XML 30 R7.htm IDEA: XBRL DOCUMENT
v2.4.1.9

NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended
--- | ---
Dec. 31, 2014
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business Our manufacturing services include complete medical devices, printed circuit board assemblies, wire and cable assemblies, and complex higher level electromechanical assemblies for a wide range of medical, industrial and defense and aerospace industries. We provide a full "turn-key" contract manufacturing service to our customers. All products are built to the customer's design specifications. We also provide engineering services and repair services. Our manufacturing facilities are located in Bemidji, Blue Earth, Merrifield, Milaca, Mankato and Baxter, Minnesota as well as Augusta, Wisconsin and Monterrey, Mexico. Products are sold to customers both domestically and internationally. A summary of our significant accounting policies follows: Principles of Consolidation The consolidated financial statements include the accounts of our wholly owned subsidiary, Manufacturing Assembly Solutions of Monterrey, Inc. All significant intercompany accounts and transactions have been eliminated. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our consolidated financial statements. Estimates also affect the reported amounts of revenue and expense during the reporting period. Significant items subject to estimates and assumptions include the valuation allowance for inventories, allowance for doubtful accounts and realizability of deferred tax assets. Actual results could differ from those estimates. Accounts Receivable and Allowance for Doubtful Accounts We grant credit to customers in the normal course of business. Accounts receivable are unsecured and are presented net of an allowance for doubtful accounts. The allowance for doubtful accounts was $137,000 and $138,000 at December 31, 2014 and 2013, respectively. We determine our allowance by considering a number of factors, including the length of time accounts receivable are past due, our previous loss history, the customers' current ability to pay their obligations to us, and the condition of the general economy and the industry as a whole. We write-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market (based on the lower of replacement cost or net realizable value). Costs include material, labor, and overhead required in the production of our products. Inventory reserves are maintained for inventories that may have a lower value than stated or quantities in excess of future production needs. Inventories are as follows:
|  | 2014 |  | 2013 |
Raw materials |  | $ | 12,745,623 |  | $ | 12,282,902 |
Work in process |  |  | 3,653,670 |  |  | 3,317,573 |
Finished goods |  |  | 2,861,373 |  |  | 2,926,512 |
Reserves |  |  | (732,248 | ) |  | (1,099,517 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total |  | $ | 18,528,418 |  | $ | 17,427,470 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Property, Equipment and Depreciation Property and equipment are stated at cost less accumulated depreciation. Additions, improvements and major renewals are capitalized, while maintenance and minor repairs are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in operations. Leasehold improvements are depreciated over the shorter of their estimated useful lives or their remaining lease terms. All other property and equipment are depreciated by the straight-line method over their estimated useful lives, as follows:
Buildings |  | 39 Years
Leasehold improvements |  | 3-15 Years
Manufacturing equipment |  | 3-7 Years
Office and other equipment |  | 3-7 Years
Property and equipment at December 31, 2014 and 2013:
|  | 2014 |  | 2013 |
Land |  | $ | 375,000 |  | $ | 375,000 |
Building and Leasehold Improvements |  |  | 9,184,710 |  |  | 9,116,429 |
Manufacturing Equipment |  |  | 16,769,847 |  |  | 15,953,227 |
Office and Other Equipment |  |  | 5,386,805 |  |  | 4,535,897 |
Accumulated Depreciation |  |  | (20,827,645 | ) |  | (18,943,393 | )
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net Property and Equipment |  | $ | 10,888,717 |  | $ | 11,037,160 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Other Assets Other Assets include capitalized bond issue costs. The value of this asset is $34,395 and $39,687 at December 31, 2014 and 2013, respectively. Related amortization expense for 2014 and 2013 was $5,292 and $5,291, respectively. Estimated future annual amortization expense for the asset is approximately $5,000 per year through 2021 when the related bond matures. Impairment Analysis We evaluate long-lived assets, primarily property and equipment, as well as the related depreciation periods, whenever current events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability for assets to be held and used is based on our projection of the undiscounted future operating cash flows of the underlying assets. To the extent such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amounts of related assets, a charge might be required to reduce the carrying amount to equal estimated fair value. Assets held for sale are reported at the lower of the carrying amount or fair value less costs to dispose. We recorded an impairment charge in 2013 of $74,000. The impairment charge has been included in general and administrative expenses in the consolidated statements of income. Preferred Stock Preferred stock issued is non-cumulative and nonconvertible. The holders of the preferred stock are entitled to a non-cumulative dividend of 12% when and as declared. In liquidation, holders of preferred stock have preference to the extent of $1.00 per share plus dividends accrued but unpaid. No preferred stock dividends were declared or paid during the years ended December 31, 2014 and 2013. Revenue Recognition We recognize manufacturing revenue when we ship goods or the goods are received by our customer, when title has passed, all contractual obligations have been satisfied, the price is fixed or determinable and collection of the resulting receivable is reasonably assured. Generally, there are no formal substantive customer acceptance requirements or further obligations related to manufacturing services. If such requirements or obligations exist, then we recognize the related revenues at the time when such requirements are completed and the obligations are fulfilled. We also provide engineering services separate from the manufacture of a product. Revenue for engineering services is generally recognized upon completion of the engineering process. In addition, we have another separate source of revenue that comes from short-term repair services, which are recognized when the repairs are completed and the repaired products are shipped back to the customer. Our net sales for services were less than 5% of our total sales for all periods presented, and accordingly, are included in net sales in the consolidated statement of operations. Shipping and handling costs charged to our customers are included in net sales, while the corresponding shipping expenses are included in cost of goods sold. Product Warranties We provide limited warranty for the replacement or repair of defective product within a specified time period after the sale at no cost to our customers. We make no other guarantees or warranties, expressed or implied, of any nature whatsoever as to the goods including, without limitation, warranties to merchantability, fit for a particular purpose or non-infringement of patent or the like unless agreed upon in writing. We estimate the costs that may be incurred under our limited warranty and provide a reserve based on actual historical warranty claims coupled with an analysis of unfulfilled claims at the balance sheet date. Our warranty claim costs are not material given the nature of our products and services. Advertising Advertising costs are charged to operations as incurred. The total amount charged to expense was $162,000 and $146,000 for the years ended December 31, 2014 and 2013, respectively. Income Taxes We account for income taxes under the asset and liability method. Deferred income tax assets and liabilities are recognized annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Incentive Compensation We use a Black-Scholes option-pricing model to determine the grant date fair value of our incentive awards and recognize the expense on a straight-line basis over the vesting period less awards expected to be forfeited using estimated forfeiture rates. See Note 6 for additional information. Net Income Per Common Share Basic net income per common share is computed by dividing net income by the weighted-average number of common shares outstanding. Dilutive net income per common share assumes the exercise and issuance of all potential common stock equivalents in computing the weighted-average number of common shares outstanding, unless their effect is antidilutive. For the years ended December 31, 2014 and 2013, 134,250 and 189,250 option shares were excluded, respectively, because their inclusion would be antidilutive. A reconciliation of basic and diluted share amounts for the years ended December 31, 2014 and 2013 is as follows:
|  | 2014 |  | 2013 |
Basic weighted average common shares outstanding |  |  | 2,742,992 |  |  | 2,742,992 |
Weighted average common stock equivalents from assumed exercise of stock options |  |  | 5,833 |  |  | 1,144 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Diluted weighted average common shares outstanding |  |  | 2,748,825 |  |  | 2,744,136 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Enterprise-Wide Disclosures Our results of operations for the years ended December 31, 2014 and 2013 represent a single operating and reporting segment referred to as Contract Manufacturing within the Electronic Manufacturing Services (EMS) industry. We strategically direct production between our various manufacturing facilities based on a number of considerations to best meet our customers' requirements. We share resources for sales, marketing, engineering, supply chain, information services, human resources, payroll and all corporate accounting functions. Consolidated financial information is available that is evaluated regularly by the chief operating decision maker in assessing performance and allocating resources. Export sales represent approximately 13% and 12% of consolidated net sales for the years ended December 31, 2014 and 2013, respectively. Net sales by our major EMS industry markets for the years ended December 31, 2014 and 2013 are as follows:
(in thousands) |  | 2014 |  | 2013 |
Aerospace and Defense |  | $ | 14,869 |  | $ | 19,879 |
Medical/Life Sciences |  |  | 41,402 |  |  | 35,429 |
Industrial |  |  | 55,771 |  |  | 55,750 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Total Net Sales |  | $ | 112,042 |  | $ | 111,058 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Noncurrent assets, excluding deferred taxes, by country are as follows:
|  | United States |  | Mexico |  | Total |
2014 |  |  |  |  |  |  |  |  |  |
Net property and equipment |  | $ | 10,214,279 |  | $ | 822,881 |  | $ | 10,888,717 |
Other assets |  |  | 109,401 |  |  | 7,726 |  |  | 117,127 |
2013 |  |  |  |  |  |  |  |  |  |
Net property and equipment |  | $ | 10,560,184 |  | $ | 476,976 |  | $ | 11,037,160 |
Other assets |  |  | 114,693 |  |  | 7,726 |  |  | 122,419 |
Foreign Currency Transactions Foreign exchange transaction gains and losses attributable to exchange rate movements related to transactions made in the local currency and on intercompany receivables and payables not deemed to be of a long-term investment nature are recorded in other income (expense). The functional currency for our Mexico subsidiary is the US dollar. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). This standard outlines a single comprehensive model for companies to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that revenue is recognized when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of and obtain the benefits from the good or service. Transfer of control is not the same as transfer of risks and rewards, as it is considered in current guidance. We will also need to apply new guidance to determine whether revenue should be recognized over time or at a point in time. This standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016, with no early adoption permitted, using either of two methods: (a) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (b) retrospective with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined in ASU 2014-09. We have not yet selected a transition method and are currently evaluating the impact of the pending adoption of ASU 2014-09 on the consolidated financial statements.

X
- Details
Name: | us-gaap_AccountingPoliciesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References No definition available. + Details
Name: | us-gaap_BasisOfPresentationAndSignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration