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BLONDER TONGUE LABORATORIES INC - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis of the Company's historical results of operations and liquidity and capital resources should be read in conjunction with the consolidated financial statements of the Company and notes thereto appearing elsewhere herein. The following discussion and analysis also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors. See "Forward Looking Statements" that precedes Item 1 above. Overview The Company was incorporated in November, 1988, under the laws of Delaware as GPS Acquisition Corp. for the purpose of acquiring the business of Blonder-Tongue Laboratories, Inc., a New Jersey corporation, which was founded in 1950 by Ben H. Tongue and Isaac S. Blonder to design, manufacture and supply a line of electronics and systems equipment principally for the private cable industry. Following the acquisition, the Company changed its name to Blonder Tongue Laboratories, Inc. The Company completed the initial public offering of its shares of Common Stock in December, 1995. Today the Company is a technology-development and manufacturing company that delivers television signal encoding, transcoding, digital transport and broadband product solutions for a broad range of applications. The markets served include cable television systems, multi-dwelling units, the lodging/hospitality market, and institutional systems including hospitals, prisons and schools. The technology requirements of these markets change rapidly and the Company's research and development team is continually delivering high performance-lower cost solutions to meet customers' needs. The Company's strategy is focused on the development of products for digital signal generation and transmission and, since 2008, the Company entered into and renewed various agreements for technologies in concert with the new digital encoder and EdgeQAM line of products. As a result, the Company continues to significantly expand its digital product lines. The continuing evolution of the Company's product lines will focus on the increased needs created in the digital space by IPTV, digital SD and HD video content and the transport of these signals over state of the art broadband networks. The Company has seen a continuing shift in product mix from analog products to digital products and expects this shift to continue. Accordingly, any substantial decrease in sales of analog products without a related increase in digital products could have a material adverse effect on the Company's results of operations, financial condition and cash flows. Sales of digital video headend products were $12,930,000 and $14,384,000 and sales of analog video headend products were $5,818,000 and $6,875,000 in 2013 and 2012, respectively. In April 2010, the Company obtained a $4.1 million purchase commitment for the first member of its EdgeQAM family of products (the EQAM-400) from World Cinema Inc. ("World Cinema"), a supplier of free-to-guest digital and HD television to the hospitality market. These shipments were made in the second and third quarters of 2010, during which time the EQAM-400 was exclusive to World Cinema. Since then, the parties had extended the exclusivity arrangement on a number of occasions, with the most recent extension expiring at the end of 2013. In connection with the most recent extension, World Cinema committed to purchase approximately $1.5 million of EQAM-400 from the fourth quarter of 2012 through the fourth quarter of 2013. World Cinema's purchases of this product were approximately $1,119,000 and $1,911,000 in 2013 and 2012, respectively. World Cinema did not extend this exclusivity arrangement into 2014 with further purchase commitments. Nevertheless, the Company anticipates that World Cinema will continue to purchase the EQAM-400 from Blonder as needed in the normal course of its business, but will not commit to any minimum dollar amount. The EQAM-400 accepts HD content received by satellite via its IP Gigabit Ethernet (GbE) input, adds content protection by utilizing Pro:Idiom™ encryption, and QAM modulates it for distribution over standard coax networks. 23 On February 1, 2012, the Company's wholly-owned subsidiary, R. L. Drake Holdings, LLC ("RLD"), a Delaware limited liability company, acquired substantially all of the assets and assumed certain specified liabilities of R. L. Drake, LLC, a Delaware limited liability company ("Seller") (the "RLD Acquisition"), pursuant to an Asset Purchase Agreement of even date, by and among RLD, Seller, R. L. Drake Acquisition Corporation, a Delaware corporation, and WBMK Holding Company, an Ohio corporation, as amended by a certain First Amendment to Asset Purchase Agreement dated February 3, 2012 (as so amended, the "Asset Purchase Agreement"). The purchase price was approximately $7,020,000, which included a working capital adjustment of approximately $545,000, plus contingent purchase price payments of up to $1,500,000 in the aggregate that may be made over the three-year period after closing if certain financial results are realized. The assets acquired from Seller include assets used in the manufacturing and delivery of electronic communications solutions for cable television systems, digital television reception, video signal distribution and digital video encoding, including equipment, supplies and other tangible personal property, inventory, accounts receivable, business records, trademarks and other intellectual property rights. RLD manufactures and distributes similar products to those currently being produced by the Company. The acquisition allowed the Company to leverage the combined research and development and sales and marketing departments to shorten the development and manufacturing cycle and deliver a more complete compliment of business and product solutions for the markets the Company serves. The Company's manufacturing is allocated primarily between its facility in Old Bridge, New Jersey ("Old Bridge Facility") and a key contract manufacturer located in the People's Republic of China ("PRC"). The Company currently manufactures most of its digital products, including the latest encoder and EdgeQAM collections at the Old Bridge Facility. Since 2007 the Company has transitioned and continues to manufacture certain high volume, labor intensive products, including many of the Company's analog products, in the PRC, pursuant to a manufacturing agreement that governs the production of products that may from time to time be the subject of purchase orders submitted by (and in the discretion of) the Company. The Company may transition additional products to the PRC if determined by the Company to be advantageous based upon changing business and market conditions. Manufacturing products both at the Company's Old Bridge Facility as well as in the PRC, enables the Company to realize cost reductions while maintaining a competitive position and time-to-market advantage. As a result of the RLD Acquisition, the Company assumed certain post-closing obligations for a leased manufacturing, engineering, sales and administrative facility in Franklin, Ohio at which the RLD products were being manufactured. The lease for this facility expired in November, 2012. In anticipation of such expiration, in August 2012 the Company secured an alternative smaller space in Miamisburg, Ohio, more suitable to its continuing business activities. The Company fully transitioned the manufacture of RLD products from the Franklin, Ohio facility to the Old Bridge Facility during July 2012. The Company may, from time to time, provide manufacturing, research and development and product support services for other companies' products. In 2011, the Company entered into an agreement with XRS Corporation (formerly known as XATA Corporation) to provide manufacturing, research and development and product support to XRS for an electronic on-board recorder for the trucking industry that the Company had been producing for XRS. The Company has contract manufactured products under this agreement since 2011. XRS' purchases of this product were approximately $3,227,000 and $1,989,000 in 2013 and 2012, respectively. During the second quarter of 2013, the Company was advised by XRS that it had undertaken a redesign of its core product through a third party. Later in 2013, XRS provided the Company with engineering details of the redesigned product and invited the Company to participate in a bidding process to provide contract manufacturing of the newly designed product. During February 2014, the Company was advised by XRS that it was not chosen to perform this manufacturing function and as such, the Company does not anticipate additional sales to XRS unless and until the Company is invited to bid for contract manufacturing of the new design and is a successful bidder. XRS has advised the Company that it may again be asked to bid to provide contract manufacturing services in connection with this newly designed product in the later part of 2014; however, there can be no assurance that the Company will be asked to bid or that if it does bid, such bid will be successful. The Company does, however, continue to provide repair services to XRS in connection with the prior design and expects that work to continue throughout 2014. While the sales attributable to such repair services are not material, they do allow the Company to maintain a continuing connection and dialog with this customer in anticipation of future contract manufacturing opportunities. 24 Results of Operations The following table sets forth, for the fiscal periods indicated, certain consolidated statement of earnings data from continuing operations as a percentage of net sales. Year Ended December 31, 2013 2012 Net sales 100.0 % 100.0 % Costs of goods sold 66.6 67.3 Gross profit 33.4 32.7 Selling expenses 12.1 11.0 General and administrative expenses 18.3 18.4 Research and development expenses 12.1 11.4 Loss from operations (9.1 ) (8.1 ) Other expense, net 1.0 1.1 Loss before income taxes (10.1 ) (9.2 ) Provision (benefit) for income taxes - 7.6 2013 Compared with 2012 Net Sales. Net sales decreased $2,773,000 or 9.0% to $27,870,000 in 2013 from $30,643,000 in 2012. The decrease is primarily attributed to a decrease in sales of digital video headend products, analog video headend products and HFC distribution products offset by an increase in sales of contract manufactured products. Sales of digital video headend products were $12,930,000 and $14,384,000, sales of analog video headend products were $5,818,000 and $6,875,000, sales of HFC distribution products were $4,375,000 and $5,185,000 and sales of contract manufactured products were $3,465,000 and $2,440,000 in 2013 and 2012, respectively. RLD sales were $8,335,000 and $7,760,000 in 2013 and 2012, respectively. The Company has experienced and expects to continue to experience a shift in product mix from analog products to digital products. Cost of Goods Sold. Cost of goods sold decreased to $18,559,000 for 2013 from $20,625,000 in 2012 and decreased as a percentage of sales to 66.6% from 67.3%. The decrease is primarily attributed to a decrease in net sales. The decrease as a percentage of sales is attributed to a more favorable product mix offset by a decrease in the provision for inventory reserves ($285,000 and $1,422,000 in 2013 and 2012, respectively). The Company increases its provision for inventory reserves as necessary during the course of the year. The Company expects cost of goods sold as a percentage of sales to decrease throughout the first half of 2014 as manufacturing efficiencies continue to be realized and as the overall product mix is contemplated to improve. Selling Expenses. Selling expenses decreased to $3,372,000 for 2013 from $3,378,000 in 2012 and increased as a percentage of sales to 12.1% for 2013 from 11.0% for 2012. This $6,000 decrease is primarily attributable to a decrease in royalty expenses of $43,000 offset by an increase in department supplies of $35,000. The Company anticipates that selling expenses will increase slightly in 2014 as compared to 2013 as a result of the Company's continuing efforts to foster brand awareness and to achieve greater market penetration. The increase as a percentage of sales is attributed to a decrease in net sales. General and Administrative Expenses. General and administrative expenses decreased to $5,111,000 in 2013 from $5,635,000 in 2012 and decreased as a percentage of sales to 18.3% for 2013 from 18.4% in 2012. The $524,000 decrease was primarily the result of a decrease in salaries and fringe benefits of $298,000 due to decreased head count and a decrease in building expenses of $128,000, primarily related to the synergies achieved with the RLD Acquisition. The decrease as a percentage of sales was primarily the result of the aforementioned decreases. The Company anticipates that general and administrative expenses will be relatively the same in 2014 compared to 2013. 25 Research and Development Expense. Research and development expenses decreased to $3,373,000 in 2013 from $3,500,000 in 2012, but increased as a percentage of sales to 12.1% in 2013 from 11.4% in 2012. This $127,000 decrease is primarily attributable to a decrease in salaries and fringe benefits of $100,000 due to a decreased head count and a decrease in license fees of $93,000 offset by an increase in consulting fees of $40,000 all related to the synergies achieved with the RLD Acquisition. The increase as a percentage of sales is attributed to a decrease in net sales. The Company anticipates that research and development expenses will increase in 2014 compared to 2013 as a result of increased product development costs. Operating Loss. Operating loss of $(2,545,000) for 2013 represents an increase of $50,000 from the operating loss of $(2,495,000) in 2012. Operating loss as a percentage of sales increased to (9.1)% in 2013 from (8.1)% in 2012. Interest expense. Interest expense decreased to $277,000 in 2013 from $330,000 in 2012. The decrease is the result of lower average borrowings. The Company anticipates an increase in its interest expense in 2014 as a result of adjustments to its cost of funds under the Santander Agreement pursuant to the Sixth Amendment. Income Taxes. The provision for income taxes is zero and $2,332,000 for 2013 and 2012, respectively. The decrease in the 2013 provision is primarily attributable to the Company recording a full valuation allowance for deferred tax assets that were no longer considered to be realizable. The decision to record this valuation allowance was based on management evaluating all positive and negative evidence. The significant negative evidence included a loss for the current year, a cumulative pre-tax loss for the three years ended December 31, 2013, the inability to carryback the net operating losses, limited future reversals of existing temporary differences and the limited availability of tax planning strategies. The Company expects to continue to provide a full valuation allowance until, or unless, it can sustain a level of profitability that demonstrates its ability to utilize these assets. Inflation and Seasonality Inflation and seasonality have not had a material impact on the results of operations of the Company. Fourth quarter sales in 2013 as compared to other quarters were slightly impacted by fewer production days. The Company expects sales each year in the fourth quarter to be impacted by fewer production days. Liquidity and Capital Resources As of December 31, 2013 and 2012, the Company's working capital was $9,499,000 and $10,471,000, respectively. The decrease in working capital is attributable primarily to the Company's decrease in inventories of $2,344,00, offset by a decrease in the line of credit of $969,000. The Company's net cash provided by operating activities for the year ended December 31, 2013 was $1,861,000 primarily due to non-cash expenses of $1,792,000 and a reduction in inventories of $2,542,000, offset by a net loss of $2,822,000, compared to net cash provided by operating activities for the year ended December 31, 2012 of $3,640,000 primarily due to non-cash expenses of $5,664,000 and a reduction in accounts receivable of $1,543,000, offset by a net loss of $5,157,000. Cash used in investing activities was $1,001,000, which was attributable primarily to capital expenditures of $154,000 and the acquisition of licenses of $847,000. Cash used in financing activities was $1,246,000 for the period ended December 31, 2013, comprised primarily of net borrowings on the line of credit of $969,000 offset by the repayment of debt of $277,000. On August 6, 2008, the Company entered into a Revolving Credit, Term Loan and Security Agreement with Santander Bank, N.A. (formerly known as Sovereign Bank, N.A.) through its Sovereign Business Capital division ("Santander"), pursuant to which the Company obtained an $8,000,000 credit facility from Santander (the "Santander Financing"). The Company and Santander entered into a series of amendments to the foregoing Revolving Credit, Term Loan and Security Agreement (as so amended, the "Santander Agreement"), including the Sixth Amendment referenced below, which, among other things, adjusted the Santander Financing to $9,350,000 consisting of (i) a $5,000,000 asset-based revolving credit facility ("Revolver") and (ii) a $4,350,000 term loan facility ("Term Loan"), each expiring on February 1, 2015. The amounts which may be borrowed under the Revolver are based on certain percentages of Eligible Receivables and Eligible Inventory, as such terms are defined in the Santander Agreement. The obligations of the Company under the Santander Agreement are secured by substantially all of the assets of the Company and certain of its subsidiaries. 26 Under the Santander Agreement, the Revolver currently bears interest at a rate per annum equal to the prime lending rate announced from time to time by Santander ("Prime") plus 01.25% or the LIBOR rate plus 4.00%. The Term Loan currently bears interest at a rate per annum equal to Prime plus 01.50% or the LIBOR rate plus 4.25%. Prime was 3.25% at December 31, 2013. LIBOR rate loans under the Santander Agreement may be borrowed for interest periods of one, three or six months. The LIBOR rates for interest periods of one-month, three-months and six-months were 0.17%, 0.25% and 0.35%, respectively, at December 31, 2013. The interest rates above are effective on April 1, 2014, pursuant to the terms of the Sixth Amendment described below. On March 28, 2014, the Company entered into a Sixth Amendment to Revolving Credit, Term Loan and Security Agreement with Santander (the "Sixth Amendment") to amend the Santander Financing. The Sixth Amendment (i) reduced the maximum amount available for borrowing under the Revolver from $6,000,000 to $5,000,000, (ii) increased the interest rates applicable to the Revolver and the Term Loan by three quarters of one percent, (iii) modified the Company's fixed charge coverage ratio covenant to eliminate the testing thereof with respect to the trailing 12-month period ended as of December 31, 2013, (iv) eliminated the fixed charge coverage ratio covenant with respect to all periods after December 31, 2013, (v) modified the minimum EBITDA covenant to (a) eliminate the testing thereof with respect to the fiscal year ended December 31, 2013, (b) change the manner of calculation thereof, and (c) imposed a quarterly building minimum EBITDA covenant test, commencing with the fiscal quarter ended on March 31, 2014, and thereafter for the two fiscal quarters ending June 30, 2014, the three fiscal quarters ending September 30, 2014, the four fiscal quarters ending December 31, 2014 and thereafter quarterly on a trailing four fiscal quarter basis, (vi) reduced the advance rate applicable to Eligible Inventory (as defined in the Santander Agreement) from 50% to 35%, with a further reduction in such advance rate to 25% effective on or about June 27, 2014 and (vii) reduced the sublimit on advances against such Eligible Inventory from $3,000,000 to $2,000,000. In connection with the Sixth Amendment, the Company paid Santander an amendment fee of $45,000. On November 13, 2013, the Company entered into a Fifth Amendment to Revolving Credit, Term Loan and Security Agreement with Santander (the "Fifth Amendment") to amend the Santander Financing. The Fifth Amendment (i) reduced the maximum amount available for borrowing under the Revolver from $8,500,000 to $6,000,000 and (ii) modified the Company's fixed charge coverage ratio covenant to eliminate the testing thereof with respect to the trailing 12-month period ended as of September 30, 2013. On March 27, 2013, the Company entered into a Fourth Amendment to Revolving Credit, Term Loan and Security Agreement with Santander (the "Fourth Amendment"), to amend the Santander Financing. The Fourth Amendment (i) increased the interest rates applicable to the Revolver and the Term Loan by one half of one percent, effective as of April 1, 2013, subject to being reduced by one quarter of one percent effective as of the date on which the Company delivered to Santander its financial statements for the fiscal quarter ending June 30, 2013, evidencing compliance with the Santander Agreement and continuing compliance with the Santander Agreement through such date of delivery, and further reduced by an additional one quarter of one percent, effective as of the date on which the Company delivers to Santander its audited financial statements for the fiscal year ending December 31, 2013, evidencing compliance with the Santander Agreement and continuing compliance with the Santander Agreement through such date of delivery; (ii) retroactively effective as of December 31, 2012, eliminated the minimum net income covenant and replaced the same with a minimum EBITDA covenant tested as of and for the fiscal year ended December 31, 2012 and as of and for each subsequent fiscal year ending on December 31 thereafter, (iii) modified the definition of Net Income (as defined in the Santander Agreement), retroactively effective as of December 31, 2012; and (iv) modified the fixed charge coverage ratio, effective for each of the trailing four fiscal quarters ending in 2013. The Company was in compliance with the Santander Agreement as of June 30, 2013 and, accordingly, the interest rates applicable to both the Revolver and the Term Loan were decreased by one quarter of one percent, effective as of August 14, 2013. Upon termination of the Revolver, all outstanding borrowings under the Revolver are due. The outstanding principal balance of the Revolver was $1,275,000 at December 31, 2013. The Term Loan requires equal monthly principal payments of approximately $18,000 each, plus interest, with the remaining balance due at maturity. The outstanding principal balance of the Term Loan was $3,983,000 at December 31, 2013. 27 The Santander Agreement contains customary representations and warranties as well as affirmative and negative covenants, including certain financial covenants. The Santander Agreement contains customary events of default, including, among others, non-payment of principal, interest or other amounts when due. The fair value of the debt approximates the recorded value based on the borrowing rates currently available to the Company for loans with similar terms and maturities, as evidenced by the Sixth Amendment. The Company's primary sources of liquidity are its existing cash balances, cash generated from operations and amounts available under the Sovereign Financing. As of December 31, 2013, the Company had approximately $1,275,000 outstanding under the Revolver and $3,251,000 of additional availability for borrowing under the Revolver. As a result of the implementation of the Sixth Amendment, the Company's liquidity will be reduced. After giving effect to the Sixth Amendment, the Company's anticipated availability for additional borrowing under the Revolver, on a pro forma basis as of March 28, 2014, would be reduced by approximately $459,000. The Company anticipates these sources of liquidity will be sufficient to fund its operating activities, anticipated capital expenditures and debt repayment obligations for the next twelve months. The Company's primary long-term obligations are for payment of interest and principal on the Company's Revolver and Term Loan, both of which expire on February 1, 2015. The Company expects to use cash generated from operations to meet its long-term debt obligations, and anticipates refinancing its long-term debt obligations at maturity. The Company considers opportunities to refinance its existing indebtedness based on market conditions. Although the Company may refinance all or part of its existing indebtedness in the future and will be required to do so by February 1, 2015, there can be no assurances that it will do so. Changes in the Company's operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may require the Company to seek additional debt or equity financing. There can be no assurance that financing will be available on acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations and additional covenants and operating restrictions. The Company also expects to make financed and unfinanced long-term capital expenditures from time to time in the ordinary course of business, which capital expenditures were $154,000 and $177,000 in the years ended December 31, 2013 and 2012, respectively. The Company expects to use cash generated from operations, amounts available under its credit facility and purchase-money financing to meet any anticipated long-term capital expenditures. Critical Accounting Estimates The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States. Preparing financial statements in accordance with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The following paragraphs include a discussion of some critical areas where estimates are required. You should also review Note 1 to the consolidated financial statements for further discussion of significant accounting policies. Revenue Recognition The Company records revenue when products are shipped. Legal title and risk of loss with respect to the products pass to customers at the point of shipment. Customers do not have a right to return products shipped. Products carry a three year warranty, which amount is not material to the Company's operations. Inventory and Obsolescence The Company periodically analyzes anticipated product sales based on historical results, current backlog and marketing plans. Based on these analyses, the Company estimates and projects those products that are unlikely to be sold during the next twelve months. Inventories that are not anticipated to be sold in the next twelve months, have been classified as non-current. 28 Approximately 60% of the non-current inventories are comprised of finished goods. The Company has established a program to use interchangeable parts in its various product offerings and to modify certain of its finished goods to better match customer demands. In addition, the Company has instituted additional marketing programs to dispose of the slower moving inventories. The Company continually analyzes its slow-moving, excess and obsolete inventories. Based on historical and projected sales volumes for finished goods, historical and projected usage of raw materials, and anticipated selling prices, the Company establishes reserves. If the Company does not meet its sales expectations these reserves are increased. Products that are determined to be obsolete are written down to net realizable value. Accounts Receivable and Allowance for Doubtful Accounts Management periodically performs a detailed review of amounts due from customers to determine if accounts receivable balances are impaired based on factors affecting the collectability of those balances. Management's estimates of the allowance for doubtful accounts requires management to exercise significant judgment about the timing, frequency and severity of collection losses, which affects the allowances and net earnings. As these factors are difficult to predict and are subject to future events that may alter management assumptions, these allowances may need to be adjusted in the future. Long-Lived Assets On a periodic basis, management assesses whether there are any indicators that the value of the Company's long-lived assets may be impaired. An asset's value may be impaired only if management's estimate of the aggregate future cash flows, on an undiscounted basis, to be generated by the asset are less than the carrying value of the asset. If impairment has occurred, the loss shall be measured as the excess of the carrying amount of the asset over the fair value of the long-lived asset. The Company's estimates of aggregate future cash flows expected to be generated by each long-lived asset are based on a number of assumptions that are subject to economic and market uncertainties. As these factors are difficult to predict and are subject to future events that may alter management's assumptions, the future cash flows estimated by management in their impairment analyses may not be achieved. Valuation of Deferred Tax Assets Management periodically evaluates its ability to recover the reported amount of its deferred income tax assets considering several factors, including the estimate of the likelihood that it will generate sufficient taxable income in future years in which temporary differences reverse. Due to the uncertainties related to, among other things, the extent and timing of future taxable income, which currently indicates that it was more likely than not that the Company would not realize the benefits related to the deferred tax assets, the Company recorded a valuation allowance equal to a significant portion of the net deferred tax assets as of December 31, 2013 and 2012. Recent Accounting Pronouncements In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2013-11"). ASU 2013-11 amends Accounting Standards Codification ("ASC") 740, Income Taxes, by providing guidance on the financial statement presentation of an unrecognized benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The ASU does not affect the recognition or measurement of uncertain tax positions under ASC 740. ASU 2013-11 will be effective for the Company for interim and annual periods beginning after December 15, 2013, with early adoption permitted. The Company does not expect the adoption of this ASU to have a material impact on its consolidated financial statements. 29 In February 2013, the FASB issued ASU 2013-02 ("ASU 2013-02"), "Reporting of Amounts Reclassified Out of Other Comprehensive Income". ASU 2013-02 finalized the reporting for reclassifications out of accumulated other comprehensive income, which was previously deferred, as discussed below. The amendments do not change the current requirements for reporting net income or other comprehensive income in financial statements. However, they do require an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. An entity is also required to present on the face of the financials where net income is reported or in the footnotes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. Other amounts need only be cross-referenced to other disclosures required that provide additional detail of these amounts. The amendments in this update are effective for reporting periods beginning after December 15, 2012, and early adoption is permitted. The adoption of this standard did not have a material impact on the Company's financial position and results of operations. The FASB, the Emerging Issues Task Force and the SEC have issued certain other accounting standards updates and regulations as of December 31, 2013 that will become effective in subsequent periods; however, management of the Company does not believe that any of those updates would have significantly affected the Company's financial accounting measures or disclosures had they been in effect during 2013 or 2012, and does not believe that any of those pronouncements will have a significant impact on the Company's consolidated financial statements at the time they become effective. |