | (52 | ) | 190 | |||||||
Foreign | 901 | (237 | ) | 664 | |||||||
$ | 2,936 | $ | (786 | ) | $ | 2,150 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Computed “expected” tax expense | $ | 906 | $ | 451 | $ | 2,339 | |||||
(Decrease) increase in income taxes resulting from: | |||||||||||
State income tax expense, net of federal benefit | (37 | ) | (31 | ) | 336 | ||||||
State research and development, investment credits | (317 | ) | (365 | ) | (309 | ) | |||||
Non-deductible meals & entertainment | 33 | 37 | 31 | ||||||||
Non-deductible stock compensation expense | 181 | 29 | 178 | ||||||||
Non-deductible deferred compensation expense | 260 | 87 | — | ||||||||
Non-deductible transaction costs | — | 73 | 170 | ||||||||
Subpart F income, net of foreign tax credits | 61 | 296 | 162 | ||||||||
Manufacturing deduction | (102 | ) | (123 | ) | — | ||||||
Nontaxable interest income | (106 | ) | (105 | ) | (86 | ) | |||||
Foreign tax rate differential | (792 | ) | (289 | ) | (369 | ) | |||||
Federal research and development credits | (348 | ) | (453 | ) | (746 | ) | |||||
Uncertain tax positions | (413 | ) | 97 | — | |||||||
Provision to tax return adjustments | 80 | (317 | ) | — | |||||||
Change in tax rates | (313 | ) | 235 | — | |||||||
Change in valuation allowance | 1,392 | 1,665 | 491 | ||||||||
Foreign research and development incentives | (59 | ) | — | — | |||||||
Other | (13 | ) | (3 | ) | (47 | ) | |||||
Net income tax expense | $ | 413 | $ | 1,284 | $ | 2,150 |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
United States | $ | (570 | ) | $ | 907 | $ | 5,500 | ||||
Foreign | 3,236 | 418 | 1,183 | ||||||||
Total | $ | 2,666 | $ | 1,325 | $ | 6,683 |
December 31, | |||||||
2015 | 2014 | ||||||
Deferred tax assets: | |||||||
Accounts receivable, due to allowance for doubtful accounts | $ | 900 | $ | 664 | |||
Inventories | 562 | 531 | |||||
Operating loss carry-forwards | 2,094 | 1,939 | |||||
Stock-based compensation expense | 1,981 | 1,743 | |||||
Property and equipment, due to difference in depreciation | 209 | 1,334 | |||||
Research and development, alternative minimum tax credit carry-forwards | 3,111 | 3,313 | |||||
Foreign tax credit carry-forwards | — | 725 | |||||
State tax credit carry-forwards | 2,228 | 2,176 | |||||
Warranty reserve | 675 | 682 | |||||
Accrued expenses | 424 | 505 | |||||
Gross deferred tax assets | 12,184 | 13,612 | |||||
Less valuation allowance | (4,688 | ) | (4,157 | ) | |||
Total deferred tax assets | 7,496 | 9,455 | |||||
Deferred tax liabilities: | |||||||
Purchased intangible assets | (4,944 | ) | (6,917 | ) | |||
Property and equipment, due to differences in depreciation | (2,849 | ) | (2,410 | ) | |||
Other | (114 | ) | (130 | ) | |||
Total deferred tax liabilities | (7,907 | ) | (9,457 | ) | |||
Net deferred tax liability | $ | (411 | ) | $ | (2 | ) | |
Net deferred tax asset—current | $ | — | $ | 2,772 | |||
Net deferred tax asset—non-current | $ | 4,686 | $ | 2,690 | |||
Net deferred tax liability—non-current | $ | (5,097 | ) | $ | (5,464 | ) |
Year Ended December 31, | |||||||||||
2015 | 2014 | 2013 | |||||||||
Unrecognized tax benefits as of January 1 | $ | 2,487 | $ | — | $ | — | |||||
Gross increase in unrecognized tax benefits - prior year tax positions | 168 | — | — | ||||||||
Gross decrease in unrecognized tax benefits due to currency fluctuations - prior year tax positions | (116 | ) | — | — | |||||||
Gross increase in unrecognized tax benefits - current year tax position | 13 | 14 | — | ||||||||
Settlements with taxing authorities | (1,569 | ) | — | — | |||||||
Lapse of statute of limitations | — | — | — | ||||||||
Positions assumed in Videotel transaction | — | 2,473 | — | ||||||||
Ending balance | $ | 983 | $ | 2,487 | $ | — |
Consideration transferred - cash | $ | 47,446 | |||||
Book value of tangible net assets acquired | $ | 1,732 | |||||
Fair value adjustments to deferred revenue | 961 | ||||||
Fair value of tangible net assets acquired | $ | 2,693 | |||||
Identifiable intangibles at acquisition-date fair value | |||||||
Subscriber relationships | $ | 12,759 | |||||
Proprietary content | 9,814 | ||||||
Internally developed software | 2,160 | ||||||
Favorable operating leases | 791 | ||||||
Total intangible assets | $ | 25,524 | |||||
Deferred income taxes | (3,922 | ) | |||||
Goodwill | $ | 23,151 |
Year Ended December 31, | ||||||||
2014 | 2013 | |||||||
Pro forma net revenues | $ | 183,886 | $ | 183,267 | ||||
Pro forma net income | $ | 2,386 | $ | 7,356 | ||||
Basic pro forma net income per share | $ | 0.15 | $ | 0.49 | ||||
Diluted pro forma net income per share | $ | 0.15 | $ | 0.48 |
Consideration transferred - cash | $ | 24,169 | |||||
Book value of tangible net assets acquired | $ | 163 | |||||
Fair value adjustments to deferred revenue | 123 | ||||||
Fair value of tangible net assets acquired | $ | 286 | |||||
Identifiable intangibles at acquisition-date fair value | |||||||
Subscriber relationships | $ | 8,271 | |||||
Distribution rights | 4,888 | ||||||
Internally developed software | 543 | ||||||
Proprietary content | 186 | ||||||
Total intangible assets | $ | 13,888 | |||||
Deferred income taxes | (3,134 | ) | |||||
Goodwill | $ | 13,129 |
Year Ended December 31, | ||||
2013 | ||||
Pro forma net revenues | $ | 166,819 | ||
Pro forma net income | $ | 5,276 | ||
Basic pro forma net income per share | $ | 0.35 | ||
Diluted pro forma net income per share | $ | 0.34 |
Gross Carrying Amount | Accumulated Amortization | Net Carrying Value | |||||||||
December 31, 2015 | |||||||||||
Subscriber relationships | $ | 19,161 | $ | 4,426 | $ | 14,735 | |||||
Distribution rights | 4,736 | 895 | 3,841 | ||||||||
Internally developed software | 2,457 | 1,244 | 1,213 | ||||||||
Proprietary content | 8,812 | 2,879 | 5,933 | ||||||||
Intellectual property | 2,283 | 1,729 | 554 | ||||||||
Favorable lease | 696 | 217 | 479 | ||||||||
$ | 38,145 | $ | 11,390 | $ | 26,755 | ||||||
December 31, 2014 | |||||||||||
Subscriber relationships | $ | 19,919 | $ | 2,165 | $ | 17,754 | |||||
Distribution rights | 4,915 | 558 | 4,357 | ||||||||
Internally developed software | 2,529 | 569 | 1,960 | ||||||||
Proprietary content | 9,137 | 1,094 | 8,043 | ||||||||
Intellectual property | 2,284 | 1,403 | 881 | ||||||||
Favorable lease | 721 | 75 | 646 | ||||||||
$ | 39,505 | $ | 5,864 | $ | 33,641 |
Years ending December 31, | Amortization Expense | ||
2016 | $ | 5,174 | |
2017 | 5,028 | ||
2018 | 4,564 | ||
2019 | 3,412 | ||
2020 | 2,500 | ||
Thereafter | 6,077 | ||
Total amortization expense | $ | 26,755 |
2015 | |||
Balance at January 1 | $ | 40,454 | |
Foreign currency translation adjustment | (3,707 | ) | |
Balance at December 31 | $ | 36,747 |
2015 | |||
Balance at January 1 | $ | 33,641 | |
Amortization expense | (5,526 | ) | |
Foreign currency translation adjustment | (1,360 | ) | |
Balance at December 31 | $ | 26,755 |
Year Ended December 31, | ||||||||
2015 | 2014 | 2013 | ||||||
Net sales to foreign customers outside the U.S. and Canada | 37 | % | 33 | % | 37 | % | ||
Net sales to SANG | * | * | 12 | % |
* | Represents less than 10% of net sales |
Sales Originating From | |||||||||||
Year ended December 31, 2015 | Americas | Europe and Asia | Total | ||||||||
Mobile communication sales to the United States | $ | 84,674 | $ | 1,598 | $ | 86,272 | |||||
Mobile communication sales to Canada | 2,002 | 84 | 2,086 | ||||||||
Mobile communication sales to Europe | 469 | 23,135 | 23,604 | ||||||||
Mobile communication sales to other geographic areas | 5,303 | 28,179 | 33,482 | ||||||||
Guidance and stabilization sales to the United States | 10,537 | — | 10,537 | ||||||||
Guidance and stabilization sales to Canada | 17,151 | — | 17,151 | ||||||||
Guidance and stabilization sales to Europe | 4,371 | — | 4,371 | ||||||||
Guidance and stabilization sales to other geographic areas | 7,131 | — | 7,131 | ||||||||
Intercompany sales | 8,779 | 843 | 9,622 | ||||||||
Subtotal | 140,417 | 53,839 | 194,256 | ||||||||
Eliminations | (8,779 | ) | (843 | ) | (9,622 | ) | |||||
Net sales | $ | 131,638 | $ | 52,996 | $ | 184,634 | |||||
Segment net income (loss) | $ | 2,682 | $ | (429 | ) | $ | 2,253 | ||||
Depreciation and amortization | $ | 4,800 | $ | 7,919 | $ | 12,719 | |||||
Total assets | $ | 144,219 | $ | 82,058 | $ | 226,277 |
Sales Originating From | |||||||||||
Year ended December 31, 2014 | Americas | Europe and Asia | Total | ||||||||
Mobile communication sales to the United States | $ | 85,670 | $ | 1,527 | $ | 87,197 | |||||
Mobile communication sales to Canada | 539 | 66 | 605 | ||||||||
Mobile communication sales to Europe | 482 | 21,698 | 22,180 | ||||||||
Mobile communication sales to other geographic areas | 4,576 | 15,362 | 19,938 | ||||||||
Guidance and stabilization sales to the United States | 13,807 | — | 13,807 | ||||||||
Guidance and stabilization sales to Canada | 13,982 | — | 13,982 | ||||||||
Guidance and stabilization sales to Europe | 4,351 | — | 4,351 | ||||||||
Guidance and stabilization sales to other geographic areas | 10,531 | — | 10,531 | ||||||||
Intercompany sales | 5,366 | 3,902 | 9,268 | ||||||||
Subtotal | 139,304 | 42,555 | 181,859 | ||||||||
Eliminations | (5,366 | ) | (3,902 | ) | (9,268 | ) | |||||
Net sales | $ | 133,938 | $ | 38,653 | $ | 172,591 | |||||
Segment net (loss) income | $ | (1,390 | ) | $ | 1,431 | $ | 41 | ||||
Depreciation and amortization | $ | 4,532 | $ | 5,455 | $ | 9,987 | |||||
Total assets | $ | 127,920 | $ | 107,917 | $ | 235,837 |
Sales Originating From | |||||||||||
Year ended December 31, 2013 | Americas | Europe | Total | ||||||||
Mobile communication sales to the United States | $ | 78,729 | $ | 1,099 | $ | 79,828 | |||||
Mobile communication sales to Canada | 462 | 39 | 501 | ||||||||
Mobile communication sales to Europe | 455 | 18,571 | 19,026 | ||||||||
Mobile communication sales to other geographic areas | 3,596 | 5,200 | 8,796 | ||||||||
Guidance and stabilization sales to the United States | 7,892 | — | 7,892 | ||||||||
Guidance and stabilization sales to Canada | 13,810 | — | 13,810 | ||||||||
Guidance and stabilization sales to Europe | 7,421 | — | 7,421 | ||||||||
Guidance and stabilization sales to other geographic areas | 25,014 | — | 25,014 | ||||||||
Intercompany sales | 3,465 | 2,184 | 5,649 | ||||||||
Subtotal | 140,844 | 27,093 | 167,937 | ||||||||
Eliminations | (3,465 | ) | (2,184 | ) | (5,649 | ) | |||||
Net sales | $ | 137,379 | $ | 24,909 | $ | 162,288 | |||||
Segment net income (loss) | $ | 5,260 | $ | (727 | ) | $ | 4,533 | ||||
Depreciation and amortization | $ | 4,521 | $ | 1,473 | $ | 5,994 | |||||
Total assets | $ | 136,051 | $ | 47,798 | $ | 183,849 |
Level 1: | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company’s Level 1 assets are investments in money market mutual funds, government agency bonds, United States treasuries, certain corporate notes, and certificates of deposit. |
Level 2: | Quoted prices for similar assets or liabilities in active markets; or observable prices that are based on observable market data, based on directly or indirectly market-corroborated inputs. The Company’s Level 2 assets are investments in certain corporate notes and municipal bonds and its Level 2 liabilities are interest rate swaps. |
Level 3: | Unobservable inputs that are supported by little or no market activity, and are developed based on the best information available given the circumstances. The Company has no Level 3 assets. |
(a) | Market approach—prices and other relevant information generated by market transactions involving identical or comparable assets. |
(b) | The valuations of the interest rate swaps intended to mitigate the Company’s interest rate risk are determined with the assistance of a third-party financial institution using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each instrument. This analysis utilizes observable market-based inputs, including interest rate curves and interest rate volatility, and reflects the contractual terms of these instruments, including the period to maturity. |
(c) | The valuations of municipal bonds are determined utilizing standard pricing procedures of the Company’s investment brokerage firm, which include various third-party pricing services. These procedures also require specific price monitoring practices as well as pricing review reports, valuation oversight, and pricing challenge procedures to maintain an accurate representation of investment fair market value. |
December 31, 2015 | Total | Level 1 | Level 2 | Level 3 | Valuation Technique | ||||||||||||
Assets | |||||||||||||||||
Money market mutual funds | $ | 13,244 | $ | 13,244 | $ | — | $ | — | (a) | ||||||||
United States treasuries | 1,002 | 1,002 | — | — | (a) | ||||||||||||
Corporate notes | 2,284 | — | 2,284 | — | (a) | ||||||||||||
Certificates of deposit | 6,089 | 6,089 | — | — | (a) | ||||||||||||
Liabilities | |||||||||||||||||
Interest rate swaps | $ | 238 | $ | — | $ | 238 | $ | — | (b) | ||||||||
December 31, 2014 | Total | Level 1 | Level 2 | Level 3 | Valuation Technique | ||||||||||||
Assets | |||||||||||||||||
Money market mutual funds | $ | 6,824 | $ | 6,824 | $ | — | $ | — | (a) | ||||||||
Government agency bonds | 3,502 | 3,502 | — | — | (a) | ||||||||||||
United States treasuries | 4,006 | 4,006 | — | — | (a) | ||||||||||||
Corporate notes | 4,667 | 4,667 | — | — | (a) | ||||||||||||
Certificates of deposit | 4,155 | 4,155 | — | — | (a) | ||||||||||||
Municipal bonds | 1,359 | — | 1,359 | — | (c) | ||||||||||||
Liabilities | |||||||||||||||||
Interest rate swaps | $ | 295 | $ | — | $ | 295 | $ | — | (b) |
Interest Rate Derivatives | Notional (in thousands) | Asset (Liability) | Effective Date | Maturity Date | Index | Strike Rate | |||||||||
Interest rate swap | $ | 1,557 | (115 | ) | April 1, 2010 | April 1, 2019 | 1-month LIBOR | 5.91 | % | ||||||
Interest rate swap | $ | 1,557 | (123 | ) | April 1, 2010 | April 1, 2019 | 1-month LIBOR | 6.07 | % |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||||||||||||
(in thousands, except per share amounts) | |||||||||||||||
2015 | |||||||||||||||
Product sales | $ | 15,386 | $ | 17,946 | $ | 15,622 | $ | 27,259 | |||||||
Service sales | 25,919 | 26,909 | 28,833 | 26,760 | |||||||||||
Gross profit | 17,560 | 19,145 | 19,726 | 25,983 | |||||||||||
Net (loss) income | $ | (1,422 | ) | $ | 37 | $ | (463 | ) | $ | 4,101 | |||||
Net (loss) income per share (a): | |||||||||||||||
Basic | $ | (0.09 | ) | $ | 0.00 | $ | (0.03 | ) | $ | 0.26 | |||||
Diluted | $ | (0.09 | ) | $ | 0.00 | $ | (0.03 | ) | $ | 0.26 | |||||
2014 | |||||||||||||||
Product sales | $ | 18,007 | $ | 20,998 | $ | 16,862 | $ | 25,276 | |||||||
Service sales | 18,978 | 19,924 | 27,388 | 25,158 | |||||||||||
Gross profit | 14,593 | 17,485 | 18,802 | 22,567 | |||||||||||
Net (loss) income | $ | (1,123 | ) | $ | 55 | $ | 151 | $ | 958 | ||||||
Net (loss) income per share (a): | |||||||||||||||
Basic | $ | (0.07 | ) | $ | 0.00 | $ | 0.01 | $ | 0.06 | ||||||
Diluted | $ | (0.07 | ) | $ | 0.00 | $ | 0.01 | $ | 0.06 |
(a) | Net (loss) income per share is computed independently for each of the quarters. Therefore, the net (loss) income per share for the four quarters may not equal the annual net (loss) income per share data. |
Exhibit 21.1 | ||
List of Subsidiaries | ||
KVH Industries A/S | Denmark | |
KVH Industries Pte. Ltd. | Singapore | |
KVH Industries Brasil Comunicacao Por Satelite Ltda. | Brazil | |
KVH Industries Norway AS | Norway | |
KVH Industries Japan Co. Ltd. | Japan | |
KVH Industries UK Ltd. | United Kingdom | |
KVH Media Group Ltd. | United Kingdom | |
KVH Media Group Services Ltd. | United Kingdom | |
KVH Media Group Entertainment Ltd. | United Kingdom | |
KVH Media Group Communication Ltd. | United Kingdom | |
KVH Media Group International Ltd. | United Kingdom | |
KVH Media Group Ltd. | Cyprus | |
Good Morning News Sprl. | Belgium | |
KVH Media Group ApS | Denmark | |
KVH Media Group Communication, Inc. | United States | |
KVH Media Group, Inc. | United States | |
Rigstream B.V. | The Netherlands | |
KVH Media Group Ltd. | Bermuda | |
Super Dragon Ltd. | Hong Kong | |
Videotel Consultants and Rentals Ltd. | United Kingdom | |
Videotel Marine International Ltd. | United Kingdom | |
Videotel Training Services Ltd. | United Kingdom |
Videotel Marine Asia Ltd. | Hong Kong | |
Videotel Pte. Ltd. | Singapore | |
/s/ Grant Thornton LLP |
Boston, Massachusetts |
March 14, 2016 |
/s/ KPMG LLP |
Providence, Rhode Island |
March 14, 2016 |
/s/ Martin A. Kits van Heyningen | ||||
Martin A. Kits van Heyningen | ||||
President, Chief Executive Officer and | ||||
Chairman of the Board |
/s/ Peter A. Rendall | ||||
Peter A. Rendall | ||||
Chief Financial Officer | ||||
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the by |
/s/ Martin A. Kits van Heyningen | /s/ Peter A. Rendall | |||
Martin A. Kits van Heyningen | Peter A. Rendall | |||
President, Chief Executive Officer and | Chief Financial Officer | |||
Chairman of the Board | ||||
Date: | March 14, 2016 | Date: | March 14, 2016 |
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Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Mar. 11, 2016 |
Jun. 30, 2015 |
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | KVH INDUSTRIES INC \DE\ | ||
Entity Central Index Key | 0001007587 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2015 | ||
Document Fiscal Period Focus | FY | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 16,168,380 | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Public Float | $ 196,345,440 |
Consolidated Balance Sheets (Parenthetical) - USD ($) |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 3,534,000 | $ 2,723,000 |
Property and equipment, accumulated depreciation | 43,201,512 | 41,486,000 |
Intangible assets, accumulated amortization | $ 11,390,000 | $ 5,864,000 |
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 1,000,000 | 1,000,000 |
Preferred stock, shares issued | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 30,000,000 | 30,000,000 |
Common stock, shares issued | 17,336,314 | 17,152,743 |
Common stock, shares outstanding | 15,677,323 | 15,493,752 |
Treasury stock, shares outstanding | 1,658,991 | 1,658,991 |
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Sales: | |||
Product | $ 76,213 | $ 81,143 | $ 90,295 |
Service | 108,421 | 91,448 | 71,993 |
Net sales | 184,634 | 172,591 | 162,288 |
Costs and expenses: | |||
Costs of product sales | 47,404 | 48,843 | 51,518 |
Costs of service sales | 54,816 | 50,301 | 45,058 |
Research and development | 14,039 | 14,101 | 12,987 |
Sales, marketing and support | 35,714 | 32,976 | 28,792 |
General and administrative | 29,453 | 24,448 | 17,764 |
Total costs and expenses | 181,426 | 170,669 | 156,119 |
Income from operations | 3,208 | 1,922 | 6,169 |
Interest income | 546 | 738 | 657 |
Interest expense | 1,460 | 1,296 | 637 |
Other income (expense) | 372 | (39) | 494 |
Income before income tax expense | 2,666 | 1,325 | 6,683 |
Income tax expense | 413 | 1,284 | 2,150 |
Net income | $ 2,253 | $ 41 | $ 4,533 |
Per share information: | |||
Net income per share, basic (in dollars per share) | $ 0.14 | $ 0.00 | $ 0.30 |
Net income per share, diluted (in dollars per share) | $ 0.14 | $ 0.00 | $ 0.30 |
Number of shares used in per share calculation: | |||
Basic (in shares) | 15,625 | 15,420 | 15,144 |
Diluted (in shares) | 15,834 | 15,605 | 15,341 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Net income | $ 2,253 | $ 41 | $ 4,533 |
Unrealized (loss) gain on marketable securities | (3) | 8 | (4) |
Foreign currency translation adjustment | (4,207) | (3,953) | 388 |
Unrealized gain on derivative instruments | 57 | 37 | 210 |
Other comprehensive (loss) income, net of tax | (4,153) | (3,908) | 594 |
Total comprehensive (loss) income | $ (1,900) | $ (3,867) | $ 5,127 |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies
KVH Industries, Inc. (together with its subsidiaries, the Company or KVH) designs, develops, manufactures and markets mobile communications products and services for the marine and land mobile markets, and navigation, guidance, and stabilization products for both the commercial and defense markets. KVH’s mobile communications products enable customers to receive voice and Internet services, and live digital television via satellite services in marine vessels, recreational vehicles, buses and automobiles. KVH’s CommBox offers a range of tools designed to increase communication efficiency, reduce costs, and manage network operations. KVH sells and leases its mobile communications products through an extensive international network of dealers and distributors. KVH also sells and leases products directly to end users. KVH’s mobile communications service sales represent primarily sales earned from satellite voice and Internet airtime services. KVH provides, for monthly fixed and usage fees, satellite connectivity services, including broadband Internet, data and Voice over Internet Protocol (VoIP) services, to its TracPhone V-series customers. Mobile communications services sales also include the distribution of commercially licensed entertainment, including news, sports, music, and movies to commercial and leisure customers in the maritime, hotel, and retail markets through KVH Media Group (acquired as Headland Media Limited), the media and entertainment service company that KVH acquired on May 11, 2013, and the distribution of training films and eLearning computer-based training courses to commercial customers in the maritime market through Super Dragon Limited and Videotel Marine Asia Limited (together referred to as Videotel), a maritime training services company that KVH acquired on July 2, 2014. KVH also earns monthly usage fees from third-party satellite connectivity services, including voice, data and Internet services, provided to its Inmarsat and Iridium customers who choose to activate their subscriptions with KVH. Mobile communications service sales also include engineering services provided under development contracts, sales from product repairs, and extended warranty sales. KVH also offers precision fiber optic gyro (FOG)-based systems that enable platform and optical stabilization, navigation, pointing and guidance. KVH’s guidance and stabilization products also include tactical navigation systems that provide uninterrupted access to navigation and pointing information in a variety of military vehicles, including tactical trucks and light armored vehicles. KVH’s guidance and stabilization products are sold directly to U.S. and foreign governments and government contractors, as well as through an international network of authorized independent sales representatives. In addition, KVH's guidance and stabilization products are used in numerous commercial products, such as navigation and positioning systems for various applications including precision mapping, dynamic surveying, autonomous vehicles, train location control and track geometry measurement systems, industrial robotics and optical stabilization. KVH’s guidance and stabilization service sales include product repairs, engineering services provided under development contracts and extended warranty sales.
The accompanying consolidated financial statements of KVH Industries, Inc. and its wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America. The Company has evaluated all subsequent events through the date of this filing. All of the operating expenses of the subsidiaries that serve as the Company’s European, Singaporean, Japanese, and Brazilian international distributors are reflected within sales, marketing, and support within the accompanying consolidated statements of operations. All significant intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Significant estimates and assumptions by management affect the Company’s revenue recognition, valuation of accounts receivable, valuation of inventory, assumptions used to determine fair value of goodwill and intangible assets, deferred tax assets and related valuation allowance, stock-based compensation, warranty and accounting for contingencies. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. The Company has accounted for its $35,600 contract received in June 2012 from SANG to purchase TACNAV products and services under ASC 605-25, Multiple-Element Arrangements. See section (e) of this note for estimates and assumptions related to multiple-element-arrangements and completed contract sales accounting. The SANG total contract value associated with TACNAV products is $21,200, for which final shipments were completed in the second quarter of 2013. Revenue was recognized for these product sales after transfer of title and risk of loss and after inspection occurred. The total contract value associated with all services is $14,400, and services were completed in the third quarter of 2014. The revenue for these services is recognized using the proportional performance accounting method. The Company limits the amount of revenue recognized for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations, or subject to customer-specific return or refund privileges. Total revenue recognized on the SANG contract in 2014 and 2013 was approximately $1,300 and $19,600, respectively.
Cash, cash equivalents and marketable securities. The Company is potentially subject to financial instrument concentration of credit risk through its cash, cash equivalent and marketable securities investments. To mitigate these risks the Company maintains cash, cash equivalents and marketable securities with reputable and nationally recognized financial institutions. As of December 31, 2015, $22,619 classified as marketable securities was held by Wells Fargo and substantially all of the cash and cash equivalents were held by Bank of America, N.A. See Note 2 for a description of marketable securities. Trade accounts receivable. Concentrations of risk (see Note 12) with respect to trade accounts receivable are generally limited due to the large number of customers and their dispersion across several geographic areas. Although the Company does not foresee that credit risk associated with these receivables will deviate from historical experience, repayment is dependent upon the financial stability of those individual customers. The Company establishes allowances for potential bad debts and evaluates, on a monthly basis, the adequacy of those reserves based upon historical experience and its expectations for future collectability concerns. Activity within the Company’s allowance for doubtful accounts for the periods presented is as follows:
Certain components from third parties used in the Company’s products are procured from single sources of supply. The failure of a supplier, including a subcontractor, to deliver on schedule could delay or interrupt the Company’s delivery of products and thereby materially adversely affect the Company’s revenues and operating results.
Product sales. Product sales are recognized when persuasive evidence of an arrangement exists, goods are shipped, title has passed and collectability is reasonably assured. The Company’s standard sales terms require that:
For certain guidance and stabilization product sales, customer acceptance or inspection may be required before title and risk of loss transfers. For those sales, revenue is recognized after transfer of title and risk of loss and after notification of customer acceptance. In certain circumstances customers may request a bill and hold arrangement. Under these bill and hold arrangements, revenue is recognized when the Company has fulfilled all of its performance obligations, the units are segregated and available for shipment in accordance with the defined contract delivery schedule, and the Company has received notification of customer acceptance which transfers title and risk of loss to the customer. Under certain limited conditions, the Company, at its sole discretion, provides for the return of goods. No product is accepted for return and no credit is allowed on any returned product unless the Company has granted and confirmed prior written permission by means of appropriate authorization. The Company establishes reserves for potential sales returns, credits, and allowances, and evaluates, on a monthly basis, the adequacy of those reserves based upon historical experience and expectations for the future. Multiple-element revenue arrangements. Some of our sales involve multiple-element arrangements that include both hardware-related products and contracted service, or satellite connectivity that are accounted under ASC 605-25, Multiple-Element Arrangements. Multiple elements, arrangement consideration is allocated to each element based on the relative selling prices of all of the elements in the arrangement using the fair value hierarchy as required by “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements,” (Accounting Standards Update “ASU” 2009-13). The Company adopted the provisions of ASU 2009-13 as of January 1, 2010. ASU 2009-13 requires that the Company establish VSOE of fair value based upon the price charged when the same element is sold separately or established by management having the relevant pricing authority. When VSOE exists it is used to determine the selling price of a deliverable. When VSOE is not established, the Company attempts to establish the selling price of each element based on TPE. When the Company is unable to establish selling price using VSOE or TPE, the Company uses BESP in the allocation of arrangement consideration for the relevant deliverables. The objective of BESP is to determine the price at which the Company would transact a sale if a product or service was sold on a stand-alone basis. The Company determines BESP for our products and certain services by considering multiple factors including, but not limited to, overall market conditions, including geographic or regional-specific market factors and profit objectives for such deliverables. Each deliverable within the Company's multiple-deliverable revenue arrangements is accounted for as a separate unit of accounting under the guidance of ASU 2009-13 if both of the following criteria are met: the delivered item or items have value to the customer on a standalone basis; and for an arrangement that includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. The Company considers a deliverable to have standalone value if the item is sold separately by the Company or another vendor or if the item could be resold by the customer. Further, the Company's revenue arrangements generally do not include a general right of return relative to delivered products. Deliverables not meeting the criteria for being a separate unit of accounting are combined with a deliverable that does meet that criterion. The appropriate allocation of arrangement consideration and recognition of revenue is then determined for the combined unit of accounting. Satellite connectivity and media content sales. Directly sold and re-sold satellite connectivity service for voice, data and Internet is recognized monthly based upon minutes or megabytes of traffic processed or contracted fixed fee schedules. Typically, all subscribers enter into a contracted one-year minimum service agreement. The Company records all satellite connectivity service sales to subscribers as gross sales, as the Company is the primary obligor in the contracted service arrangement. All associated regulatory service fees and costs are recorded net in the consolidated financial statements. Media content sales include the Company's distribution of commercially licensed news, sports, movies and music content for commercial and leisure customers in the maritime, hotel, and retail markets as well as training videos to the merchant marine market that are typically based on a contracted fixed fee schedule. The Company typically recognizes revenue from media content sales ratably over the period of the service contract. The accounting estimates related to the recognition of satellite connectivity and media content service sales in results of operations requires the Company to make assumptions about future billing adjustments for disputes with subscribers as well as unauthorized usage. Lease financing. Lease financing consists of sales-type leases primarily of the TracPhone V-IP Series. The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount. Upon delivery, the Company records the present value of all payments under these leases as revenues, and the related costs of the product are charged to cost of sales. Interest income is recognized throughout the lease term (typically three years) using an implicit interest rate. Through December 31, 2015, lease sales have not been a significant portion of the Company’s total sales. Contracted service sales. The Company engages in contracts for development, production, and services activities related to standard product modification or enhancement, which it accounts for using the proportional performance method of revenue recognition. The Company considers the nature of these contracts and the types of products and services provided when determining the proper accounting for a particular contract. Customer and government-agency contracted engineering service and grant sales under development contracts are recognized primarily under the proportional performance method during the period in which the Company performs the service or development efforts in accordance with the agreement. Services performed under these types of contracts include engineering studies, surveys, building construction, prototype development, and program management. Performance is determined principally by comparing the accumulated costs incurred to date with management’s estimate of the total cost to complete the contracted work. The Company establishes billing terms at the time project deliverables and milestones are agreed. Unbilled revenue recognized in excess of the amounts invoiced to clients are classified within the accompanying consolidated balance sheets in the caption “prepaid expenses and other assets.” The use of contract accounting requires significant judgment relative to estimating total contract revenues and costs, including assumptions relative to the length of time to complete the contract, the nature and complexity of the work to be performed, and prices for subcontractor services and materials. The risk to the Company on a fixed-price contract is that if estimates to complete the contract change from one period to the next, profit levels will vary from period to period. The Company's estimates are based upon the professional knowledge and experience of its engineers, program managers and other personnel, who review each long-term contract monthly to assess the contract's schedule, performance, technical matters and estimated cost at completion. Changes in estimates are applied when adjustments in estimated contract costs are identified, such revisions may result in current period adjustments to earnings applicable to performance in prior periods. Any advance payments arising from such extended-term development contracts are recorded as deposits. If, in any period, estimated total costs under a contract indicate an expected loss, then such loss is provided for in that period. Through December 31, 2015, contracted service revenue has not been a significant portion of the Company’s total sales. Product service sales. Product service sales other than under development contracts are recognized when completed services are provided to the customer and collectability is reasonably assured. The Company establishes reserves for potential sales returns, credit and allowances, and evaluates, on a monthly basis, the adequacy of those reserves based upon historical experience and its expectations for the future. Through December 31, 2015, product service sales have not been a significant portion of the Company’s total sales. Extended warranty sales. The Company sells extended warranty contracts on mobile communications and guidance and stabilization products. Sales under these contracts are recognized ratably over the contract term. Through December 31, 2015, warranty sales have not been a significant portion of the Company’s total sales.
The carrying amounts of the Company’s financial instruments, which include cash equivalents, investments, accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short maturity of these instruments. The carrying amount of the Company’s mortgage loan approximates fair value based on currently available quoted rates of similarly structured mortgage facilities. See Note 2 for more information on the fair value of the Company’s marketable securities.
In accordance with the Company’s investment policy, cash in excess of operational needs is invested in money market mutual funds, government agency bonds, United States treasuries, municipal bonds, corporate notes, and certificates of deposit, which are reflected within marketable securities in the accompanying consolidated balance sheets. The Company determines the appropriate classification of marketable securities at each balance sheet date. As of December 31, 2015 and 2014, all of the Company’s marketable securities have been designated as available-for-sale and are carried at their fair value with unrealized gains and losses included in accumulated other comprehensive (loss) income in the accompanying consolidated balance sheets. The Company reviews investments in debt securities for other than temporary impairment whenever the fair value of an investment is less than amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers whether it intends to sell the security, whether it expects to recover the credit loss, and if it is more likely than not that the Company will be required to sell the security prior to recovery. Evidence considered in this assessment includes the reasons for the impairment, compliance with the Company’s investment policy, the severity and duration of the impairment, changes in value subsequent to year-end and forecasted performance of the investee. The Company has reviewed its securities with unrealized losses as of December 31, 2015 and 2014 and has concluded that no other-than-temporary impairments exist.
Inventories are stated at the lower of cost or market using the first-in first-out costing method. The Company provides inventory reserves based on excess and obsolete inventory determined primarily by future demand forecasts. The Company records inventory charges to costs of product sales.
Property and equipment are stated at cost. Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the respective assets. The principal lives used in determining the depreciation rates of various assets are: buildings and improvements, 5-40 years; machinery, satellite hubs and equipment, and video-on-demand (VOD) units, 5-10 years; office and computer equipment, 3-7 years; and motor vehicles, 5 years.
The Company’s goodwill and intangible assets are associated with the purchase of Virtek Communication (now known as KVH Industries Norway AS) in September 2010. Headland Media Limited (now known as the KVH Media Group) in May 2013, and Videotel in July 2014. Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but instead is tested for impairment at least annually, or if events or changes in circumstances indicate that the carrying value may not be recoverable. The Company estimates the fair value of the reporting unit using a discounted cash flow model or other valuation models, such as comparative transactions and market multiples. The impairment test is performed through the application of a two-step process. The first step compares the carrying value of the Company’s reporting units to their estimated fair values as of the test date. If fair value is less than carrying value, a second step is performed to quantify the amount of the impairment, if any. As of August 31, 2015, the Company performed its annual impairment test for goodwill at the reporting unit level and, after conducting the first step, determined that it was not necessary to conduct the second step as it concluded that the fair value of its reporting units exceeded their carrying value. Accordingly, the Company determined no adjustment to goodwill was necessary. There were no indicators of potential goodwill impairment noted as of December 31, 2015. Intangible assets are comprised of the following, which are being amortized on a straight-line basis over the following estimated useful lives:
Intangible assets with estimated lives and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of intangible assets with estimated lives and other long-lived assets is measured by a comparison of the carrying amount of an asset or asset group to future net undiscounted cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future operating cash flows or appraised values, depending on the nature of the asset. There are no events or changes in circumstances that indicated any of the carrying amounts of the Company’s intangible assets may not be recoverable during 2015. See Note 10 for further discussion of goodwill and intangible assets.
Other non-current assets are primarily comprised of long-term lease receivables, prepaid expenses, and deposits.
The Company’s products carry standard limited warranties that range from one to two years and vary by product. The warranty period begins on the date of retail purchase or lease by the original purchaser. The Company accrues estimated product warranty costs at the time of sale and any additional amounts are recorded when such costs are probable and can be reasonably estimated. Factors that affect the Company’s warranty liability include the number of units sold or leased, historical and anticipated rates of warranty repairs and the cost per repair. Warranty and related costs are reflected within sales, marketing and support in the accompanying statements of operations. As of December 31, 2015 and 2014, the Company had accrued product warranty costs of $1,880 and $1,853, respectively. The following table summarizes product warranty activity during 2015 and 2014:
Shipping and handling costs are expensed as incurred and included in cost of sales. Billings for shipping and handling are reflected within net sales in the accompanying statements of operations.
Expenditures for research and development, including customer-funded research and development, are expensed as incurred. Revenue and related development costs from customer-funded research and development are as follows:
Costs related to advertising are expensed as incurred. Advertising expense was $2,712, $2,825, and $3,189 for the years ended December 31, 2015, 2014, and 2013, respectively, and is included in sales, marketing, and support expense in the accompanying consolidated statements of operations.
The financial statements of the Company’s foreign subsidiaries located in Denmark and Singapore are maintained using the United States dollar as the functional currency. Exchange rates in effect on the date of the transaction are used to record monetary assets and liabilities. Revenue and other expense elements are recorded at rates that approximate the rates in effect on the transaction dates. Realized foreign currency remeasurement gains and losses are recognized within “other (expense) income” in the accompanying consolidated statements of operations. For the years ended December 31, 2015, 2014, and 2013, the Company experienced foreign currency losses of $59, $126, and $123, respectively. The financial statements of the Company’s foreign subsidiaries located in the United Kingdom, Brazil, Norway, Cyprus, Belgium, the Netherlands and Japan subsidiaries use the foreign subsidiaries’ respective local currencies as the functional currency. The Company translates the assets and liabilities of these foreign subsidiaries at the exchange rates in effect at year-end. Net sales, costs and expenses are translated using average exchange rates in effect during the year. Gains and losses from foreign currency translation are credited or charged to accumulated other comprehensive loss included in stockholders' equity in the accompanying consolidated balance sheets.
Income taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records valuation allowances to reduce deferred income tax assets to the amount that is more likely than not to be realized. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely than not that a position will be sustained, no amount of the benefit attributable to the position is recognized. The tax benefit to be recognized of any tax position that meets the more likely than not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency. See Note 8 for further discussion of income taxes.
Basic net income per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted net income per share incorporates the dilutive effect of common stock equivalent options, warrants and other convertible securities, if any, as determined in accordance with the treasury stock accounting method. Common stock equivalents related to options and restricted stock awards for 766, 784, and 545 shares of common stock for the years ended December 31, 2015, 2014, and 2013, respectively, have been excluded from the fully diluted calculation of net income per share, as inclusion would be anti-dilutive. A reconciliation of the basic and diluted weighted average common shares outstanding is as follows:
The Company estimates the amount of potential exposure it may have with respect to claims, assessments and litigation in accordance with ASC 450, Contingencies. As of December 31, 2015, the Company was party to a lawsuit, as described in Note 17. The Company settled the legal claim for a cash payment by us. The cash payment was included in accrued other in our consolidated balance sheet at December 31, 2015. The cash payment was made in January 2016.
The Company operates in two geographic segments, exclusively in the mobile communications, navigation and guidance and stabilization equipment industry, which it considers to be a single business industry. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance. To date, the chief operating decision maker has made such decisions and assessed performance at the company level, as one segment. The Company’s chief operating decision maker is its President, Chief Executive Officer and Chairman of the Board. (u) Film Production Costs The Company capitalizes direct costs incurred in the production of its training videos, such as writing, directing, narrating, casting, location rental, and editing. These film costs are classified as a non-current asset on its consolidated balance sheet and are placed into service upon the film title being released and available for customers' use. The Company’s sales model associated with training is subscription-based, in which fees from third parties are not directly attributable to the exhibition of a particular film but relate instead to access to the entire film library. Accordingly, management estimates that the straight line method is the most representative method for the amortization of film costs. Consistent with the period over which revenues are assessed (i.e. the subscription period), the film costs are amortized over four years. In the event that the film title is replaced or removed from the film library before the amortization period has expired, all unamortized costs are expensed immediately. (v) Recently Issued Accounting Standards Revenue from Contracts In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"), regarding ASC Topic 606 of the same nomenclature. ASU 2014-09 represents the culmination of efforts by the FASB and the International Accounting Standards Board to issue a common revenue standard. In April 2015, the FASB voted to defer the effective date of the new revenue recognition standard by one year, which resulted in ASU 2014-09 becoming effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company is evaluating whether the adoption of ASU 2014-09 will have a material effect on the Company's consolidated statements of financial condition, results of operations or cash flows. Inventory In July 2015, the FASB issued ASU 2015-11,"Simplifying the Measurement of Inventory" ("ASU 2015-11"), regarding ASC Topic 330 - Inventory. The amendments in the ASU require entities that measure inventory using the first-in, first-out or average cost methods to measure inventory at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal. ASU 2015-11 is effective on a prospective basis for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016, with earlier application permitted. The Company does not believe that the adoption of ASU 2015-11 will have a material effect on the Company's consolidated statements of financial condition, results of operations or cash flows. Deferred Tax Assets In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17"). The standard requires that deferred tax assets and liabilities be classified as non-current on the balance sheet rather than being separated into current and non-current. The Company early adopted its provisions during fiscal year 2015 on a prospective basis. Accordingly, as permitted by ASU 2015-17, the current deferred taxes have been classified as non-current on the Company's balance sheet. The prospective adoption of ASU 2015-17 does not require a restatement of prior year balances; as such, they have not been adjusted. Lease Accounting On February 25, 2016, the Financial Accounting Standards Board ("FASB") issued its new leases standard, ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 is aimed at putting most leases on lessees’ balance sheets, but it would also change aspects of lessor accounting. ASU 2016-02 is effective for public business entities for annual periods beginning after December 15, 2018 and interim periods within that year. As a result, the Company will adopt this standard effective January 1, 2019. The Company is currently evaluating the impact of adoption on its financial position and results from operations. There are no other recent accounting pronouncements that have been issued by the FASB that would have a material impact on the financial statements of the Company. |
Marketable Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Marketable Securities | Marketable Securities Included in marketable securities as of December 31, 2015 and 2014 are the following:
The amortized costs and fair value of debt securities as of December 31, 2015 and 2014 are shown below by effective maturity. Effective maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.
Interest income from marketable securities was $110 for the years ended December 31, 2015, and 2014, respectively. |
Inventories |
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Inventories | Inventories Inventories are stated at the lower of cost or market using the first-in first-out costing method. Inventories as of December 31, 2015 and 2014 include the costs of material, labor, and factory overhead. Inventories consist of the following:
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment disclosure | Property and Equipment Property and equipment, net, as of December 31, 2015 and 2014 consist of the following:
Depreciation for the years ended December 31, 2015, 2014, and 2013 amounted to $7,193, $6,127, and $4,815, respectively. |
Debt and Line of Credit |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt and Line of Credit | Debt and Line of Credit Long-term debt consists of the following:
Term Note and Line of Credit On July 1, 2014, the Company entered into (i) a five-year senior credit facility agreement (the Credit Agreement) with Bank of America, N.A., as Administrative Agent, and the lenders named from time to time as parties thereto (the Lenders), for an aggregate amount of up to $80,000, including a revolving credit facility (the Revolver) of up to $15,000 and a term loan (Term Loan) of $65,000 to be used for general corporate purposes, including both (A) the refinancing of the Company’s $30,000 then-outstanding indebtedness under its previous credit facility and (B) permitted acquisitions, (ii) revolving credit notes (together, the Revolving Credit Note) to evidence the Revolver, (iii) term notes (together, the Term Note, and together with the Revolving Credit Note, the Notes) to evidence the Term Loan, (iv) a Security Agreement (the Security Agreement) required by the Lenders with respect to the grant by the Company of a security interest in substantially all of the assets of the Company in order to secure the obligations of the Company under the Credit Agreement and the Notes, and (v) Pledge Agreements (the Pledge Agreements) required by the Lenders with respect to the grant by the Company of a security interest in 65% of the capital stock of each of KVH Industries A/S and KVH Industries U.K. Limited held by the Company in order to secure the obligations of the Company under the Credit Agreement and the Notes. The Credit Agreement was amended in June 2015 to modify the circumstances under which certain changes in the Company's Board of Directors would constitute a change of control. The Credit Agreement was further amended in September 2015 to modify the Maximum Consolidate Leverage Ratio as of September 30, 2015. The $65,000 Term Note was executed on July 1, 2014 in connection with the acquisition of Videotel. See Note 13 below for more information regarding the acquisition. Proceeds in the amount of $35,000 were applied toward the payment of a portion of the purchase price for the acquired shares of Videotel, and proceeds in the amount of approximately $30,000 were applied toward the refinancing of the then-outstanding balance of the Company’s previous credit facility. The Company must make principal repayments on the Term Loan in the amount of approximately $1,200 at the end of each of the first 8 three-month periods following the closing; thereafter, the Company must make principal repayments in the amount of approximately $1,600 for each succeeding three-month period until the maturity of the loan on July 1, 2019. The Company made the first payment on this debt in September 2014. On the maturity date, the entire remaining principal balance of the loan, including any future loans under the Revolver, is due and payable, together with all accrued and unpaid interest, penalties, and other amounts due and payable under the Credit Agreement. The Credit Agreement contains provisions requiring the mandatory prepayment of amounts outstanding under the Term Loan and the Revolver under specified circumstances, including (i) 100% of the net cash proceeds from certain dispositions to the extent not reinvested in the Company’s business within a stated period, (ii) 50% of the net cash proceeds from stated equity issuances and (iii) 100% of the net cash proceeds from certain receipts of more than $250 outside the ordinary course of business. The prepayments are first applied to the Term Loan, in inverse order of maturity, and then to the Revolver. In the discretion of the Administrative Agent, certain mandatory prepayments made on the Revolver can permanently reduce the amount of credit available under the Revolver. Loans under the Credit Agreement bear interest at varying rates determined in accordance with the Credit Agreement. Each LIBOR Rate Loan, as defined in the Credit Agreement, bears interest on the outstanding principal amount thereof for each interest period from the applicable borrowing date at a rate per annum equal to the LIBOR Daily Floating Rate or LIBOR Monthly Floating Rate, each as defined in the Credit Agreement, as applicable, plus the Applicable Rate, as defined in the Credit Agreement, and each Base Rate Loan, as defined in the Credit Agreement, bears interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate, as defined in the Credit Agreement, plus the Applicable Rate. The Applicable Rate ranges from 1.50% to 2.25%, depending on the Company’s Consolidated Leverage Ratio, as defined in the Credit Agreement. The highest Applicable Rate applies when the Consolidated Leverage Ratio exceeds 2.00:1.00. Upon certain defaults, including failure to make payments when due, interest becomes payable at a higher default rate. Borrowings under the Revolver are subject to the satisfaction of numerous conditions precedent at the time of each borrowing, including the continued accuracy of the Company’s representations and warranties and the absence of any default under the Credit Agreement. As of December 31, 2015, there were no borrowings outstanding under the revolver. The Credit Agreement contains two financial covenants, a Maximum Consolidated Leverage Ratio and a Minimum Consolidated Fixed Charge Coverage Ratio, each as defined in the Credit Agreement. In September 2015, the Maximum Consolidated Leverage Ratio was increased from 1.00:1.00 to 1.75:1.00 for September 30, 2015, 1.50:1.00 for December 31, 2015, and 1.25:1.00 for March 31, 2016 and each fiscal quarter thereafter. The Minimum Consolidated Fixed Charge Coverage Ratio may not be less than 1.25:1.00. The Company was in compliance with these financial ratio debt covenants as of December 31, 2015. The Credit Agreement imposes certain other affirmative and negative covenants, including without limitation covenants with respect to the payment of taxes and other obligations, compliance with laws, entry into material contracts, creation of liens, incurrence of indebtedness, investments, dispositions, fundamental changes, restricted payments, changes in the nature of the Company’s business, transactions with affiliates, corporate and accounting changes, and sale and leaseback arrangements. The Company’s obligation to repay loans under the Credit Agreement could be accelerated upon a default or event of default under the terms of the Credit Agreement, including certain failures to pay principal or interest when due, certain breaches of representations and warranties, the failure to comply with the Company’s affirmative and negative covenants under the Credit Agreement, a change of control of the Company, certain defaults in payment relating to other indebtedness, the acceleration of payment of certain other indebtedness, certain events relating to the liquidation, dissolution, bankruptcy, insolvency or receivership of the Company, the entry of certain judgments against the Company, certain events relating to the impairment of collateral or the Lenders' security interest therein, and any other material adverse change with respect to the Company. Mortgage Loan On April 6, 2009, the Company entered into a mortgage loan in the amount of $4,000 related to its headquarters facility in Middletown, Rhode Island. On June 9, 2011, the Company entered into an amendment to the mortgage loan. The loan term is ten years, with a principal amortization of 20 years, and the interest rate will be a rate per year adjusted periodically based on a defined interest period equal to the BBA LIBOR Rate plus 2.00 percentage points. Land, building and improvements with an approximate carrying value of $5,000 as of December 31, 2015 secure the mortgage loan. The monthly mortgage payment is approximately $12 plus interest and increases in increments of approximately $1 each year throughout the life of the mortgage. Due to the difference in the term of the loan and amortization of the principal, a balloon payment of $2,551 is due on April 1, 2019. The loan contains one financial covenant, a Fixed Charge Coverage Ratio, which applies in the event that the Company’s consolidated cash, cash equivalents, and marketable securities balance falls below $25,000 at any time. As the Company’s consolidated cash, cash equivalents, and marketable securities balance was above the minimum threshold throughout the year ended December 31, 2015, the Fixed Charge Coverage Ratio did not apply. Under the mortgage loan, the Company may prepay its outstanding loan balance subject to certain early termination charges as defined in the mortgage loan agreement. If the Company were to default on its mortgage loan, the land, building and improvements would be used as collateral. As discussed in Note 16 to the consolidated financial statements, effective April 1, 2010, in order to reduce the volatility of cash outflows that arise from changes in interest rates, the Company entered into two interest rate swap agreements that are intended to hedge its mortgage interest obligations by fixing the interest rates specified in the mortgage loan to 5.91% for half of the principal amount outstanding and 6.07% for the remaining half of the principal amount outstanding as of April 1, 2010 until the mortgage loan expires on April 16, 2019. Equipment Loan On January 30, 2013, the Company borrowed $4,700 from a bank and pledged as collateral six satellite hubs and related equipment, including three hubs purchased in 2012. The term of the equipment loan is five years, and the loan bears interest at a fixed rate of 2.76% per annum. The monthly payment is approximately $83, including interest expense. On December 30, 2013, the Company borrowed $1,200 from a bank and pledged as collateral one satellite hub and related equipment. The term of the equipment loan is five years, and the loan bears interest at a fixed rate of 3.08% per annum. The monthly payment is approximately $21, including interest expense. The following is a summary of future principal payments under these long-term debt agreements:
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Commitment and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies The Company has certain operating leases for satellite capacity, various equipment, and facilities. The following reflects future minimum payments under operating leases that have initial or remaining non-cancelable lease terms at December 31, 2015:
Total rent expense incurred under facility operating leases for the years ended December 31, 2015, 2014, and 2013 amounted to $630, $820, and $639, respectively. Total expense incurred under satellite capacity and equipment operating leases for the years ended December 31, 2015, 2014, and 2013 amounted to $32,793, $30,280, and $23,215, respectively, which also includes payments for usage charges in excess of the minimum contractual requirements. In the normal course of business, the Company enters into unconditional purchase order obligations with its suppliers for inventory and other operational purchases. Outstanding and unconditional purchase order obligations were $21,678 as of December 31, 2015. The Company did not have any off-balance sheet commitments, guarantees, or standby repurchase obligations as of December 31, 2015. Legal Matters From time to time, the Company is involved in litigation incidental to the conduct of its business. In the ordinary course of business, the Company is a party to inquiries, legal proceedings and claims including, from time to time, disagreements with vendors and customers. Advanced Media Networks, L.L.C., or AMN, filed suit in the United States District Court for the District of Rhode Island against us for allegedly infringing two of its patents, seeking unspecified monetary damages and other relief. The Company settled this claim in January 2016 with a payment of cash to AMN. |
Stockholders' Equity |
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Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity
Options are granted with an exercise price equal to the fair market value of the common stock on the date of grant and generally vest in equal annual amounts over four years beginning on the first anniversary of the date of the grant. No options are exercisable for periods of more than five years after date of grant. Under the Company’s Amended and Restated 2006 Stock Incentive Plan, each share issued under awards other than options will reduce the number of shares reserved for issuance by two shares. Shares issued under options will reduce the shares reserved for issuance on a share-for-share basis. All plans were approved by the Company’s shareholders, pursuant to which 9,415 shares of the Company’s common stock were reserved for issuance. As of December 31, 2015, 7,840 options and awards to purchase shares of common stock had been issued, net of expired, canceled or forfeited options, and 1,575 were available for future grants. The Compensation Committee of the Board of Directors administers the plan, approves the individuals to whom options will be granted and determines the number of shares and exercise price of each option. Outstanding options under the plan at December 31, 2015 expire from February 2016 through November 2020. None of the Company’s outstanding options includes performance-based or market-based vesting conditions as of December 31, 2015. The Company has estimated the fair value of each option grant on the date of grant using the Black-Scholes option-pricing model. The expected volatility assumption is based on the historical daily price data of the Company’s common stock over a period equivalent to the weighted average expected life of the Company’s options. The expected term of options granted is derived using assumed exercise rates based on historical exercise patterns and represents the period of time the options granted are expected to be outstanding. The risk-free interest rate is based on the actual U.S. Treasury zero-coupon rates for bonds matching the expected term of the option as of the option grant date. The dividend yield of zero is based upon the fact that the Company has not historically declared or paid cash dividends, and does not expect to declare or pay dividends in the foreseeable future. The per share weighted-average fair values of stock options granted during 2015, 2014, and 2013 were $4.39, $4.71, and $5.45, respectively. The weighted-average assumptions used to value options as of their grant date were as follows:
The changes in outstanding stock options for the year ended December 31, 2015 are as follows:
The total aggregate intrinsic value of options exercised was $50, $232, and $933 in 2015, 2014, and 2013, respectively. The total aggregate intrinsic value of options outstanding at December 31, 2014 and 2013 was $1,814 and $1,958, respectively. The total aggregate intrinsic value of options exercisable at December 31, 2014 and 2013 was $761 and $619, respectively. As of December 31, 2014 and 2013, the number of options exercisable was 490 and 349, respectively, and the weighted average exercise price of those options was $11.87 and $11.90 per share, respectively. The weighted average remaining contractual term for options exercisable at December 31, 2014 and 2013 was 1.76 and 2.21 years, respectively. The weighted average remaining contractual term for options outstanding at December 31, 2014 and 2013 was 2.72 and 2.83 years, respectively. As of December 31, 2015, there was $1,505 of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 2.01 years. In 2015, 2014, and 2013, the Company recorded compensation charges of $1,229, $1,368, and $1,438, respectively, related to stock options. Compensation costs for options subject only to service conditions that vest ratably are recognized on a straight-line basis over the requisite service period for the entire award. During 2015, 2014, and 2013, cash received under stock option plans for exercises was $90, $471 and $1,344, respectively.
The Company granted 203, 265, and 266 restricted stock awards to employees under the terms of the Amended and Restated 2006 Stock Incentive Plan for the years ended December 31, 2015, 2014, and 2013, respectively. The restricted stock awards vest annually over four years from the date of grant subject to the recipient remaining an employee through the applicable vesting dates. Compensation expense for restricted stock awards is measured at fair value on the date of grant based on the number of shares granted and the quoted market closing price of the Company’s common stock. Such value is recognized as expense over the vesting period of the award, net of estimated forfeitures. The weighted-average grant-date fair value of restricted stock granted during 2015, 2014, and 2013 was $12.43, $13.57, and $13.61 per share, respectively. As of December 31, 2015, there was $4,173 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over a weighted-average period of 2.22 years. Compensation costs for awards subject only to service conditions that vest ratably are recognized on a straight-line basis over the requisite service period for the entire award. Compensation cost for awards initially subject to certain performance conditions are recognized on a ratable basis over the requisite service period for the entire award. In 2015, 2014, and 2013, the Company recorded compensation charges of $2,422, $2,317, and $2,613, respectively, related to restricted stock awards. Restricted stock activity under the Amended and Restated 2006 Stock Incentive Plan for 2015 is as follows:
Under the Company’s Amended and Restated Employee Stock Purchase Plan (ESPP), the Company is authorized to issue up to 650 shares of common stock, of which 18 shares remain available as of December 31, 2015. The ESPP covers all of the Company’s employees. Under the terms of the ESPP, eligible employees can elect to have up to six percent of their pre-tax compensation withheld to purchase shares of the Company’s common stock on a semi-annual basis. The ESPP allows eligible employees the right to purchase the Company’s common stock on a semi-annual basis at 85% of the market price at the end of each purchase period. During 2015, 2014, and 2013, shares issued under this plan were 28, 12, and 27 shares, respectively. The Company utilizes the Black-Scholes option-pricing model to calculate the fair value of these discounted purchases. The fair value of the 15% discount is recognized as compensation expense over the purchase period. The Company applies a graded vesting approach because the ESPP provides for multiple purchase periods and is, in substance, a series of linked awards. In 2015, 2014, and 2013, the Company recorded compensation charges of $58, $55, and $73, respectively, related to the ESPP. During 2015, 2014, and 2013, cash received under the ESPP was $291, $138, and $308, respectively. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Income tax expense for the years ended December 31, 2015, 2014, and 2013 attributable to income from operations is presented below.
The actual income tax expense (benefit) differs from the “expected” income tax expense (benefit) computed by applying the United States Federal corporate income tax rate of 34% to income before tax expense (benefit) as follows:
The components of income before income tax expense (benefit) determined by tax jurisdiction, are as follows:
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities for the periods presented are as follows:
As of December 31, 2015, the Company had foreign net operating loss carry-forwards available to offset future foreign income of $6,176. The foreign net operating loss carry-forwards have no expiration. As of December 31, 2015, the Company had federal research and development tax credit carry-forwards in the amount of $3,752 and other general business credits of $9 that expire in years 2026 through 2035. The Company also had alternative minimum tax credits of $132 that have no expiration date. As of December 31, 2015, the Company had state research and development tax credit carry-forwards in the amount of $3,472 that expire in years 2016 through 2023. The Company also had other state tax credit carry-forwards of $242 available to reduce future state tax expense that expire in years 2018 through 2019. The tax benefit related to $1,716 of federal and state tax credits would result in a credit to additional paid-in capital when these deferred tax assets reduce taxes payable. The Company’s ability to utilize these net operating loss carry-forwards and tax credit carry-forwards may be limited in the future if the Company experiences an ownership change pursuant to Internal Revenue Code Section 382. An ownership change occurs when the ownership percentages of 5% or greater stockholders change by more than 50% over a three-year period. In assessing the reliability of its net deferred tax assets, the Company considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2015, the Company concluded that a net increase of $531 of the valuation allowance was appropriate. As part of the Company’s analysis, the Company evaluated, among other factors, its recent history of generating taxable income and its near-term forecasts of future taxable income. The net increase in valuation allowance of $531 is composed of expense of $1,392, a decrease of $330 related to the expiration of previously reserved state tax credit carry-forwards, and a decrease of $531 related to the use of net operating loss and credit carryforwards attributed to tax deductions in excess of recognized compensation expense from employee stock compensation awards that existed as of the adoption of ASC 718, Compensation - Stock Compensation. $712 of the valuation allowance is attributable to tax deductions in excess of recognized compensation cost from employee stock compensation awards that existed as of the adoption of ASC 718. The Company will recognize the net deferred tax asset and corresponding benefit to additional paid-in capital for these windfall tax benefits once such amounts reduce income taxes payable, in accordance with the requirements of ASC 718. As of December 31, 2015, the Company has not provided for U.S. deferred income taxes on undistributed earnings of its foreign subsidiaries of approximately $11,913 since these earnings are expected to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends or otherwise, the Company will be subject to additional U.S. and state income taxes (less foreign tax credits), as well as withholding taxes in its foreign locations. The amount of taxes attributable to the undistributed earnings is not practicably determinable. The Company establishes reserves for uncertain tax positions based on management’s assessment of exposure associated with tax deductions, permanent tax differences, and tax credits. The tax reserves are analyzed periodically and adjustments are made as events occur to warrant adjustment to the reserve. The Company's policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. During the years ended December 31, 2015, 2014, and 2013, the aggregate changes in the total gross amount of unrecognized tax benefits are summarized as follows:
The Company had gross unrecognized tax benefits of $983 and $2,487 as of December 31, 2015 and 2014, respectively. The Company did not have any material unrecognized tax benefits at December 31, 2013. $983, $1,172, and $0 represent the amount of unrecognized tax benefits that, if recognized, would result in a reduction of the Company's effective tax rate at December 31 2015, 2014, and 2013, respectively. The Company recorded interest and penalties of $78, $84, and $0 in its statement of operations for the years ended December 31, 2015, 2014, and 2013, respectively. The combined amount of accrued interest and penalties related to tax positions taken on our tax returns and included in non-current income taxes payable was approximately $468, $1,067, and $0 as of December 31, 2015, 2014, and 2013, respectively. The timing of any resolution of income tax examinations is highly uncertain, as are the amounts and timing of any settlement payment. These events could cause fluctuations in the balance sheet classification of current and non-current assets and liabilities. The Company expects a reduction of approximately $849 of unrecognized tax benefits within the next twelve months. $788 of the expected decrease is attributable to tax positions related to the Videotel acquisition that the Company anticipates will be resolved with taxing authorities during 2016. $61 of the expected decrease is related to amended tax returns that the Company anticipates it will file during 2016. The Company’s tax jurisdictions include the United States, the UK, Denmark, Cyprus, Norway, Brazil, Singapore, Belgium, Bermuda, the Netherlands, Hong Kong, and Japan. In general, the statute of limitations with respect to the Company's United States federal income taxes has expired for years prior to 2012, and the relevant state and foreign statutes vary. However, preceding years remain open to examination by United States federal and state and foreign taxing authorities to the extent of future utilization of net operating losses and research and development tax credits generated in each preceding year. |
Acquisition |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition | Acquisitions Videotel On July 2, 2014, KVH Media Group Limited (KMG UK), an indirectly wholly owned subsidiary of KVH, entered into a Share Purchase Agreement with Nigel Cleave to acquire all of the issued share capital of Super Dragon Limited and Videotel Marine Asia Limited, for an aggregate purchase price of approximately $47,446, which excluded $1,719 of cash consideration that was considered deferred compensation in purchase accounting. The Company expensed approximately $770 and $400 related to the deferred compensation during the year ended December 31, 2015 and 2014, respectively. Videotel is a maritime training services company headquartered in London that produces and distributes training films and eLearning computer-based training courses to commercial customers in the maritime market. Videotel also has sales offices in Hong Kong and Singapore. The purchase price was determined through arm’s-length negotiation and was subject to a potential post-closing adjustment based on the value of the net assets delivered at the closing. In the second quarter of 2015, the Company finalized its valuations of the fair value of the assets acquired and liabilities assumed, which resulted in no adjustments to the purchase price. The Share Purchase Agreement contains certain representations, warranties, covenants and indemnification provisions. The Share Purchase Agreement provides that 10% of the purchase price shall be held in escrow for a period of approximately 21 months after the closing in order to satisfy valid indemnification claims that KMG UK may assert for specified breaches of representations, warranties and covenants. The escrow and holdback amounts of approximately $6,000 were fully funded during the first quarter of 2015. In the Share Purchase Agreement, Mr. Cleave agreed to comply with certain confidentiality, non-competition and non-solicitation covenants with respect to the business of Videotel for a period of 18 months after the closing. The total purchase price and the excess of the total purchase price over the estimated fair value of the net assets acquired are as follows:
The acquired finite-lived intangible assets from the Videotel acquisition were recorded at their estimated fair value of $25,524 on the acquisition date. Refer to Note 1 and Note 10 for the classification of Videotel intangible assets including their useful lives. From the acquisition on July 2, 2014 through December 31, 2015, the Company has recorded approximately $33,600 of service revenues attributable to Videotel within its consolidated financial statements, of which approximately $23,200 was recorded during the year ended December 31, 2015. Transaction costs related to the acquisition of Videotel were $1,200 for the year ended December 31, 2014. The following table summarizes the supplemental statements of operations information on an unaudited pro forma basis as if the Videotel acquisition had occurred on January 1, 2013:
The pro forma results presented above are for illustrative purposes only for the periods presented and do not purport to be indicative of the actual results which would have occurred had the transaction been completed as of the beginning of the period, nor are they indicative of results of operations which may occur in the future. Headland Media Limited On May 11, 2013, KVH Industries U.K. Limited, a newly formed, wholly owned subsidiary of KVH, entered into a Share Purchase Agreement with Oakley Capital Private Equity L.P., Mark Woodhead, Andrew Michael Galvin and the Trustees of the Headland Media Limited Employee Benefit Trust to acquire all of the issued share capital of Headland Media Limited (now known as the KVH Media Group), a media and entertainment service company based in the United Kingdom that distributes news, sports, movies, music and training video content for commercial and leisure customers in the maritime, hotel, and retail markets, for an aggregate purchase price of £15,576 ($24,169 at the exchange rate of £1.00: $1.5517 on May 11, 2013). The aggregate purchase price includes $169 in payments made in July 2013 related to a post-closing adjustment. The acquisition of Headland Media Limited (now known as the KVH Media Group) was accounted for under the acquisition method of accounting for the business combination. The purchase price was determined as a result of arms-length negotiation and was subject to a potential post-closing adjustment based on the value of the net assets delivered at the closing. The Share Purchase Agreement contains certain representations, warranties, covenants and indemnification provisions. The Share Purchase Agreement provided that 10% of the purchase price would be held in escrow for a period of at least 18 months after the closing in order to satisfy valid indemnification claims that KVH could have asserted for specified breaches of representations, warranties and covenants. The Company released the escrow in November 2014. The total purchase price and the excess of the total purchase price over the fair value of the net assets acquired are as follows:
From the date of the acquisition, May 11, 2013, to December 31, 2015, the Company has recorded approximately $38,200 of service revenue attributable to KVH Media Group within its consolidated financial statements, of which approximately $15,000 was recorded during the year ended December 31, 2015. The following table summarizes the supplemental statements of operations information on an unaudited pro forma basis as if the KVH Media Group acquisition had occurred on January 1, 2012:
The pro forma results presented above are for illustrative purposes only for the periods presented and do not purport to be indicative of the actual results which would have occurred had the transaction been completed as of the beginning of the period, nor are they indicative of results of operations which may occur in the future. |
Goodwill and Intangible Assets |
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Goodwill and Intangible Assets | Goodwill and Intangible Assets The Company’s goodwill and intangible assets are associated with the purchase of Virtek Communication (now KVH Industries Norway AS) in September 2010, Headland Media Limited (now known as the KVH Media Group) in May 2013, and Videotel in July 2014. Intangible assets are subject to amortization. The following table summarizes other intangible assets as of December 31, 2015 and 2014, respectively:
The Company amortizes its intangible assets over the estimated useful lives of the respective assets as discussed above in our Summary of Significant Accounting Policies. Amortization expense related to intangible assets was $5,526, $3,859, and $1,179 for years ended December 31, 2015, 2014, and 2013, respectively. Estimated future amortization expense for intangible assets recorded by the Company at December 31, 2015 is as follows:
Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiable intangible assets acquired. The changes in the carrying amount of goodwill during the year ended December 31, 2015 is as follows:
The changes in the carrying amount of intangible assets during the year ended December 31, 2015 is as follows:
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401(k) Plan |
12 Months Ended |
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Dec. 31, 2015 | |
Compensation and Retirement Disclosure [Abstract] | |
401(k) Plan | 401(k) Plan The Company has a 401(k) Plan (the Plan) for all eligible employees. Participants may defer a portion of their pre-tax earnings subject to limits determined by the Internal Revenue Service. Participants age 50 or older may be eligible to make additional contributions. As of December 31, 2015, the Company matches one half of the first 6% contributed by the Plan participants. The Company’s contributions vest over a five-year period from the date of hire. Total Company matching contributions were $608, $462, and $376 for the years ended December 31, 2015, 2014, and 2013, respectively. In addition, the Company may make contributions to the Plan at the discretion of the Compensation Committee of the Board of Directors. There were no discretionary contributions in 2015, 2014, or 2013. |
Business and Credit Concentrations |
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Business and Credit Concentrations | Business and Credit Concentrations Significant portions of the Company’s net sales are as follows:
The terms and conditions of sales to SANG are consistent with the Company’s standard terms and conditions of product sales as discussed in Note 1 above. No other individual customer accounted for more than 10% of the Company’s net sales for the years ended December 31, 2015, 2014, and 2013, respectively. The Company had one customer that accounted for 17% of accounts receivable as of December 31, 2015, which was paid as of the date of this report. |
Segment Reporting |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting Under common operational management, the Company designs, develops, manufactures and markets its navigation, guidance and stabilization and mobile communications products for use in a wide variety of applications. Products are generally sold directly to third-party consumer electronic dealers and retailers, original equipment manufacturers, government contractors or to U.S. and other foreign government agencies. Primarily, sales originating in the Americas consist of sales within the United States and Canada and, to a lesser extent, Mexico and some Latin and South American countries. The Americas’ sales also include all guidance and stabilization product sales throughout the world. Sales originating from the Company’s European and Asian subsidiaries principally consist of sales into all European countries, both inside and outside the European Union, as well as Africa, Asia/Pacific, the Middle East, and India. The Company operates in two geographic segments, exclusively in the mobile communications, navigation and guidance and stabilization equipment industry, which it considers to be a single business activity. The Company has two primary product categories: mobile communication and guidance and stabilization. Mobile communication sales and services include marine, land mobile, and automotive communication equipment and satellite-based voice, television and Broadband Internet connectivity services; distribution of commercially licensed news, sports, movies, and music content for commercial and leisure customers in the maritime, hotel, and retail markets; and distribution of training films and eLearning computer-based training courses to commercial customers in the maritime market. Guidance and stabilization sales and services include sales of navigation and guidance and stabilization equipment based upon digital compass and FOG sensor technology. Mobile communication and guidance and stabilization sales also include development contract revenue, product repairs and extended warranty sales. The following table summarizes information regarding the Company’s operations by geographic segment:
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Share Buyback Program |
12 Months Ended |
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Dec. 31, 2015 | |
Disclosure of Repurchase Agreements [Abstract] | |
Share Buyback Program | Share Buyback Program On November 26, 2008, the Company’s Board of Directors authorized a program to repurchase up to 1,000 shares of the Company’s common stock. As of December 31, 2015, 341 shares of the Company’s common stock remain available for repurchase under the authorized program. The repurchase program is funded using the Company’s existing cash, cash equivalents, marketable securities and future cash flows. Under the repurchase program, the Company, at management’s discretion, may repurchase shares on the open market from time to time, in privately negotiated transactions or block transactions, or through an accelerated repurchase agreement. The timing of such repurchases depends on availability of shares, price, market conditions, alternative uses of capital, and applicable regulatory requirements. The program may be modified, suspended or terminated at any time without prior notice. The repurchase program has no expiration date. There were no other repurchase programs outstanding during the year ended December 31, 2015 and no repurchase programs expired during the period. During the years ended December 31, 2015, 2014, and 2013, the Company did not repurchase any shares of its common stock in open market transactions. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements ASC 820, Fair Value Measurements and Disclosures, provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an 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. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Assets and liabilities measured at fair value are based the valuation techniques identified in the table below. The valuation techniques are:
The following tables present financial assets and liabilities at December 31, 2015 and December 31, 2014 for which the Company measures fair value on a recurring basis, by level, within the fair value hierarchy:
Certain financial instruments are carried at cost on the consolidated balance sheets, which approximates fair value due to their short-term, highly liquid nature. These instruments include cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses. Assets Measured and Recorded at Fair Value on a Nonrecurring Basis The Company's non-financial assets and liabilities, such as goodwill, intangible assets, and other long-lived assets resulting from business combinations, are measured at fair value using income approach valuation methodologies at the date of acquisition and subsequently re-measured if there are indicators of impairment. There were no indicators of impairment identified during the year ended December 31, 2015. As of December 31, 2015, the Company did not have any other non-financial assets and liabilities that were carried at fair value on a recurring basis in the consolidated financial statements or for which a fair value measurement was required. |
Derivative Instruments and Hedging Activities |
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General Discussion of Derivative Instruments and Hedging Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities Effective April 1, 2010, in order to reduce the volatility of cash outflows that arise from changes in interest rates, the Company entered into two interest rate swap agreements. These interest rate swap agreements are intended to hedge the Company’s mortgage loan related to its headquarters facility in Middletown, Rhode Island by fixing the interest rates specified in the mortgage loan to 5.9% for half of the principal amount outstanding and 6.1% for the remaining half of the principal amount outstanding as of April 1, 2010 until the mortgage loan expires on April 16, 2019. As required by ASC Topic 815, Derivatives and Hedging, the Company records all derivatives on the balance sheet at fair value. As of December 31, 2015, the fair value of the derivatives is included in other accrued liabilities and the unrealized loss is included in other comprehensive loss. As of December 31, 2015, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
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Legal Matters |
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Legal Matters [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Legal Matters | Commitments and Contingencies The Company has certain operating leases for satellite capacity, various equipment, and facilities. The following reflects future minimum payments under operating leases that have initial or remaining non-cancelable lease terms at December 31, 2015:
Total rent expense incurred under facility operating leases for the years ended December 31, 2015, 2014, and 2013 amounted to $630, $820, and $639, respectively. Total expense incurred under satellite capacity and equipment operating leases for the years ended December 31, 2015, 2014, and 2013 amounted to $32,793, $30,280, and $23,215, respectively, which also includes payments for usage charges in excess of the minimum contractual requirements. In the normal course of business, the Company enters into unconditional purchase order obligations with its suppliers for inventory and other operational purchases. Outstanding and unconditional purchase order obligations were $21,678 as of December 31, 2015. The Company did not have any off-balance sheet commitments, guarantees, or standby repurchase obligations as of December 31, 2015. Legal Matters From time to time, the Company is involved in litigation incidental to the conduct of its business. In the ordinary course of business, the Company is a party to inquiries, legal proceedings and claims including, from time to time, disagreements with vendors and customers. Advanced Media Networks, L.L.C., or AMN, filed suit in the United States District Court for the District of Rhode Island against us for allegedly infringing two of its patents, seeking unspecified monetary damages and other relief. The Company settled this claim in January 2016 with a payment of cash to AMN. |
Quarterly Financial Results (Unaudited) |
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Quarterly Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Results (Unaudited) | Quarterly Financial Results (Unaudited) The following financial information for interim periods includes transactions which affect comparability of the quarterly results for the years ended December 31, 2015 and 2014. During the third quarter of 2014, the Company acquired Videotel, as described in Note 9 “Acquisitions,” resulting in increased service sales and service gross margins. Financial information for interim periods was as follows:
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements of KVH Industries, Inc. and its wholly owned subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America. The Company has evaluated all subsequent events through the date of this filing. All of the operating expenses of the subsidiaries that serve as the Company’s European, Singaporean, Japanese, and Brazilian international distributors are reflected within sales, marketing, and support within the accompanying consolidated statements of operations. All significant intercompany accounts and transactions have been eliminated in consolidation. |
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Significant Estimates and Assumptions | Significant Estimates and Assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of sales and expenses during the reporting periods. Significant estimates and assumptions by management affect the Company’s revenue recognition, valuation of accounts receivable, valuation of inventory, assumptions used to determine fair value of goodwill and intangible assets, deferred tax assets and related valuation allowance, stock-based compensation, warranty and accounting for contingencies. Although the Company regularly assesses these estimates, actual results could differ materially from these estimates. Changes in estimates are recorded in the period in which they become known. The Company bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances. |
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Concentration of Credit Risk and Single Source Suppliers | Concentration of Credit Risk and Single Source Suppliers Cash, cash equivalents and marketable securities. The Company is potentially subject to financial instrument concentration of credit risk through its cash, cash equivalent and marketable securities investments. To mitigate these risks the Company maintains cash, cash equivalents and marketable securities with reputable and nationally recognized financial institutions. As of December 31, 2015, $22,619 classified as marketable securities was held by Wells Fargo and substantially all of the cash and cash equivalents were held by Bank of America, N.A. See Note 2 for a description of marketable securities. Trade accounts receivable. Concentrations of risk (see Note 12) with respect to trade accounts receivable are generally limited due to the large number of customers and their dispersion across several geographic areas. Although the Company does not foresee that credit risk associated with these receivables will deviate from historical experience, repayment is dependent upon the financial stability of those individual customers. The Company establishes allowances for potential bad debts and evaluates, on a monthly basis, the adequacy of those reserves based upon historical experience and its expectations for future collectability concerns. Activity within the Company’s allowance for doubtful accounts for the periods presented is as follows:
Certain components from third parties used in the Company’s products are procured from single sources of supply. The failure of a supplier, including a subcontractor, to deliver on schedule could delay or interrupt the Company’s delivery of products and thereby materially adversely affect the Company’s revenues and operating results. |
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Revenue Recognition | Revenue Recognition Product sales. Product sales are recognized when persuasive evidence of an arrangement exists, goods are shipped, title has passed and collectability is reasonably assured. The Company’s standard sales terms require that:
For certain guidance and stabilization product sales, customer acceptance or inspection may be required before title and risk of loss transfers. For those sales, revenue is recognized after transfer of title and risk of loss and after notification of customer acceptance. In certain circumstances customers may request a bill and hold arrangement. Under these bill and hold arrangements, revenue is recognized when the Company has fulfilled all of its performance obligations, the units are segregated and available for shipment in accordance with the defined contract delivery schedule, and the Company has received notification of customer acceptance which transfers title and risk of loss to the customer. Under certain limited conditions, the Company, at its sole discretion, provides for the return of goods. No product is accepted for return and no credit is allowed on any returned product unless the Company has granted and confirmed prior written permission by means of appropriate authorization. The Company establishes reserves for potential sales returns, credits, and allowances, and evaluates, on a monthly basis, the adequacy of those reserves based upon historical experience and expectations for the future. Multiple-element revenue arrangements. Some of our sales involve multiple-element arrangements that include both hardware-related products and contracted service, or satellite connectivity that are accounted under ASC 605-25, Multiple-Element Arrangements. Multiple elements, arrangement consideration is allocated to each element based on the relative selling prices of all of the elements in the arrangement using the fair value hierarchy as required by “Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements,” (Accounting Standards Update “ASU” 2009-13). The Company adopted the provisions of ASU 2009-13 as of January 1, 2010. ASU 2009-13 requires that the Company establish VSOE of fair value based upon the price charged when the same element is sold separately or established by management having the relevant pricing authority. When VSOE exists it is used to determine the selling price of a deliverable. When VSOE is not established, the Company attempts to establish the selling price of each element based on TPE. When the Company is unable to establish selling price using VSOE or TPE, the Company uses BESP in the allocation of arrangement consideration for the relevant deliverables. The objective of BESP is to determine the price at which the Company would transact a sale if a product or service was sold on a stand-alone basis. The Company determines BESP for our products and certain services by considering multiple factors including, but not limited to, overall market conditions, including geographic or regional-specific market factors and profit objectives for such deliverables. Each deliverable within the Company's multiple-deliverable revenue arrangements is accounted for as a separate unit of accounting under the guidance of ASU 2009-13 if both of the following criteria are met: the delivered item or items have value to the customer on a standalone basis; and for an arrangement that includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. The Company considers a deliverable to have standalone value if the item is sold separately by the Company or another vendor or if the item could be resold by the customer. Further, the Company's revenue arrangements generally do not include a general right of return relative to delivered products. Deliverables not meeting the criteria for being a separate unit of accounting are combined with a deliverable that does meet that criterion. The appropriate allocation of arrangement consideration and recognition of revenue is then determined for the combined unit of accounting. Satellite connectivity and media content sales. Directly sold and re-sold satellite connectivity service for voice, data and Internet is recognized monthly based upon minutes or megabytes of traffic processed or contracted fixed fee schedules. Typically, all subscribers enter into a contracted one-year minimum service agreement. The Company records all satellite connectivity service sales to subscribers as gross sales, as the Company is the primary obligor in the contracted service arrangement. All associated regulatory service fees and costs are recorded net in the consolidated financial statements. Media content sales include the Company's distribution of commercially licensed news, sports, movies and music content for commercial and leisure customers in the maritime, hotel, and retail markets as well as training videos to the merchant marine market that are typically based on a contracted fixed fee schedule. The Company typically recognizes revenue from media content sales ratably over the period of the service contract. The accounting estimates related to the recognition of satellite connectivity and media content service sales in results of operations requires the Company to make assumptions about future billing adjustments for disputes with subscribers as well as unauthorized usage. Lease financing. Lease financing consists of sales-type leases primarily of the TracPhone V-IP Series. The Company records the leases at a price typically equivalent to normal selling price and in excess of the cost or carrying amount. Upon delivery, the Company records the present value of all payments under these leases as revenues, and the related costs of the product are charged to cost of sales. Interest income is recognized throughout the lease term (typically three years) using an implicit interest rate. Through December 31, 2015, lease sales have not been a significant portion of the Company’s total sales. Contracted service sales. The Company engages in contracts for development, production, and services activities related to standard product modification or enhancement, which it accounts for using the proportional performance method of revenue recognition. The Company considers the nature of these contracts and the types of products and services provided when determining the proper accounting for a particular contract. Customer and government-agency contracted engineering service and grant sales under development contracts are recognized primarily under the proportional performance method during the period in which the Company performs the service or development efforts in accordance with the agreement. Services performed under these types of contracts include engineering studies, surveys, building construction, prototype development, and program management. Performance is determined principally by comparing the accumulated costs incurred to date with management’s estimate of the total cost to complete the contracted work. The Company establishes billing terms at the time project deliverables and milestones are agreed. Unbilled revenue recognized in excess of the amounts invoiced to clients are classified within the accompanying consolidated balance sheets in the caption “prepaid expenses and other assets.” The use of contract accounting requires significant judgment relative to estimating total contract revenues and costs, including assumptions relative to the length of time to complete the contract, the nature and complexity of the work to be performed, and prices for subcontractor services and materials. The risk to the Company on a fixed-price contract is that if estimates to complete the contract change from one period to the next, profit levels will vary from period to period. The Company's estimates are based upon the professional knowledge and experience of its engineers, program managers and other personnel, who review each long-term contract monthly to assess the contract's schedule, performance, technical matters and estimated cost at completion. Changes in estimates are applied when adjustments in estimated contract costs are identified, such revisions may result in current period adjustments to earnings applicable to performance in prior periods. Any advance payments arising from such extended-term development contracts are recorded as deposits. If, in any period, estimated total costs under a contract indicate an expected loss, then such loss is provided for in that period. Through December 31, 2015, contracted service revenue has not been a significant portion of the Company’s total sales. Product service sales. Product service sales other than under development contracts are recognized when completed services are provided to the customer and collectability is reasonably assured. The Company establishes reserves for potential sales returns, credit and allowances, and evaluates, on a monthly basis, the adequacy of those reserves based upon historical experience and its expectations for the future. Through December 31, 2015, product service sales have not been a significant portion of the Company’s total sales. Extended warranty sales. The Company sells extended warranty contracts on mobile communications and guidance and stabilization products. Sales under these contracts are recognized ratably over the contract term. Through December 31, 2015, warranty sales have not been a significant portion of the Company’s total sales. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include cash equivalents, investments, accounts receivable, accounts payable and accrued expenses approximate their fair values due to the short maturity of these instruments. The carrying amount of the Company’s mortgage loan approximates fair value based on currently available quoted rates of similarly structured mortgage facilities. See Note 2 for more information on the fair value of the Company’s marketable securities. |
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Cash, Cash Equivalents and Marketable Securities | Cash, Cash Equivalents, and Marketable Securities In accordance with the Company’s investment policy, cash in excess of operational needs is invested in money market mutual funds, government agency bonds, United States treasuries, municipal bonds, corporate notes, and certificates of deposit, which are reflected within marketable securities in the accompanying consolidated balance sheets. The Company determines the appropriate classification of marketable securities at each balance sheet date. As of December 31, 2015 and 2014, all of the Company’s marketable securities have been designated as available-for-sale and are carried at their fair value with unrealized gains and losses included in accumulated other comprehensive (loss) income in the accompanying consolidated balance sheets. The Company reviews investments in debt securities for other than temporary impairment whenever the fair value of an investment is less than amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers whether it intends to sell the security, whether it expects to recover the credit loss, and if it is more likely than not that the Company will be required to sell the security prior to recovery. Evidence considered in this assessment includes the reasons for the impairment, compliance with the Company’s investment policy, the severity and duration of the impairment, changes in value subsequent to year-end and forecasted performance of the investee. The Company has reviewed its securities with unrealized losses as of December 31, 2015 and 2014 and has concluded that no other-than-temporary impairments exist. |
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Inventories | Inventories Inventories are stated at the lower of cost or market using the first-in first-out costing method. The Company provides inventory reserves based on excess and obsolete inventory determined primarily by future demand forecasts. The Company records inventory charges to costs of product sales. |
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Property and Equipment | Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed on the straight-line method over the estimated useful lives of the respective assets. The principal lives used in determining the depreciation rates of various assets are: buildings and improvements, 5-40 years; machinery, satellite hubs and equipment, and video-on-demand (VOD) units, 5-10 years; office and computer equipment, 3-7 years; and motor vehicles, 5 years. |
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Goodwill and Long-lived Assets | Goodwill and Intangible Assets The Company’s goodwill and intangible assets are associated with the purchase of Virtek Communication (now known as KVH Industries Norway AS) in September 2010. Headland Media Limited (now known as the KVH Media Group) in May 2013, and Videotel in July 2014. Goodwill is recorded when the consideration for an acquisition exceeds the fair value of net tangible and identifiable intangible assets acquired. Goodwill is not amortized, but instead is tested for impairment at least annually, or if events or changes in circumstances indicate that the carrying value may not be recoverable. The Company estimates the fair value of the reporting unit using a discounted cash flow model or other valuation models, such as comparative transactions and market multiples. The impairment test is performed through the application of a two-step process. The first step compares the carrying value of the Company’s reporting units to their estimated fair values as of the test date. If fair value is less than carrying value, a second step is performed to quantify the amount of the impairment, if any. As of August 31, 2015, the Company performed its annual impairment test for goodwill at the reporting unit level and, after conducting the first step, determined that it was not necessary to conduct the second step as it concluded that the fair value of its reporting units exceeded their carrying value. Accordingly, the Company determined no adjustment to goodwill was necessary. There were no indicators of potential goodwill impairment noted as of December 31, 2015. Intangible assets are comprised of the following, which are being amortized on a straight-line basis over the following estimated useful lives:
Intangible assets with estimated lives and other long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of intangible assets with estimated lives and other long-lived assets is measured by a comparison of the carrying amount of an asset or asset group to future net undiscounted cash flows expected to be generated by the asset or asset group. If these comparisons indicate that an asset is not recoverable, the Company will recognize an impairment loss for the amount by which the carrying value of the asset or asset group exceeds the related estimated fair value. Estimated fair value is based on either discounted future operating cash flows or appraised values, depending on the nature of the asset. There are no events or changes in circumstances that indicated any of the carrying amounts of the Company’s intangible assets may not be recoverable during 2015. See Note 10 for further discussion of goodwill and intangible assets. |
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Other Non-Current Assets | Other Non-Current Assets Other non-current assets are primarily comprised of long-term lease receivables, prepaid expenses, and deposits. |
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Product Warranty | Product Warranty The Company’s products carry standard limited warranties that range from one to two years and vary by product. The warranty period begins on the date of retail purchase or lease by the original purchaser. The Company accrues estimated product warranty costs at the time of sale and any additional amounts are recorded when such costs are probable and can be reasonably estimated. Factors that affect the Company’s warranty liability include the number of units sold or leased, historical and anticipated rates of warranty repairs and the cost per repair. Warranty and related costs are reflected within sales, marketing and support in the accompanying statements of operations. |
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Shipping and Handling Cost | Shipping and Handling Costs Shipping and handling costs are expensed as incurred and included in cost of sales. Billings for shipping and handling are reflected within net sales in the accompanying statements of operations. |
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Research and Development | Research and Development Expenditures for research and development, including customer-funded research and development, are expensed as incurred. |
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Advertising Costs | Advertising Costs Costs related to advertising are expensed as incurred. Advertising expense was $2,712, $2,825, and $3,189 for the years ended December 31, 2015, 2014, and 2013, respectively, and is included in sales, marketing, and support expense in the accompanying consolidated statements of operations. |
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Foreign Currency Translations | Foreign Currency Translation The financial statements of the Company’s foreign subsidiaries located in Denmark and Singapore are maintained using the United States dollar as the functional currency. Exchange rates in effect on the date of the transaction are used to record monetary assets and liabilities. Revenue and other expense elements are recorded at rates that approximate the rates in effect on the transaction dates. Realized foreign currency remeasurement gains and losses are recognized within “other (expense) income” in the accompanying consolidated statements of operations. For the years ended December 31, 2015, 2014, and 2013, the Company experienced foreign currency losses of $59, $126, and $123, respectively. The financial statements of the Company’s foreign subsidiaries located in the United Kingdom, Brazil, Norway, Cyprus, Belgium, the Netherlands and Japan subsidiaries use the foreign subsidiaries’ respective local currencies as the functional currency. The Company translates the assets and liabilities of these foreign subsidiaries at the exchange rates in effect at year-end. Net sales, costs and expenses are translated using average exchange rates in effect during the year. Gains and losses from foreign currency translation are credited or charged to accumulated other comprehensive loss included in stockholders' equity in the accompanying consolidated balance sheets. |
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Income Tax | Income Taxes Income taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records valuation allowances to reduce deferred income tax assets to the amount that is more likely than not to be realized. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely than not that a position will be sustained, no amount of the benefit attributable to the position is recognized. The tax benefit to be recognized of any tax position that meets the more likely than not recognition threshold is calculated as the largest amount that is more than 50% likely of being realized upon resolution of the contingency. See Note 8 for further discussion of income taxes. |
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Net Income (Loss) per Common Share | Net Income per Common Share Basic net income per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted net income per share incorporates the dilutive effect of common stock equivalent options, warrants and other convertible securities, if any, as determined in accordance with the treasury stock accounting method. |
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Contingent Liabilities | Contingent Liabilities The Company estimates the amount of potential exposure it may have with respect to claims, assessments and litigation in accordance with ASC 450, Contingencies. As of December 31, 2015, the Company was party to a lawsuit, as described in Note 17. |
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Operating Segments | Operating Segments The Company operates in two geographic segments, exclusively in the mobile communications, navigation and guidance and stabilization equipment industry, which it considers to be a single business industry. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance. To date, the chief operating decision maker has made such decisions and assessed performance at the company level, as one segment. The Company’s chief operating decision maker is its President, Chief Executive Officer and Chairman of the Board. |
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Film Costs, Policy [Policy Text Block] | (u) Film Production Costs The Company capitalizes direct costs incurred in the production of its training videos, such as writing, directing, narrating, casting, location rental, and editing. These film costs are classified as a non-current asset on its consolidated balance sheet and are placed into service upon the film title being released and available for customers' use. The Company’s sales model associated with training is subscription-based, in which fees from third parties are not directly attributable to the exhibition of a particular film but relate instead to access to the entire film library. Accordingly, management estimates that the straight line method is the most representative method for the amortization of film costs. Consistent with the period over which revenues are assessed (i.e. the subscription period), the film costs are amortized over four years. In the event that the film title is replaced or removed from the film library before the amortization period has expired, all unamortized costs are expensed immediately |
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Recent Accounting Pronouncements | Recently Issued Accounting Standards Revenue from Contracts In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU 2014-09, "Revenue from Contracts with Customers" ("ASU 2014-09"), regarding ASC Topic 606 of the same nomenclature. ASU 2014-09 represents the culmination of efforts by the FASB and the International Accounting Standards Board to issue a common revenue standard. In April 2015, the FASB voted to defer the effective date of the new revenue recognition standard by one year, which resulted in ASU 2014-09 becoming effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company is evaluating whether the adoption of ASU 2014-09 will have a material effect on the Company's consolidated statements of financial condition, results of operations or cash flows. Inventory In July 2015, the FASB issued ASU 2015-11,"Simplifying the Measurement of Inventory" ("ASU 2015-11"), regarding ASC Topic 330 - Inventory. The amendments in the ASU require entities that measure inventory using the first-in, first-out or average cost methods to measure inventory at the lower of cost and net realizable value. Net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion and disposal. ASU 2015-11 is effective on a prospective basis for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2016, with earlier application permitted. The Company does not believe that the adoption of ASU 2015-11 will have a material effect on the Company's consolidated statements of financial condition, results of operations or cash flows. Deferred Tax Assets In November 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-17, "Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes" ("ASU 2015-17"). The standard requires that deferred tax assets and liabilities be classified as non-current on the balance sheet rather than being separated into current and non-current. The Company early adopted its provisions during fiscal year 2015 on a prospective basis. Accordingly, as permitted by ASU 2015-17, the current deferred taxes have been classified as non-current on the Company's balance sheet. The prospective adoption of ASU 2015-17 does not require a restatement of prior year balances; as such, they have not been adjusted. Lease Accounting On February 25, 2016, the Financial Accounting Standards Board ("FASB") issued its new leases standard, ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). ASU 2016-02 is aimed at putting most leases on lessees’ balance sheets, but it would also change aspects of lessor accounting. ASU 2016-02 is effective for public business entities for annual periods beginning after December 15, 2018 and interim periods within that year. As a result, the Company will adopt this standard effective January 1, 2019. The Company is currently evaluating the impact of adoption on its financial position and results from operations. There are no other recent accounting pronouncements that have been issued by the FASB that would have a material impact on the financial statements of the Company. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of accounts, notes, loans and financing receivable | Activity within the Company’s allowance for doubtful accounts for the periods presented is as follows:
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Summary of product warranty activity | The following table summarizes product warranty activity during 2015 and 2014:
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Revenue and related development costs, customer-funded research and development costs | Revenue and related development costs from customer-funded research and development are as follows:
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Schedule of reconciliation of basic and diluted weighted average common shares outstanding | A reconciliation of the basic and diluted weighted average common shares outstanding is as follows:
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Marketable Securities (Tables) |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities | Included in marketable securities as of December 31, 2015 and 2014 are the following:
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Available-for-sale securities, debt maturities, amortized cost and fair value basis |
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Inventories (Tables) |
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of inventories | Inventories as of December 31, 2015 and 2014 include the costs of material, labor, and factory overhead. Inventories consist of the following:
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Property and Equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment | Property and equipment, net, as of December 31, 2015 and 2014 consist of the following:
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Debt and Line of Credit (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of future principal payments under the mortgage | The following is a summary of future principal payments under these long-term debt agreements:
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Commitment and Contingencies (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Schedule of future minimum rental payments for operating leases | The following reflects future minimum payments under operating leases that have initial or remaining non-cancelable lease terms at December 31, 2015:
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Stockholders' Equity (Tables) |
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Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of weighted-average assumptions used to value options as of their grant date | The weighted-average assumptions used to value options as of their grant date were as follows:
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Schedule of share-based compensation, stock options, activity | The changes in outstanding stock options for the year ended December 31, 2015 are as follows:
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Schedule of share-based compensation, activity | Restricted stock activity under the Amended and Restated 2006 Stock Incentive Plan for 2015 is as follows:
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Positions for which Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Table Text Block] | During the years ended December 31, 2015, 2014, and 2013, the aggregate changes in the total gross amount of unrecognized tax benefits are summarized as follows:
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Schedule of Components of Income Tax Expense (Benefit) | Income tax expense for the years ended December 31, 2015, 2014, and 2013 attributable to income from operations is presented below.
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Schedule of Effective Income Tax Rate Reconciliation | The actual income tax expense (benefit) differs from the “expected” income tax expense (benefit) computed by applying the United States Federal corporate income tax rate of 34% to income before tax expense (benefit) as follows:
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Schedule of Income before Income Tax, Domestic and Foreign | The components of income before income tax expense (benefit) determined by tax jurisdiction, are as follows:
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Schedule of Deferred Tax Assets and Liabilities | The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities for the periods presented are as follows:
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Acquisition (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of recognized identified assets acquired and liabilities assumed | The total purchase price and the excess of the total purchase price over the estimated fair value of the net assets acquired are as follows:
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Business acquisition, pro forma information | The following table summarizes the supplemental statements of operations information on an unaudited pro forma basis as if the Videotel acquisition had occurred on January 1, 2013:
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Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of finite-lived intangible assets | The following table summarizes other intangible assets as of December 31, 2015 and 2014, respectively:
The changes in the carrying amount of intangible assets during the year ended December 31, 2015 is as follows:
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Schedule of finite-lived intangible assets, future amortization expense | Estimated future amortization expense for intangible assets recorded by the Company at December 31, 2015 is as follows:
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Schedule of goodwill | The changes in the carrying amount of goodwill during the year ended December 31, 2015 is as follows:
|
Business and Credit Concentrations (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risks and Uncertainties [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of significant portions of the Company's net sales | Significant portions of the Company’s net sales are as follows:
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Segment Reporting (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of operations by geographic segment |
The following table summarizes information regarding the Company’s operations by geographic segment:
|
Fair Value Measurements (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of assets and liabilities measured at fair value on recurring basis | Assets and liabilities measured at fair value are based the valuation techniques identified in the table below. The valuation techniques are:
The following tables present financial assets and liabilities at December 31, 2015 and December 31, 2014 for which the Company measures fair value on a recurring basis, by level, within the fair value hierarchy:
|
Derivative Instruments and Hedging Activities (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Discussion of Derivative Instruments and Hedging Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of interest rate derivatives designated as cash flow hedges of interest rate risk | As of December 31, 2015, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:
|
Quarterly Financial Results (Unaudited) (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of quarterly financial information | Financial information for interim periods was as follows:
|
Summary of Significant Accounting Policies (Details Textual) - USD ($) $ in Thousands |
7 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 31, 2012 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Concentration of Credit Risk and Single Source Suppliers | ||||
Marketable securities | $ 22,619 | $ 24,513 | ||
Advertising Costs | ||||
Advertising expense | 2,712 | 2,825 | $ 3,189 | |
Foreign Currency Translation | ||||
Foreign currency transaction gain (loss), before tax | 59 | 126 | $ 123 | |
Net sales to SANG | ||||
Accounting Policies [Line Items] | ||||
Contract amount | $ 35,600 | |||
Contracts revenue | $ 1,300 | $ 19,600 | ||
Net sales to SANG | Defense Products | ||||
Accounting Policies [Line Items] | ||||
Contract amount | 21,200 | |||
Net sales to SANG | Sevices | ||||
Accounting Policies [Line Items] | ||||
Contract amount | $ 14,400 |
Summary of Significant Accounting Policies - Allowance For Doubtful Accounts Rollforward (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Allowance for doubtful accounts receivable [Roll Forward] | |||
Beginning balance | $ 2,723 | $ 1,705 | $ 929 |
Additions to sales allowance and bad debt expense | 1,337 | 1,610 | 1,305 |
Deductions (write-offs/recoveries) from reserve | (531) | (592) | (529) |
Ending balance | 3,534 | 2,723 | 1,705 |
Allowance, net of FX [Member] | |||
Allowance for doubtful accounts receivable [Roll Forward] | |||
Additions to sales allowance and bad debt expense | $ 1,342 | $ 1,610 | $ 1,305 |
Summary of Significant Accounting Policies - Product Warranty (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Summary of product warranty activity | ||
Beginning balance | $ 1,853 | $ 1,269 |
Charges to expense | 1,431 | 2,048 |
Costs incurred | (1,404) | (1,464) |
Ending balance | $ 1,880 | $ 1,853 |
Minimum | ||
Product Liability Contingency [Line Items] | ||
Limited product warranty period | 1 year | |
Maximum | ||
Product Liability Contingency [Line Items] | ||
Limited product warranty period | 2 years |
Summary of Significant Accounting Policies - Research and Development (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Research and Development | |||
Customer-funded service sales | $ 3,002 | $ 3,806 | $ 10,302 |
Customer-funded costs included in costs of service sales | $ 1,546 | $ 2,633 | $ 2,387 |
Summary of Significant Accounting Policies - Net Income per Common Share (Details) - shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Accounting Policies [Abstract] | |||
Anti-dilutive common stock equivalents related to options and restricted stock awards excluded from fully diluted calculation | 766 | 784 | 545 |
Weighted Average Number of Shares Outstanding Reconciliation [Abstract] | |||
Weighted average common shares outstanding—basic | 15,625 | 15,420 | 15,144 |
Dilutive common shares issuable in connection with stock plans | 209 | 185 | 197 |
Weighted average common shares outstanding—diluted | 15,834 | 15,605 | 15,341 |
Marketable Securities - Maturity Schedule (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Schedule of Available-for-sale Securities [Line Items] | ||
Marketable Securities, Interest Income | $ 0 | $ 110 |
Amortized Cost | ||
Amortized Cost | 22,618,000 | 24,509,000 |
Fair Value | ||
Fair Value | 22,619,000 | 24,513,000 |
Debt Securities | ||
Amortized Cost | ||
Due in less than one year | 5,515,000 | 7,663,000 |
Due after one year and within two years | 3,859,000 | 10,022,000 |
Amortized Cost | 9,374,000 | 17,685,000 |
Fair Value | ||
Due in less than one year | 5,516,000 | 7,668,000 |
Due after one year and within two years | 3,859,000 | 10,021,000 |
Fair Value | $ 9,375,000 | $ 17,689,000 |
Inventories (Details) - USD ($) $ in Thousands |
Dec. 31, 2015 |
Dec. 31, 2014 |
---|---|---|
Components of inventories | ||
Raw materials | $ 12,833 | $ 8,619 |
Work in process | 2,778 | 2,896 |
Finished goods | 5,978 | 5,909 |
Inventories, net | $ 21,589 | $ 17,424 |
Commitment and Contingencies (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |||
2016 | $ 14,125 | ||
2017 | 9,890 | ||
2018 | 5,332 | ||
2019 | 3,212 | ||
2020 | 935 | ||
Thereafter | 229 | ||
Total minimum lease payments | 33,723 | ||
Purchase Commitment | |||
Operating Leased Assets [Line Items] | |||
Unconditional purchase order obligations | 21,678 | ||
Facility | |||
Operating Leased Assets [Line Items] | |||
Operating leases, rent expense | 630 | $ 820 | $ 639 |
Satellite Capacity and Equipment | |||
Operating Leased Assets [Line Items] | |||
Operating leases, rent expense | $ 32,793 | $ 30,280 | $ 23,215 |
Stockholders' Equity (Details) - Stock options |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Schedule of weighted-average assumptions used to value options as of their grant date | |||
Risk-free interest rate | 1.55% | 1.52% | 1.06% |
Expected volatility | 43.30% | 46.50% | 50.90% |
Expected life (in years) | 4 years 2 months 1 day | 4 years 2 months 15 days | 4 years 2 months 25 days |
Dividend yield | 0.00% | 0.00% | 0.00% |
Stockholders' Equity - Restricted Stock Outstanding Rollforward (Details) - Restricted stock - $ / shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Number of Shares | |||
Outstanding at December 31, 2014, nonvested (in shares) | 427 | ||
Granted (in shares) | 203 | 265 | 266 |
Vested (in shares) | (171) | ||
Forfeited (in shares) | (2) | ||
Outstanding at December 31, 2015, nonvested (in shares) | 458 | 427 | |
Weighted- average grant date fair value | |||
Outstanding at December 31, 2014, nonvested (in dollars per share) | $ 13.67 | ||
Granted (in dollars per share) | 12.43 | $ 13.57 | $ 13.61 |
Vested (in dollars per share) | 13.44 | ||
Forfeited (in dollars per share) | 10.68 | ||
Outstanding at December 31, 2015, nonvested (in dollars per share) | $ 13.22 | $ 13.67 |
Income Taxes - Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Income Tax Expense (Benefit) [Abstract] | |||
Current federal tax expense (benefit) | $ (555) | $ 325 | $ 1,793 |
Deferred federal income tax expense (benefit) | (94) | (623) | (497) |
Federal income tax expense (benefit), continuing operations | (649) | (298) | 1,296 |
Current state and local tax expense (benefit) | 120 | (2) | 242 |
Deferred state and local income tax expense (benefit) | 765 | 1,036 | (52) |
State and local income tax expense (benefit), continuing operations | 885 | 1,034 | 190 |
Current foreign tax expense (benefit) | 295 | 1,640 | 901 |
Deferred foreign income tax expense (benefit) | (118) | (1,092) | (237) |
Foreign income tax expense (benefit), continuing operations | 177 | 548 | 664 |
Current income tax expense (benefit) | (140) | 1,963 | 2,936 |
Deferred income tax expense (benefit) | 553 | (679) | (786) |
Net income tax expense | $ 413 | $ 1,284 | $ 2,150 |
Income Taxes - Income (Loss) From Continuing Operations Before Income Tax (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Income (Loss) from Operations before Income Tax Expense (Benefit) [Abstract] | |||
Income (loss) before income taxes | $ 2,666 | $ 1,325 | $ 6,683 |
United States | |||
Income (Loss) from Operations before Income Tax Expense (Benefit) [Abstract] | |||
Income (loss) before income taxes | (570) | 907 | 5,500 |
Foreign Tax Authority | |||
Income (Loss) from Operations before Income Tax Expense (Benefit) [Abstract] | |||
Income (loss) before income taxes | $ 3,236 | $ 418 | $ 1,183 |
Income Taxes Interest and penalties (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Accrued interest and penalties (tax) [Abstract] | |||
Income Tax Examination, Penalties and Interest Expense | $ 78 | $ 84 | $ 0 |
Income Tax Examination, Penalties and Interest Accrued | $ 468 | $ 1,067 | $ 0 |
Goodwill and Intangible Assets - Amortization and Goodwill (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Intangible Assets, Gross (Excluding Goodwill) | $ 26,755 | $ 33,641 | |
Amortization expense | 5,526 | 3,859 | $ 1,179 |
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract] | |||
2014 | 5,174 | ||
2015 | 5,028 | ||
2016 | 4,564 | ||
2017 | 3,412 | ||
2018 | 2,500 | ||
Thereafter | 6,077 | ||
Total amortization expense | 26,755 | 33,641 | |
Goodwill [Roll Forward] | |||
Balance at January 1 | 40,454 | ||
Foreign currency translation adjustment | (3,707) | ||
Balance at December 31 | 36,747 | $ 40,454 | |
Amortization expense | (5,526) | ||
Finite-Lived Intangible Assets, Translation Adjustments | $ (1,360) |
401(k) Plan (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Compensation and Retirement Disclosure [Abstract] | |||
Defined contribution plan, employer matching contribution, percent of match | 50.00% | ||
Defined contribution plan, employer matching contribution, percent | 6.00% | ||
Defined contribution plan, vesting period | 5 years | ||
Defined contribution plan, employer matching contribution, amount | $ 608 | $ 462 | $ 376 |
Business and Credit Concentrations (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|
Canadian Customer [Member] | |||
Schedule of significant portions of the Company's net sales | |||
Net sales, percentage | 17.00% | ||
Net sales to foreign customers outside the U.S. and Canada | |||
Schedule of significant portions of the Company's net sales | |||
Net sales, percentage | 37.00% | 33.00% | 37.00% |
Net sales to SANG | |||
Schedule of significant portions of the Company's net sales | |||
Net sales, percentage | 12.00% |
Business and Credit Concentrations (Details Textual) |
12 Months Ended |
---|---|
Dec. 31, 2015 | |
Business and Credit Concentrations (Textual) [Abstract] | |
Business concentration risk percentage attributable to net sales | 10.00% |
Concentration Risk, Additional Characteristic | one |
Segment Reporting (Details Textual) |
12 Months Ended |
---|---|
Dec. 31, 2015
Products
Segment
| |
Segment Reporting (Textual) [Abstract] | |
Number of geographical segments | Segment | 2 |
Number of primary products | Products | 2 |
Share Buyback Program (Details) shares in Thousands, $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2015
USD ($)
Program
shares
|
Dec. 31, 2014
USD ($)
shares
|
Dec. 31, 2013
USD ($)
shares
|
Nov. 26, 2008
shares
|
|
Share Buyback Program (Textual) [Abstract] | ||||
Common stock available for repurchase (in shares) | shares | 341 | 1,000 | ||
Number of other repurchase programs outstanding | Program | 0 | |||
Number of stock repurchase programs other expired | Program | 0 | |||
Stock repurchased during period, shares | shares | 0 | 0 | 0 | |
Stock repurchased during period, value | $ | $ 0 | $ 0 | $ 0 |
Derivative Instruments and Hedging Activities (Details Textual) - Interest Rate Swap |
12 Months Ended |
---|---|
Dec. 31, 2015
Swap_Agreements
| |
Derivative Instruments and Hedging Activities (Textual) [Abstract] | |
Mortgage loan expiry date | Apr. 16, 2019 |
Mortgages | |
Derivative Instruments and Hedging Activities (Textual) [Abstract] | |
Number of Interest rate swap agreements | 2 |
Mortgages | First Half of Mortgage | |
Derivative Instruments and Hedging Activities (Textual) [Abstract] | |
Strike Rate | 5.91% |
Mortgages | Second Half of Mortgage | |
Derivative Instruments and Hedging Activities (Textual) [Abstract] | |
Strike Rate | 6.07% |
Derivative Instruments and Hedging Activities (Details) - Interest Rate Swap $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2015
USD ($)
| |
First Half of Mortgage | |
Schedule of interest rate derivatives designated as cash flow hedges of interest rate risk | |
Notional (in thousands) | $ 1,557 |
Asset (Liability) | $ (115) |
Effective Date | Apr. 01, 2010 |
Maturity Date | Apr. 01, 2019 |
Derivative, Type of Interest Rate Paid on Swap | 1-month LIBOR |
Second Half of Mortgage | |
Schedule of interest rate derivatives designated as cash flow hedges of interest rate risk | |
Notional (in thousands) | $ 1,557 |
Asset (Liability) | $ (123) |
Effective Date | Apr. 01, 2010 |
Maturity Date | Apr. 01, 2019 |
Derivative, Type of Interest Rate Paid on Swap | 1-month LIBOR |
Mortgages | First Half of Mortgage | |
Schedule of interest rate derivatives designated as cash flow hedges of interest rate risk | |
Strike Rate | 5.91% |
Mortgages | Second Half of Mortgage | |
Schedule of interest rate derivatives designated as cash flow hedges of interest rate risk | |
Strike Rate | 6.07% |
Quarterly Financial Results (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Sep. 30, 2014 |
Jun. 30, 2014 |
Mar. 31, 2014 |
Sep. 30, 2013 |
Jun. 30, 2013 |
Mar. 31, 2013 |
Dec. 31, 2015 |
Dec. 31, 2014 |
Dec. 31, 2013 |
|||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||
Product sales | $ 27,259 | $ 25,276 | $ 15,622 | $ 17,946 | $ 15,386 | $ 16,862 | $ 20,998 | $ 18,007 | $ 76,213 | $ 81,143 | $ 90,295 | ||||||||||
Service sales | 26,760 | 25,158 | 28,833 | 26,909 | 25,919 | 27,388 | 19,924 | 18,978 | 108,421 | 91,448 | 71,993 | ||||||||||
Gross profit | 25,983 | 22,567 | 19,726 | 19,145 | 17,560 | 18,802 | 17,485 | 14,593 | |||||||||||||
Net (loss) income | $ 4,101 | $ 958 | $ (463) | $ 37 | $ (1,422) | $ 151 | $ 55 | $ (1,123) | $ 2,253 | $ 41 | $ 4,533 | ||||||||||
Net (loss) income per share: | |||||||||||||||||||||
Basic (in dollars per share) | $ 0.26 | [1] | $ 0.06 | [1] | $ (0.03) | [1] | $ 0 | [1] | $ (0.09) | [1] | $ 0.01 | [1] | $ 0 | [1] | $ (0.07) | [1] | $ 0.14 | $ 0.00 | $ 0.30 | ||
Diluted (in dollars per share) | $ 0.26 | [1] | $ 0.06 | [1] | $ (0.03) | [1] | $ 0 | [1] | $ (0.09) | [1] | $ 0.01 | [1] | $ 0 | [1] | $ (0.07) | [1] | $ 0.14 | $ 0.00 | $ 0.30 | ||
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