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EX-31.1 - EXHIBIT 31.1 - CSP INC /MA/ex31-1.htm
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EX-31.2 - EXHIBIT 31.2 - CSP INC /MA/ex31-2.htm


United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
______________________
 
FORM 10-Q/A
(Amendment No. 1)

______________________
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended March 31, 2011.
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from              to             .
 
Commission File Number 0-10843
 
______________________
 
CSP Inc.
(Exact name of Registrant as specified in its Charter)
 
______________________
 
Massachusetts
04-2441294
(State of incorporation)
(I.R.S. Employer Identification No.)
 
43 Manning Road
Billerica, Massachusetts 01821-3901
(978) 663-7598
(Address and telephone number of principal executive offices)
______________________
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨.
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨.
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
¨
Accelerated filer
¨
       
Non-accelerated filer
¨  (Do not check if a smaller reporting company)
Smaller reporting company
x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
 
As of May 2, 2011,  the registrant had 3,486,510 shares of common stock issued and outstanding.
 
 


 
 
 
 

INDEX
 
   
Page
PART I. FINANCIAL INFORMATION
     
Item 1.
Financial Statements
 
     
 
Consolidated Balance Sheets as of March 31, 2011 (unaudited) and September 30, 2010
4
     
 
Consolidated Statements of Operations (unaudited) for the three and six months ended March 31, 2011 and 2010
5
     
 
Consolidated Statement of Shareholders’ Equity (unaudited) for the six months ended March 31, 2011
6
     
 
Consolidated Statements of Cash Flows (unaudited) for the six months ended March 31, 2011 and 2010
7
     
 
Notes to Consolidated Financial Statements (unaudited)
8-14
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
15-25
     
Item 4.
Controls and Procedures
26
     
PART II. OTHER INFORMATION
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
27
     
Item 6.
Exhibits
28

 
2

 
 
EXPLANATORY NOTE
 
This Amendment No. 1 on Form 10-Q/A to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, filed with the Securities and Exchange Commission (SEC) on May 9, 2011 is being filed to restate our consolidated financial statements and other financial information to give effect to adjustments resulting from the identification of sales that are maintenance and support services provided by third parties where the Company is not the primary obligor for the service, which requires presentation of the revenue reported by the Company net of the cost of the services as opposed to recognition as the gross sales value of the services. We have therefore reduced the product revenue and product cost of sales by the amount of the costs associated with these services.  In addition, the Company identified certain other services provided pursuant to third party contracts for which the Company is the primary obligor and reported these services correctly at the gross sales value; however these services were reported as product revenue and should have been reported as service revenue. We have therefore, reclassified both the revenue and cost of sales for these services from product revenue and product cost of sales to service revenue and service cost of sales.  The adjustments made to the restated financial statements referred to above did not affect gross profit, income before taxes, net income, cash flow, total assets, total liabilities, retained earnings or total shareholder equity as of or for the quarters and six-month periods ended March 31, 2011 and 2010.

We have added a disclosure in Note 2 to our Consolidated Financial Statements that explains the restatement and the impact to our Consolidated Financial Statements that were originally filed.  This Form 10-Q/A (Amendment No. 1) amends and restates Part I – Items 1, 2 and 4 of the May 9, 2011 filing, in each case to reflect only the adjustments described herein and the filing of restated financial statements as discussed above, and no other information in our May 9, 2011 filing is amended hereby. Except for the foregoing amended information, this Form 10-Q/A (Amendment No. 1) filing does not reflect events occurring after May 9, 2011.

 
3

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CSP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value)
 
   
March 31,
2011
   
September 30,
2010
 
   
(Unaudited)
       
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 14,372     $ 15,531  
Accounts receivable, net of allowances of $322 and $288
    12,610       12,190  
Inventories
    8,314       5,862  
Refundable income taxes
    228       721  
Deferred income taxes
    126       124  
Other current assets
    2,186       1,523  
Total current assets
    37,836       35,951  
                 
Property, equipment and improvements, net
    920       873  
                 
Other assets:
               
Intangibles, net
    631       687  
Deferred income taxes
    903       880  
Cash surrender value of life insurance
    2,867       2,689  
Other assets
    250       299  
Total other assets
    4,651       4,555  
Total assets
  $ 43,407     $ 41,379  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable and accrued expenses
  $ 10,577     $ 10,049  
Deferred revenue
    3,678       3,078  
Pension and retirement plans
    454       441  
Income taxes payable
    508       380  
Total current liabilities
    15,217       13,948  
Pension and retirement plans
    9,199       8,928  
Capital lease obligation
    24       24  
Total liabilities
    24,440       22,900  
                 
Commitments and contingencies
               
Shareholders’ equity:
               
Common stock, $.01 par; authorized, 7,500 shares; issued and outstanding 3,485 and 3,520 shares, respectively
    35       35  
Additional paid-in capital
    11,052       11,280  
Retained earnings
    13,191       12,516  
Accumulated other comprehensive loss
    (5,311 )     (5,352 )
Total shareholders’ equity
    18,967       18,479  
Total liabilities and shareholders’ equity
  $ 43,407     $ 41,379  
 
See accompanying notes to unaudited consolidated financial statements.
 
 
4

 

CSP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except for per share data)

   
For the three months ended
   
For the six months ended
 
   
March 31,
2011
   
March 31,
2010
   
March 31,
2011
   
March 31,
2010
 
Sales:
 
(Restated)
   
(Restated)
   
(Restated)
   
(Restated)
 
Product
  $ 12,767     $ 18,283     $ 28,058     $ 31,781  
Services
    4,862       4,568       10,198       8,878  
Total sales
    17,629       22,851       38,256       40,659  
                                 
Cost of sales:
                               
Product
    9,961       13,986       23,376       26,028  
Services
    3,419       3,375       6,103       6,837  
Total cost of sales
    13,380       17,361       29,479       32,865  
                                 
Gross profit
    4,249       5,490       8,777       7,794  
                                 
Operating expenses:
                               
Engineering and development
    508       430       1,018       902  
Selling, general and administrative
    3,310       3,411       6,685       6,468  
Total operating expenses
    3,818       3,841       7,703       7,370  
                                 
Operating income
    431       1,649       1,074       424  
                                 
Other income (expense):
                               
Foreign exchange gain (loss)
    12       (3 )     8       (10 )
Other income (expense), net
    (13 )     (13 )     (30 )     (26 )
Total other income (expense), net
    (1 )     (16 )     (22 )     (36 )
                                 
Income before income taxes
    430       1,633       1,052       388  
Income tax expense
    144       644       377       141  
Net income
  $ 286     $ 989     $ 675     $ 247  
                                 
Net income attributable to common shareholders
  $ 282     $ 979     $ 666     $ 245  
                                 
Net income per share – basic
  $ 0.08     $ 0.28     $ 0.19     $ 0.07  
                                 
Weighted average shares outstanding – basic
    3,437       3,552       3,455       3,544  
                                 
Net income per share – diluted
  $ 0.08     $ 0.27     $ 0.19     $ 0.07  
                                 
Weighted average shares outstanding – diluted
    3,471       3,581       3,491       3,573  
 
See accompanying notes to unaudited consolidated financial statements.
 
 
5

 

CSP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
For the Six Months Ended March 31, 2011
(Amounts in thousands)
 
   
Shares
   
Amount
   
Additional
Paid-in
Capital
   
Retained
Earnings
   
Accumulated
other
comprehensive
loss
   
Total
Shareholders’
Equity
   
Comprehensive
Income
 
Balance as of September 30, 2010
    3,520     $ 35     $ 11,280     $ 12,516     $ (5,352 )   $ 18,479        
Comprehensive income (loss):
                                                     
Net income
                      675             675     $ 675  
Other comprehensive loss:
                                                       
Effect of foreign currency translation
                            41       41       41  
Total comprehensive income
                                                  $ 716  
                                                         
Stock-based compensation
                46                   46          
Issuance of shares under employee stock purchase plan
    25             75                   75          
Restricted stock shares issued
    37       1       45                   46          
Purchase of common stock
    (97 )     (1 )     (394 )                 (395 )        
                                                         
Balance as of March 31, 2011
    3,485     $ 35     $ 11,052     $ 13,191     $ (5,311 )   $ 18,967          
 
See accompanying notes to unaudited consolidated financial statements.
 
 
6

 

CSP INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)

   
For the six months ended
 
   
March 31,
2011
   
March 31,
2010
 
Cash flows from operating activities:
           
Net income
  $ 675     $ 247  
Adjustments to reconcile net income to net cash used in operating activities:
               
Depreciation and amortization
    182       200  
Amortization of intangibles
    56       57  
Loss on disposal of fixed assets, net
    3       1  
Foreign exchange loss (gain)
    (8 )     10  
Non-cash changes in accounts receivable
    34       (21 )
Stock-based compensation expense on stock options and restricted stock awards
    92       107  
Deferred income taxes
    -       (60 )
Increase in cash surrender value of life insurance
    (41 )     (41 )
Changes in operating assets and liabilities:
               
Increase in accounts receivable
    (202 )     (7,718 )
Increase in inventories
    (2,442 )     (705 )
(Increase) decrease in refundable income taxes
    502       (68 )
(Increase) decrease in other current assets
    (601 )     175  
Decrease in other assets
    52       5  
Increase in accounts payable and accrued expenses
    386       1,445  
Increase in deferred revenue
    509       358  
Increase in pension and retirement plans liability
    83       110  
Increase in income taxes payable
    127       145  
Decrease in other long term liabilities
    -       (14 )
Net cash used in operating activities
    (593 )     (5,767 )
                 
Cash flows from investing activities:
               
Life insurance premiums paid
    (137 )     (64 )
Purchases of property, equipment and improvements
    (211 )     (172 )
Net cash used in investing activities
    (348 )     (236 )
                 
Cash flows from financing activities:
               
Proceeds from issuance of shares under employee stock purchase plan
    75       61  
Purchase of common stock
    (395 )     (40 )
Net cash provided by (used in) financing activities
    (320 )     21  
                 
Effects of exchange rate on cash
    102       (636 )
                 
Net decrease in cash and cash equivalents
    (1,159 )     (6,618 )
Cash and cash equivalents, beginning of period
    15,531       18,904  
                 
Cash and cash equivalents, end of period
  $ 14,372     $ 12,286  
                 
Supplementary cash flow information:
               
Cash paid for income taxes
  $ 251     $ 146  
                 
Cash paid for interest
  $ 85     $ 89  

See accompanying notes to unaudited consolidated financial statements.
 
 
7

 
 
CSP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED MARCH 31, 2011 AND 2010
 
Organization and Business
 
CSP Inc. was founded in 1968 and is based in Billerica, Massachusetts. To meet the diverse requirements of its industrial, commercial and defense customers worldwide, CSP Inc. and its subsidiaries (collectively “CSPI” or the “Company”) develop and market IT integration solutions and high-performance cluster computer systems. The Company operates in two segments, its Systems segment and its Service and System Integration segment.
 
1.
Basis of Presentation
 
The accompanying consolidated financial statements have been prepared by the Company, without audit, and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. All adjustments were of a normal recurring nature. Certain information and footnote disclosures normally included in the annual financial statements, which are prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted. Accordingly, the Company believes that although the disclosures are adequate to make the information presented not misleading, the unaudited financial statements should be read in conjunction with the footnotes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2010, and Form 8-K/A filed on January 11, 2012.
 
 2.
Restatement
 
The Company has restated its Consolidated Statements of Operations for the three-month and six-month periods ended March 31, 2011 and 2010  to reflect adjustments and reclassifications of revenue and cost of sales, in connection with the identification of sales that are maintenance and support services provided by third parties where the Company is not the primary obligor of the service, which requires presentation of the revenue reported by the Company net of the cost of the services as opposed to recognition of the gross sales value of the services.  In addition, the Company identified certain other services provided pursuant to third party contracts for which the Company is the primary obligor and reported these services correctly at the gross sales value; however these services were reported as product revenue and should have been included as service revenue. We have therefore, reclassified both the revenue and cost of sales for these services from product revenue and product cost of sales to service revenue and service cost of sales.
 
The adjustments made to the restated financial statements referred to above did not affect gross profit, income before taxes, net income, cash flow, total assets, total liabilities, retained earnings or total shareholder equity as of or for the quarters and six-month periods ended March 31, 2011 or 2010.
 
The tables below show the impact to the statements of operations for the restated periods.
 
   
Three months ended March 31, 2011 (unaudited)
   
Three months ended March 31, 2010 (unaudited)
 
   
As
reported
   
Restatement
Adjustment
   
Restated
   
As
reported
   
Restatement
Adjustment
   
Restated
 
   
(Amounts in thousands except for per share data)
 
Sales: 
           
Product 
  $ 15,726     $ (2,959 )   $ 12,767     $ 20,551     $ (2,268 )   $ 18,283  
Services 
    3,483       1,379       4,862       3,370       1,198       4,568  
Total sales 
    19,209       (1,580 )     17,629       23,921       (1,070 )     22,851  
                                                 
Cost of sales:
                                               
Product 
    12,457       (2,496 )     9,961       15,960       (1,974 )     13,986  
Services 
    2,503       916       3,419       2,471       904       3,375  
Total cost of sales 
    14,960       (1,580 )     13,380       18,431       (1,070 )     17,361  
Gross profit 
    4,249       -       4,249       5,490       -       5,490  
                                                 
Operatingexpenses 
    3,818       -       3,818       3,841       -       3,841  
Operating income 
    431       -       431       1,649       -       1,649  
Other income (expense), net 
    (1 )     -       (1 )     (16 )     -       (16 )
Income before income taxes 
    430       -       430       1,633       -       1,633  
Income tax expense 
    144       -       144       644       -       644  
Net income 
  $ 286       -     $ 286     $ 989       -     $ 989  
                                                 
Net income per share – basic 
  $ 0.08       -     $ 0.08     $ 0.28       -     $ 0.28  
Weighted average shares outstanding – basic 
    3,437       -       3,437       3,552       -       3,552  
Net income per share – diluted 
  $ 0.08       -     $ 0.08     $ 0.27       -     $ 0.27  
Weighted average shares outstanding – diluted 
    3,471       -       3,471       3,581       -       3,581  
 
 
8

 

   
Six months ended March 31, 2011 (unaudited)
   
Six months ended March 31, 2010 (unaudited)
 
   
As
reported
   
Restatement
Adjustment
   
Restated
   
As
reported
   
Restatement
Adjustment
   
Restated
 
   
(Amounts in thousands except for per share data)
 
Sales: 
           
Product 
  $ 33,150     $ (5,092 )   $ 28,058     $ 35,796     $ (4,015 )   $ 31,781  
Services 
    8,169       2,029       10,198       6,786       2,092       8,878  
Total sales 
    41,319       (3,063 )     38,256       42,582       (1,923 )     40,659  
                                                 
Cost of sales:
                                               
Product 
    27,750       (4,374 )     23,376       29,576       (3,548 )     26,028  
Services 
    4,792       1,311       6,103       5,212       1,625       6,837  
Total cost of sales 
    32,542       (3,063 )     29,479       34,788       (1,923 )     32,865  
Gross profit 
    8,777       -       8,777       7,794       -       7,794  
                                                 
Operatingexpenses 
    7,703       -       7,703       7,370       -       7,370  
Operating income 
    1,074       -       1,074       424       -       424  
Other income (expense), net 
    (22 )     -       (22 )     (36 )     -       (36 )
Income before income taxes 
    1,052       -       1,052       388       -       388  
Income tax expense 
    377       -       377       141       -       141  
Net income 
  $ 675       -     $ 675     $ 247       -     $ 247  
                                                 
Net income per share – basic 
  $ 0.19       -     $ 0.19     $ 0.07       -     $ 0.07  
Weighted average shares outstanding – basic 
    3,455       -       3,455       3,544       -       3,544  
Net income per share – diluted 
  $ 0.19       -     $ 0.19     $ 0.07       -     $ 0.07  
Weighted average shares outstanding – diluted 
    3,491       -       3,491       3,573       -       3,573  
 
3.
Use of Estimates
 
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management 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 the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates under different assumptions or conditions.
 
4.
Earnings Per Share of Common Stock
 
Basic net income per common share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted net income per common share reflects the maximum dilution that would have resulted from the assumed exercise and share repurchase related to dilutive stock options and is computed by dividing net income by the assumed weighted average number of common shares outstanding.
 
 
9

 
 
We are required to present earnings per share, or EPS, utilizing the two class method because we had outstanding, non-vested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, which are considered participating securities.
 
Basic and diluted earnings per share computations for the Company’s reported net income attributable to common stockholders are as follows:
 
   
For the Three Months Ended
   
For the Six Months Ended
 
   
March 31,
2011
   
March 31,
2010
   
March 31,
2011
   
March 31,
2010
 
   
(Amounts in thousands, except per share data)
 
Net income
  $ 286     $ 989     $ 675     $ 247  
Less: Net income attributable to nonvested common stock
    4       10       9       2  
                                 
Net income attributable to common stockholders
    282       979       666       245  
                                 
Weighted average total shares outstanding – basic
    3,492       3,591       3,504       3,577  
Less: weighted average non-vested shares outstanding
    55       39       49       33  
Weighted average number of common shares outstanding – basic
    3,437       3,552       3,455       3,544  
Potential common shares from non-vested stock awards and the assumed exercise of stock options
    34       29       36       29  
Weighted average common shares outstanding – diluted
    3,471       3,581       3,491       3,573  
                                 
Net income per share – basic
  $ 0.08     $ 0.28     $ 0.19     $ 0.07  
                                 
Net income per share – diluted
  $ 0.08     $ 0.27     $ 0.19     $ 0.07  
 
All anti-dilutive securities, including stock options, are excluded from the diluted income per share computation. For the three and six months ended March 31, 2011, 208,000 and 211,000 options, respectively, were excluded from the diluted income per share calculation because their inclusion would have been anti-dilutive.
 
5.
Inventories
 
Inventories consist of the following:
 
   
March 31,
2011
   
September 30,
2010
 
   
(Amounts in thousands)
 
Raw materials
  $ 1,162     $ 1,029  
Work-in-process
    808       439  
Finished goods
    6,344       4,394  
Total
  $ 8,314     $ 5,862  
 
Finished goods includes inventory that has been shipped, but for which all revenue recognition criteria has not been met of approximately $3.6 million and $2.4 million as of March 31, 2011 and September 30, 2010, respectively.
 
Total inventory balances in the table above are shown net of reserves for obsolescence of approximately $4.2 million and $4.1 million as of March 31, 2011 and September 30, 2010, respectively.
 
6.
Accumulated Other Comprehensive Loss
 
The components of comprehensive income (loss) are as follows:
 
   
For the Three Months Ended
   
For the Six Months Ended
 
   
March 31,
2011
   
March 31,
2010
   
March 31,
2011
   
March 31,
2010
 
   
(Amounts in thousands)
 
Net income
  $ 286     $ 989     $ 675     $ 247  
Effect of foreign currency translation
    102       (297 )     41       (356 )
Minimum pension liability
                       
Comprehensive income (loss)
  $ 388     $ 692     $ 716     $ (109 )
 
 
10

 
 
The components of Accumulated Other Comprehensive Loss are as follows:
 
   
March 31,
2011
   
September 30,
2010
 
   
(Amounts in thousands)
 
Cumulative effect of foreign currency translation
  $ (2,092 )   $ (2,133 )
Additional minimum pension liability
    (3,219 )     (3,219 )
Accumulated Other Comprehensive Loss
  $ (5,311 )   $ (5,352 )
 
7.
Pension and Retirement Plans
 
The Company has defined benefit and defined contribution plans in the United Kingdom, Germany and the U.S. In the United Kingdom and Germany, the Company provides defined benefit pension plans and defined contribution plans for the majority of its employees. In the U.S., the Company provides benefits through supplemental retirement plans to certain current and former employees. The domestic supplemental retirement plans have life insurance policies which are not plan assets but were purchased by the Company as a vehicle to fund the costs of the plan. Domestically, the Company also provides for officer death benefits through post-retirement plans to certain officers.  All of the Company’s defined benefit plans are closed to newly hired employees and have been for fiscal years 2009, 2010 and for the six months ended March 31, 2011.
 
The Company funds its pension plans in amounts sufficient to meet the requirements set forth in applicable employee benefits laws and local tax laws. Liabilities for amounts in excess of these funding levels are accrued and reported in the consolidated balance sheets.
 
Our pension plan in the United Kingdom is the only plan with plan assets. The plan assets consist of an investment in a commingled fund which in turn comprises a diversified mix of assets including corporate equity securities, government securities and corporate debt securities.
 
The components of net periodic benefit costs related to the U.S. and international plans are as follows:
 
   
For the Three Months Ended March 31
 
   
2011
   
2010
 
   
Foreign
   
U.S.
   
Total
   
Foreign
   
U.S.
   
Total
 
   
(Amounts in thousands)
 
Pension:
                                   
Service cost
  $ 18     $ 2     $ 20     $ 15     $ 2     $ 17  
Interest cost
    172       25       197       168       30       198  
Expected return on plan assets
    (126 )           (126 )     (111 )           (111 )
Amortization of:
                                               
Prior service gain
                                   
Amortization of net gain
    17       8       25       11       7       18  
Net periodic benefit cost
  $ 81     $ 35     $ 116     $ 83     $ 39     $ 122  
                                                 
Post Retirement:
                                               
Service cost
  $     $ 5     $ 5     $     $ 5     $ 5  
Interest cost
          17       17             17       17  
Amortization of net gain
          12       12             16       16  
Net periodic benefit cost
  $     $ 34     $ 34     $     $ 38     $ 38  
 
 
11

 
 
   
For the Six Months Ended March 31
 
   
2011
   
2010
 
   
Foreign
   
U.S.
   
Total
   
Foreign
   
U.S.
   
Total
 
   
(Amounts in thousands)
 
Pension:
                                   
Service cost
  $ 36     $ 4     $ 40     $ 31     $ 4     $ 35  
Interest cost
    342       50       392       345       58       403  
Expected return on plan assets
    (251 )           (251 )     (227 )           (227 )
Amortization of:
                                               
Prior service gain
                                   
Amortization of net gain
    34       16       50       22       15       37  
Net periodic benefit cost
  $ 161     $ 70     $ 231     $ 171     $ 77     $ 248  
                                                 
Post Retirement:
                                               
Service cost
  $     $ 10     $ 10     $     $ 9     $ 9  
Interest cost
          34       34             34       34  
Amortization of net gain
          24       24             33       33  
Net periodic benefit cost
  $     $ 68     $ 68     $     $ 76     $ 76  

 
12

 
 
8.
Segment Information
 
The following table presents certain operating segment information.

         
Service and System Integration Segment
       
Three Months Ended March 31,
 
Systems
Segment
   
Germany
   
United Kingdom
   
U.S.
   
Total
   
Consolidated
Total
 
   
(Amounts in thousands)
 
2011
                                   
Sales:
                                   
Product
  $ 1,931     $ 2,785     $ 61     $ 7,990     $ 10,836     $ 12,767  
Service
    368       3,401       364       729       4,494       4,862  
Total sales
    2,299       6,186       425       8,719       15,330       17,629  
                                                 
Profit from operations
    72       39       15       305       359       431  
Assets
    13,335       13,150       3,847       13,075       30,072       43,407  
Capital expenditures
    77       11       1       11       23       100  
Depreciation and amortization
    21       45       7       45       97       118  
                                                 
2010
                                               
Sales:
                                               
Product
  $ 4,136     $ 2,407     $ 25     $ 11,715     $ 14,147     $ 18,283  
Service
    432       3,056       460       620       4,136       4,568  
Total sales
    4,568       5,463       485       12,335       18,283       22,851  
                                                 
Profit from operations
    1,431       47       18       153       218       1,649  
Assets
    13,926       10,340       4,001       13,475       27,816       41,742  
Capital expenditures
    5       103       4       10       117       122  
Depreciation and amortization
    30       44       6       50       100       130  

 
         
Service and System Integration Segment
       
Six Months Ended March 31,
 
Systems
Segment
   
Germany
   
United Kingdom
   
U.S.
   
Total
   
Consolidated
Total
 
   
(Amounts in thousands)
 
2011
                                   
Sales:
                                   
Product
  $ 2,240     $ 6,251     $ 72     $ 19,495     $ 25,818     $ 28,058  
Service
    1,884       6,022       696       1,596       8,314       10,198  
Total sales
    4,124       12,273       768       21,091       34,132       38,256  
                                                 
Profit (loss) from operations
    186       151       (15 )     752       888       1,074  
Assets
    13,335       13,150       3,847       13,075       30,072       43,407  
Capital expenditures
    133       47       3       28       78       211  
Depreciation and amortization
    41       92       14       91       197       238  
                                                 
2010
                                               
Sales:
                                               
Product
  $ 4,529     $ 5,762     $ 51     $ 21,439     $ 27,252     $ 31,781  
Service
    493       6,314       845       1,226       8,385       8,878  
Total sales
    5,022       12,076       896       22,665       35,637       40,659  
                                                 
Profit from operations
    136       48       14       226       288       424  
Assets
    13,926       10,340       4,001       13,475       27,816       41,742  
Capital expenditures
    15       135       9       13       157       172  
Depreciation and amortization
    64       79       12       102       193       257  
 
 
13

 
 
Profit (loss) from operations is sales less cost of sales, engineering and development, selling, general and administrative expenses but is not affected by either non-operating charges/income or by income taxes. Non-operating charges/income consists principally of investment income and interest expense.  All intercompany transactions have been eliminated.
 
The following table lists customers from which the Company derived revenues in excess of 10% of total revenues for the three and six month periods ended March 31, 2011 and 2010.
 
   
For the Three Months Ended
   
For the Six Months Ended
 
   
March 31,
2011
   
March 31,
2010
   
March 31,
2011
   
March 31,
2010
 
   
Amount
   
% of
Revenues
   
Amount
   
% of
Revenues
   
Amount
   
% of
Revenues
   
Amount
   
% of
Revenues
 
   
(Dollar amounts in millions)
 
Vodafone
  $ 3.2       18 %   $ 2.3       10 %   $ 4.8       13 %   $ 4.9       12 %
Verio
  $ 1.8       10 %   $ 5.8       25 %   $ 4.3       11 %   $ 7.8       19 %
Raytheon
  $ 0.1        ― %   $