|
(Mark One)
|
|
x
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
05-0420589
|
(State or Other Jurisdiction of Incorporation or Organization)
|
|
(I.R.S. Employer Identification Number)
|
Title of Each Class
|
|
Name of Each Exchange on Which Registered
|
Common Stock, $0.01 par value per share
|
|
The NASDAQ Stock Market LLC (NASDAQ Global Market)
|
Large accelerated filer
o
|
|
Accelerated filer
x
|
Non-accelerated filer
o
|
|
Smaller reporting company
o
|
(Do not check if a smaller reporting company)
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
Item 1.
|
||
Item 1A.
|
||
Item 1B.
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
Mine Safety Disclosures
|
|
|
|
|
|
|
|
Item 5.
|
||
Item 6.
|
||
Item 7.
|
||
Item 7A.
|
||
Item 8.
|
||
Item 9.
|
||
Item 9A.
|
||
Item 9B.
|
||
|
|
|
|
|
|
|
|
|
Item 10.
|
||
Item 11.
|
||
Item 12.
|
||
Item 13.
|
||
Item 14.
|
||
|
|
|
|
|
|
|
|
|
Item 15.
|
||
Item 16.
|
|
|
ITEM 1.
|
Business
|
•
|
the mobile connectivity segment and
|
•
|
the inertial navigation segment
|
Segment
|
|
Primary Products
|
|
Major Brands
|
|
2016 Net Sales
(1)
|
||
Mobile connectivity
|
|
Satellite television, phone and internet solutions and media and content delivery solutions
|
|
TracVision®
TracPhone®
CommBox
TM
Videotel®
Mini-VSAT Broadband
SM
IP-MobileCast
TM
KVH OneCare
TM
|
|
$
|
141,507
|
|
Inertial navigation
|
|
Digital compass and fiber optic gyro-based navigation and guidance systems
|
|
TACNAV®
|
|
34,615
|
|
|
|
|
|
|
Total
|
|
$
|
176,122
|
|
(1) Amounts in thousands
|
|
|
|
|
|
|
•
|
TracVision - satellite television systems for vessels and vehicles
|
•
|
TracPhone - two-way satellite communications systems
|
•
|
mini-VSAT Broadband - hardware, software, content and content delivery for mobile satellite communications network
|
•
|
IP-MobileCast - content delivery service
|
•
|
NEWSlink - maritime news delivery service through a variety of means
|
•
|
SPORTSlink - sporting content delivered through a variety of means
|
•
|
TVlink - television programming delivered through a variety of means
|
•
|
MOVIElink - movie distribution through a variety of means
|
•
|
Videotel - maritime eLearning content and related services
|
•
|
CommBox - network management hardware and software for maritime communications
|
•
|
TACNAV - tactical navigation systems for military vehicles
|
•
|
KVH OneCare - services and support for the mini-VSAT Broadband solution
|
•
|
We released the DSP-1760 Unhoused Multi-Axis FOG, which provides more flexibility for our customers to build navigation and stabilization systems
|
•
|
We developed, but did not release, technologies, products and services to support future high throughput satellite (HTS) initiatives that will provide higher speed Internet services to our customers
|
•
|
We released the TACNAV Moving Map Display to provide more capability to our TACNAV customers who use our dead reckoning systems to operate in GPS denied environments
|
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;
|
•
|
many of our prime 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 additional debt or create liens on our assets;
|
•
|
pay dividends or make distributions;
|
•
|
prepay indebtedness; and
|
•
|
merge, dissolve, liquidate, consolidate, or dispose of all or substantially all of our assets.
|
•
|
technical challenges we may face in adapting our mobile 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 products and services and inertial navigation products and services;
|
•
|
the timing and size of individual orders from military customers, which may be delayed or cancelled 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;
|
•
|
expenses incurred in pursuing acquisitions;
|
•
|
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 1B.
|
Unresolved Staff Comments
|
ITEM 2.
|
Properties
|
Location
|
|
Type
|
|
Principal Uses
|
|
Approximate
Square
Footage
|
|
Ownership
|
|
Lease
Expiration
|
Middletown, Rhode Island
|
|
Office
|
|
Corporate headquarters, research and development, sales and service, marketing and administration
|
|
75,000
|
|
Owned
|
|
—
|
Middletown, Rhode Island
|
|
Plant and warehouse
|
|
Manufacturing and warehousing (mobile connectivity products)
|
|
75,300
|
|
Owned
|
|
—
|
Tinley Park, Illinois
|
|
Plant and warehouse
|
|
Manufacturing, warehousing, research and development (inertial navigation products)
|
|
101,000
|
|
Owned
|
|
—
|
Horten, Norway
|
|
Office
|
|
Research and development, sales, marketing and support
|
|
4,400
|
|
Leased
|
|
December 2018
|
Singapore
|
|
Office
|
|
Asian headquarters and sales office
|
|
2,000
|
|
Leased
|
|
April 2017
|
Kokkedal, Denmark
|
|
Office and warehouse
|
|
European headquarters, sales, marketing and support
|
|
11,000
|
|
Leased
|
|
3 month notice
|
Leeds, UK
|
|
Office
|
|
Audio/video production, sales and support
|
|
2,700
|
|
Leased
|
|
April 2018
|
Liverpool, UK
|
|
Office
|
|
Maritime sales, news production, marketing and support
|
|
4,692
|
|
Leased
|
|
June 2023
|
London, UK
|
|
Office
|
|
Sales, production, dispatch, and general office
|
|
7,309
|
|
Leased
|
|
August 2019
|
Leeds, UK
|
|
Media Lab
|
|
Audio/video production, Media distribution, sales and administration
|
|
6,236
|
|
Leased
|
|
January 2020
|
Manila, Philippines
|
|
Office
|
|
News production, inside sales, support
|
|
7,400
|
|
Leased
|
|
September 2021
|
New Delhi, India
|
|
Office
|
|
News production
|
|
1,800
|
|
Leased
|
|
November 2025
|
ITEM 3.
|
Legal Proceedings
|
ITEM 4.
|
Mine Safety Disclosures
|
ITEM 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
|
High
|
|
Low
|
||||
Year Ended December 31, 2016:
|
|
|
|
||||
First quarter
|
$
|
9.88
|
|
|
$
|
8.00
|
|
Second quarter
|
10.20
|
|
|
7.51
|
|
||
Third quarter
|
9.24
|
|
|
7.31
|
|
||
Fourth quarter
|
12.75
|
|
|
7.50
|
|
||
Year Ended December 31, 2015:
|
|
|
|
||||
First quarter
|
$
|
15.18
|
|
|
$
|
11.62
|
|
Second quarter
|
15.79
|
|
|
11.14
|
|
||
Third quarter
|
13.99
|
|
|
9.22
|
|
||
Fourth quarter
|
10.64
|
|
|
8.83
|
|
|
|
|||||||||||||||||||||||
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
||||||||||||
KVH Industries, Inc.
|
|
$
|
100
|
|
|
$
|
180
|
|
|
$
|
167
|
|
|
$
|
163
|
|
|
$
|
121
|
|
|
$
|
152
|
|
NASDAQ Composite
|
|
100
|
|
|
116
|
|
|
160
|
|
|
182
|
|
|
192
|
|
|
207
|
|
||||||
NASDAQ Telecommunications
|
|
100
|
|
|
102
|
|
|
127
|
|
|
138
|
|
|
127
|
|
|
146
|
|
ITEM 6.
|
Selected Financial Data
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
(in thousands, except per share data)
|
||||||||||||||||||
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Sales:
|
|
|
|
|
|
|
|
|
|
||||||||||
Product
|
$
|
73,075
|
|
|
$
|
76,213
|
|
|
$
|
81,143
|
|
|
$
|
90,295
|
|
|
$
|
90,677
|
|
Service
|
103,047
|
|
|
108,421
|
|
|
91,448
|
|
|
71,993
|
|
|
46,435
|
|
|||||
Net sales
|
176,122
|
|
|
184,634
|
|
|
172,591
|
|
|
162,288
|
|
|
137,112
|
|
|||||
Costs and expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Costs of product sales
|
46,334
|
|
|
47,404
|
|
|
48,843
|
|
|
51,518
|
|
|
51,775
|
|
|||||
Costs of service sales
|
52,966
|
|
|
54,816
|
|
|
50,301
|
|
|
45,058
|
|
|
30,363
|
|
|||||
Research and development
|
16,030
|
|
|
14,039
|
|
|
14,101
|
|
|
12,987
|
|
|
12,147
|
|
|||||
Sales, marketing and support
|
33,942
|
|
|
35,714
|
|
|
32,976
|
|
|
28,792
|
|
|
24,069
|
|
|||||
General and administrative
|
28,172
|
|
|
29,453
|
|
|
24,448
|
|
|
17,764
|
|
|
12,188
|
|
|||||
Total costs and expenses
|
177,444
|
|
|
181,426
|
|
|
170,669
|
|
|
156,119
|
|
|
130,542
|
|
|||||
(Loss) income from operations
|
(1,322
|
)
|
|
3,208
|
|
|
1,922
|
|
|
6,169
|
|
|
6,570
|
|
|||||
Interest income
|
513
|
|
|
546
|
|
|
738
|
|
|
657
|
|
|
510
|
|
|||||
Interest expense
|
1,436
|
|
|
1,460
|
|
|
1,296
|
|
|
637
|
|
|
323
|
|
|||||
Other income (expense), net
|
275
|
|
|
372
|
|
|
(39
|
)
|
|
494
|
|
|
86
|
|
|||||
(Loss) income before income taxes
|
(1,970
|
)
|
|
2,666
|
|
|
1,325
|
|
|
6,683
|
|
|
6,843
|
|
|||||
Income tax expense
|
5,547
|
|
|
413
|
|
|
1,284
|
|
|
2,150
|
|
|
3,263
|
|
|||||
Net (loss) income
|
$
|
(7,517
|
)
|
|
$
|
2,253
|
|
|
$
|
41
|
|
|
$
|
4,533
|
|
|
$
|
3,580
|
|
Per share information:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net (loss) income per common share, basic
|
$
|
(0.47
|
)
|
|
$
|
0.14
|
|
|
$
|
0.00
|
|
|
$
|
0.30
|
|
|
$
|
0.24
|
|
Net (loss) income per common share, diluted
|
$
|
(0.47
|
)
|
|
$
|
0.14
|
|
|
$
|
0.00
|
|
|
$
|
0.30
|
|
|
$
|
0.24
|
|
Number of shares used in per share calculation:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
15,834
|
|
|
15,625
|
|
|
15,420
|
|
|
15,144
|
|
|
14,777
|
|
|||||
Diluted
|
15,834
|
|
|
15,834
|
|
|
15,605
|
|
|
15,341
|
|
|
15,019
|
|
|
December 31,
|
||||||||||||||||||
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
|
(in thousands)
|
||||||||||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash, cash equivalents, and marketable securities
|
$
|
52,134
|
|
|
$
|
45,338
|
|
|
$
|
49,802
|
|
|
$
|
55,744
|
|
|
$
|
38,285
|
|
Working capital
|
69,189
|
|
|
71,534
|
|
|
65,200
|
|
|
78,933
|
|
|
65,242
|
|
|||||
Total assets
|
199,757
|
|
|
226,277
|
|
|
235,837
|
|
|
183,849
|
|
|
137,568
|
|
|||||
Line of credit
|
—
|
|
|
—
|
|
|
—
|
|
|
30,000
|
|
|
7,000
|
|
|||||
Long-term debt, excluding current portion
|
50,153
|
|
|
58,054
|
|
|
64,687
|
|
|
7,094
|
|
|
3,414
|
|
|||||
Other long-term obligations
|
326
|
|
|
1,391
|
|
|
1,459
|
|
|
204
|
|
|
140
|
|
|||||
Total stockholders’ equity
|
106,502
|
|
|
118,176
|
|
|
116,540
|
|
|
116,467
|
|
|
105,704
|
|
ITEM 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
changes in our overall organizational structure, including the appointment of a Chief Operating Officer and a new Chief Financial Officer;
|
•
|
the completion of our planning process for 2017 and later years, as a result of which we changed how we will measure and assess our financial performance; and
|
•
|
our process for measuring incentive compensation for key executives for 2016 and later years.
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Mobile connectivity
|
$
|
141,507
|
|
|
$
|
147,809
|
|
|
$
|
129,819
|
|
Inertial navigation
|
34,615
|
|
|
36,825
|
|
|
42,772
|
|
|||
Net sales
|
$
|
176,122
|
|
|
$
|
184,634
|
|
|
$
|
172,591
|
|
|
Year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
|
(in thousands)
|
||||||||||
Research and development expense presented on the statement of operations
|
$
|
16,030
|
|
|
$
|
14,039
|
|
|
$
|
14,101
|
|
Costs of customer-funded research and development included in costs of service sales
|
498
|
|
|
1,546
|
|
|
2,633
|
|
|||
Total consolidated statements of operations expenditures on research and development activities
|
$
|
16,528
|
|
|
$
|
15,585
|
|
|
$
|
16,734
|
|
|
Year Ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Sales:
|
|
|
|
|
|
|||
Product
|
41.5
|
%
|
|
41.3
|
%
|
|
47.0
|
%
|
Service
|
58.5
|
|
|
58.7
|
|
|
53.0
|
|
Net sales
|
100.0
|
|
|
100.0
|
|
|
100.0
|
|
Costs and expenses:
|
|
|
|
|
|
|||
Costs of product sales
|
26.3
|
|
|
25.7
|
|
|
28.3
|
|
Costs of service sales
|
30.1
|
|
|
29.6
|
|
|
29.1
|
|
Research and development
|
9.1
|
|
|
7.6
|
|
|
8.2
|
|
Sales, marketing and support
|
19.3
|
|
|
19.3
|
|
|
19.1
|
|
General and administrative
|
16.0
|
|
|
16.0
|
|
|
14.2
|
|
Total costs and expenses
|
100.8
|
|
|
98.2
|
|
|
98.9
|
|
(Loss) income from operations
|
(0.8
|
)
|
|
1.8
|
|
|
1.1
|
|
Interest income
|
0.3
|
|
|
0.3
|
|
|
0.4
|
|
Interest expense
|
0.8
|
|
|
0.7
|
|
|
0.8
|
|
Other income, net
|
0.2
|
|
|
0.2
|
|
|
—
|
|
Income before income taxes
|
(1.1
|
)
|
|
1.6
|
|
|
0.7
|
|
Income tax expense
|
3.1
|
|
|
0.2
|
|
|
0.7
|
|
Net (loss) income
|
(4.2
|
)%
|
|
1.4
|
%
|
|
—
|
%
|
|
|
|
|
|
Change
|
|||||||||
|
For the year ended December 31,
|
|
2016 vs. 2015
|
|||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Mobile connectivity sales
|
|
|
|
|
|
|
|
|||||||
Product
|
$40,904
|
|
$43,169
|
|
$
|
(2,265
|
)
|
|
(5
|
)%
|
||||
Service
|
100,603
|
|
|
104,640
|
|
|
(4,037
|
)
|
|
(4
|
)%
|
|||
Net sales
|
$
|
141,507
|
|
|
$
|
147,809
|
|
|
$
|
(6,302
|
)
|
|
(4
|
)%
|
|
|
|
|
|
|
|
|
|||||||
Inertial navigation sales
|
|
|
|
|
|
|
|
|||||||
Product
|
$32,171
|
|
$33,044
|
|
$
|
(873
|
)
|
|
(3
|
)%
|
||||
Service
|
2,444
|
|
|
3,781
|
|
|
(1,337
|
)
|
|
(35
|
)%
|
|||
Net sales
|
$
|
34,615
|
|
|
$
|
36,825
|
|
|
$
|
(2,210
|
)
|
|
(6
|
)%
|
|
|
|
|
|
Change
|
|||||||||
|
For the year ended December 31,
|
|
2016 vs. 2015
|
|||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Mobile connectivity
|
$10,041
|
|
$9,459
|
|
$
|
582
|
|
|
6
|
%
|
||||
Inertial navigation
|
5,272
|
|
7,934
|
|
(2,662
|
)
|
|
(34
|
)%
|
|||||
|
$15,313
|
|
$17,393
|
|
$(2,080)
|
|
(12
|
)%
|
||||||
Unallocated
|
(16,635
|
)
|
|
(14,185
|
)
|
|
(2,450
|
)
|
|
17
|
%
|
|||
Operating (loss) earnings
|
$
|
(1,322
|
)
|
|
$
|
3,208
|
|
|
$
|
(4,530
|
)
|
|
(141
|
)%
|
|
|
|
|
|
Change
|
|||||||||
|
For the year ended December 31,
|
|
2015 vs. 2014
|
|||||||||||
|
2015
|
|
2014
|
|
$
|
|
%
|
|||||||
|
(dollars in thousands)
|
|||||||||||||
Mobile connectivity sales
|
|
|
|
|
|
|
|
|||||||
Product
|
$43,169
|
|
$42,885
|
|
$
|
284
|
|
|
1
|
%
|
||||
Service
|
104,641
|
|
|
86,934
|
|
|
17,707
|
|
|
20
|
%
|
|||
Net sales
|
$
|
147,810
|
|
|
$
|
129,819
|
|
|
$
|
17,991
|
|
|
14
|
%
|
|
|
|
|
|
|
|
|
|||||||
Inertial navigation sales
|
|
|
|
|
|
|
|
|||||||
Product
|
$33,044
|
|
$38,258
|
|
$
|
(5,214
|
)
|
|
(14
|
)%
|
||||
Service
|
3,781
|
|
|
4,514
|
|
|
(733
|
)
|
|
(16
|
)%
|
|||
Net sales
|
$
|
36,825
|
|
|
$
|
42,772
|
|
|
$
|
(5,947
|
)
|
|
(14
|
)%
|
|
|
|
|
|
Change
|
|||||||
|
For the year ended December 31,
|
|
2015 vs. 2014
|
|||||||||
|
2015
|
|
2014
|
|
$
|
|
%
|
|||||
|
(dollars in thousands)
|
|||||||||||
Mobile connectivity
|
$9,459
|
|
$5,056
|
|
$
|
4,403
|
|
|
87
|
%
|
||
Inertial navigation
|
$7,934
|
|
$10,431
|
|
(2,497
|
)
|
|
(24
|
)%
|
|||
|
$17,393
|
|
$15,487
|
|
$
|
1,906
|
|
|
12
|
%
|
||
Unallocated
|
(14,185
|
)
|
|
(13,565
|
)
|
|
(620
|
)
|
|
5
|
%
|
|
Operating earnings
|
3,208
|
|
|
1,922
|
|
|
$
|
1,286
|
|
|
67
|
%
|
•
|
All sales are final;
|
•
|
Terms are generally Net 30;
|
•
|
Shipments are tendered and shipped FOB (or as may be applicable, FCA or EXW) our plant or warehouse; and
|
•
|
Title and risk of loss or damage passes to the dealer or distributor at the point of shipment when delivery is made to the possession of the carrier.
|
•
|
We are the primary obligor in its arrangements with its subscribers. We manage all interactions with the subscribers, while satellite connectivity service providers do not interact with the subscribers. In addition, we assume the entire performance risk under its arrangements with the subscribers and in the event of a performance issue, we may incur reduction in fees without regard for any recourse that we may have with the applicable satellite connective service providers.
|
•
|
We have latitude in establishing pricing, as the pricing under its arrangements with the subscribers is negotiated through a contracting process and has discretion on establishing pricing. We then separately negotiated the fees with the applicable satellite service providers.
|
•
|
We have had complete discretion in determining which satellite service providers it will contract with.
|
|
|
Payment Due by Period
|
||||||||||||||||||
Contractual Obligations
|
|
Total
|
|
Less than
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
More than
5 Years
|
||||||||||
|
|
(in thousands)
|
||||||||||||||||||
Term notes payable
|
|
$
|
53,625
|
|
|
$
|
6,500
|
|
|
$
|
47,125
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Satellite service capacity and related equipment lease obligations
|
|
27,158
|
|
|
13,196
|
|
|
12,590
|
|
|
1,372
|
|
|
—
|
|
|||||
Inventory, materials, and fixed asset purchase commitments
|
|
14,818
|
|
|
14,818
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Mortgage notes payable
|
|
2,951
|
|
|
172
|
|
|
2,779
|
|
|
—
|
|
|
—
|
|
|||||
Equipment notes payable
|
|
1,477
|
|
|
1,228
|
|
|
249
|
|
|
—
|
|
|
—
|
|
|||||
Facility lease obligations
|
|
2,172
|
|
|
608
|
|
|
928
|
|
|
388
|
|
|
248
|
|
|||||
Total
|
|
$
|
102,201
|
|
|
$
|
36,522
|
|
|
$
|
63,671
|
|
|
$
|
1,760
|
|
|
$
|
248
|
|
ITEM 7A.
|
Quantitative and Qualitative Disclosure About Market Risk
|
ITEM 8.
|
Financial Statements and Supplementary Data
|
ITEM 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
ITEM 9A.
|
Controls and Procedures
|
/s/ Grant Thornton LLP
|
|
Boston, Massachusetts
|
March 9, 2017
|
ITEM 9B.
|
Other Information
|
ITEM 10.
|
Directors, Executive Officers and Corporate Governance
|
ITEM 11.
|
Executive Compensation
|
ITEM 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
ITEM 13.
|
Certain Relationships and Related Transactions and Director Independence
|
ITEM 14.
|
Principal Accountant Fees and Services
|
ITEM 15.
|
Exhibits and Financial Statement Schedules
|
|
|
|
Page
|
(a)
|
1.
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
Consolidated Statements of Comprehensive
Loss for the years ended December 31, 2016, 2015 and 2014
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
||
|
|
|
|
(a)
|
2.
|
Financial Statement Schedules
|
|
|
|
|
|
|
|
None.
|
|
|
|
|
|
|
3.
|
Exhibits
|
|
Exhibit No.
|
|
Description
|
|
Filed with
this Form
10-K
|
|
Incorporated by Reference
|
||||||
|
Form
|
|
Filing Date
|
|
Exhibit No.
|
|||||||
2.1
|
|
|
Share Purchase Agreement, dated as of July 2, 2014, by and between KVH Media Group Limited and Nigel Cleave
|
|
|
|
8-K
|
|
July 3, 2014
|
|
2.1
|
|
3.1
|
|
|
Amended and Restated Certificate of Incorporation, as amended
|
|
|
|
10-Q
|
|
August 6,
2010
|
|
3.1
|
|
3.2
|
|
|
Amended and Restated Bylaws of KVH Industries, Inc.
|
|
|
|
8-K
|
|
April 30, 2014
|
|
3.1
|
|
4.1
|
|
|
Specimen certificate for the common stock
|
|
|
|
S-1/A
|
|
March 22,
1996
|
|
4.1
|
|
*10.1
|
|
|
Second Amended and Restated 2003 Incentive and Nonqualified Stock Option Plan
|
|
|
|
10-Q
|
|
May 6, 2009
|
|
10.21
|
|
*10.2
|
|
|
Fourth Amended and Restated 2006 Stock Incentive Plan
|
|
|
|
DEF 14A
|
|
April 25, 2013
|
|
App. A
|
|
*10.3
|
|
|
2016 Equity and Incentive Plan
|
|
|
|
DEF 14A
|
|
April 25, 2016
|
|
App. A
|
|
*10.4
|
|
|
Amended and Restated 1996 Employee Stock Purchase Plan
|
|
|
|
DEF 14A
|
|
April 25, 2016
|
|
App. B
|
|
*10.5
|
|
|
Form of Incentive Stock Option Agreement granted under the 2016 Equity and Incentive Plan
|
|
X
|
|
|
|
|
|
|
|
*10.6
|
|
|
Form of Non-Statutory Stock Option Agreement granted under the 2016 Equity and Incentive Plan
|
|
X
|
|
|
|
|
|
|
|
*10.7
|
|
|
Form of Restricted Stock Agreement granted under the 2016 Equity and Incentive Plan
|
|
X
|
|
|
|
|
|
|
|
*10.8
|
|
|
Policy Regarding Automatic Grants to Non-Employee Directors
|
|
|
|
10-Q
|
|
May 6, 2009
|
|
10.23
|
|
10.9
|
|
|
Loan Agreement dated April 6, 2009 by and among KVH Industries, Inc., and Bank of America, N.A.
|
|
|
|
8-K
|
|
April 8,
2009
|
|
10.1
|
|
Exhibit No.
|
|
Description
|
|
Filed with
this Form
10-K
|
|
Incorporated by Reference
|
||||||
|
Form
|
|
Filing Date
|
|
Exhibit No.
|
|||||||
10.10
|
|
|
Second Amendment, dated June 9, 2011 by and between KVH Industries, Inc. and Bank of America, N.A., amending the Loan Agreement, dated April 6, 2009, as amended
|
|
|
|
8-K
|
|
June 14,
2011
|
|
10.2
|
|
10.11
|
|
|
Master Loan and Security Agreement, dated as of January 30, 2013 by and between KVH Industries, Inc. and Banc of America Leasing & Capital, LLC
|
|
|
|
8-K
|
|
February 5, 2013
|
|
10.1
|
|
10.12
|
|
|
Equipment Security Note, dated as of January 30, 2013 by and between KVH Industries, Inc. and Banc of America Leasing & Capital, LLC
|
|
|
|
8-K
|
|
February 5, 2013
|
|
10.2
|
|
10.13
|
|
|
Credit Agreement, dated as of July 1, 2014, by and between Bank of America, N.A., The Washington Trust Company and KVH Industries, Inc.
|
|
|
|
8-K
|
|
July 3, 2014
|
|
10.1
|
|
10.14
|
|
|
Term Notes, dated as of July 1, 2014, by and between KVH Industries, Inc. and each of Bank of America, N.A. and The Washington Trust Company
|
|
|
|
8-K
|
|
July 3, 2014
|
|
10.2
|
|
10.15
|
|
|
Revolving Credit Notes, dated as of July 1, 2014, by and between KVH Industries, Inc. and each of Bank of America, N.A. and The Washington Trust Company
|
|
|
|
8-K
|
|
July 3, 2014
|
|
10.3
|
|
10.16
|
|
|
Security Agreement, dated as of July 1, 2014, by and between Bank of America, N.A. and KVH Industries, Inc.
|
|
|
|
8-K
|
|
July 3, 2014
|
|
10.4
|
|
10.17
|
|
|
Pledge Agreements, dated as of July 1, 2014, by and between Bank of America, N.A. and KVH Industries, Inc. with respect to KVH Industries A/S and KVH Industries U.K. Limited
|
|
|
|
8-K
|
|
July 3, 2014
|
|
10.5
|
|
10.18
|
|
|
First Amendment to Credit Agreement, dated as of June 15, 2015, by and among Bank of America, N.A., The Washington Trust Company and KVH Industries, Inc.
|
|
|
|
10-Q/A
|
|
August 13, 2015
|
|
10.1
|
|
10.19
|
|
|
Second Amendment to Credit Agreement, dated as of September 30, 2015, by and among Bank of America, N.A., The Washington Trust Company and KVH Industries, Inc.
|
|
|
|
8-K
|
|
October 5, 2015
|
|
10.1
|
|
10.20
|
|
|
Third Amendment to Credit Agreement, dated as of March 7, 2017, by and among Bank of America, N.A., The Washington Trust Company and KVH Industries, Inc.
|
|
|
|
8-K
|
|
March 9, 2017
|
|
10.1
|
|
21.1
|
|
|
List of Subsidiaries
|
|
X
|
|
|
|
|
|
|
|
23.1
|
|
|
Consent of Grant Thornton LLP
|
|
X
|
|
|
|
|
|
|
|
31.1
|
|
|
Rule 13a-14(a)/15d-14(a) certification of principal executive officer
|
|
X
|
|
|
|
|
|
|
|
31.2
|
|
|
Rule 13a-14(a)/15d-14(a) certification of principal financial officer
|
|
X
|
|
|
|
|
|
|
|
32.1
|
|
|
Rule 1350 certification
|
|
X
|
|
|
|
|
|
|
101.1
|
|
|
Interactive Data File regarding (a) our Consolidated Balance Sheets as of December 31, 2016 and 2015, (b) our Consolidated Statements of Operations for the years ended December 31, 2016, 2015, and 2014, (c) our Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016, 2015, and 2014, (d) our Consolidated Statements of Stockholders' Equity for the years ended December 31, 2016, 2015, and 2014, (e) our Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015, and 2014 and (e) the Notes to such Consolidated Financial Statements
|
|
X
|
|
|
|
|
|
|
|
*
|
Management contract or compensatory plan.
|
ITEM 16.
|
Form 10-K Summary
|
|
KVH Industries, Inc.
|
|
|
|
|
Date: March 9, 2017
|
By:
|
/
S
/ M
ARTIN
A. K
ITS
V
AN
H
EYNINGEN
|
|
|
Martin A. Kits van Heyningen
President, Chief Executive Officer and Chairman of the Board
|
Name
|
|
Title
|
|
Date
|
|
|
|
|
|
/
S
/ M
ARTIN
A. K
ITS
V
AN
H
EYNINGEN
|
|
President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
|
|
March 9, 2017
|
Martin A. Kits van Heyningen
|
|
|
|
|
|
|
|
|
|
/
S
/ D
ONALD
W. R
EILLY
|
|
Chief Financial Officer (Principal Financial and Accounting Officer)
|
|
March 9, 2017
|
Donald W. Reilly
|
|
|
|
|
|
|
|
|
|
/
S
/ M
ARK
S. A
IN
|
|
Director
|
|
March 9, 2017
|
Mark S. Ain
|
|
|
|
|
|
|
|
|
|
/
S
/ S
TANLEY
K. H
ONEY
|
|
Director
|
|
March 9, 2017
|
Stanley K. Honey
|
|
|
|
|
|
|
|
|
|
/
S
/ B
RUCE
J. R
YAN
|
|
Director
|
|
March 9, 2017
|
Bruce J. Ryan
|
|
|
|
|
|
|
|
|
|
/
S
/ C
HARLES
R. T
RIMBLE
|
|
Director
|
|
March 9, 2017
|
Charles R. Trimble
|
|
|
|
|
/s/ Grant Thornton LLP
|
Boston, Massachusetts
|
March 9, 2017
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
26,422
|
|
|
$
|
22,719
|
|
Marketable securities
|
25,712
|
|
|
22,619
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $3,477 as of December 31, 2016 and $3,534 as of December 31, 2015
|
31,152
|
|
|
43,895
|
|
||
Inventories
|
20,745
|
|
|
21,589
|
|
||
Prepaid expenses and other current assets
|
4,801
|
|
|
4,271
|
|
||
Total current assets
|
108,832
|
|
|
115,093
|
|
||
Property and equipment, less accumulated depreciation of $45,766 as of December 31, 2016 and $43,202 as of December 31, 2015
|
36,586
|
|
|
39,900
|
|
||
Intangible assets, less accumulated amortization of $16,344 as of December 31, 2016 and $11,390 as of December 31, 2015
|
17,838
|
|
|
26,755
|
|
||
Goodwill
|
31,343
|
|
|
36,747
|
|
||
Other non-current assets
|
5,134
|
|
|
3,096
|
|
||
Non-current deferred income tax asset
|
24
|
|
|
4,686
|
|
||
Total assets
|
$
|
199,757
|
|
|
$
|
226,277
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
8,436
|
|
|
$
|
8,975
|
|
Accrued compensation and employee-related expenses
|
4,766
|
|
|
6,588
|
|
||
Accrued other
|
8,317
|
|
|
12,042
|
|
||
Accrued product warranty costs
|
2,280
|
|
|
1,880
|
|
||
Deferred revenue
|
6,661
|
|
|
5,962
|
|
||
Current portion of long-term debt
|
7,900
|
|
|
6,638
|
|
||
Liability for uncertain tax positions
|
1,283
|
|
|
1,474
|
|
||
Total current liabilities
|
39,643
|
|
|
43,559
|
|
||
Other long-term liabilities
|
326
|
|
|
1,391
|
|
||
Long-term debt, excluding current portion
|
50,153
|
|
|
58,054
|
|
||
Non-current deferred income tax liability
|
3,133
|
|
|
5,097
|
|
||
Total liabilities
|
$
|
93,255
|
|
|
$
|
108,101
|
|
Commitments and contingencies (Notes 1, 5, 6, 16 and 17)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.01 par value. Authorized 1,000,000 shares; none issued
|
—
|
|
|
—
|
|
||
Common stock, $0.01 par value. Authorized 30,000,000 shares, 18,420,914 and
17,336,314 shares issued; 16,761,923 and 15,677,323 shares outstanding at
December 31, 2016 and December 31, 2015, respectively
|
184
|
|
|
173
|
|
||
Additional paid-in capital
|
129,660
|
|
|
124,619
|
|
||
Accumulated earnings
|
6,617
|
|
|
14,134
|
|
||
Accumulated other comprehensive loss
|
(16,809
|
)
|
|
(7,600
|
)
|
||
|
119,652
|
|
|
131,326
|
|
||
Less: treasury stock at cost, common stock, 1,658,991 shares as of December 31, 2016 and December 31, 2015, respectively
|
(13,150
|
)
|
|
(13,150
|
)
|
||
Total stockholders’ equity
|
106,502
|
|
|
118,176
|
|
||
Total liabilities and stockholders’ equity
|
$
|
199,757
|
|
|
$
|
226,277
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Sales:
|
|
|
|
|
|
||||||
Product
|
$
|
73,075
|
|
|
$
|
76,213
|
|
|
$
|
81,143
|
|
Service
|
103,047
|
|
|
108,421
|
|
|
91,448
|
|
|||
Net sales
|
176,122
|
|
|
184,634
|
|
|
172,591
|
|
|||
Costs and expenses:
|
|
|
|
|
|
||||||
Costs of product sales
|
46,334
|
|
|
47,404
|
|
|
48,843
|
|
|||
Costs of service sales
|
52,966
|
|
|
54,816
|
|
|
50,301
|
|
|||
Research and development
|
16,030
|
|
|
14,039
|
|
|
14,101
|
|
|||
Sales, marketing and support
|
33,942
|
|
|
35,714
|
|
|
32,976
|
|
|||
General and administrative
|
28,172
|
|
|
29,453
|
|
|
24,448
|
|
|||
Total costs and expenses
|
177,444
|
|
|
181,426
|
|
|
170,669
|
|
|||
(Loss) income from operations
|
(1,322
|
)
|
|
3,208
|
|
|
1,922
|
|
|||
Interest income
|
513
|
|
|
546
|
|
|
738
|
|
|||
Interest expense
|
1,436
|
|
|
1,460
|
|
|
1,296
|
|
|||
Other income (expense), net
|
275
|
|
|
372
|
|
|
(39
|
)
|
|||
(Loss) income before income tax expense
|
(1,970
|
)
|
|
2,666
|
|
|
1,325
|
|
|||
Income tax expense
|
5,547
|
|
|
413
|
|
|
1,284
|
|
|||
Net (loss) income
|
$
|
(7,517
|
)
|
|
$
|
2,253
|
|
|
$
|
41
|
|
Per share information:
|
|
|
|
|
|
||||||
Net (loss) income per share, basic
|
$
|
(0.47
|
)
|
|
$
|
0.14
|
|
|
$
|
0.00
|
|
Net (loss) income per share, diluted
|
$
|
(0.47
|
)
|
|
$
|
0.14
|
|
|
$
|
0.00
|
|
Number of shares used in per share calculation:
|
|
|
|
|
|
||||||
Basic
|
15,834
|
|
|
15,625
|
|
|
15,420
|
|
|||
Diluted
|
15,834
|
|
|
15,834
|
|
|
15,605
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net (loss) income
|
$
|
(7,517
|
)
|
|
$
|
2,253
|
|
|
$
|
41
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
||||||
Unrealized (loss) gain on marketable securities
|
(1
|
)
|
|
(3
|
)
|
|
8
|
|
|||
Foreign currency translation adjustment
|
(9,288
|
)
|
|
(4,207
|
)
|
|
(3,953
|
)
|
|||
Unrealized gain on derivative instruments, net
|
80
|
|
|
57
|
|
|
37
|
|
|||
Other comprehensive loss, net of tax
(1)
|
(9,209
|
)
|
|
(4,153
|
)
|
|
(3,908
|
)
|
|||
Total comprehensive loss
|
$
|
(16,726
|
)
|
|
$
|
(1,900
|
)
|
|
$
|
(3,867
|
)
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated Earnings
|
|
Accumulated
Other
Comprehensive
(Loss) Income
|
|
Treasury Stock
|
|
Total
Stockholders’
Equity
|
||||||||||||||||||
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
||||||||||||||||||||||
Balance at December 31, 2013
|
16,936
|
|
|
$
|
169
|
|
|
$
|
117,147
|
|
|
$
|
11,840
|
|
|
$
|
461
|
|
|
(1,659
|
)
|
|
$
|
(13,150
|
)
|
|
$
|
116,467
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,908
|
)
|
|
—
|
|
|
—
|
|
|
(3,908
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3,771
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,771
|
|
||||||
Registration fees
|
—
|
|
|
—
|
|
|
41
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
||||||
Excess tax shortfall on share-based awards
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
Issuance of common stock under employee stock purchase plan
|
12
|
|
|
—
|
|
|
138
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
138
|
|
||||||
Shares withheld, repurchased and retired related to minimum statutory tax withholding requirements
|
(35
|
)
|
|
—
|
|
|
(481
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(481
|
)
|
||||||
Exercise of stock options and issuance of restricted stock awards, net of forfeitures
|
240
|
|
|
3
|
|
|
470
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
473
|
|
||||||
Balance at December 31, 2014
|
17,153
|
|
|
$
|
172
|
|
|
$
|
121,084
|
|
|
$
|
11,881
|
|
|
$
|
(3,447
|
)
|
|
(1,659
|
)
|
|
$
|
(13,150
|
)
|
|
$
|
116,540
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
2,253
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,253
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,153
|
)
|
|
—
|
|
|
—
|
|
|
(4,153
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3,734
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,734
|
|
||||||
Issuance of common stock under employee stock purchase plan
|
28
|
|
|
—
|
|
|
291
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
291
|
|
||||||
Shares withheld, repurchased and retired related to minimum statutory tax withholding requirements
|
(27
|
)
|
|
—
|
|
|
(578
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(578
|
)
|
||||||
Exercise of stock options and issuance of restricted stock awards, net of forfeitures
|
182
|
|
|
1
|
|
|
88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
89
|
|
||||||
Balance at December 31, 2015
|
17,336
|
|
|
$
|
173
|
|
|
$
|
124,619
|
|
|
$
|
14,134
|
|
|
$
|
(7,600
|
)
|
|
(1,659
|
)
|
|
$
|
(13,150
|
)
|
|
$
|
118,176
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,517
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,517
|
)
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,209
|
)
|
|
—
|
|
|
—
|
|
|
(9,209
|
)
|
||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3,651
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,651
|
|
||||||
Issuance of common stock under employee stock purchase plan
|
18
|
|
|
—
|
|
|
146
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
146
|
|
||||||
Shares withheld, repurchased and retired related to minimum statutory tax withholding requirements
|
(32
|
)
|
|
—
|
|
|
(313
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(313
|
)
|
||||||
Excess tax shortfall on share-based awards
|
—
|
|
|
—
|
|
|
(869
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(869
|
)
|
||||||
Exercise of stock options and issuance of restricted stock awards, net of forfeitures
|
1,099
|
|
|
11
|
|
|
2,426
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,437
|
|
||||||
Balance at December 31, 2016
|
18,421
|
|
|
$
|
184
|
|
|
$
|
129,660
|
|
|
$
|
6,617
|
|
|
$
|
(16,809
|
)
|
|
(1,659
|
)
|
|
$
|
(13,150
|
)
|
|
$
|
106,502
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net (loss) income
|
$
|
(7,517
|
)
|
|
$
|
2,253
|
|
|
$
|
41
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Provision for doubtful accounts
|
872
|
|
|
1,337
|
|
|
1,610
|
|
|||
Depreciation and amortization
|
12,564
|
|
|
12,719
|
|
|
9,987
|
|
|||
Deferred income taxes
|
2,406
|
|
|
(411
|
)
|
|
(1,813
|
)
|
|||
Loss (gain) on sale of fixed assets
|
907
|
|
|
(4
|
)
|
|
30
|
|
|||
Loss on derivatives instruments
|
—
|
|
|
57
|
|
|
—
|
|
|||
Compensation expense related to stock-based awards and employee stock purchase plan
|
3,651
|
|
|
3,734
|
|
|
3,771
|
|
|||
Unrealized currency translation loss
|
881
|
|
|
391
|
|
|
—
|
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
||||||
Accounts receivable
|
10,709
|
|
|
(5,803
|
)
|
|
(8,235
|
)
|
|||
Inventories
|
806
|
|
|
(3,755
|
)
|
|
867
|
|
|||
Prepaid expenses and other current assets
|
(332
|
)
|
|
(1,576
|
)
|
|
1,141
|
|
|||
Other non-current assets
|
(2,378
|
)
|
|
1,539
|
|
|
569
|
|
|||
Accounts payable
|
(790
|
)
|
|
(3,390
|
)
|
|
1,676
|
|
|||
Deferred revenue
|
1,474
|
|
|
(1,643
|
)
|
|
1,622
|
|
|||
Accrued expenses
|
(3,687
|
)
|
|
3,023
|
|
|
(1,002
|
)
|
|||
Other long-term liabilities
|
(867
|
)
|
|
(74
|
)
|
|
106
|
|
|||
Net cash provided by operating activities
|
$
|
18,699
|
|
|
$
|
8,397
|
|
|
$
|
10,370
|
|
Cash flows from investing activities:
|
|
|
|
|
|
||||||
Capital expenditures
|
(5,631
|
)
|
|
(5,694
|
)
|
|
(5,118
|
)
|
|||
Net cash paid for business acquired
|
—
|
|
|
—
|
|
|
(43,448
|
)
|
|||
Purchases of marketable securities
|
(13,173
|
)
|
|
(11,323
|
)
|
|
(12,270
|
)
|
|||
Maturities and sales of marketable securities
|
10,080
|
|
|
13,217
|
|
|
34,150
|
|
|||
Net cash used in investing activities
|
$
|
(8,724
|
)
|
|
$
|
(3,800
|
)
|
|
$
|
(26,686
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
||||||
Repayments of long-term debt
|
(1,358
|
)
|
|
(1,307
|
)
|
|
(1,272
|
)
|
|||
Repayments of term note borrowings
|
(5,281
|
)
|
|
(4,876
|
)
|
|
(1,219
|
)
|
|||
Proceeds from term note borrowings
|
—
|
|
|
—
|
|
|
65,000
|
|
|||
Proceeds from stock options exercised and employee stock purchase plan
|
2,583
|
|
|
432
|
|
|
608
|
|
|||
Payment of employee restricted stock withholdings
|
(313
|
)
|
|
(578
|
)
|
|
(482
|
)
|
|||
Repayments of line of credit borrowings
|
—
|
|
|
—
|
|
|
(30,000
|
)
|
|||
Other
|
(4
|
)
|
|
—
|
|
|
41
|
|
|||
Net cash (used in) provided by financing activities
|
$
|
(4,373
|
)
|
|
$
|
(6,329
|
)
|
|
$
|
32,676
|
|
Effect of exchange rate changes on cash and cash equivalents
|
(1,899
|
)
|
|
(838
|
)
|
|
(429
|
)
|
|||
Net increase in cash and cash equivalents
|
3,703
|
|
|
(2,570
|
)
|
|
15,931
|
|
|||
Cash and cash equivalents at beginning of period
|
22,719
|
|
|
25,289
|
|
|
9,358
|
|
|||
Cash and cash equivalents at end of period
|
$
|
26,422
|
|
|
$
|
22,719
|
|
|
$
|
25,289
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
||||||
Cash paid for interest
|
$
|
1,433
|
|
|
$
|
1,467
|
|
|
$
|
1,296
|
|
Cash paid for income taxes, net of refunds
|
$
|
3,647
|
|
|
$
|
2,182
|
|
|
$
|
2,470
|
|
Changes in accrued liabilities and accounts payable related to fixed asset additions
|
$
|
345
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
Summary of Significant Accounting Policies
|
(a)
|
Description of Business
|
•
|
changes in the Company's overall organizational structure, including the appointment of a Chief Operating Officer and a new Chief Financial Officer;
|
•
|
the completion of the Company's planning process for 2017 and later years, as a result of which the Company changed how it will measure and assess its financial performance; and
|
•
|
the Company's process for measuring incentive compensation for key executives for 2016 and later years.
|
(b)
|
Principles of Consolidation
|
(c)
|
Significant Estimates and Assumptions and Other Significant Non-Recurring Transactions
|
(d)
|
Concentration of Credit Risk and Single Source Suppliers
|
|
2016
|
|
2015
|
|
2014
|
||||||
Beginning balance
|
$
|
3,534
|
|
|
$
|
2,723
|
|
|
$
|
1,705
|
|
Additions
|
872
|
|
|
1,342
|
|
|
1,610
|
|
|||
Deductions (write-offs/recoveries) from reserve
|
(929
|
)
|
|
(531
|
)
|
|
(592
|
)
|
|||
Ending balance
|
$
|
3,477
|
|
|
$
|
3,534
|
|
|
$
|
2,723
|
|
(e)
|
Revenue Recognition
|
•
|
All sales are final;
|
•
|
Terms are generally Net 30;
|
•
|
Shipments are tendered and shipped FOB (or as may be applicable, FCA, or EXW) the Company’s plant or warehouse; and
|
•
|
Title and risk of loss or damage passes to the dealer or distributor at the point of shipment when delivery is made to the possession of the carrier.
|
•
|
The Company is the primary obligor in its arrangements with its subscribers. The Company manages all interactions with the subscribers, while satellite connectivity service providers do not interact with the subscribers. In addition, the Company assumes the entire performance risk under its arrangements with the subscribers and in the event of a performance issue, the Company may incur reduction in fees without regard for any recourse that the Company may have with the applicable satellite connective service providers.
|
•
|
The Company has latitude in establishing pricing, as the pricing under its arrangements with the subscribers is negotiated through a contracting process and has discretion on establishing pricing. The Company then separately negotiates the fees with the applicable satellite service providers.
|
•
|
The Company has complete discretion in determining which satellite service providers it will contract with.
|
(f)
|
Fair Value of Financial Instruments
|
(g)
|
Cash, Cash Equivalents, and Marketable Securities
|
(h)
|
Inventories
|
(i)
|
Property and Equipment
|
(j)
|
Goodwill, Intangible Assets and other Long-Lived Assets
|
(k)
|
Other Non-Current Assets
|
(l)
|
Product Warranty
|
|
2016
|
|
2015
|
||||
Beginning balance
|
$
|
1,880
|
|
|
$
|
1,853
|
|
Charges to expense
|
1,723
|
|
|
1,431
|
|
||
Costs incurred
|
(1,323
|
)
|
|
(1,404
|
)
|
||
Ending balance
|
$
|
2,280
|
|
|
$
|
1,880
|
|
(m)
|
Shipping and Handling Costs
|
(n)
|
Research and Development
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Customer-funded service sales
|
$
|
1,400
|
|
|
$
|
3,002
|
|
|
$
|
3,806
|
|
Customer-funded costs included in costs of service sales
|
498
|
|
|
1,546
|
|
|
2,633
|
|
(o)
|
Advertising Costs
|
(p)
|
Foreign Currency Translation
|
(q)
|
Income Taxes
|
(r)
|
Net (Loss) Income per Common Share
|
|
2016
|
|
2015
|
|
2014
|
|||
Weighted average common shares outstanding—basic
|
15,834
|
|
|
15,625
|
|
|
15,420
|
|
Dilutive common shares issuable in connection with stock plans
|
—
|
|
|
209
|
|
|
185
|
|
Weighted average common shares outstanding—diluted
|
15,834
|
|
|
15,834
|
|
|
15,605
|
|
(s)
|
Contingent Liabilities
|
(t)
|
Operating Segments
|
•
|
The adoption of ASU 2016-09 also requires all income tax adjustments to be recorded in the consolidated statements of operations. The cumulative adjustment upon adoption to accumulated earnings was zero since the increase in net deferred tax assets was fully offset by a corresponding increase in the deferred tax asset valuation allowance. The amount of deferred tax assets that had not been previously recognized due to the recognition of excess tax benefits was
|
•
|
The Company has elected to account for forfeitures on share-based payments as these forfeitures occur, which represents a change from the accounting previously required under ASC 718. As a result, the Company notes that future forfeitures could result in a significant reversal of stock-based compensation expense recognized in the period in which such forfeitures occur.
|
(2)
|
Marketable Securities
|
December 31, 2016
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Money market mutual funds
|
$
|
21,848
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
21,848
|
|
Certificates of deposit
|
3,864
|
|
|
—
|
|
|
—
|
|
|
3,864
|
|
||||
Total marketable securities designated as available-for-sale
|
$
|
25,712
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,712
|
|
December 31, 2015
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
||||||||
Money market mutual funds
|
$
|
13,244
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
13,244
|
|
United States treasuries
|
1,002
|
|
|
—
|
|
|
—
|
|
|
1,002
|
|
||||
Corporate notes
|
2,283
|
|
|
1
|
|
|
—
|
|
|
2,284
|
|
||||
Certificates of deposit
|
6,089
|
|
|
—
|
|
|
—
|
|
|
6,089
|
|
||||
Total marketable securities designated as available-for-sale
|
$
|
22,618
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
22,619
|
|
December 31, 2016
|
Amortized
Cost
|
|
Fair
Value
|
||||
Due in less than one year
|
$
|
3,864
|
|
|
$
|
3,864
|
|
Due after one year and within two years
|
—
|
|
|
—
|
|
||
|
$
|
3,864
|
|
|
$
|
3,864
|
|
December 31, 2015
|
Amortized
Cost
|
|
Fair
Value
|
||||
Due in less than one year
|
$
|
5,515
|
|
|
$
|
5,516
|
|
Due after one year and within two years
|
3,859
|
|
|
3,859
|
|
||
|
$
|
9,374
|
|
|
$
|
9,375
|
|
(3)
|
Inventories
|
(4)
|
Property and Equipment
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Land
|
$
|
3,828
|
|
|
$
|
3,828
|
|
Building and improvements
|
21,717
|
|
|
22,407
|
|
||
Leasehold improvements
|
155
|
|
|
299
|
|
||
Machinery and equipment
|
41,777
|
|
|
40,788
|
|
||
Office and computer equipment
|
14,824
|
|
|
15,729
|
|
||
Motor vehicles
|
51
|
|
|
51
|
|
||
|
82,352
|
|
|
83,102
|
|
||
Less accumulated depreciation
|
(45,766
|
)
|
|
(43,202
|
)
|
||
|
$
|
36,586
|
|
|
$
|
39,900
|
|
(5)
|
Debt and Line of Credit
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Term notes
|
$
|
53,625
|
|
|
$
|
58,906
|
|
Mortgage loan
|
2,951
|
|
|
3,114
|
|
||
Equipment loans
|
1,477
|
|
|
2,672
|
|
||
Total
|
58,053
|
|
|
64,692
|
|
||
Less amounts classified as current
|
7,900
|
|
|
6,638
|
|
||
Long-term debt, excluding current portion
|
$
|
50,153
|
|
|
$
|
58,054
|
|
Year ending December 31,
|
|
Principal
Payment
|
||
2017
|
|
$
|
7,900
|
|
2018
|
|
6,931
|
|
|
2019
|
|
43,222
|
|
|
Total outstanding at December 31, 2016
|
|
$
|
58,053
|
|
(6)
|
Commitments and Contingencies
|
Years ending December 31,
|
Operating
Leases
|
||
2017
|
$
|
13,804
|
|
2018
|
8,851
|
|
|
2019
|
4,667
|
|
|
2020
|
1,581
|
|
|
2021
|
179
|
|
|
Thereafter
|
248
|
|
|
Total minimum lease payments
|
$
|
29,330
|
|
(7)
|
Stockholders’ Equity
|
(a)
|
Employee Stock Options
|
|
Year Ended
December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Risk-free interest rate
|
1.43
|
%
|
|
1.55
|
%
|
|
1.52
|
%
|
Expected volatility
|
38.2
|
%
|
|
43.3
|
%
|
|
46.5
|
%
|
Expected life (in years)
|
4.18
|
|
|
4.17
|
|
|
4.21
|
|
Forfeiture rate
|
5.00
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
Dividend yield
|
0
|
%
|
|
0
|
%
|
|
0
|
%
|
|
Number of Options
|
|
Weighted Average
Exercise Price
|
|
Weighted Average
Remaining
Contractual Life
(in Years)
|
|
Aggregate Intrinsic
Value
|
|||||
Outstanding at December 31, 2015
|
1,177
|
|
|
$
|
11.60
|
|
|
|
|
|
||
Granted
|
75
|
|
|
$
|
8.90
|
|
|
|
|
|
||
Exercised
|
(269
|
)
|
|
$
|
9.06
|
|
|
|
|
|
||
Expired, canceled or forfeited
|
(297
|
)
|
|
$
|
13.68
|
|
|
|
|
|
||
Outstanding at December 31, 2016
|
686
|
|
|
$
|
11.41
|
|
|
2.23
|
|
$
|
681
|
|
Exercisable at December 31, 2016
|
379
|
|
|
$
|
11.39
|
|
|
1.50
|
|
$
|
382
|
|
Options vested or expected to vest at December 31, 2016
|
674
|
|
|
$
|
11.42
|
|
|
2.04
|
|
$
|
662
|
|
(b)
|
Restricted Stock
|
|
Number of
Shares
|
|
Weighted-
average
grant date
fair value
|
|||
Outstanding at December 31, 2015, unvested
|
458
|
|
|
$
|
13.22
|
|
Granted
|
424
|
|
|
8.68
|
|
|
Vested
|
(186
|
)
|
|
12.82
|
|
|
Forfeited
|
(52
|
)
|
|
10.39
|
|
|
Outstanding at December 31, 2016, unvested
|
644
|
|
|
$
|
10.58
|
|
(c)
|
Employee Stock Purchase Plan
|
(d)
|
Stock- Based Compensation Expense
|
|
2016
|
|
2015
|
|
2014
|
||||||
Cost of product sales
|
$
|
321
|
|
|
$
|
317
|
|
|
$
|
384
|
|
Cost of service sales
|
1
|
|
|
—
|
|
|
1
|
|
|||
Research and development
|
690
|
|
|
619
|
|
|
695
|
|
|||
Sales, marketing and support
|
1,027
|
|
|
927
|
|
|
926
|
|
|||
General and administrative
|
1,612
|
|
|
1,871
|
|
|
1,765
|
|
|||
|
$
|
3,651
|
|
|
$
|
3,734
|
|
|
$
|
3,771
|
|
|
Foreign Currency Translation
|
|
Unrealized Gain (Loss) on Available for Sale Marketable Securities
|
|
Interest Rate Swaps
|
|
Total Accumulated Other Comprehensive Loss
|
||||||||
Balance, December 31, 2013
|
$
|
797
|
|
|
$
|
(4
|
)
|
|
$
|
(332
|
)
|
|
$
|
461
|
|
Other comprehensive (loss) income before reclassifications
|
(3,953
|
)
|
|
8
|
|
|
(84
|
)
|
|
(4,029
|
)
|
||||
Amounts reclassified from AOCI to Other income (expense), net (1)
|
—
|
|
|
—
|
|
|
121
|
|
|
121
|
|
||||
Net other comprehensive (loss) income, December 31, 2014
|
(3,953
|
)
|
|
8
|
|
|
37
|
|
|
(3,908
|
)
|
||||
Balance, December 31, 2014
|
(3,156
|
)
|
|
4
|
|
|
(295
|
)
|
|
(3,447
|
)
|
||||
Other comprehensive (loss) income before reclassifications
|
(4,207
|
)
|
|
(3
|
)
|
|
(58
|
)
|
|
(4,268
|
)
|
||||
Amounts reclassified from AOCI to Other income (expense), net (1)
|
—
|
|
|
—
|
|
|
115
|
|
|
115
|
|
||||
Net other comprehensive (loss) income, December 31, 2015
|
(4,207
|
)
|
|
(3
|
)
|
|
57
|
|
|
(4,153
|
)
|
||||
Balance, December 31, 2015
|
(7,363
|
)
|
|
1
|
|
|
(238
|
)
|
|
(7,600
|
)
|
||||
Other comprehensive (loss) income before reclassifications
|
(9,288
|
)
|
|
(1
|
)
|
|
(20
|
)
|
|
(9,309
|
)
|
||||
Amounts reclassified from AOCI to Other income (expense), net (1)
|
—
|
|
|
—
|
|
|
100
|
|
|
100
|
|
||||
Net other comprehensive (loss) income, December 31, 2016
|
(9,288
|
)
|
|
(1
|
)
|
|
80
|
|
|
(9,209
|
)
|
||||
Balance, December 31, 2016
|
(16,651
|
)
|
|
—
|
|
|
(158
|
)
|
|
(16,809
|
)
|
(8)
|
Income Taxes
|
|
Current
|
|
Deferred
|
|
Total
|
||||||
Year ended December 31, 2016
|
|
|
|
|
|
||||||
Federal
|
$
|
227
|
|
|
$
|
3,197
|
|
|
$
|
3,424
|
|
State
|
144
|
|
|
457
|
|
|
601
|
|
|||
Foreign
|
2,770
|
|
|
(1,248
|
)
|
|
1,522
|
|
|||
|
$
|
3,141
|
|
|
$
|
2,406
|
|
|
$
|
5,547
|
|
Year ended December 31, 2015
|
|
|
|
|
|
||||||
Federal
|
$
|
(555
|
)
|
|
$
|
(94
|
)
|
|
$
|
(649
|
)
|
State
|
120
|
|
|
765
|
|
|
885
|
|
|||
Foreign
|
295
|
|
|
(118
|
)
|
|
177
|
|
|||
|
$
|
(140
|
)
|
|
$
|
553
|
|
|
$
|
413
|
|
Year ended December 31, 2014
|
|
|
|
|
|
||||||
Federal
|
$
|
325
|
|
|
$
|
(623
|
)
|
|
$
|
(298
|
)
|
State
|
(2
|
)
|
|
1,036
|
|
|
1,034
|
|
|||
Foreign
|
1,640
|
|
|
(1,092
|
)
|
|
548
|
|
|||
|
$
|
1,963
|
|
|
$
|
(679
|
)
|
|
$
|
1,284
|
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Computed “expected” tax expense
|
$
|
(670
|
)
|
|
$
|
906
|
|
|
$
|
451
|
|
Increase (decrease) in income taxes resulting from:
|
|
|
|
|
|
||||||
State income tax expense, net of federal benefit
|
(156
|
)
|
|
(37
|
)
|
|
(31
|
)
|
|||
State research and development, investment credits
|
(363
|
)
|
|
(317
|
)
|
|
(365
|
)
|
|||
Non-deductible meals & entertainment
|
49
|
|
|
33
|
|
|
37
|
|
|||
Non-deductible stock compensation expense
|
216
|
|
|
181
|
|
|
29
|
|
|||
Non-deductible deferred compensation expense
|
116
|
|
|
260
|
|
|
87
|
|
|||
Non-deductible transaction costs
|
—
|
|
|
—
|
|
|
73
|
|
|||
Subpart F income, net of foreign tax credits
|
523
|
|
|
61
|
|
|
296
|
|
|||
Foreign branch income
|
52
|
|
|
—
|
|
|
—
|
|
|||
Manufacturing deduction
|
—
|
|
|
(102
|
)
|
|
(123
|
)
|
|||
Nontaxable interest income
|
(162
|
)
|
|
(106
|
)
|
|
(105
|
)
|
|||
Foreign tax rate differential
|
(1,258
|
)
|
|
(792
|
)
|
|
(289
|
)
|
|||
Federal research and development credits
|
(395
|
)
|
|
(348
|
)
|
|
(453
|
)
|
|||
Uncertain tax positions
|
283
|
|
|
(413
|
)
|
|
97
|
|
|||
Provision to tax return adjustments
|
(95
|
)
|
|
80
|
|
|
(317
|
)
|
|||
Change in tax rates
|
14
|
|
|
(313
|
)
|
|
235
|
|
|||
Change in valuation allowance
|
7,425
|
|
|
1,392
|
|
|
1,665
|
|
|||
Foreign research and development incentives
|
(45
|
)
|
|
(59
|
)
|
|
—
|
|
|||
Other
|
13
|
|
|
(13
|
)
|
|
(3
|
)
|
|||
Net income tax expense
|
$
|
5,547
|
|
|
$
|
413
|
|
|
$
|
1,284
|
|
|
December 31,
|
||||||
|
2016
|
|
2015
|
||||
Deferred tax assets:
|
|
|
|
||||
Accounts receivable, due to allowance for doubtful accounts
|
$
|
1,104
|
|
|
$
|
900
|
|
Inventories
|
792
|
|
|
562
|
|
||
Operating loss carry-forwards
|
3,078
|
|
|
2,094
|
|
||
Stock-based compensation expense
|
1,231
|
|
|
1,981
|
|
||
Property and equipment, due to difference in depreciation
|
148
|
|
|
209
|
|
||
Research and development, alternative minimum tax credit carry-forwards
|
3,031
|
|
|
3,111
|
|
||
Foreign tax credit carry-forwards
|
754
|
|
|
—
|
|
||
State tax credit carry-forwards
|
2,277
|
|
|
2,228
|
|
||
Warranty reserve
|
822
|
|
|
675
|
|
||
Accrued expenses
|
432
|
|
|
424
|
|
||
Gross deferred tax assets
|
13,669
|
|
|
12,184
|
|
||
Less valuation allowance
|
(11,567
|
)
|
|
(4,688
|
)
|
||
Total deferred tax assets
|
2,102
|
|
|
7,496
|
|
||
Deferred tax liabilities:
|
|
|
|
||||
Purchased intangible assets
|
(3,197
|
)
|
|
(4,944
|
)
|
||
Property and equipment, due to differences in depreciation
|
(2,003
|
)
|
|
(2,849
|
)
|
||
Other
|
(11
|
)
|
|
(114
|
)
|
||
Total deferred tax liabilities
|
(5,211
|
)
|
|
(7,907
|
)
|
||
Net deferred tax liability
|
$
|
(3,109
|
)
|
|
$
|
(411
|
)
|
Net deferred tax asset—non-current
|
$
|
24
|
|
|
$
|
4,686
|
|
Net deferred tax liability—non-current
|
$
|
(3,133
|
)
|
|
$
|
(5,097
|
)
|
|
Year Ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Unrecognized tax benefits as of January 1
|
$
|
983
|
|
|
$
|
2,487
|
|
|
$
|
—
|
|
Gross increase in unrecognized tax benefits - prior year tax positions
|
—
|
|
|
168
|
|
|
—
|
|
|||
Gross decrease in unrecognized tax benefits due to currency fluctuations - prior year tax positions
|
(131
|
)
|
|
(116
|
)
|
|
—
|
|
|||
Gross increase in unrecognized tax benefits - current year tax position
|
293
|
|
|
13
|
|
|
14
|
|
|||
Settlements with taxing authorities
|
(330
|
)
|
|
(1,569
|
)
|
|
—
|
|
|||
Lapse of statute of limitations
|
—
|
|
|
—
|
|
|
—
|
|
|||
Positions assumed in Videotel transaction
|
—
|
|
|
—
|
|
|
2,473
|
|
|||
Ending balance
|
$
|
815
|
|
|
$
|
983
|
|
|
$
|
2,487
|
|
Consideration transferred - cash
|
|
|
$
|
47,446
|
|
||
Book value of tangible net assets acquired
|
$
|
1,732
|
|
|
|
||
Fair value adjustments to deferred revenue
|
961
|
|
|
|
|||
Fair value of tangible net assets acquired
|
|
|
$
|
2,693
|
|
||
|
|
|
|
||||
Identifiable intangibles at acquisition-date fair value
|
|
|
|
||||
Subscriber relationships
|
$
|
12,759
|
|
|
|
||
Proprietary content
|
9,814
|
|
|
|
|||
Internally developed software
|
2,160
|
|
|
|
|||
Favorable operating leases
|
791
|
|
|
|
|||
Total intangible assets
|
|
|
$
|
25,524
|
|
||
Deferred income taxes
|
|
|
(3,922
|
)
|
|||
Goodwill
|
|
|
$
|
23,151
|
|
|
|
Year Ended December 31,
|
||
|
|
2014
|
||
Pro forma net revenues
|
|
$
|
183,886
|
|
Pro forma net income
|
|
$
|
2,386
|
|
Basic pro forma net income per share
|
|
$
|
0.15
|
|
Diluted pro forma net income per share
|
|
$
|
0.15
|
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Value
|
||||||
December 31, 2016
|
|
|
|
|
|
||||||
Subscriber relationships
|
$
|
16,888
|
|
|
$
|
6,431
|
|
|
$
|
10,457
|
|
Distribution rights
|
4,122
|
|
|
1,180
|
|
|
2,942
|
|
|||
Internally developed software
|
2,301
|
|
|
1,904
|
|
|
397
|
|
|||
Proprietary content
|
7,960
|
|
|
4,431
|
|
|
3,529
|
|
|||
Intellectual property
|
2,284
|
|
|
2,056
|
|
|
228
|
|
|||
Favorable lease
|
627
|
|
|
342
|
|
|
285
|
|
|||
|
$
|
34,182
|
|
|
$
|
16,344
|
|
|
$
|
17,838
|
|
December 31, 2015
|
|
|
|
|
|
||||||
Subscriber relationships
|
$
|
19,161
|
|
|
$
|
4,426
|
|
|
$
|
14,735
|
|
Distribution rights
|
4,736
|
|
|
895
|
|
|
3,841
|
|
|||
Internally developed software
|
2,457
|
|
|
1,244
|
|
|
1,213
|
|
|||
Proprietary content
|
8,812
|
|
|
2,879
|
|
|
5,933
|
|
|||
Intellectual property
|
2,283
|
|
|
1,729
|
|
|
554
|
|
|||
Favorable lease
|
696
|
|
|
217
|
|
|
479
|
|
|||
|
$
|
38,145
|
|
|
$
|
11,390
|
|
|
$
|
26,755
|
|
Expense Category
|
2016
|
|
2015
|
|
2014
|
||||||
Cost of service sales
|
$
|
2,068
|
|
|
$
|
1,978
|
|
|
$
|
1,123
|
|
General administrative expense
|
2,888
|
|
|
3,548
|
|
|
2,736
|
|
|||
Total amortization expense
|
$
|
4,956
|
|
|
$
|
5,526
|
|
|
$
|
3,859
|
|
Intangible Asset
|
Weighted Average Remaining Useful Life in Years
|
Subscriber relationships
|
5.8
|
Distribution rights
|
11.3
|
Internally developed software
|
1.4
|
Proprietary content
|
2.5
|
Intellectual property
|
0.8
|
Favorable lease
|
2.5
|
Years ending December 31,
|
Amortization
Expense
|
||
2017
|
$
|
4,129
|
|
2018
|
3,720
|
|
|
2019
|
2,842
|
|
|
2020
|
2,084
|
|
|
2021
|
2,084
|
|
|
Thereafter
|
2,979
|
|
|
Total amortization expense
|
$
|
17,838
|
|
|
2016
|
||
Balance at January 1
|
$
|
26,755
|
|
Amortization expense
|
(4,956
|
)
|
|
Foreign currency translation adjustment
|
(3,961
|
)
|
|
Balance at December 31
|
$
|
17,838
|
|
|
Goodwill
|
||
Balance at January 1, 2015
|
$
|
40,454
|
|
Foreign currency translation adjustment
|
$
|
(3,707
|
)
|
Balance at December 31, 2015
|
$
|
36,747
|
|
Foreign currency translation adjustment
|
(5,404
|
)
|
|
Balance at December 31, 2016
|
$
|
31,343
|
|
•
|
Changes in overall organizational structure, including appointments of a Chief Operating Officer and a new Chief Financial Officer
|
•
|
Changes in how financial performance is measured and assessed based on current operating results and planned future operations driven by completion of the Company’s fiscal 2017 and long-term planning process
|
•
|
Consideration regarding how incentive compensation for key executives will be measured for both 2016 and prospectively.
|
•
|
Mobile connectivity, and
|
•
|
Inertial navigation
|
|
For the year ended December 31,
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net sales:
|
|
|
|
|
|
||||||
Mobile connectivity
|
$
|
141,507
|
|
|
$
|
147,809
|
|
|
$
|
129,819
|
|
Inertial navigation
|
34,615
|
|
|
36,825
|
|
|
42,772
|
|
|||
Consolidated net sales
|
$
|
176,122
|
|
|
$
|
184,634
|
|
|
$
|
172,591
|
|
|
|
|
|
|
|
||||||
Operating earnings (loss):
|
|
|
|
|
|
||||||
Mobile connectivity
|
$
|
10,041
|
|
|
$
|
9,459
|
|
|
$
|
5,056
|
|
Inertial navigation
|
5,272
|
|
|
7,934
|
|
|
10,431
|
|
|||
Subtotal
|
15,313
|
|
|
17,393
|
|
|
15,487
|
|
|||
Unallocated, net
|
(16,635
|
)
|
|
(14,185
|
)
|
|
(13,565
|
)
|
|||
Consolidated operating earnings
|
(1,322
|
)
|
|
3,208
|
|
|
1,922
|
|
|||
Net interest and other expense
|
(648
|
)
|
|
(542
|
)
|
|
(597
|
)
|
|||
(Loss) income before income tax expense
|
$
|
(1,970
|
)
|
|
$
|
2,666
|
|
|
$
|
1,325
|
|
|
For the year ended December 31,
|
|||||||
|
2016
|
|
2015
|
|
2014
|
|||
Depreciation expense:
|
|
|
|
|
|
|||
Mobile connectivity
|
6,084
|
|
|
5,843
|
|
|
4,827
|
|
Inertial navigation
|
1,063
|
|
|
961
|
|
|
935
|
|
Unallocated
|
461
|
|
|
389
|
|
|
365
|
|
Total consolidated depreciation expense
|
7,608
|
|
|
7,193
|
|
|
6,127
|
|
|
|
|
|
|
|
|||
Amortization expense:
|
|
|
|
|
|
|||
Mobile connectivity
|
4,956
|
|
|
5,526
|
|
|
3,859
|
|
Inertial navigation
|
—
|
|
|
—
|
|
|
—
|
|
Unallocated
|
—
|
|
|
—
|
|
|
—
|
|
Total consolidated amortization expense
|
4,956
|
|
|
5,526
|
|
|
3,859
|
|
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, United States treasuries, and certificates of deposit.
|
Level 2:
|
Quoted prices for similar assets or liabilities in active markets; or observable prices that are based on observable market data, based on directly or indirectly market-corroborated inputs. The Company’s Level 2 assets are investments in certain corporate notes and its Level 2 liabilities are interest rate swaps.
|
Level 3:
|
Unobservable inputs that are supported by little or no market activity, and are developed based on the best information available given the circumstances. The Company has no Level 3 assets.
|
(a)
|
Market approach—prices and other relevant information generated by market transactions involving identical or comparable assets.
|
(b)
|
The valuations of the interest rate swaps intended to mitigate the Company’s interest rate risk are determined with the assistance of a third-party financial institution using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each instrument. This analysis utilizes observable market-based inputs, including interest rate curves and interest rate volatility, and reflects the contractual terms of these instruments, including the period to maturity.
|
December 31, 2016
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Valuation
Technique
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
21,848
|
|
|
$
|
21,848
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(a)
|
Certificates of deposit
|
3,864
|
|
|
3,864
|
|
|
—
|
|
|
—
|
|
|
(a)
|
||||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
$
|
158
|
|
|
$
|
—
|
|
|
$
|
158
|
|
|
$
|
—
|
|
|
(b)
|
December 31, 2015
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Valuation
Technique
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
|
||||||||
Money market mutual funds
|
$
|
13,244
|
|
|
$
|
13,244
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(a)
|
United States treasuries
|
1,002
|
|
|
1,002
|
|
|
—
|
|
|
—
|
|
|
(a)
|
||||
Corporate notes
|
2,284
|
|
|
—
|
|
|
2,284
|
|
|
—
|
|
|
(a)
|
||||
Certificates of deposit
|
6,089
|
|
|
6,089
|
|
|
—
|
|
|
—
|
|
|
(a)
|
||||
Liabilities
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
$
|
238
|
|
|
$
|
—
|
|
|
$
|
238
|
|
|
$
|
—
|
|
|
(b)
|
Interest Rate Derivatives
|
Notional
(in thousands)
|
|
Asset
(Liability)
|
|
Effective Date
|
|
Maturity Date
|
|
Index
|
|
Strike Rate
|
||||
Interest rate swap
|
$
|
1,476
|
|
|
(76
|
)
|
|
April 1, 2010
|
|
April 1, 2019
|
|
1-month LIBOR
|
|
5.91
|
%
|
Interest rate swap
|
$
|
1,476
|
|
|
(82
|
)
|
|
April 1, 2010
|
|
April 1, 2019
|
|
1-month LIBOR
|
|
6.07
|
%
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
||||||||
|
(in thousands, except per share amounts)
|
||||||||||||||
2016
|
|
|
|
|
|
|
|
||||||||
Product sales
|
$
|
15,382
|
|
|
$
|
20,062
|
|
|
$
|
19,020
|
|
|
$
|
18,611
|
|
Service sales
|
24,998
|
|
|
25,904
|
|
|
26,826
|
|
|
25,319
|
|
||||
Cost of product sales
|
10,670
|
|
|
12,989
|
|
|
11,001
|
|
|
11,674
|
|
||||
Cost of service sales
|
12,991
|
|
|
13,259
|
|
|
13,576
|
|
|
13,140
|
|
||||
Operating expenses
|
20,093
|
|
|
20,411
|
|
|
18,256
|
|
|
19,384
|
|
||||
(Loss) income from operations
|
(3,374
|
)
|
|
(693
|
)
|
|
3,013
|
|
|
(268
|
)
|
||||
Net (loss) income
|
$
|
(2,791
|
)
|
|
$
|
(806
|
)
|
|
$
|
2,863
|
|
|
$
|
(6,783
|
)
|
Net (loss) income per share (a):
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.18
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.18
|
|
|
$
|
(0.43
|
)
|
Diluted
|
$
|
(0.18
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
0.18
|
|
|
$
|
(0.43
|
)
|
2015
|
|
|
|
|
|
|
|
||||||||
Product sales
|
$
|
15,386
|
|
|
$
|
17,946
|
|
|
$
|
15,622
|
|
|
$
|
27,259
|
|
Service sales
|
25,919
|
|
|
26,909
|
|
|
28,833
|
|
|
26,760
|
|
||||
Cost of product sales
|
10,485
|
|
|
12,017
|
|
|
10,275
|
|
|
14,627
|
|
||||
Cost of service sales
|
13,260
|
|
|
13,693
|
|
|
14,454
|
|
|
13,409
|
|
||||
Operating expenses
|
19,468
|
|
|
19,403
|
|
|
19,520
|
|
|
20,815
|
|
||||
(Loss) income from operations
|
(1,908
|
)
|
|
(258
|
)
|
|
206
|
|
|
5,168
|
|
||||
Net (loss) income
|
$
|
(1,422
|
)
|
|
$
|
37
|
|
|
$
|
(463
|
)
|
|
$
|
4,101
|
|
Net (loss) income per share (a):
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.09
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.26
|
|
Diluted
|
$
|
(0.09
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.26
|
|
|
(a)
|
Net (loss) income per share is computed independently for each of the quarters. Therefore, the net (loss) income per share for the four quarters may not equal the annual net (loss) income per share data.
|
3.
|
Maximum number of shares of Stock
|
6.
|
Expiration Date of Option:
|
7.
|
Vesting Schedule:
|
8.
|
Termination of Employment.
This Option shall terminate on the earliest to occur of:
|
(ii)
|
the Holder’s Termination Date in the event of termination by the Company for Cause;
|
(iii)
|
three (3) months following the Holder’s Termination Date upon any termination other than for Disability, death or Cause; or
|
(iv)
|
twelve (12) months following the Termination Date upon termination for Disability or death, or if the Holder dies within three (3) months after his or her Termination Date upon any termination other than for Cause.
|
9.
|
Incentive Stock Option; Disqualifying Disposition.
Although this Option is intended to qualify as an incentive stock option under the Code, the Company makes no representation as to the tax treatment upon exercise of this Option or sale or other disposition of the shares covered by this Option, and the Holder is advised to consult a personal tax advisor. Upon a Disqualifying Disposition of shares received upon exercise of this Option, the Holder will forfeit the favorable income tax treatment otherwise available with respect to the exercise of this Option. A “Disqualifying Disposition” shall have the meaning specified in Section 421(b) of the Code; as of the Grant Date of this Option a Disqualifying Disposition is any disposition (including any sale) of such shares before the later of (a) the second anniversary of the Grant Date of this Option and (b) the first anniversary of the date on which the Holder acquired such shares by exercising this Option,
provided
that such holding period requirements terminate upon the death of the Holder. The Holder shall notify the Company in writing immediately upon making a Disqualifying Disposition of any shares received pursuant to the exercise of this Option, and shall provide the Company with any information that the Company shall request concerning any such Disqualifying Disposition.
|
10.
|
Notice.
Any notice to be given to the Company hereunder shall be deemed sufficient if addressed to the Company and delivered to the office of the Company, KVH Industries, Inc., 50 Enterprise Center, Middletown, RI 02842, Attention: President, or such other address as the Company may hereafter designate.
|
3.
|
Maximum number of shares of Stock
|
6.
|
Expiration Date of Option:
|
7.
|
Vesting Schedule:
|
(ii)
|
the Holder’s Termination Date in the event of termination by the Company for Cause;
|
(iii)
|
three (3) months following the Holder’s Termination Date upon any termination other than for Disability, death or Cause; or
|
(iv)
|
twelve (12) months following the Termination Date upon termination for Disability or death, or if the Holder dies within three (3) months after his or her Termination Date upon any termination other than for Cause.
|
9.
|
Tax Withholding.
The Company’s obligation to deliver shares upon exercise of this Option shall be subject to the Holder’s satisfaction of all applicable tax withholding requirements, including any federal, state and local income and employment tax withholding requirements.
|
10.
|
Notice.
Any notice to be given to the Company hereunder shall be deemed sufficient if addressed to the Company and delivered to the office of the Company, KVH Industries, Inc., 50 Enterprise Center, Middletown, RI 02842, Attention: President, or such other address as the Company may hereafter designate.
|
|
|
Exhibit 21.1
|
List of Subsidiaries
|
||
|
|
|
KVH Industries A/S
|
Denmark
|
|
|
|
|
KVH Industries Pte. Ltd.
|
Singapore
|
|
|
|
|
KVH Industries Brasil Comunicacao Por Satelite Ltda.
|
Brazil
|
|
|
|
|
KVH Industries Norway AS
|
Norway
|
|
|
|
|
KVH Industries Japan Co. Ltd.
|
Japan
|
|
|
|
|
KVH Industries UK Ltd.
|
United Kingdom
|
|
|
|
|
KVH Media Group Ltd.
|
United Kingdom
|
|
|
|
|
KVH Media Group Entertainment Ltd.
|
United Kingdom
|
|
|
|
|
KVH Media Group Communication Ltd.
|
United Kingdom
|
|
|
|
|
KVH Media Group International Ltd.
|
United Kingdom
|
|
|
|
|
KVH Media Group Ltd.
|
Cyprus
|
|
|
|
|
Good Morning News Sprl.
|
Belgium
|
|
|
|
|
KVH Media Group ApS
|
Denmark
|
|
|
|
|
KVH Media Group Communication, Inc.
|
United States
|
|
|
|
|
KVH Media Group, Inc.
|
United States
|
|
|
|
|
Rigstream B.V.
|
The Netherlands
|
|
|
|
|
Super Dragon Ltd.
|
Hong Kong
|
|
|
|
|
Videotel Consultants and Rentals Ltd.
|
United Kingdom
|
|
|
|
|
Videotel Marine International Ltd.
|
United Kingdom
|
|
|
|
|
Videotel Training Services Ltd.
|
United Kingdom
|
|
|
|
|
Videotel Marine Asia Ltd.
|
Hong Kong
|
|
|
|
|
Videotel Pte. Ltd.
|
Singapore
|
|
|
|
|
KVH Media Group India Private Ltd
|
India
|
|
|
|
|
/s/ Grant Thornton LLP
|
|
Boston, Massachusetts
|
March 9, 2017
|
|
|
|
/s/ Martin A. Kits van Heyningen
|
|
|
|
|
Martin A. Kits van Heyningen
|
|
|
|
|
President, Chief Executive Officer and
|
|
|
|
|
Chairman of the Board
|
|
|
|
|
/s/ Donald W. Reilly
|
|
|
|
|
Donald W. Reilly
|
|
|
|
|
Chief Financial Officer
|
|
|
|
|
|
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Act of 1934; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the by
|
|
/s/ Martin A. Kits van Heyningen
|
|
|
/s/ Donald W. Reilly
|
|
Martin A. Kits van Heyningen
|
|
|
Donald W. Reilly
|
|
President, Chief Executive Officer and
|
|
|
Chief Financial Officer
|
|
Chairman of the Board
|
|
|
|
|
|
|
|
|
Date:
|
March 9, 2017
|
|
Date:
|
March 9, 2017
|