Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Interim Consolidated Financial Statement Details

v3.7.0.1
Note 4 - Interim Consolidated Financial Statement Details
 6 Months Ended
Jul. 02, 2017
Notes to Financial Statements  
Condensed Financial Statements [Text Block]
4
.
Interim Consolidated financial statement details
 
The following consolidated financial statement details are presented as of the period ended for the consolidated balance sheets and for the periods ended for each of the consolidated statements of operations and comprehensive income (loss).
 
Consolidated Balance Sheets
 
Accounts receivable – net:
 
 
 
July
2
, 201
7
 
 
January
1
, 201
7
 
Trade accounts receivable
   $
22,214
     $
22,284
  
Other receivables
    
311
      
511
  
Allowance for doubtful accounts
    
(985
 )    
(171
)
Accounts receivable—net
   $
21,540
     $
22,624
  
 
The increase in the allowance for doubtful accounts from
January 1, 2017
to
July 2, 2017
predominantly related to
one
customer for which management has concluded a provision was required for the outstanding accounts receivable due to the deterioration of the credit risk associated with
one
customer.
 
Inventories:
 
 
 
July
2
, 201
7
 
 
January
1
, 201
7
 
Raw materials
   $
16,976
     $
14,863
  
Work in process
    
2,715
      
1,557
  
Finished goods
    
4,655
      
3,678
  
Parts
    
749
      
576
  
Inventories
   $
25,095
     $
20,674
  
 
Inventories are recorded net of a provision for obsolescence as at
July 2, 2017
and
January 1, 2017
of 
$865
and
$442,
respectively. The increase in the provision for obsolescence was due primarily to an identified collection risk related to aged inventory for a small number of customers.
 
Property, plant and equipment – net:
 
 
 
July
2
, 201
7
 
 
January
1
, 201
7
 
Cost:
                
Land
   $
1,648
     $
1,648
  
Buildings
    
9,852
      
9,852
  
Machinery and equipment (a) (c) (d)
    
29,913
      
31,615
  
Office furniture and equipment
    
518
      
556
  
Computer hardware and software (b) (d)
    
3,079
      
3,544
  
Leasehold improvements
   
2,240
      
2,129
  
     
47,250
      
49,344
  
Less accumulated depreciation:
               
Land
    
—
      
—
  
Buildings
    
(8,397
 )    
(8,174
)
Machinery and equipment (a) (c) (d)
    
(23,389
 )    
(22,460
)
Office furniture and equipment
    
(400
 )    
(438
)
Computer hardware and software (b) (d)
    
(2,428
 )    
(2,842
)
Leasehold improvements
   
(1,062
 )    
(993
)
     
(35,676
 )    
(34,907
)
Property, plant and equipment—net
   $
11,574
     $
14,437
  
 
(a)
Included within machinery and equipment were assets under capital leases with costs of
$533
and
$2,193
and associated accumulated depreciation of
$95
and
$673
as of
July 2, 2017
and
January 1, 2017,
respectively. The related depreciation expense for the
three
months ended
July 2, 2017
and
July 3, 2016
was
$55
and
$74,
respectively. The related depreciation expense for the
six
months ended
July 2, 2017
and
July 3, 2016
was
$133
and
$154,
respectively. During the
three
months ended
July 2, 2017,
machinery and equipment under capital lease of
$1,660
was purchased and transferred to machinery and equipment owned. 
 
(b)
Included within computer hardware and software are assets under capital leases with costs of
Nil
and
$83
as at
July 2, 2017
and
January 1, 2017
and associated accumulated depreciation of
Nil
and
$80
as at
July 2, 2017
and
January 1, 2017,
respectively. The related depreciation expense for the
three
months ended
July 2, 2017
and
July 3, 2016
was
Nil
and
$10,
respectively. The related depreciation expense for the
six
months ended
July 2, 2017
and
July 3, 2016
was
$3
and
$20,
respectively.
 
(c)
In accordance with ASC
360
-
10,
the Company is required to evaluate for impairment when events or changes in circumstances indicate that the carrying value of such assets
may
not
be recoverable.  Upon the occurrence of a triggering event, the Company assesses whether the estimated undiscounted cash flows expected from the use of the asset and the residual value from the ultimate disposal of the asset exceeds the carrying value. In the
second
quarter of
2017,
the Company identified that results did
not
meet forecasted results, which was considered a triggering event related to its U.S. segment asset group. The net carrying amount of the U.S. asset group was
$2,108.
The Company estimated undiscounted cash flows and determined the carrying amounts was exceeded by the recoverable amount, and therefore performed a discounted cash flow analysis. The difference between the discounted cash flows and the carrying amount resulted in an impairment loss of
$1,025
which has been recorded in the
second
quarter of
2017.
The estimate of discounted cash flows are sensitive to these key assumptions, for instance, if our revenue projections are lower by
1%,
the impairment would increase by
$110.
If there was a
1%
increase in the weighted average cost of capital, the impairment would increase by
$37.
The Company calculated the impairment loss by discounting the future cash flows which was determined to represent the fair value of the asset group and deducted this from the carrying amount of the segment asset group.
 
In the
second
quarter of
2017,
the Company also identified that results did
not
meet forecasted results, which was considered a triggering event related to its China segment asset group. The net carrying amount of the China asset group was
$1,504.
  The Company estimated undiscounted cash flows and determined a recoverable amount of
$1,128
in excess of the net carrying value, therefore
no
impairment loss has been recorded in the
second
quarter of
2017.
The key assumptions included in these cash flows are projected revenue based on management’s forecast and corresponding margins. The estimate of undiscounted cash flows are sensitive to these key assumptions, for instance, if our revenue projections are lower by
1%,
the recoverable amount in excess of the carrying amount would be reduced to
$641.
As such, the Company will continue to review for impairment triggers which
may
result in a need to impair the assets to fair value in the future.  
   
(d)
During the quarter ended
July 2, 2017,
the Company removed fully depreciated assets that were
no
longer in use with a cost and accumulated depreciation value of
$870.
The China segment impaired assets from machinery and equipment with net book value of
$265,
associated cost of
$383
and accumulated depreciation value of
$118.
The China segment also impaired assets from machinery and equipment with net book value of
$181,
associated cost of
$472
and accumulated depreciation value of
$291.
The corporate segment also impaired assets with net book value of
$130,
associated cost of
$135
and accumulated depreciation of
$5.
A total impairment loss was recorded of
$576
in the
second
quarter of
2017.
 
Accrued liabilities:
 
 
 
July
2
, 201
7
 
 
January
1
, 201
7
 
Customer related
   $
1,222
     $
898
  
Payroll
    
2,360
      
2,134
  
Professional services
    
300
      
281
  
Restructuring (note 11)
    
518
      
27
  
Vendor related
    
524
      
613
  
Other
    
497
      
651
  
Accrued liabilities
   $
5,421
     $
4,604
  
 
 
 
Interim consolidated statements of operations and comprehensive income (loss)
 
Interest expense:
 
 
 
Three months ended
 
 
Six months ended
 
 
 
July
2
,
201
7
 
 
July 3,
2016
 
 
July
2
,
201
7
 
 
July 3,
2016
 
Revolving credit facility
   $
87
     $
124
     $
142
     $
290
  
Long-term debt
    
117
      
54
      
226
      
93
  
Amortization of deferred financing fees
    
7
      
8
      
11
      
17
  
Obligations under capital leases
    
6
      
17
      
17
      
34
  
Interest expense
   $
217
     $
203
     $
396
     $
434