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 SEPTEMBER 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 October 31, 2014, the registrant had 8,185,323 shares of its Common Stock outstanding.

 

 

 

 

 

 


 

AMERICAN ELECTRIC TECHNOLOGIES, INC. AND SUBSIDIARIES

FORM 10-Q Index

For the Quarterly Period Ended September 30, 2014

 

 

  

 

  

Page

 

  

Part I. Financial Information

  

 

 

Item 1.

  

Financial Statements (Unaudited)

  

 

 

  

 

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

  

3

 

  

 

Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30, 2014 and 2013

  

4

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Nine Months Ended September 30, 2014 and 2013

 

5

 

  

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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

  

16

 

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk

  

27

 

Item 4.

  

Controls and Procedures

  

27

 

  

 

Part II. Other Information

  

 

 

Item 1.

  

Legal Proceedings

  

28

 

Item 1A.

  

Risk Factors

  

28

 

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

  

28

 

Item 3.

  

Defaults upon Senior Securities

  

28

 

Item 4.

  

Mine Safety Disclosures

  

28

 

Item 5.

  

Other Information

  

28

 

Item 6.

  

Exhibits

  

28

 

Signatures

  

29

 

 

 

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)  

 

 

September 30, 2014

 

 

December 31,

 

 

(unaudited)

 

 

2013

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

$

2,384

 

 

$

4,148

 

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

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

 

10,917

 

 

 

10,462

 

Inventories, net of allowance of $65 and $40 at September

   30, 2014 and December 31, 2013

 

3,781

 

 

 

3,184

 

Cost and estimated earnings in excess of billings on

   uncompleted contracts

 

4,960

 

 

 

5,312

 

Prepaid expenses and other current assets

 

438

 

 

 

376

 

Current assets held for sale

 

-

 

 

 

3,113

 

Total current assets

 

22,480

 

 

 

26,595

 

Property, plant and equipment, net

 

8,535

 

 

 

4,077

 

Advances to and investments in foreign joint ventures

 

11,812

 

 

 

13,033

 

Other assets

 

45

 

 

 

126

 

Long-term assets held for sale

 

650

 

 

 

2,005

 

Total assets

$

43,522

 

 

$

45,836

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

7,897

 

 

$

5,327

 

Accrued payroll and benefits

 

956

 

 

 

1,911

 

Other accrued expenses

 

414

 

 

 

397

 

Billings in excess of costs and estimated earnings on

   uncompleted contracts

 

2,535

 

 

 

3,021

 

Short-term notes payable

-

 

 

-

 

Other current liabilities

 

12

 

 

 

121

 

Current liabilities held for sale

 

-

 

 

 

536

 

Total current liabilities

 

11,814

 

 

 

11,313

 

Notes payable

 

500

 

 

 

500

 

Deferred income taxes

 

3,424

 

 

 

3,541

 

Deferred compensation

 

270

 

 

 

211

 

Total liabilities

 

16,008

 

 

 

15,565

 

Convertible preferred stock:

 

 

 

 

 

 

 

Redeemable convertible preferred stock, Series A, net of discount

   of $731 at September 30, 2014 and $764 at December 31, 2013;

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

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

 

4,269

 

 

 

4,236

 

Stockholders’ equity:

 

 

 

 

 

 

 

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

   authorized, 8,184,188 and 8,008,759 shares issued and

   outstanding at September 30, 2014 and December 31, 2013

 

8

 

 

 

8

 

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

   and 49,863 shares at December 31, 2013)

 

(704

)

 

 

(238

)

Additional paid-in capital

 

11,207

 

 

 

10,494

 

Accumulated other comprehensive income

 

951

 

 

 

983

 

Retained earnings; including accumulated statutory reserves

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

   and December 31, 2013

 

11,783

 

 

 

14,788

 

Total stockholders’ equity

 

23,245

 

 

 

26,035

 

Total liabilities and stockholders’ equity

$

43,522

 

 

$

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 September 30,

 

 

Nine Months Ended September 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Net sales

$

14,283

 

 

$

16,236

 

 

$

43,561

 

 

$

42,743

 

Cost of sales

 

13,788

 

 

 

13,477

 

 

 

38,603

 

 

 

35,130

 

Gross profit

 

495

 

 

 

2,759

 

 

 

4,958

 

 

 

7,613

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

425

 

 

 

112

 

 

 

651

 

 

 

356

 

Selling and marketing

 

617

 

 

 

500

 

 

 

1,850

 

 

 

1,587

 

General and administrative

 

1,640

 

 

 

1,176

 

 

 

3,995

 

 

 

3,566

 

Total operating expenses

 

2,682

 

 

 

1,788

 

 

 

6,496

 

 

 

5,509

 

Income (loss) from consolidated continuing operations

 

(2,187

)

 

 

971

 

 

 

(1,538

)

 

 

2,104

 

Net equity income from foreign joint ventures’ operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity income from foreign joint ventures’ operations

 

350

 

 

 

434

 

 

 

1,934

 

 

 

3,140

 

Foreign joint ventures’ operations related expenses

 

(122

)

 

 

(66

)

 

 

(412

)

 

 

(204

)

Net equity income from foreign joint ventures’

   operations

 

228

 

 

 

368

 

 

 

1,522

 

 

 

2,936

 

Income (loss) from consolidated continuing operations

   and net equity income from foreign joint

   ventures’ operations

 

(1,959

)

 

 

1,339

 

 

 

(16

)

 

 

5,040

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense and other, net

 

(23

)

 

 

(27

)

 

 

(56

)

 

 

(72

)

Continuing operations income (loss) before income taxes

 

(1,982

)

 

 

1,312

 

 

 

(72

)

 

 

4,968

 

Provision for income taxes on continuing operations

-

 

 

 

110

 

 

-

 

 

 

745

 

Net income (loss) from continuing operations

 

(1,982

)

 

 

1,202

 

 

 

(72

)

 

 

4,223

 

Discontinued operations income (loss)

 

(21

)

 

 

(215

)

 

 

(2,673

)

 

 

(350

)

Provision for income taxes on discontinued operations

-

 

 

-

 

 

-

 

 

-

 

Net income (loss) from discontinued operations

 

(21

)

 

 

(215

)

 

 

(2,673

)

 

 

(350

)

Net income (loss) before dividends on

   redeemable convertible preferred stock

 

(2,003

)

 

 

987

 

 

 

(2,745

)

 

 

3,873

 

Dividends on redeemable convertible preferred stock

 

(86

)

 

 

(86

)

 

 

(258

)

 

 

(256

)

Net income (loss) attributable to common stockholders

$

(2,089

)

 

$

901

 

 

$

(3,003

)

 

$

3,617

 

Earnings (loss) from continuing operations

   per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.25

)

 

$

0.14

 

 

$

(0.04

)

 

$

0.50

 

Diluted

 

(0.25

)

 

 

0.13

 

 

 

(0.04

)

 

 

0.45

 

Weighted - average number of continuing

   operations shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

8,180,970

 

 

 

8,004,026

 

 

 

8,137,133

 

 

 

7,985,318

 

Diluted

 

8,180,970

 

 

 

9,497,056

 

 

 

8,137,133

 

 

 

9,450,719

 

Loss per common share from discontinued operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

$

(0.00

)

 

$

(0.03

)

 

$

(0.33

)

 

$

(0.04

)

Total Earnings (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.26

)

 

$

0.11

 

 

$

(0.37

)

 

$

0.45

 

Diluted

 

(0.26

)

 

 

0.10

 

 

 

(0.37

)

 

 

0.41

 

Weighted - average number of common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

8,180,970

 

 

 

8,004,026

 

 

 

8,137,133

 

 

 

7,985,318

 

Diluted

 

8,180,970

 

 

 

9,497,056

 

 

 

8,137,133

 

 

 

9,450,719

 

 

 

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 September 30,

 

 

2014

 

 

2013

 

Net income (loss)

$

(2,003

)

 

$

987

 

Other comprehensive income:

 

 

 

 

 

 

 

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

   ($1) and ($48) for the three months ended September 30, 2014 and 2013

 

(31

)

 

 

93

 

Total comprehensive income (loss)

$

(2,034

)

 

$

1,080

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

2014

 

 

2013

 

Net income (loss)

$

(2,745

)

 

$

3,873

 

Other comprehensive income:

 

 

 

 

 

 

 

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

   ($1) and $(22) for the nine months ended September 30, 2014 and 2013

 

(32

)

 

 

42

 

Total comprehensive income (loss)

$

(2,777

)

 

$

3,915

 

 

 

 

 

 

 

 

 

 

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)

 

 

Nine Months Ended September 30,

 

 

2014

 

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss) from continuing operations

$

(72

)

 

$

4,223

 

Adjustments to reconcile net income (loss) to net cash provided by

   operating activities:

 

 

 

 

 

 

 

Deferred income tax provision (benefit)

-

 

 

 

745

 

Equity income from foreign joint ventures’ operations

 

(1,934

)

 

 

(3,140

)

Depreciation and amortization

 

457

 

 

 

348

 

Stock based compensation

 

601

 

 

 

446

 

Provision for bad debt

-

 

 

 

66

 

Allowance for obsolete inventory

 

25

 

 

 

(24

)

Deferred compensation costs

 

59

 

 

 

70

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

(604

)

 

 

(779

)

Income taxes payable

 

(108

)

 

 

6

 

Inventories

 

(623

)

 

 

(1,728

)

Costs and estimated earnings in excess of billings on

   uncompleted contracts

 

352

 

 

 

(2,552

)

Prepaid expenses and other current assets

 

88

 

 

 

1

 

Accounts payable and accrued liabilities

 

2,174

 

 

 

1,644

 

Billings in excess of costs and estimated

   earnings on uncompleted contracts

 

(486

)

 

 

434

 

Other

 

-

 

 

 

(7

)

Net cash provided by (used in) operating activities

 

(71

)

 

 

(247

)

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property, plant and equipment and other

   assets

 

(4,715

)

 

 

(618

)

Proceeds from foreign joint ventures’ operations dividends

 

2,522

 

 

 

1,391

 

Net cash provided by (used in) from investing activities

 

(2,193

)

 

 

773

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from sale of common stock, preferred stock, and

   warrants

 

113

 

 

 

-

 

Treasury stocks purchase

 

(466

)

 

 

(147

)

Preferred stock cash dividend

 

(225

)

 

 

(225

)

Net cash provided by (used in) financing activities

 

(578

)

 

 

(372

)

Net increase (decrease) in cash and cash equivalents

   from continuing operations

 

(2,842

)

 

 

154

 

Advances from (to) discontinued operations

 

1,078

 

 

 

(455

)

Net increase (decrease) in cash and cash equivalents

 

(1,764

)

 

 

(301

)

Cash and cash equivalents, beginning of period

 

4,148

 

 

 

4,477

 

Cash and cash equivalents, end of period

$

2,384

 

 

$

4,176

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Interest paid

$

36

 

 

$

21

 

Income taxes paid

$

102

 

 

$

139

 

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 September 30, 2014 and for the three months and nine 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 September 30, 2014 and results of operations for the three months and nine months ending September 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 our Annual Report on Form 10-K for the year ended December 31, 2013, which was filed on March 28, 2014. Because of the sale of the American Access Technologies, Inc. (“AAT”) segment’s operations which was completed on August 15, 2014, (except for its real estate) its remaining assets 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 nine months ended September 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.


7


 

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

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Net income attributable to common stockholders***

$

(2,068

)

 

$

1,116

 

 

$

(330

)

 

$

3,967

 

Weighted average basic shares

 

8,180,970

 

 

 

8,004,026

 

 

 

8,137,133

 

 

 

7,985,318

 

Dilutive effect of preferred stock, warrants, stock options

   and restricted stock units *

 

-

 

 

 

1,493,030

 

 

-

 

 

 

1,465,401

 

Total weighted average diluted shares

 

8,180,970

 

 

 

9,497,056

 

 

 

8,137,133

 

 

 

9,450,719

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.25

)

 

$

0.14

 

 

$

(0.04

)

 

$

0.50

 

Dilutive **

$

(0.25

)

 

$

0.13

 

 

$

(0.04

)

 

$

0.45

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

With Discontinued Operations

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Net income attributable to common stockholders

$

(2,089

)

 

$

901

 

 

$

(3,003

)

 

$

3,617

 

Weighted average basic shares

 

8,180,970

 

 

 

8,004,026

 

 

 

8,137,133

 

 

 

7,985,318

 

Dilutive effect of preferred stock, warrants, stock options

   and restricted stock units *

-

 

 

 

1,493,030

 

 

-

 

 

 

1,465,401

 

Total weighted average diluted shares

 

8,180,970

 

 

 

9,497,056

 

 

 

8,137,133

 

 

 

9,450,719

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.26

)

 

$

0.11

 

 

$

(0.37

)

 

$

0.45

 

Dilutive **

$

(0.26

)

 

$

0.10

 

 

$

(0.37

)

 

$

0.41

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

* No shares are dilutive when losses are reported.

** When preferred shares are assumed converted, their dividends are added back to net income.

***Net income (loss) from continuing operations less dividends on redeemable convertible preferred stock.

 

 

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.

8


 

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, 2016, 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.

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, industrial, marine and commercial markets. The American Access Technologies (AAT) segment manufactures and markets zone cabling and formed metal products of varying designs. Because of the disposition of the (AAT) segment’s operations and net assets in August 2014, that segment’s results are excluded from segment reporting and presented as discontinued operations in the accompanying condensed consolidated statements of operations.

9


 

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

 

 

Three Months Ended September 30,

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

2014

 

 

 

 

 

 

2013

 

 

 

 

 

 

2014

 

 

 

 

 

 

2013

 

 

 

 

 

Net sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technical Products and Services

$

12,618

 

 

 

 

 

 

$

13,970

 

 

 

 

 

 

$

38,743

 

 

 

 

 

 

$

35,607

 

 

 

 

 

Electrical and Instrumentation Construction **

 

1,665

 

 

 

 

 

 

 

2,266

 

 

 

 

 

 

 

4,818

 

 

 

 

 

 

 

7,136

 

 

 

 

 

 

$

14,283

 

 

 

 

 

 

$

16,236

 

 

 

 

 

 

$

43,561

 

 

 

 

 

 

$

42,743

 

 

 

 

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technical Products and Services

$

251

 

 

 

2

%

 

$

2,428

 

 

 

17

%

 

$

4,385

 

 

 

11

%

 

$

6,117

 

 

 

17

%

Electrical and Instrumentation Construction **

 

244

 

 

 

15

%

 

 

331

 

 

 

15

%

 

 

573

 

 

 

12

%

 

 

1,496

 

 

 

21

%

 

$

495

 

 

 

3

%

 

$

2,759

 

 

 

17

%

 

$

4,958

 

 

 

11

%

 

$

7,613

 

 

 

18

%

Income (loss) from consolidated continuing

     operations and net equity income

     from foreign joint ventures’ operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Technical Products and Services

$

(210

)

 

 

-2

%

 

$

2,188

 

 

 

16

%

 

$

3,623

 

 

 

9

%

 

$

5,372

 

 

 

15

%

Electrical and Instrumentation Construction **

 

62

 

 

 

4

%

 

 

331

 

 

 

15

%

 

 

391

 

 

 

8

%

 

 

1,496

 

 

 

21

%

Corporate and other unallocated expenses

 

(2,039

)

 

 

-14

%

 

 

(1,548

)

 

 

-9.5

%

 

 

(5,552

)

 

 

-13

%

 

 

(4,764

)

 

 

-11

%

Income (loss) from consolidated continuing operations

 

(2,187

)

 

 

-15

%

 

 

971

 

 

 

6

%

 

 

(1,538

)

 

 

-4

%

 

 

2,104

 

 

 

5

%

Equity income from BOMAY

 

285

 

 

 

 

 

 

 

475

 

 

 

 

 

 

 

1,793

 

 

 

 

 

 

 

2,123

 

 

 

 

 

Equity income (loss) from MIEFE

 

65

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

 

139

 

 

 

 

 

 

 

146

 

 

 

 

 

Equity income (loss) from AAG*

 

-

 

 

 

 

 

 

 

(29

)

 

 

 

 

 

 

2

 

 

 

 

 

 

 

871

 

 

 

 

 

Foreign operations (expenses)

 

(122

)

 

 

 

 

 

 

(66

)

 

 

 

 

 

 

(412

)

 

 

 

 

 

 

(204

)

 

 

 

 

Net equity income from foreign joint ventures’

     operations

 

228

 

 

 

 

 

 

 

368

 

 

 

 

 

 

 

1,522

 

 

 

 

 

 

 

2,936

 

 

 

 

 

Income (loss) from consolidated continuing

     operations and net equity income

     from foreign joint ventures’ operations

$

(1,959

)

 

 

 

 

 

$

1,339

 

 

 

 

 

 

$

(16

)

 

 

 

 

 

$

5,040

 

 

 

 

 

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

**Brazil operations are included in E&I amounts for the three months and nine months ended September 30, 2014.  The Brazil operations for the three months and nine months ended September 30, 2014 are: Net sales: $184; Gross profit (loss): ($29); and Net income (loss): ($208).

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;

Effective April 30, 2014 the Company withdrew from the AETI Alliance Group do Brazil Sistemas E Servicos Em Energia LTDA. (“AAG”)joint venture in exchange for the book value at April 30, 2014 of approximately $0.6 million, receivable from AAG in 12 equal monthly payments. The Company has received four payments through September 30, 2014.

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

10


 

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

 

 

BOMAY

 

 

MIEFE

 

 

AAG

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

 

2014*

 

 

2013

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total current assets

$

77,458

 

 

$

94,220