SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2014

¨

TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                 TO                

Commission File No. 000-24575

 

AMERICAN ELECTRIC TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

 

 

Florida

 

59-3410234

(State or other jurisdiction
of incorporation)

 

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

1250 Wood Branch Park Drive, Suite 600, Houston, TX 77079

(Address of principal executive offices)

(713) 644-8182

(Registrant’s telephone number)

* * * * * * * * * * * * * * * * * * * * * *

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (S. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

¨

  

Accelerated filer

 

¨

 

 

 

 

Non-accelerated filer

 

¨

  

Smaller reporting company

 

x

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

As of July 31, 2014, the registrant had 8,177,956 shares of its Common Stock outstanding.

 

 

 

 

 


AMERICAN ELECTRIC TECHNOLOGIES, INC. AND SUBSIDIARIES

FORM 10-Q Index

For the Quarterly Period Ended June 30, 2014

 

 

  

 

  

Page

 

  

Part I. Financial Information

  

 

 

Item 1.

  

Financial Statements (Unaudited)

  

3

 

  

 

Condensed Consolidated Balance Sheets at June 30, 2014 and December 31, 2013

  

3

 

  

 

Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2014 and 2013

  

4

 

 

 

Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Six Months Ended June 30, 2014 and 2013

 

5

 

  

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2014 and 2013

  

6

 

  

 

Notes to Condensed Consolidated Financial Statements

  

7

 

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

14

 

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk

  

24

 

Item 4.

  

Controls and Procedures

  

24

 

  

 

Part II. Other Information

  

 

 

Item 1.

  

Legal Proceedings

  

25

 

Item 1A.

  

Risk Factors

  

25

 

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

  

25

 

Item 3.

  

Defaults upon Senior Securities

  

25

 

Item 4.

  

Mine Safety Disclosures

  

25

 

Item 5.

  

Other Information

  

25

 

Item 6.

  

Exhibits

  

26

 

Signatures

  

27

 

 

 

2


PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

American Electric Technologies, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)  

 

 

June 30, 2014

 

 

December 31,

 

 

(unaudited)

 

 

2013

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

2,900

 

 

$

4,148

 

Accounts receivable-trade, net of allowance of $315 and

   $327 at June 30, 2014 and December 31, 2013

 

10,578

 

 

 

10,462

 

Inventories, net of allowance of $57 and $40 at June

   30, 2014 and December 31, 2013

 

3,542

 

 

 

3,184

 

Cost and estimated earnings in excess of billings on

   uncompleted contracts

 

5,214

 

 

 

5,312

 

Prepaid expenses and other current assets

 

406

 

 

 

376

 

Current assets held for sale

 

2,161

 

 

 

3,113

 

Total current assets

 

24,801

 

 

 

26,595

 

Property, plant and equipment, net

 

7,475

 

 

 

4,077

 

Advances to and investments in foreign joint ventures

 

11,458

 

 

 

13,033

 

Other assets

 

72

 

 

 

126

 

Long-term assets held for sale

 

1,022

 

 

 

2,005

 

Total assets

$

44,828

 

 

$

45,836

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

6,312

 

 

$

5,327

 

Accrued payroll and benefits

 

1,070

 

 

 

1,911

 

Other accrued expenses

 

172

 

 

 

397

 

Billings in excess of costs and estimated earnings on

   uncompleted contracts

 

2,920

 

 

 

3,021

 

Short-term notes payable

 

 

 

Other current liabilities

 

49

 

 

 

121

 

Current liabilities held for sale

 

719

 

 

 

536

 

Total current liabilities

 

11,242

 

 

 

11,313

 

Notes payable

 

500

 

 

 

500

 

Deferred income taxes

 

3,422

 

 

 

3,541

 

Deferred compensation

 

250

 

 

 

211

 

Total liabilities

 

15,414

 

 

 

15,565

 

Convertible preferred stock:

 

 

 

 

 

 

 

Redeemable convertible preferred stock, Series A, net of discount

   of $742 at June 30, 2014 and $764 at December 31, 2013;

   $0.001 par value, 1,000,000 shares authorized, issued

   and outstanding at June 30, 2014 and December 31, 2013

 

4,258

 

 

 

4,236

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock; $0.001 par value, 50,000,000 shares

   authorized, 8,176,833 and 8,008,759 shares issued and

   outstanding at June 30, 2014 and December 31, 2013

 

8

 

 

 

8

 

Treasury stock, at cost (108,976 shares at June 30, 2014

   and 49,863 shares at December 31, 2013)

 

(704

)

 

 

(238

)

Additional paid-in capital

 

10,996

 

 

 

10,494

 

Accumulated other comprehensive income

 

982

 

 

 

983

 

Retained earnings; including accumulated statutory reserves

   in equity method investments of $1,857 at June 30, 2014

   and December 31, 2013

 

13,874

 

 

 

14,788

 

Total stockholders’ equity

 

25,156

 

 

 

26,035

 

Total liabilities and stockholders’ equity

$

44,828

 

 

$

45,836

 

3


 

 

American Electric Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

Unaudited

(in thousands, except share and per share data)

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Net sales

$

13,430

 

 

$

13,499

 

 

$

29,278

 

 

$

26,507

 

Cost of sales

 

11,402

 

 

 

11,410

 

 

 

24,815

 

 

 

21,653

 

Gross profit

 

2,028

 

 

 

2,089

 

 

 

4,463

 

 

 

4,854

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

159

 

 

 

75

 

 

 

226

 

 

 

244

 

Selling and marketing

 

570

 

 

 

533

 

 

 

1,233

 

 

 

1,087

 

General and administrative

 

1,148

 

 

 

1,026

 

 

 

2,355

 

 

 

2,391

 

Total operating expenses

 

1,877

 

 

 

1,634

 

 

 

3,814

 

 

 

3,722

 

Income (loss) from consolidated continuing operations

 

151

 

 

 

455

 

 

 

649

 

 

 

1,132

 

Net equity income from foreign joint ventures’ operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity income from foreign joint ventures’ operations

 

1,110

 

 

 

1,248

 

 

 

1,584

 

 

 

2,706

 

Foreign joint ventures’ operations related expenses

 

(178

)

 

 

(87

)

 

 

(290

)

 

 

(138

)

Net equity income from foreign joint ventures’

   operations

 

932

 

 

 

1,161

 

 

 

1,294

 

 

 

2,568

 

Income (loss) from consolidated continuing operations

   and net equity income from foreign joint

   ventures’ operations

 

1,083

 

 

 

1,616

 

 

 

1,943

 

 

 

3,700

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and other, net

 

(21

)

 

 

(28

)

 

 

(33

)

 

 

(44

)

Continuing operations income before income taxes

 

1,062

 

 

 

1,588

 

 

 

1,910

 

 

 

3,656

 

Provision for income taxes on continuing operations

 

 

 

(380

)

 

 

 

 

(635

)

Net income (loss) from continuing operations

 

1,062

 

 

 

1,208

 

 

 

1,910

 

 

 

3,021

 

Discontinued operations income (loss)

 

(2,384

)

 

 

(60

)

 

 

(2,652

)

 

 

(135

)

Provision for income taxes on discontinued operations

 

 

 

 

 

 

 

Net income (loss) from discontinued operations

 

(2,384

)

 

 

(60

)

 

 

(2,652

)

 

 

(135

)

Net income (loss) before dividends on

   redeemable convertible preferred stock

 

(1,322

)

 

 

1,148

 

 

 

(742

)

 

 

2,886

 

Dividends on redeemable convertible preferred stock

 

(86

)

 

 

(85

)

 

 

(172

)

 

 

(170

)

Net income (loss) attributable to common stockholders

$

(1,408

)

 

$

1,063

 

 

$

(914

)

 

$

2,716

 

Earnings (loss) from continuing operations

   per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.12

 

 

$

0.14

 

 

$

0.21

 

 

$

0.36

 

Diluted

 

0.11

 

 

 

0.12

 

 

 

0.20

 

 

 

0.32

 

Weighted - average number of continuing

   operations shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

8,176,808

 

 

 

8,002,872

 

 

 

8,115,214

 

 

 

7,976,222

 

Diluted

 

9,723,076

 

 

 

9,435,695

 

 

 

9,710,422

 

 

 

9,409,537

 

Loss per common share from discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

(0.29

)

 

 

(0.01

)

 

 

(0.32

)

 

 

(0.02

)

Total Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.17

)

 

$

0.13

 

 

$

(0.11

)

 

$

0.34

 

Diluted

 

(0.17

)

 

 

0.12

 

 

 

(0.11

)

 

 

0.31

 

Weighted - average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

8,176,808

 

 

 

8,002,872

 

 

 

8,115,214

 

 

 

7,976,222

 

Diluted

 

8,176,808

 

 

 

9,435,695

 

 

 

8,115,214

 

 

 

9,409,537

 

The accompanying notes are an integral part of the condensed consolidated financial statements

4


American Electric Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(in thousands)

 

 

Three Months Ended June 30,

 

 

2014

 

 

2013

 

Net income (loss)

$

(1,322

)

 

$

1,148

 

Other comprehensive income:

 

 

 

 

 

 

 

Foreign currency translation gain (loss), net of deferred income taxes of

   $51 and $43 for the three months ended June 30, 2014 and 2013

 

(99

)

 

 

(83

)

Total comprehensive income (loss)

$

(1,421

)

 

$

1,065

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

2014

 

 

2013

 

Net income (loss)

$

(742

)

 

$

2,886

 

Other comprehensive income:

 

 

 

 

 

 

 

Foreign currency translation gain (loss), net of deferred income taxes of

   $0 and $26 for the six months ended June 30, 2014 and 2013

 

(1

)

 

 

(51

)

Total comprehensive income (loss)

$

(743

)

 

$

2,835

 

 

 

 

 

 

 

 

 

  

The accompanying notes are an integral part of the condensed consolidated financial statements.

 


5


 

American Electric Technologies, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Unaudited

(in thousands)

 

 

Six Months Ended June 30,

 

 

2014

 

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income from continuing operations

$

1,910

 

 

$

3,021

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

Deferred income tax provision (benefit)

 

 

 

635

 

Equity income from foreign joint ventures’ operations

 

(1,584

)

 

 

(2,706

)

Depreciation and amortization

 

259

 

 

 

216

 

Stock based compensation

 

191

 

 

 

340

 

Provision for bad debt

 

 

 

66

 

Allowance for obsolete inventory

 

17

 

 

 

66

 

Loss or (gain) on sale of property and equipment

 

 

 

6

 

Deferred compensation costs

 

39

 

 

 

52

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

421

 

 

 

1,332

 

Income taxes payable

 

(71

)

 

 

5

 

Inventories

 

(376

)

 

 

(1,206

)

Costs and estimated earnings in excess of billings on

   uncompleted contracts

 

98

 

 

 

(1,950

)

Prepaid expenses and other current assets

 

36

 

 

 

(105

)

Accounts payable and accrued liabilities

 

(343

)

 

 

1,433

 

Billings in excess of costs and estimated

   earnings on uncompleted contracts

 

(101

)

 

 

645

 

Other

 

(12

)

 

 

(2

)

Net cash provided by (used in) operating activities

 

484

 

 

 

1,848

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property, plant and equipment and other

   assets

 

(3,603

)

 

 

(433

)

Proceeds from disposal of property, plant and equipment

 

 

 

Proceeds from foreign joint ventures’ operations dividends

 

2,522

 

 

 

106

 

Cash withdrawal from joint venture

 

46

 

 

 

Net cash provided by (used in) from investing activities

 

(1,035

)

 

 

(327

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from sale of common stock, preferred stock, and

   warrants

 

313

 

 

 

14

 

Treasury stocks purchase

 

(466

)

 

 

(146

)

Preferred stock cash dividend

 

(150

)

 

 

(150

)

Advances from credit facility

 

1,000

 

 

 

Repayments (of) credit facility

 

(1,000

)

 

 

 

 

Capital lease obligation payment

 

 

 

Net cash provided by (used in) financing activities

 

(303

)

 

 

(282

)

Net increase (decrease) in cash and cash equivalents

   from continuing operations

 

(854

)

 

 

1,239

 

Advances (to) discontinued operations

 

(394

)

 

 

(294

)

Net increase (decrease) in cash and cash equivalents

 

(1,248

)

 

 

945

 

Cash and cash equivalents, beginning of period

 

4,148

 

 

 

4,477

 

Cash and cash equivalents, end of period

$

2,900

 

 

$

5,422

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Interest paid

$

29

 

 

$

15

 

Income taxes paid

$

72

 

 

$

28

 

The accompanying notes are an integral part of the condensed consolidated financial statements

 

6


AMERICAN ELECTRIC TECHNOLOGIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

1. Basis of Presentation

The accompanying condensed unaudited consolidated financial statements of American Electric Technologies, Inc. and its wholly-owned subsidiaries (“AETI”, “the Company”, “our”, “we”, “us”) as of June 30, 2014 and for the three months and six months then ended have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and include all adjustments which, in the opinion of management, are necessary for a fair presentation of financial position as of June 30, 2014 and results of operations for the three months and six months ending June 30, 2014 and 2013. All adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The statements should be read in conjunction with the Company’s consolidated financial statements included in on our Annual Report on Form 10-K for the year ended December 31, 2013, which was filed on March 28, 2014. Because of the planned sale of the American Access Technologies, Inc. (“AAT”) segment’s operations, its assets and liabilities are presented as “held for sale” and its operations are reported as discontinued operations.

 

2. Earnings Per Common Share

Basic earnings per common share is based on the weighted average number of common shares outstanding for the three months and six months ended June 30, 2014 and 2013. Diluted earnings per common share is based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed conversion of convertible instruments, exercise of all potentially dilutive stock options and other stock units subject to anti-dilution limitations.

The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except shares and per share data):

 

Continuing Operations

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Net income attributable to common stockholders

$

976

 

 

$

1,123

 

 

$

1,738

 

 

$

2,851

 

Weighted average basic shares

 

8,176,808

 

 

 

8,002,872

 

 

 

8,115,214

 

 

 

7,976,222

 

Dilutive effect of preferred stock, warrants, stock options

   and restricted stock units

 

1,546,268

 

 

 

1,432,823

 

 

 

1,595,208

 

 

 

1,433,315

 

Total weighted average diluted shares

 

9,723,076

 

 

 

9,435,695

 

 

 

9,710,422

 

 

 

9,409,537

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.12

 

 

$

0.14

 

 

$

0.21

 

 

$

0.36

 

Dilutive

$

0.11

 

 

$

0.12

 

 

$

0.20

 

 

$

0.32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With Discontinued Operations

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Net income attributable to common stockholders

$

(1,408

)

 

$

1,063

 

 

$

(914

)

 

$

2,716

 

Weighted average basic shares

 

8,176,808

 

 

 

8,002,872

 

 

 

8,115,214

 

 

 

7,976,222

 

Dilutive effect of preferred stock, warrants, stock options

   and restricted stock units

 

 

 

1,432,823

 

 

 

 

 

1,433,315

 

Total weighted average diluted shares

 

8,176,808

 

 

 

9,435,695

 

 

 

8,115,214

 

 

 

9,409,537

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.17

)

 

$

0.13

 

 

$

(0.11

)

 

$

0.34

 

Dilutive

$

(0.17

)

 

$

0.12

 

 

$

(0.11

)

 

$

0.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7


 

3. Recent Accounting Pronouncements

In January 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-01, Balance Sheet (Topic 210) – Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities. ASU No. 2013-01 was issued to clarify that ordinary trade receivables and receivables are not within the scope of ASU No. 2011-11. ASU No. 2011-11 applies only to derivatives, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria contained in the Codification or subject to a master netter arrangement or similar agreement. ASU No. 2013-01 is effective for annual periods beginning on or after January 1, 2013 and interim periods within those periods. The adoption of ASU No. 2013-01 did not have a significant impact on the Company’s consolidated financial position or results of operations.

In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830) – Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. ASU No. 2013-05 provides guidance on releasing cumulative translation adjustments when a reporting entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, ASU No. 2013-05 provides guidance on the release of cumulative translation adjustments in partial sales of equity method investments and in step acquisition. ASU No. 2013-05 is effective on a prospective basis for annual periods beginning after December 15, 2013 and interim periods within those periods. The adoption of ASU No. 2013-05 did not have a significant impact on the Company’s consolidated financial position or results of operations.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. ASU No. 2014-08 changes the criteria for reporting discontinued operations while enhancing disclosures in this area. It also addresses sources of confusion and inconsistent application related to financial reporting of discontinued operations guidance in U.S. GAAP. Under ASU No. 2014-08, only disposals representing a strategic shift in operations should be presented as discontinued operations. Those strategic shifts should have a major effect on the organization’s operations and financial results. In addition, ASU No. 2014-08 requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The guidance also requires disclosure of pre-tax income attributable to a disposal of a significant part of an organization that does not qualify for discontinued operations reporting. ASU No. 2014-08 is effective in the first quarter of 2015 with early adoption permitted. Management is currently evaluating the future impact of ASU No. 2014-08 on the Company’s consolidated financial position, results of operations and disclosures.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2014, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the future impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method with which we will adopt the standard in 2017.

 

4. Segment Information

The Company follows the guidance prescribed by the Accounting Standard Codification (“ASC”) Topic 280, Segment Reporting, which governs the way the Company reports information about its operating segments.

The American Access Technologies (AAT) segment manufactures and markets zone cabling and formed metal products of varying designs. Because of the planned disposition of the segment’s operations and net assets, that segment’s results are excluded from segment reporting and presented as discontinued operations. Management has organized the Company around its continuing products and services and has two reportable segments: Technical Products and Services (“TP&S”) and Electrical and Instrumentation Construction (“E&I”). TP&S develops, manufactures, provides and markets switchgear and variable speed drives. The service component of this segment includes retrofitting equipment upgrades, startups, testing and troubleshooting electrical substations, switchgear, drives and control systems. The E&I segment installs electrical equipment for the energy, water, industrial, marine and commercial markets.

8


The following are selected financial details regarding the Company’s reportable segments (in thousands):

 

 

Three Months Ended June 30,

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

 

 

 

2014

 

 

 

 

 

 

2013

 

 

 

 

 

 

2014

 

 

 

 

 

 

2013

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technical Products and Services

$

12,039

 

 

 

 

 

 

$

11,157

 

 

 

 

 

 

$

26,125

 

 

 

 

 

 

$

21,637

 

 

 

 

 

Electrical and Instrumentation Construction

 

1,391

 

 

 

 

 

 

 

2,342

 

 

 

 

 

 

 

3,153

 

 

 

 

 

 

 

4,870

 

 

 

 

 

 

$

13,430

 

 

 

 

 

 

$

13,499

 

 

 

 

 

 

$

29,278

 

 

 

 

 

 

$

26,507

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technical Products and Services

$

2,004

 

 

 

17

%

 

$

1,832

 

 

 

16

%

 

$

4,134

 

 

 

16

%

 

$

3,689

 

 

 

17

%

Electrical and Instrumentation Construction

 

24

 

 

 

2

%

 

 

257

 

 

 

11

%

 

 

329

 

 

 

10

%

 

 

1,165

 

 

 

24

%

 

$

2,028

 

 

 

15

%

 

$

2,089

 

 

 

15

%

 

$

4,463

 

 

 

15

%

 

$

4,854

 

 

 

18

%

Income from consolidated continuing

     operations and net equity income

     from foreign joint ventures’ operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technical Products and Services

$

1,806

 

 

 

15

%

 

$

1,630

 

 

 

15

%

 

$

3,833

 

 

 

15

%

 

$

3,184

 

 

 

15

%

Electrical and Instrumentation Construction

 

24

 

 

 

2

%

 

 

257

 

 

 

11

%

 

 

329

 

 

 

10

%

 

 

1,165

 

 

 

24

%

Corporate and other unallocated expenses

 

(1,679

)

 

 

-13

%

 

 

(1,432

)

 

 

-11

%

 

 

(3,513

)

 

 

-12

%

 

 

(3,217

)

 

 

-12

%

Income from consolidated continuing operations

 

151

 

 

 

1

%

 

 

455

 

 

 

3

%

 

 

649

 

 

 

2

%

 

 

1,132

 

 

 

4

%

Equity income from BOMAY

 

960

 

 

 

 

 

 

 

647

 

 

 

 

 

 

 

1,508

 

 

 

 

 

 

 

1,648

 

 

 

 

 

Equity income (loss) from MIEFE

 

112

 

 

 

 

 

 

 

138

 

 

 

 

 

 

 

74

 

 

 

 

 

 

 

158

 

 

 

 

 

Equity income (loss) from AAG*

 

38

 

 

 

 

 

 

 

463

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

900

 

 

 

 

 

Foreign operations (expenses)

 

(178

)

 

 

 

 

 

 

(87

)

 

 

 

 

 

 

(290

)

 

 

 

 

 

 

(138

)

 

 

 

 

Net equity income from foreign joint ventures’

     Operations

 

932

 

 

 

 

 

 

 

1,161

 

 

 

 

 

 

 

1,294

 

 

 

 

 

 

 

2,568

 

 

 

 

 

Income from consolidated continuing

     operations and net equity income

     from foreign joint ventures’ operations

$

1,083

 

 

 

 

 

 

$

1,616

 

 

 

 

 

 

$

1,943

 

 

 

 

 

 

$

3,700

 

 

 

 

 

 

*AAG equity income ended on April 30, 2014 when M&I withdrew from the AAG Joint Venture.

The Company’s management does not separately review and analyze its assets on a segment basis for TP&S and E&I, and all assets for the segments are recorded within the corporate segment’s records. Corporate and other unallocated general and administrative expenses include compensation costs and other expenses that cannot be meaningfully associated with the individual segments. With the exception of equity income from foreign joint ventures’ operations and joint venture management related expenses, all other costs, expenses and other income have been allocated to their respective segments.

 

5. Investments in Foreign Joint Ventures

Effective May 1, 2014, we have interests in two joint ventures, outside of the United States of America (“U.S.”) which are accounted for on the equity method:

BOMAY Electric Industries Company, Ltd. (“BOMAY”), in which the Company holds a 40% interest, Baoji Oilfield Machinery Co., Ltd. (a subsidiary of China National Petroleum Corporation) holds a 51% interest, and AA Energies, Inc., holds a 9% interest;

M&I Electric Far East, Ltd. (“MIEFE”), in which the Company holds a 41% interest, MIEFE’s general manager holds a 8% interest and, Sonepar, (private company) of France holds a 51% interest, and;

AETI Alliance Group do Brazil Sistemas E Servicos Em Energia LTDA. (“AAG”), in which the Company held a 49% interest, and Beppe Hans Eddy Askerbo, of Brazil, held a 51% interest. Effective April 30, 2014 the Company withdrew from the joint venture. We are scheduled to receive the book value at April 30, 2014 of approximately $0.6 million in 12 equal monthly payments.

Sales to joint ventures are made on an arm’s length basis.

9


Summary (unaudited) financial information of our foreign joint ventures in U.S. dollars was as follows at June 30, 2014 and December 31, 2013 and the three months and six months ended June 30, 2014 and 2013 (in thousands):

 

 

BOMAY

 

 

MIEFE

 

 

AAG

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

2014*

 

 

2013

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

$

85,660

 

 

$

94,220

 

 

$

3,498

 

 

$

3,855

 

 

$

-

 

 

$

2,572

 

Total non-current assets

 

4,914

 

 

 

5,122

 

 

 

124

 

 

 

114

 

 

 

-

 

 

 

1,550

 

Total assets

$

90,574

 

 

$

99,342

 

 

$

3,622

 

 

$

3,969

 

 

$

-

 

 

$

4,122

 

Liabilities and equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

$

62,879

 

 

$

72,644

 

 

$

2,227

 

 

$

1,197

 

 

$

-

 

 

$

1,291

 

Total joint ventures’ equity

 

27,695

 

 

 

26,698

 

 

 

1,395

 

 

 

2,772

 

 

 

-

 

 

 

2,831

 

Total liabilities and equity

$

90,574

 

 

$

99,342

 

 

$

3,622

 

 

$

3,969

 

 

$

-

 

 

$

4,122

 

  

*As of April 30, 2014, the Company withdrew from the AAG Joint Venture.

 

 

Three Months Ended June 30,

 

 

BOMAY

 

 

MIEFE

 

 

AAG

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

2014*

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

37,611

 

 

$

31,483

 

 

$

2,388

 

 

$

2,824

 

 

$

297

 

 

$

4,514

 

Gross Profit

$

4,524

 

 

$

3,309

 

 

$

760

 

 

$

805

 

 

$

44

 

 

$

1,876

 

Earnings

$

2,400

 

 

$

1,619

 

 

$

275

 

 

$

337

 

 

$

77

 

 

$

945

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Items represent the Joint Venture's final month of April 2014.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

 

BOMAY

 

 

MIEFE

 

 

AAG

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

2014*

 

 

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

57,214

 

 

$

64,992

 

 

$

3,212

 

 

$

5,491

 

 

$

1,078

 

 

$

7,999

 

Gross Profit

$

7,459

 

 

$

7,597

 

 

$

1,119

 

 

$

1,287

 

 

$

154

 

 

$

3,432

 

Earnings

$

3,771

 

 

$

4,120

 

 

$

181

 

 

$

386

 

 

$

4

 

 

$

1,837

 

  

*Items represent the Joint Venture’s final four months ending April 2014.

 

The following is a summary of activity in investments in foreign joint ventures for the six months ended June 30, 2014 (unaudited):

 

 

June 30, 2014

 

 

BOMAY**

 

 

MIEFE

 

 

AAG

 

 

TOTAL

 

 

(in thousands)

 

Investments in foreign joint ventures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2013

$

10,609

 

 

$

1,138

 

 

$

1,286

 

 

$

13,033

 

Equity in earnings (loss) in 2014

 

1,508

 

 

 

74

 

 

 

2

 

 

 

1,584

 

Dividend distributions in 2014

 

(1,042

)

 

 

(650

)

 

 

(830

)

 

 

(2,522

)

Foreign currency translation adjustment

 

(86

)

 

 

(93

)

 

 

178

 

 

 

(1

)

Withdrawal from joint venture*

 

 

 

 

 

(636

)

 

 

(636

)

Investments, end of period

$

10,989

 

 

$

469

 

 

$

-