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Share Name | Share Symbol | Market | Type |
---|---|---|---|
KVH Industries Inc | NASDAQ:KVHI | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 4.54 | 4.12 | 6.79 | 0 | 12:00:00 |
|
|
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
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)
|
50 Enterprise Center, Middletown, RI 02842
(Address of Principal Executive Offices) (Zip Code) |
|
(401) 847-3327
(Registrant’s Telephone Number, Including Area Code)
|
|
Large accelerated filer
|
o
|
Accelerated filer
|
ý
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
ý
|
|
|
Emerging growth company
|
o
|
Title of Each Class
|
Trading Symbol(s)
|
Name of Each Exchange on which Registered
|
Common Stock, par value $0.01 per share
|
KVHI
|
The NASDAQ Stock Market LLC
(NASDAQ Global Select Market)
|
Date
|
Class
|
Outstanding shares
|
July 29, 2019
|
Common Stock, par value $0.01 per share
|
18,027,681
|
|
|
Page No.
|
|
||
ITEM 1.
|
|
|
|
Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018
|
|
|
Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018 (unaudited)
|
|
|
Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018 (unaudited)
|
|
|
Consolidated Statements of Stockholders' Equity for the three and six months ended in June 30, 2019 and 2018 (unaudited)
|
|
|
Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (unaudited)
|
|
|
||
ITEM 2.
|
||
ITEM 4.
|
||
|
||
ITEM 1.
|
||
ITEM 1A.
|
||
ITEM 2.
|
||
ITEM 6.
|
||
|
June 30, 2019
|
|
December 31, 2018
|
||||
ASSETS
|
(unaudited)
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
15,306
|
|
|
$
|
15,212
|
|
Marketable securities
|
50,057
|
|
|
25
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $2,111 and $2,390 as of June 30, 2019 and December 31, 2018, respectively
|
29,598
|
|
|
28,592
|
|
||
Inventories
|
24,216
|
|
|
22,942
|
|
||
Prepaid expenses and other current assets
|
3,449
|
|
|
2,532
|
|
||
Current contract assets
|
3,834
|
|
|
3,566
|
|
||
Current assets held for sale
|
—
|
|
|
4,871
|
|
||
Total current assets
|
126,460
|
|
|
77,740
|
|
||
Property and equipment, net
|
52,501
|
|
|
50,633
|
|
||
Intangible assets, net
|
5,197
|
|
|
5,661
|
|
||
Goodwill
|
14,995
|
|
|
15,031
|
|
||
Right of use assets
|
8,162
|
|
|
—
|
|
||
Other non-current assets
|
5,809
|
|
|
5,484
|
|
||
Non-current contract assets
|
7,577
|
|
|
6,971
|
|
||
Non-current deferred income tax asset
|
195
|
|
|
226
|
|
||
Non-current assets held for sale
|
—
|
|
|
25,906
|
|
||
Total assets
|
$
|
220,896
|
|
|
$
|
187,652
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
16,974
|
|
|
$
|
16,735
|
|
Accrued compensation and employee-related expenses
|
4,783
|
|
|
4,947
|
|
||
Accrued other
|
11,467
|
|
|
9,602
|
|
||
Accrued product warranty costs
|
2,181
|
|
|
1,916
|
|
||
Current portion of long-term debt
|
2,000
|
|
|
9,928
|
|
||
Contract liabilities
|
8,119
|
|
|
7,647
|
|
||
Current operating lease liability
|
4,418
|
|
|
—
|
|
||
Liability for uncertain tax positions
|
675
|
|
|
631
|
|
||
Current liabilities held for sale
|
—
|
|
|
4,604
|
|
||
Total current liabilities
|
50,617
|
|
|
56,010
|
|
||
Other long-term liabilities
|
1,599
|
|
|
1,920
|
|
||
Long-term operating lease liability
|
3,760
|
|
|
—
|
|
||
Long-term contract liabilities
|
10,056
|
|
|
9,070
|
|
||
Long-term debt, excluding current portion
|
—
|
|
|
19,437
|
|
||
Non-current deferred income tax liability
|
868
|
|
|
887
|
|
||
Non-current liabilities held for sale
|
—
|
|
|
813
|
|
||
Total liabilities
|
$
|
66,900
|
|
|
$
|
88,137
|
|
Commitments and contingencies (Notes 2, 10, 12, and 19)
|
|
|
|
||||
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; 19,319,933 and 19,026,393 shares issued at June 30, 2019 and December 31, 2018, respectively; and 18,037,511 and 17,743,971 shares outstanding at June 30, 2019 and December 31, 2018, respectively
|
193
|
|
|
190
|
|
||
Additional paid-in capital
|
141,856
|
|
|
139,617
|
|
||
Retained earnings (accumulated deficit)
|
25,600
|
|
|
(15,397
|
)
|
||
Accumulated other comprehensive loss
|
(3,489
|
)
|
|
(14,731
|
)
|
||
|
164,160
|
|
|
109,679
|
|
||
Less: treasury stock at cost, common stock, 1,282,422 shares as of June 30, 2019 and December 31, 2018
|
(10,164
|
)
|
|
(10,164
|
)
|
||
Total stockholders’ equity
|
153,996
|
|
|
99,515
|
|
||
Total liabilities and stockholders’ equity
|
$
|
220,896
|
|
|
$
|
187,652
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Sales:
|
|
|
|
|
|
|
|
||||||||
Product
|
$
|
14,694
|
|
|
$
|
16,162
|
|
|
$
|
27,568
|
|
|
$
|
30,154
|
|
Service
|
24,541
|
|
|
22,470
|
|
|
47,702
|
|
|
43,883
|
|
||||
Net sales
|
39,235
|
|
|
38,632
|
|
|
75,270
|
|
|
74,037
|
|
||||
Costs and expenses:
|
|
|
|
|
|
|
|
||||||||
Costs of product sales
|
12,308
|
|
|
10,094
|
|
|
20,161
|
|
|
19,017
|
|
||||
Costs of service sales
|
15,379
|
|
|
14,231
|
|
|
30,752
|
|
|
26,601
|
|
||||
Research and development
|
3,798
|
|
|
3,565
|
|
|
7,666
|
|
|
7,499
|
|
||||
Sales, marketing and support
|
8,853
|
|
|
7,609
|
|
|
16,987
|
|
|
15,186
|
|
||||
General and administrative
|
5,730
|
|
|
5,713
|
|
|
12,685
|
|
|
12,146
|
|
||||
Total costs and expenses
|
46,068
|
|
|
41,212
|
|
|
88,251
|
|
|
80,449
|
|
||||
Loss from operations
|
(6,833
|
)
|
|
(2,580
|
)
|
|
(12,981
|
)
|
|
(6,412
|
)
|
||||
Interest income
|
1,000
|
|
|
147
|
|
|
1,175
|
|
|
293
|
|
||||
Interest expense
|
558
|
|
|
427
|
|
|
943
|
|
|
836
|
|
||||
Other income, net
|
338
|
|
|
543
|
|
|
242
|
|
|
237
|
|
||||
Loss from continuing operations before income tax (benefit) expense
|
(6,053
|
)
|
|
(2,317
|
)
|
|
(12,507
|
)
|
|
(6,718
|
)
|
||||
Income tax (benefit) expense from continuing operations
|
(2,599
|
)
|
|
85
|
|
|
(2,631
|
)
|
|
130
|
|
||||
Net loss from continuing operations
|
$
|
(3,454
|
)
|
|
$
|
(2,402
|
)
|
|
$
|
(9,876
|
)
|
|
$
|
(6,848
|
)
|
|
|
|
|
|
|
|
|
||||||||
Income from discontinued operations, net of tax
|
50,630
|
|
|
1,059
|
|
|
50,873
|
|
|
1,612
|
|
||||
Net income (loss)
|
$
|
47,176
|
|
|
$
|
(1,343
|
)
|
|
$
|
40,997
|
|
|
$
|
(5,236
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss from continuing operations per common share
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
(0.20
|
)
|
|
$
|
(0.14
|
)
|
|
$
|
(0.57
|
)
|
|
$
|
(0.40
|
)
|
Net income from discontinued operations per common share
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
2.90
|
|
|
$
|
0.06
|
|
|
$
|
2.93
|
|
|
$
|
0.10
|
|
Net income (loss) per common share
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
2.70
|
|
|
$
|
(0.08
|
)
|
|
$
|
2.36
|
|
|
$
|
(0.31
|
)
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
17,463
|
|
|
17,140
|
|
|
17,383
|
|
|
16,942
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net income (loss)
|
$
|
47,176
|
|
|
$
|
(1,343
|
)
|
|
$
|
40,997
|
|
|
$
|
(5,236
|
)
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Unrealized gain on available-for-sale securities
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Foreign currency translation adjustment
|
10,151
|
|
|
(3,866
|
)
|
|
11,231
|
|
|
(1,422
|
)
|
||||
Unrealized gain on derivative instruments, net
|
3
|
|
|
15
|
|
|
11
|
|
|
37
|
|
||||
Other comprehensive income (loss), net of tax
(1)
|
10,154
|
|
|
(3,851
|
)
|
|
11,242
|
|
|
(1,384
|
)
|
||||
Total comprehensive income (loss)
|
$
|
57,330
|
|
|
$
|
(5,194
|
)
|
|
$
|
52,239
|
|
|
$
|
(6,620
|
)
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
(Accumulated Deficit)
Retained Earnings
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
|
Treasury Stock
|
|
Total
Stockholders’
Equity
|
||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
||||||||||||||||||||||
Balance at March 31, 2019
|
19,134
|
|
|
$
|
191
|
|
|
$
|
140,790
|
|
|
$
|
(21,576
|
)
|
|
$
|
(13,643
|
)
|
|
(1,282
|
)
|
|
$
|
(10,164
|
)
|
|
$
|
95,598
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
47,176
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47,176
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,154
|
|
|
—
|
|
|
—
|
|
|
10,154
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
1,033
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,033
|
|
||||||
Exercise of stock options and issuance of restricted stock awards, net of forfeitures
|
186
|
|
|
2
|
|
|
33
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35
|
|
||||||
Balance at June 30, 2019
|
19,320
|
|
|
$
|
193
|
|
|
$
|
141,856
|
|
|
$
|
25,600
|
|
|
$
|
(3,489
|
)
|
|
(1,282
|
)
|
|
$
|
(10,164
|
)
|
|
$
|
153,996
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
(Accumulated Deficit)
Retained Earnings
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
|
Treasury Stock
|
|
Total
Stockholders’
Equity
|
||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
||||||||||||||||||||||
Balance at December 31, 2018
|
19,026
|
|
|
$
|
190
|
|
|
$
|
139,617
|
|
|
$
|
(15,397
|
)
|
|
$
|
(14,731
|
)
|
|
(1,282
|
)
|
|
$
|
(10,164
|
)
|
|
$
|
99,515
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
40,997
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40,997
|
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,242
|
|
|
—
|
|
|
—
|
|
|
11,242
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
1,907
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,907
|
|
||||||
Issuance of common stock under employee stock purchase plan
|
23
|
|
|
—
|
|
|
218
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
218
|
|
||||||
Exercise of stock options and issuance of restricted stock awards, net of forfeitures
|
271
|
|
|
3
|
|
|
114
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
117
|
|
||||||
Balance at June 30, 2019
|
19,320
|
|
|
$
|
193
|
|
|
$
|
141,856
|
|
|
$
|
25,600
|
|
|
$
|
(3,489
|
)
|
|
(1,282
|
)
|
|
$
|
(10,164
|
)
|
|
$
|
153,996
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Treasury Stock
|
|
Total
Stockholders’
Equity
|
||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
||||||||||||||||||||||
Balance at March 31, 2018
|
18,804
|
|
|
$
|
188
|
|
|
$
|
136,718
|
|
|
$
|
(11,058
|
)
|
|
$
|
(8,850
|
)
|
|
(1,282
|
)
|
|
$
|
(10,164
|
)
|
|
$
|
106,834
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,343
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,343
|
)
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,851
|
)
|
|
—
|
|
|
—
|
|
|
(3,851
|
)
|
||||||
ASC 606 adoption
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
739
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
739
|
|
||||||
Exercise of stock options and issuance of restricted stock awards, net of forfeitures
|
133
|
|
|
1
|
|
|
51
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
52
|
|
||||||
Balance at June 30, 2018
|
18,937
|
|
|
$
|
189
|
|
|
$
|
137,508
|
|
|
$
|
(12,401
|
)
|
|
$
|
(12,701
|
)
|
|
(1,282
|
)
|
|
$
|
(10,164
|
)
|
|
$
|
102,431
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated Deficit
|
|
Accumulated
Other
Comprehensive Loss
|
|
Treasury Stock
|
|
Total
Stockholders’
Equity
|
||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
||||||||||||||||||||||
Balance at December 31, 2017
|
18,788
|
|
|
$
|
188
|
|
|
$
|
134,361
|
|
|
$
|
(4,417
|
)
|
|
$
|
(11,317
|
)
|
|
(1,659
|
)
|
|
$
|
(13,150
|
)
|
|
$
|
105,665
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,236
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(5,236
|
)
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,384
|
)
|
|
—
|
|
|
—
|
|
|
(1,384
|
)
|
||||||
ASC 606 adoption
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,748
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,748
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
1,592
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,592
|
|
||||||
Sale of treasury stock
|
—
|
|
|
—
|
|
|
1,478
|
|
|
—
|
|
|
—
|
|
|
377
|
|
|
2,986
|
|
|
4,464
|
|
||||||
Exercise of stock options and issuance of restricted stock awards, net of forfeitures
|
149
|
|
|
1
|
|
|
77
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
78
|
|
||||||
Balance at June 30, 2018
|
18,937
|
|
|
$
|
189
|
|
|
$
|
137,508
|
|
|
$
|
(12,401
|
)
|
|
$
|
(12,701
|
)
|
|
(1,282
|
)
|
|
$
|
(10,164
|
)
|
|
$
|
102,431
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
40,997
|
|
|
$
|
(5,236
|
)
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
||||
Provision for doubtful accounts
|
(68
|
)
|
|
129
|
|
||
Depreciation and amortization
|
6,412
|
|
|
6,288
|
|
||
Deferred income taxes
|
(22
|
)
|
|
24
|
|
||
Loss on disposals of fixed assets
|
117
|
|
|
—
|
|
||
Gain on sale of Videotel
|
(54,520
|
)
|
|
—
|
|
||
Compensation expense related to stock-based awards and employee stock purchase plan
|
1,907
|
|
|
1,592
|
|
||
Unrealized currency translation gain
|
(289
|
)
|
|
(212
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(1,186
|
)
|
|
(1,719
|
)
|
||
Inventories
|
(1,308
|
)
|
|
(137
|
)
|
||
Prepaid expenses, other current assets, and current contract assets
|
272
|
|
|
230
|
|
||
Other non-current assets and non-current contract assets
|
(1,466
|
)
|
|
(1,252
|
)
|
||
Accounts payable
|
(22
|
)
|
|
908
|
|
||
Contract liabilities and long-term contract liabilities
|
2,472
|
|
|
527
|
|
||
Accrued compensation, product warranty and other current liabilities
|
1,049
|
|
|
(2,331
|
)
|
||
Other long-term liabilities
|
(928
|
)
|
|
(9
|
)
|
||
Net cash used in operating activities
|
$
|
(6,583
|
)
|
|
$
|
(1,198
|
)
|
Cash flows from investing activities:
|
|
|
|
||||
Capital expenditures
|
(6,720
|
)
|
|
(7,461
|
)
|
||
Cash paid for acquisition of intangible asset
|
(37
|
)
|
|
—
|
|
||
Proceeds from sale of fixed assets
|
103
|
|
|
—
|
|
||
Proceeds from sale of Videotel, net of cash sold
|
88,447
|
|
|
—
|
|
||
Purchases of marketable securities
|
(50,032
|
)
|
|
(2,036
|
)
|
||
Maturities and sales of marketable securities
|
—
|
|
|
10,020
|
|
||
Net cash provided by investing activities
|
$
|
31,761
|
|
|
$
|
523
|
|
Cash flows from financing activities:
|
|
|
|
||||
Repayments of long-term debt
|
(2,597
|
)
|
|
(89
|
)
|
||
Repayments of term note borrowings
|
(21,938
|
)
|
|
(3,400
|
)
|
||
Repayments of line of credit borrowings
|
(13,000
|
)
|
|
—
|
|
||
Proceeds from line of credit borrowings
|
10,000
|
|
|
—
|
|
||
Proceeds from stock options exercised and employee stock purchase plan
|
365
|
|
|
101
|
|
||
Sale of treasury stock
|
—
|
|
|
4,500
|
|
||
Payment of finance lease
|
(304
|
)
|
|
(258
|
)
|
||
Net cash (used in) provided by financing activities
|
$
|
(27,474
|
)
|
|
$
|
854
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(448
|
)
|
|
(238
|
)
|
||
Net decrease in cash and cash equivalents
|
(2,744
|
)
|
|
(59
|
)
|
||
Cash and cash equivalents at beginning of period
|
18,050
|
|
|
34,596
|
|
||
Cash and cash equivalents at end of period
|
$
|
15,306
|
|
|
$
|
34,537
|
|
Supplemental disclosure of non-cash investing activities:
|
|
|
|
||||
Changes in accrued other and accounts payable related to property and equipment additions
|
$
|
229
|
|
|
$
|
624
|
|
•
|
the mobile connectivity segment and
|
•
|
the inertial navigation segment
|
(4)
|
Marketable Securities
|
June 30, 2019
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Money market mutual funds
|
$
|
50,057
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
50,057
|
|
Total marketable securities designated as available-for-sale
|
$
|
50,057
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
50,057
|
|
December 31, 2018
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Money market mutual funds
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25
|
|
Total marketable securities designated as available-for-sale
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25
|
|
June 30, 2019
|
Amortized
Cost
|
|
Fair
Value
|
||||
Due in less than one year
|
$
|
—
|
|
|
$
|
—
|
|
December 31, 2018
|
Amortized
Cost
|
|
Fair
Value
|
||||
Due in less than one year
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
||
|
Six Months Ended
June 30,
|
||||
|
2019
|
|
2018
|
||
Risk-free interest rate
|
1.93
|
%
|
|
2.81
|
%
|
Expected volatility
|
36.95
|
%
|
|
36.60
|
%
|
Expected life (in years)
|
4.27
|
|
|
4.29
|
|
Dividend yield
|
0
|
%
|
|
0
|
%
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Cost of product sales
|
$
|
61
|
|
|
$
|
11
|
|
|
$
|
102
|
|
|
$
|
82
|
|
Research and development
|
196
|
|
|
149
|
|
|
368
|
|
|
319
|
|
||||
Sales, marketing and support
|
212
|
|
|
166
|
|
|
394
|
|
|
347
|
|
||||
General and administrative
|
564
|
|
|
413
|
|
|
1,043
|
|
|
844
|
|
||||
|
$
|
1,033
|
|
|
$
|
739
|
|
|
$
|
1,907
|
|
|
$
|
1,592
|
|
|
Foreign Currency Translation
|
|
Unrealized Gain (Loss) on Available for Sale Marketable Securities
|
|
Interest Rate Swaps
|
|
Total Accumulated Other Comprehensive Loss
|
||||||||
Balance, March 31, 2019
|
$
|
(13,640
|
)
|
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
(13,643
|
)
|
Other comprehensive (loss) income before reclassifications
|
(1,332
|
)
|
|
—
|
|
|
3
|
|
|
(1,329
|
)
|
||||
Reclassified from AOCI
|
11,483
|
|
|
—
|
|
|
—
|
|
|
11,483
|
|
||||
Net other comprehensive income, June 30, 2019
|
10,151
|
|
|
—
|
|
|
3
|
|
|
10,154
|
|
||||
Balance, June 30, 2019
|
$
|
(3,489
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3,489
|
)
|
|
Foreign Currency Translation
|
|
Unrealized Gain (Loss) on Available for Sale Marketable Securities
|
|
Interest Rate Swaps
|
|
Total Accumulated Other Comprehensive Loss
|
||||||||
Balance, March 31, 2018
|
$
|
(8,803
|
)
|
|
$
|
—
|
|
|
$
|
(47
|
)
|
|
$
|
(8,850
|
)
|
Other comprehensive (loss) income before reclassifications
|
(3,866
|
)
|
|
—
|
|
|
3
|
|
|
(3,863
|
)
|
||||
Reclassified from AOCI
|
—
|
|
|
—
|
|
|
12
|
|
|
12
|
|
||||
Net other comprehensive (loss) income, June 30, 2018
|
(3,866
|
)
|
|
—
|
|
|
15
|
|
|
(3,851
|
)
|
||||
Balance, June 30, 2018
|
$
|
(12,669
|
)
|
|
$
|
—
|
|
|
$
|
(32
|
)
|
|
$
|
(12,701
|
)
|
|
Foreign Currency Translation
|
|
Unrealized Gain (Loss) on Available for Sale Marketable Securities
|
|
Interest Rate Swaps
|
|
Total Accumulated Other Comprehensive Loss
|
||||||||
Balance, December 31, 2018
|
$
|
(14,720
|
)
|
|
$
|
—
|
|
|
$
|
(11
|
)
|
|
$
|
(14,731
|
)
|
Other comprehensive (loss) income before reclassifications
|
(252
|
)
|
|
—
|
|
|
3
|
|
|
(249
|
)
|
||||
Reclassified from AOCI
|
11,483
|
|
|
—
|
|
|
8
|
|
|
11,491
|
|
||||
Net other comprehensive income, June 30, 2019
|
11,231
|
|
|
—
|
|
|
11
|
|
|
11,242
|
|
||||
Balance, June 30, 2019
|
$
|
(3,489
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(3,489
|
)
|
|
Foreign Currency Translation
|
|
Unrealized (Loss) Gain on Available for Sale Marketable Securities
|
|
Interest Rate Swaps
|
|
Total Accumulated Other Comprehensive Loss
|
||||||||
Balance, December 31, 2017
|
$
|
(11,247
|
)
|
|
$
|
(1
|
)
|
|
$
|
(69
|
)
|
|
$
|
(11,317
|
)
|
Other comprehensive (loss) income before reclassifications
|
(1,422
|
)
|
|
1
|
|
|
10
|
|
|
(1,411
|
)
|
||||
Reclassified from AOCI
|
—
|
|
|
—
|
|
|
27
|
|
|
27
|
|
||||
Net other comprehensive (loss) income, June 30, 2018
|
(1,422
|
)
|
|
1
|
|
|
37
|
|
|
(1,384
|
)
|
||||
Balance, June 30, 2018
|
$
|
(12,669
|
)
|
|
$
|
—
|
|
|
$
|
(32
|
)
|
|
$
|
(12,701
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Weighted average common shares outstanding—basic
|
17,463
|
|
|
17,140
|
|
|
17,383
|
|
|
16,942
|
|
Dilutive common shares issuable in connection with stock plans
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Weighted average common shares outstanding—diluted
|
17,463
|
|
|
17,140
|
|
|
17,383
|
|
|
16,942
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
Raw materials
|
$
|
9,146
|
|
|
$
|
13,698
|
|
Work in process
|
4,346
|
|
|
2,489
|
|
||
Finished goods
|
10,724
|
|
|
6,755
|
|
||
|
$
|
24,216
|
|
|
$
|
22,942
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
Land
|
$
|
3,828
|
|
|
$
|
3,828
|
|
Building and improvements
|
24,096
|
|
|
24,060
|
|
||
Leasehold improvements
|
493
|
|
|
478
|
|
||
Machinery and equipment
|
17,520
|
|
|
17,239
|
|
||
Revenue-generating assets
|
43,111
|
|
|
38,066
|
|
||
Office and computer equipment
|
13,166
|
|
|
12,681
|
|
||
Motor vehicles
|
31
|
|
|
31
|
|
||
|
102,245
|
|
|
96,383
|
|
||
Less accumulated depreciation
|
(49,744
|
)
|
|
(45,750
|
)
|
||
|
$
|
52,501
|
|
|
$
|
50,633
|
|
|
June 30,
2019 |
|
December 31,
2018 |
||||
2018 term note
|
$
|
—
|
|
|
$
|
21,938
|
|
Line of credit
|
2,000
|
|
|
5,000
|
|
||
Mortgage loan
|
—
|
|
|
2,597
|
|
||
Total long-term debt
|
2,000
|
|
|
29,535
|
|
||
Less debt issuance costs for 2018 term note (a)
|
—
|
|
|
170
|
|
||
Total long-term debt less debt issuance costs
|
2,000
|
|
|
29,365
|
|
||
Less amounts classified as current
|
2,000
|
|
|
9,928
|
|
||
Long-term debt, excluding current portion
|
$
|
—
|
|
|
$
|
19,437
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net sales:
|
|
|
|
|
|
|
|
||||||||
Mobile connectivity
|
$
|
30,974
|
|
|
$
|
29,004
|
|
|
$
|
59,547
|
|
|
$
|
57,057
|
|
Inertial navigation
|
8,261
|
|
|
9,628
|
|
|
15,723
|
|
|
16,980
|
|
||||
Consolidated net sales
|
$
|
39,235
|
|
|
$
|
38,632
|
|
|
$
|
75,270
|
|
|
$
|
74,037
|
|
|
|
|
|
|
|
|
|
||||||||
Operating income (loss):
|
|
|
|
|
|
|
|
||||||||
Mobile connectivity
|
$
|
(2,519
|
)
|
|
$
|
(243
|
)
|
|
$
|
(3,876
|
)
|
|
$
|
176
|
|
Inertial navigation
|
(247
|
)
|
|
1,564
|
|
|
195
|
|
|
1,898
|
|
||||
Subtotal
|
(2,766
|
)
|
|
1,321
|
|
|
(3,681
|
)
|
|
2,074
|
|
||||
Unallocated, net
|
(4,067
|
)
|
|
(3,901
|
)
|
|
(9,300
|
)
|
|
(8,486
|
)
|
||||
Loss from operations
|
(6,833
|
)
|
|
(2,580
|
)
|
|
(12,981
|
)
|
|
(6,412
|
)
|
||||
Net interest and other income (expense)
|
780
|
|
|
263
|
|
|
474
|
|
|
(306
|
)
|
||||
Loss before income tax expense
|
$
|
(6,053
|
)
|
|
$
|
(2,317
|
)
|
|
$
|
(12,507
|
)
|
|
$
|
(6,718
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Depreciation expense:
|
|
|
|
|
|
|
|
||||||||
Mobile connectivity
|
$
|
1,669
|
|
|
$
|
1,346
|
|
|
$
|
3,339
|
|
|
$
|
2,481
|
|
Inertial navigation
|
307
|
|
|
254
|
|
|
594
|
|
|
506
|
|
||||
Unallocated
|
138
|
|
|
128
|
|
|
274
|
|
|
269
|
|
||||
Total consolidated depreciation expense
|
$
|
2,114
|
|
|
$
|
1,728
|
|
|
$
|
4,207
|
|
|
$
|
3,256
|
|
|
|
|
|
|
|
|
|
||||||||
Amortization expense:
|
|
|
|
|
|
|
|
||||||||
Mobile connectivity
|
$
|
247
|
|
|
$
|
257
|
|
|
$
|
495
|
|
|
$
|
518
|
|
Inertial navigation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Unallocated
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total consolidated amortization expense
|
$
|
247
|
|
|
$
|
257
|
|
|
$
|
495
|
|
|
$
|
518
|
|
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.
|
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 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.
|
June 30, 2019
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Valuation
Technique
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
50,057
|
|
|
$
|
50,057
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(a)
|
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(b)
|
December 31, 2018
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Valuation
Technique
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
25
|
|
|
$
|
25
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(a)
|
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
(b)
|
|
|
Amounts
|
||
Balance at December 31, 2018
|
|
$
|
15,031
|
|
Foreign currency translation adjustment
|
|
(36
|
)
|
|
Balance at June 30, 2019
|
|
$
|
14,995
|
|
|
|
Amounts
|
||
Balance at December 31, 2018
|
|
$
|
5,661
|
|
Amortization expense
|
|
(495
|
)
|
|
Intangible assets acquired in asset acquisition
|
|
37
|
|
|
Foreign currency translation adjustment
|
|
(6
|
)
|
|
Balance at June 30, 2019
|
|
$
|
5,197
|
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||
June 30, 2019
|
|
|
|
|
|
|
||||||
Subscriber relationships
|
|
$
|
7,717
|
|
|
$
|
4,880
|
|
|
$
|
2,837
|
|
Distribution rights
|
|
4,227
|
|
|
1,867
|
|
|
2,360
|
|
|||
Internally developed software
|
|
446
|
|
|
446
|
|
|
—
|
|
|||
Proprietary content
|
|
153
|
|
|
153
|
|
|
—
|
|
|||
Intellectual property
|
|
2,284
|
|
|
2,284
|
|
|
—
|
|
|||
|
|
$
|
14,827
|
|
|
$
|
9,630
|
|
|
$
|
5,197
|
|
December 31, 2018
|
|
|
|
|
|
|
||||||
Subscriber relationships
|
|
$
|
7,678
|
|
|
$
|
4,519
|
|
|
$
|
3,159
|
|
Distribution rights
|
|
4,233
|
|
|
1,731
|
|
|
2,502
|
|
|||
Internally developed software
|
|
446
|
|
|
446
|
|
|
—
|
|
|||
Proprietary content
|
|
153
|
|
|
153
|
|
|
—
|
|
|||
Intellectual property
|
|
2,284
|
|
|
2,284
|
|
|
—
|
|
|||
|
|
$
|
14,794
|
|
|
$
|
9,133
|
|
|
$
|
5,661
|
|
Intangible Asset
|
Weighted Average Remaining Useful Life in Years
|
Subscriber relationships
|
4.0
|
Distribution rights
|
8.8
|
Remainder of 2019
|
$
|
486
|
|
2020
|
972
|
|
|
2021
|
972
|
|
|
2022
|
972
|
|
|
2023
|
536
|
|
|
Thereafter
|
1,259
|
|
|
Total future amortization expense
|
$
|
5,197
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30
|
|
June 30
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Mobile connectivity product, transferred at point in time
|
|
$
|
6,697
|
|
|
$
|
6,731
|
|
|
$
|
12,374
|
|
|
$
|
13,401
|
|
Mobile connectivity product, transferred over time
|
|
1,371
|
|
|
1,372
|
|
|
2,756
|
|
|
2,622
|
|
||||
Mobile connectivity service
|
|
22,906
|
|
|
20,901
|
|
|
44,417
|
|
|
41,034
|
|
||||
Inertial navigation product
|
|
6,626
|
|
|
8,059
|
|
|
12,438
|
|
|
14,131
|
|
||||
Inertial navigation service
|
|
1,635
|
|
|
1,569
|
|
|
3,285
|
|
|
2,849
|
|
||||
Total net sales
|
|
$
|
39,235
|
|
|
$
|
38,632
|
|
|
$
|
75,270
|
|
|
$
|
74,037
|
|
Interest Rate Derivatives
|
Notional
(in thousands)
|
|
Asset
(Liability)
|
|
Effective Date
|
|
Maturity Date
|
|
Index
|
|
Strike Rate
|
|||||
Interest rate swap
|
$
|
1,299
|
|
|
$
|
(5
|
)
|
|
April 1, 2010
|
|
April 1, 2019
|
|
1-month LIBOR
|
|
5.91
|
%
|
Interest rate swap
|
$
|
1,299
|
|
|
$
|
(6
|
)
|
|
April 1, 2010
|
|
April 1, 2019
|
|
1-month LIBOR
|
|
6.07
|
%
|
Remainder of 2019
|
$
|
2,537
|
|
2020
|
2,969
|
|
|
2021
|
1,275
|
|
|
2022
|
1,193
|
|
|
2023
|
384
|
|
|
2024 and thereafter
|
538
|
|
|
Total minimum lease payments
|
$
|
8,896
|
|
|
|
||
Less amount representing interest
|
$
|
(718
|
)
|
Present value of net minimum operating lease payments
|
$
|
8,178
|
|
Less current installments of obligation under current-operating lease liabilities
|
$
|
4,418
|
|
Obligations under long-term operating lease liabilities, excluding current installments
|
$
|
3,760
|
|
|
|
||
Weighted-average remaining lease term - operating leases (years)
|
2.94
|
|
|
Weighted-average discount rate - operating leases
|
5.50
|
%
|
|
|
||
Remainder of 2019
|
$
|
312
|
|
2020
|
624
|
|
|
2021
|
624
|
|
|
2022
|
624
|
|
|
2023
|
45
|
|
|
2024 and thereafter
|
—
|
|
|
Total minimum lease payments
|
$
|
2,229
|
|
|
|
||
Less amount representing interest
|
$
|
(26
|
)
|
Present value of net minimum financing lease payments
|
$
|
2,203
|
|
Less current installments of obligation under accrued other
|
$
|
612
|
|
Obligations under other long-term liabilities, excluding current installments
|
$
|
1,591
|
|
|
|
||
Weighted-average remaining lease term - finance leases (years)
|
3.67
|
|
|
Weighted-average discount rate - finance leases
|
1.53
|
%
|
|
|
December 31, 2018
|
||
Cash and cash equivalents
|
|
$
|
2,838
|
|
Accounts receivable, net
|
|
1,071
|
|
|
Prepaid expenses and other current assets
|
|
962
|
|
|
Current assets held for sale
|
|
$
|
4,871
|
|
Property and equipment, net
|
|
2,615
|
|
|
Intangible assets, net
|
|
4,857
|
|
|
Goodwill
|
|
17,182
|
|
|
Other non-current assets
|
|
1,252
|
|
|
Non-current assets held for sale
|
|
$
|
25,906
|
|
Accounts payable
|
|
991
|
|
|
Accrued compensation and employee-related expenses
|
|
220
|
|
|
Accrued other
|
|
1,362
|
|
|
Contract liabilities
|
|
1,546
|
|
|
Liability for uncertain tax positions
|
|
485
|
|
|
Current liabilities held for sale
|
|
$
|
4,604
|
|
Non-current deferred income tax liability
|
|
813
|
|
|
Non-current liabilities held for sale
|
|
$
|
813
|
|
Net assets held for sale
|
|
$
|
25,360
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Sales:
|
|
|
|
|
|
|
|
||||||||
Service sales
|
$
|
1,832
|
|
|
$
|
4,760
|
|
|
$
|
5,769
|
|
|
$
|
9,456
|
|
|
|
|
|
|
|
|
|
||||||||
Costs, expenses and other expense, net:
|
|
|
|
|
|
|
|
||||||||
Costs of service sales
|
483
|
|
|
1,267
|
|
|
1,807
|
|
|
2,713
|
|
||||
Sales, marketing and support
|
437
|
|
|
885
|
|
|
1,606
|
|
|
2,249
|
|
||||
General and administrative
|
494
|
|
|
1,215
|
|
|
1,619
|
|
|
2,449
|
|
||||
Other expense, net
|
(14
|
)
|
|
(90
|
)
|
|
(23
|
)
|
|
(56
|
)
|
||||
Income from discontinued operations before tax expense
|
404
|
|
|
1,303
|
|
|
714
|
|
|
1,989
|
|
||||
Gain on sale of discontinued operations before tax expense
|
54,520
|
|
|
—
|
|
|
54,520
|
|
|
—
|
|
||||
Total income from discontinued operations before tax expense
|
$
|
54,924
|
|
|
$
|
1,303
|
|
|
$
|
55,234
|
|
|
$
|
1,989
|
|
Income tax expense on discontinued operations
|
4,294
|
|
|
244
|
|
|
4,361
|
|
|
377
|
|
||||
Income from discontinued operations, net of taxes
|
$
|
50,630
|
|
|
$
|
1,059
|
|
|
$
|
50,873
|
|
|
$
|
1,612
|
|
|
|
|
|
|
|
|
|
||||||||
Net income from discontinued operations per common share
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
$
|
2.90
|
|
|
$
|
0.06
|
|
|
$
|
2.93
|
|
|
$
|
0.10
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic and diluted
|
17,463
|
|
|
17,140
|
|
|
17,383
|
|
|
16,942
|
|
|
Six Months Ended
|
||||||
|
June 30,
|
||||||
|
2019
|
|
2018
|
||||
|
|
|
|
||||
Cash (used in) provided by operating activities—discontinued operations
|
$
|
(1,838
|
)
|
|
$
|
3,851
|
|
Cash provided by (used in) investing activities—discontinued operations
|
$
|
87,986
|
|
|
$
|
(779
|
)
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Mobile connectivity
|
$
|
30,974
|
|
|
$
|
29,004
|
|
|
$
|
59,547
|
|
|
$
|
57,057
|
|
Inertial navigation
|
8,261
|
|
|
9,628
|
|
|
15,723
|
|
|
16,980
|
|
||||
Net sales
|
$
|
39,235
|
|
|
$
|
38,632
|
|
|
$
|
75,270
|
|
|
$
|
74,037
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Research and development expense presented on the statement of operations
|
$
|
3,798
|
|
|
$
|
3,565
|
|
|
$
|
7,666
|
|
|
$
|
7,499
|
|
Costs of customer-funded research and development included in costs of service sales
|
1,700
|
|
|
953
|
|
|
2,748
|
|
|
1,628
|
|
||||
Total consolidated statements of operations expenditures on research and development activities
|
$
|
5,498
|
|
|
$
|
4,518
|
|
|
$
|
10,414
|
|
|
$
|
9,127
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
June 30,
|
|
June 30,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Sales:
|
|
|
|
|
|
|
|
||||
Product
|
37.5
|
%
|
|
41.8
|
%
|
|
36.6
|
%
|
|
40.7
|
%
|
Service
|
62.5
|
|
|
58.2
|
|
|
63.4
|
|
|
59.3
|
|
Net sales
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
Cost and expenses:
|
|
|
|
|
|
|
|
||||
Costs of product sales
|
31.4
|
|
|
26.1
|
|
|
26.8
|
|
|
25.7
|
|
Costs of service sales
|
39.2
|
|
|
36.8
|
|
|
40.9
|
|
|
35.9
|
|
Research and development
|
9.7
|
|
|
9.2
|
|
|
10.2
|
|
|
10.1
|
|
Sales, marketing and support
|
22.6
|
|
|
19.7
|
|
|
22.6
|
|
|
20.5
|
|
General and administrative
|
14.6
|
|
|
14.8
|
|
|
16.9
|
|
|
16.4
|
|
Total costs and expenses
|
117.5
|
|
|
106.6
|
|
|
117.4
|
|
|
108.6
|
|
Loss from operations
|
(17.5
|
)
|
|
(6.6
|
)
|
|
(17.4
|
)
|
|
(8.6
|
)
|
Interest income
|
2.5
|
|
|
0.4
|
|
|
1.6
|
|
|
0.4
|
|
Interest expense
|
1.4
|
|
|
1.1
|
|
|
1.3
|
|
|
1.1
|
|
Other income, net
|
0.9
|
|
|
1.4
|
|
|
0.3
|
|
|
0.3
|
|
Loss before income tax (benefit) expense
|
(15.5
|
)
|
|
(5.9
|
)
|
|
(16.8
|
)
|
|
(9.0
|
)
|
Income tax (benefit) expense
|
(6.6
|
)
|
|
0.2
|
|
|
(3.5
|
)
|
|
0.2
|
|
Net loss from continuing operations
|
(8.9
|
)%
|
|
(6.1
|
)%
|
|
(13.3
|
)%
|
|
(9.2
|
)%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
June 30,
|
|
June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Sales from discontinued operations
|
$
|
1,832
|
|
|
$
|
4,760
|
|
|
$
|
5,769
|
|
|
$
|
9,456
|
|
Income from discontinued operations, net tax
|
$
|
50,630
|
|
|
$
|
1,059
|
|
|
$
|
50,873
|
|
|
$
|
1,612
|
|
|
|
|
|
|
Change
|
|||||||||
|
For the three months ended June 30,
|
|
2019 vs. 2018
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Mobile connectivity sales:
|
|
|
|
|
|
|
|
|||||||
Product
|
$
|
8,068
|
|
|
$
|
8,103
|
|
|
$
|
(35
|
)
|
|
—
|
%
|
Service
|
22,906
|
|
|
20,901
|
|
|
2,005
|
|
|
10
|
%
|
|||
Net sales
|
$
|
30,974
|
|
|
$
|
29,004
|
|
|
$
|
1,970
|
|
|
7
|
%
|
|
|
|
|
|
|
|
|
|||||||
Inertial navigation sales:
|
|
|
|
|
|
|
|
|||||||
Product
|
$
|
6,626
|
|
|
$
|
8,059
|
|
|
$
|
(1,433
|
)
|
|
(18
|
)%
|
Service
|
1,635
|
|
|
1,569
|
|
|
66
|
|
|
4
|
%
|
|||
Net sales
|
$
|
8,261
|
|
|
$
|
9,628
|
|
|
$
|
(1,367
|
)
|
|
(14
|
)%
|
|
|
|
|
|
Change
|
|||||||||
|
For the three months ended June 30,
|
|
2019 vs. 2018
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Mobile connectivity
|
$
|
(2,519
|
)
|
|
$
|
(243
|
)
|
|
$
|
(2,276
|
)
|
|
(937
|
)%
|
Inertial navigation
|
(247
|
)
|
|
1,564
|
|
|
(1,811
|
)
|
|
(116
|
)%
|
|||
|
$
|
(2,766
|
)
|
|
$
|
1,321
|
|
|
$
|
(4,087
|
)
|
|
(309
|
)%
|
Unallocated
|
(4,067
|
)
|
|
(3,901
|
)
|
|
(166
|
)
|
|
(4
|
)%
|
|||
Loss from operations
|
$
|
(6,833
|
)
|
|
$
|
(2,580
|
)
|
|
$
|
(4,253
|
)
|
|
(165
|
)%
|
|
|
|
|
|
Change
|
|||||||||
|
For the six months ended
June 30,
|
|
2019 vs. 2018
|
|||||||||||
|
2019
|
|
2018
|
|
$
|
|
%
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Mobile connectivity sales:
|
|
|
|
|
|
|
|
|||||||
Product
|
$
|
15,130
|
|
|
$
|
16,023
|
|
|
$
|
(893
|
)
|
|
(6
|
)%
|
Service
|
44,417
|
|
|
41,034
|
|
|
3,383
|
|
|
8
|
%
|
|||
Net sales
|
$
|
59,547
|
|
|
$
|
57,057
|
|
|
$
|
2,490
|
|
|
4
|
%
|
|
|
|
|
|
|
|
|
|||||||
Inertial navigation sales:
|
|
|
|
|
|
|
|
|||||||
Product
|
$
|
12,438
|
|
|
$
|
14,131
|
|
|
$
|
(1,693
|
)
|
|
(12
|
)%
|
Service
|
3,285
|
|
|
2,849
|
|
|
436
|
|
|
15
|
%
|
|||
Net sales
|
$
|
15,723
|
|
|
$
|
16,980
|
|
|
$
|
(1,257
|
)
|
|
(7
|
)%
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 1.
|
LEGAL PROCEEDINGS
|
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;
|
•
|
the infrastructure costs for potential customers to switch from an existing service provider to our service may create disincentives for customers to enter into agreements for our services, even when those services are more attractive or cost-effective;
|
•
|
many of our primary competitors have well-established and/or growing partner programs, which pose a threat of multiplying their market influence;
|
•
|
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;
|
•
|
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 other 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.
|
•
|
retaliatory and other tariffs;
|
•
|
technical challenges we may face in adapting our mobile connectivity 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 inertial navigation 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;
|
•
|
entry into new or unfamiliar geographic regions, including exposure to additional tax and regulatory regimes;
|
•
|
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 connectivity and inertial navigation products and services, including as a result of our AgilePlans;
|
•
|
the timing and size of individual orders from military customers, which may be delayed or canceled for various reasons;
|
•
|
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;
|
•
|
the scope and success of our investments in research and development;
|
•
|
expenses incurred in pursuing acquisitions and investments;
|
•
|
expenses incurred in expanding, maintaining, or improving 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 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
|
Exhibit
No.
|
|
Description
|
|
Filed with
this Form 10-Q
|
|
Incorporated by Reference
|
|||||
|
Form
|
|
Filing Date
|
|
Exhibit No.
|
||||||
|
|
Share Purchase Agreement dated as of May 13, 2019 among KVH Industries, Inc., KVH Media Group Limited and Pelican Holdco Limited relating to the sale of the entire issued share capital of Super Dragon Limited and Videotel Marine Asia Limited
|
|
|
|
8-K
|
|
May 16, 2019
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Deed of Covenant dated as of May 13, 2019 among KVH Industries, Inc., KVH Media Group Limited and Pelican Holdco Limited relating to the sale of the entire issued share capital of Super Dragon Limited and Videotel Marine Asia Limited
|
|
|
|
8-K
|
|
May 16, 2019
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Certificate of Incorporation, as amended
|
|
|
|
10-Q
|
|
August 6, 2010
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended and Restated Bylaws
|
|
|
|
10-Q
|
|
November 1, 2017
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Specimen certificate for the common stock
|
|
|
|
10-K
|
|
March 2, 2017
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Agreement dated as of May 13, 2019 between KVH Media Group Limited, as Lender, and Pelican Holdco Limited, as Borrower
|
|
|
|
8-K
|
|
May 16, 2019
|
|
10.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deed of Share Charge dated as of May 13, 2019 between Pelican Holdco Limited, as Charger, in favor of KVH Media Group Limited, as Chargee, over shares of Super Dragon Limited
|
|
|
|
8-K
|
|
May 16, 2019
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deed of Share Charge dated as of May 13, 2019 between Pelican Holdco Limited, as Charger, in favor of KVH Media Group Limited, as Chargee, over shares of Videotel Marine Asia Limited
|
|
|
|
8-K
|
|
May 16, 2019
|
|
10.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consent dated as of May 13, 2019 among KVH Industries, Inc., as Borrower, Bank of America, N.A., as Lender and Administrative Agent, and The Washington Trust Company, as Lender, under the Amended and Restated Credit Agreement dated as of October 30, 2018 among such parties
|
|
|
|
8-K
|
|
May 16, 2019
|
|
10.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rule 13a-14(a)/15d-14(a) certification of principal executive officer
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rule 13a-14(a)/15d-14(a) certification of principal financial officer
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Section 1350 certification of principal executive officer and principal financial officer
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101
|
|
|
The following financial information from KVH Industries, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets (unaudited), (ii) the Consolidated Statements of Operations (unaudited), (iii) the Consolidated Statements of Comprehensive Income (Loss) (unaudited), (iv) the Consolidated Statement of Stockholder's Equity (unaudited), (v)
the Consolidated Statements of Cash Flows (unaudited), and (vi) the Notes to Consolidated Financial Statements (unaudited).
|
|
X
|
|
|
|
|
|
|
Date: August 2, 2019
|
|
|
|
KVH Industries, Inc.
|
|
|
|
By:
|
/s/ D
ONALD
W
.
R
EILLY
|
|
Donald W. Reilly
|
|
(Duly Authorized Officer and Chief Financial
Officer)
|
Exhibit
No.
|
|
Description
|
|
Filed with
this Form 10-Q
|
|
Incorporated by Reference
|
|||||
|
Form
|
|
Filing Date
|
|
Exhibit No.
|
||||||
2.1
|
|
|
Share Purchase Agreement dated as of May 13, 2019 among KVH Industries, Inc., KVH Media Group Limited and Pelican Holdco Limited relating to the sale of the entire issued share capital of Super Dragon Limited and Videotel Marine Asia Limited
|
|
|
|
8-K
|
|
May 16, 2019
|
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2
|
|
|
Tax Deed of Covenant dated as of May 13, 2019 among KVH Industries, Inc., KVH Media Group Limited and Pelican Holdco Limited relating to the sale of the entire issued share capital of Super Dragon Limited and Videotel Marine Asia Limited
|
|
|
|
8-K
|
|
May 16, 2019
|
|
2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation, as amended
|
|
|
|
10-Q
|
|
August 6, 2010
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
Amended and Restated Bylaws
|
|
|
|
10-Q
|
|
November 1, 2017
|
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
|
4.1
|
|
|
Specimen certificate for the common stock
|
|
|
|
10-K
|
|
March 2, 2017
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
|
Loan Agreement dated as of May 13, 2019 between KVH Media Group Limited, as Lender, and Pelican Holdco Limited, as Borrower
|
|
|
|
8-K
|
|
May 16, 2019
|
|
10.1
|
|
|
|
|
|
|
|
|
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10.3
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Deed of Share Charge dated as of May 13, 2019 between Pelican Holdco Limited, as Charger, in favor of KVH Media Group Limited, as Chargee, over shares of Videotel Marine Asia Limited
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8-K
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May 16, 2019
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10.3
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10.4
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Consent dated as of May 13, 2019 among KVH Industries, Inc., as Borrower, Bank of America, N.A., as Lender and Administrative Agent, and The Washington Trust Company, as Lender, under the Amended and Restated Credit Agreement dated as of October 30, 2018 among such parties
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8-K
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May 16, 2019
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10.4
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31.1
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Rule 13a-14(a)/15d-14(a) certification of principal executive officer
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X
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31.2
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Rule 13a-14(a)/15d-14(a) certification of principal financial officer
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X
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32.1
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Section 1350 certification of principal executive officer and principal financial officer
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X
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32.2
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Section 1350 certification of principal financial officer
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X
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101
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The following financial information from KVH Industries, Inc.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets (unaudited), (ii) the Consolidated Statements of Operations (unaudited), (iii) the Consolidated Statements of Comprehensive Income (Loss) (unaudited), (iv) the Consolidated Statement of Stockholder's Equity (unaudited), (v)
the Consolidated Statements of Cash Flows (unaudited), and (vi) the Notes to Consolidated Financial Statements (unaudited).
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X
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1 Year KVH Industries Chart |
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