NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(1) Basis of Financial Statement Presentation
The accompanying condensed balance sheet as of September 30, 2013, which has been derived from audited financial
statements, and the unaudited interim condensed financial statements as of December 31, 2013 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and include the accounts of Hennessy Advisors, Inc.
(the Company). Certain information and footnote disclosures in these unaudited interim condensed financial statements, normally included in financial statements prepared in accordance with generally accepted accounting principles, have
been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission for Quarterly Reports on Form 10-Q. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair presentation of the Companys financial position at December 31, 2013, the Companys operating results for the three months ended December 31, 2013, and the
Companys cash flows for the three months ended December 31, 2013. These unaudited interim condensed financial statements and notes should be read in conjunction with the Companys audited financial statements and notes thereto for
the year ended September 30, 2013, which are included in the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2013.
The Companys operating activities consist primarily of providing investment advisory services to sixteen open-end mutual funds (the
Hennessy Funds). The Company serves as the investment advisor to all classes of the Hennessy Cornerstone Growth Fund, the Hennessy Focus Fund, the Hennessy Cornerstone Mid Cap 30 Fund, the Hennessy Cornerstone Large Growth Fund, the
Hennessy Cornerstone Value Fund, the Hennessy Large Value Fund, the Hennessy Total Return Fund, the Hennessy Equity and Income Fund, the Hennessy Balanced Fund, the Hennessy Core Bond Fund, the Hennessy Gas Utility Index Fund, the Hennessy Small Cap
Financial Fund, the Hennessy Large Cap Financial Fund, the Hennessy Technology Fund, the Hennessy Japan Fund, and the Hennessy Japan Small Cap Fund. The Company also provides shareholder services to some of the Hennessy Funds.
The Companys operating revenue consists of contractual investment advisory and shareholder service fees paid to it by the Hennessy
Funds. The Company earns investment advisory fees from all of the Hennessy Funds through portfolio management of the Hennessy Funds. The Company earns shareholder service fees from some of the Hennessy Funds by assisting customers of such funds in
purchases, sales, distribution and customer service. These fee revenues are earned and calculated daily by the Hennessy Funds accountants at U.S. Bancorp Fund Services, LLC. The fees are computed and billed monthly, at which time they are
recognized in accordance with Accounting Standard Codification 605 Revenue Recognition.
The Company waives fees with respect
to some of the Hennessy Funds to comply with contractual expense ratio limitations. The fee waivers are calculated daily by the Hennessy Funds accountants at U.S. Bancorp Fund Services, LLC and are charged to expense monthly by the Company as
an offset to revenue. The waived fees are deducted from investment advisory fee income, and reduce the amount of advisory fees that the Hennessy Funds pay in the subsequent month. To date, the Company has only waived fees based on
- 7 -
contractual obligations, but the Company has the ability to waive fees at its discretion to compete with other mutual funds with lower expense ratios. If the Company were to elect voluntarily to
waive fees, the decision to waive fees would not apply to previous periods, but would only apply on a going forward basis. As of September 30, 2013, the Company has never voluntarily waived fees, and has no current intention to voluntarily
waive fees.
The Companys contractual agreements for investment advisory and shareholder services provide persuasive evidence that
an arrangement exists with fixed and determinable fees, and the services are rendered daily. The collectability is probable as the fees are received from the Hennessy Funds in the month subsequent to the month in which the services are
provided.
(2) Management Contracts Purchased
The Company has purchased assets related to the management of
open-end
mutual funds
from time to time throughout its history. Prior to September 30, 2012, the Company had completed several purchases of assets related to the management of thirteen different mutual funds, some of which were reorganized into already existing
Hennessy Funds. In accordance with guidance issued by the Financial Accounting Standards Board (FASB), the Company periodically reviews the carrying value of its purchased management contracts to determine if any impairment has occurred.
The fair value of management contracts are based on management estimates and assumptions, including third-party valuations that utilize appropriate valuation techniques. The fair value of the management contracts was estimated by applying the income
approach. As of December 31, 2013, no events or changes in circumstances had occurred that indicated potential impairment of the management contracts.
Under the FASB guidance on Intangibles Goodwill and Other, intangible assets that have indefinite useful lives are not
amortized but are tested at least annually for impairment. The Company reviews the life of the management contracts each reporting period to determine if they continue to have an indefinite useful life. The Company considers the mutual fund
management contracts to be intangible assets with an indefinite useful life as of December 31, 2013.
On October 26, 2012, the
Company purchased the assets related to the management of the entire family of ten FBR funds (the FBR Funds), adding approximately $2.2 billion in assets under management. The purchase was consummated in accordance with the terms
and conditions of that certain Asset Purchase Agreement, dated as of June 6, 2012, between the Company and FBR Fund Advisers, Inc. The purchase price was comprised of two payments: (i) an initial payment of $19,692,137 made on
October 26, 2012 based upon the net asset value of the FBR Funds as of October 25, 2012 and (ii) a contingent payment of $19,193,595 made on November 5, 2013 based upon the net asset value of the FBR Funds as of October 28,
2013. The initial payment was funded with $3.4 million of available cash and $16.3 million of debt proceeds that were obtained pursuant to an amendment and restatement of the Companys
then-existing
loan agreement with U.S. Bank National Association that allowed the Company to borrow the additional amount due. The additional capitalized transaction costs of $1.2 million, of which
$0.2 million was capitalized in the fiscal year ended September 30, 2012 and the remaining $1.0 million was capitalized in the fiscal year ended September 30, 2013, include legal fees, printing fees and other costs related to the
purchase.
- 8 -
The contingent payment due under the Asset Purchase Agreement was determined to be $19,193,595 as
of October 28, 2013. The amount of the liability was booked as of September 30, 2013 because it was measurable. The contingent payment was funded in part with $13,286,666 of debt proceeds that were obtained pursuant to an amendment of the
Companys
then-existing
loan agreement with U.S. Bank National Association that allowed the Company to borrow such amount, with the remainder of the payment being funded out of working capital. Of the
$13,286,666 of debt proceeds, $11,625,883 was shown as a
long-term
liability on the balance sheet as of September 30, 2013 because it was funded by U.S. Bank National Association on a
long-term
basis. During the quarter ended December 31, 2013, additional transaction costs related to the purchase in the amount of $58,232 were capitalized.
|
|
|
|
|
Management contracts balance at September 30, 2013 (inclusive of a contingent purchase price for assets related to management of
the FBR Funds of $19,193,595)
|
|
$
|
62,431,018
|
|
Capitalized transaction costs in current quarter
|
|
$
|
58,232
|
|
|
|
|
|
|
Management contracts balance at December 31, 2013
|
|
$
|
62,489,250
|
|
|
|
|
|
|
Contingent purchase price payment allocation at September 30, 2013
|
|
|
|
|
Current portion
|
|
$
|
7,567,712
|
|
Long-term portion
|
|
$
|
11,625,883
|
|
|
|
|
|
|
Total contingent purchase price
|
|
$
|
19,193,595
|
|
|
|
|
|
|
(3) Investment Advisory Agreements
As of December 31, 2013, the Company had management contracts with (1) The Hennessy Funds, Inc. for the Hennessy
Balanced Fund and the Hennessy Total Return Fund, (2) Hennessy Mutual Funds, Inc. for all classes of the Hennessy Cornerstone Growth Fund, the Hennessy Cornerstone Value Fund, and the Hennessy Cornerstone Mid Cap 30 Fund, (3) Hennessy
Funds Trust for all classes of the Hennessy Focus Fund, the Hennessy Cornerstone Large Growth Fund, the Hennessy Large Value Fund, the Hennessy Equity and Income Fund, the Hennessy Core Bond Fund, the Hennessy Gas Utility Index Fund, the Hennessy
Small Cap Financial Fund, the Hennessy Large Cap Financial Fund and the Hennessy Technology Fund, and (4) Hennessy SPARX Funds Trust for all classes of the Hennessy Japan Fund and the Hennessy Japan Small Cap Fund.
Pursuant to these management contracts, the Company provides investment advisory services to all classes of the sixteen Hennessy Funds. The
management contracts must be renewed annually by (i) the Board of Directors of the applicable investment company entity or by the vote of a majority of the outstanding shares of the applicable Hennessy Fund and (2) by the vote of a
majority of the directors/trustees of the applicable investment company entity who are not interested persons of the Hennessy Funds, except that the management contract for the Hennessy Focus Fund, the Hennessy Equity and Income Fund, the Hennessy
Core Bond Fund, the Hennessy Gas Utility Index Fund, the Hennessy Small Cap Financial Fund, the Hennessy Large Cap Financial Fund, and the Hennessy Technology Fund have an initial period of two years, which commenced on October 26, 2012, to be
renewed annually thereafter. If the management contracts are not renewed annually as described above, they will terminate automatically. In addition, there are two other circumstances in which the management contracts would terminate. First, the
management contracts would
- 9 -
automatically terminate if the Company assigned them to another advisor (assignment includes indirect assignment, which is the transfer of the Companys common stock in
sufficient quantities deemed to constitute a controlling block). Additionally, each management contract may be terminated prior to its expiration upon 60 days notice by either the Company or the applicable Hennessy Fund.
As provided in the management contracts with the sixteen Hennessy Funds, the Company receives investment advisory fees monthly based on a
percentage of the respective Hennessy Funds average daily net assets.
The Company has entered into sub-advisory agreements covering
the Hennessy Focus Fund, the Hennessy Large Value Fund, the Hennessy Equity and Income Fund, the Hennessy Core Bond Fund, the Hennessy Japan Fund, and the Hennessy Japan Small Cap Fund with the same asset management companies that managed such
Hennessy Funds prior to the Companys purchase of the assets related to the management of such funds. Under each of these sub-advisory agreements, the sub-advisor is responsible for the investment and re-investment of the assets of the
applicable Hennessy Fund in accordance with the terms of such agreement and the applicable Hennessy Funds Prospectus and Statement of Additional Information. The
sub-advisors
are subject to the
direction, supervision and control of the Company and the directors of the applicable Hennessy Funds investment entity.
In exchange
for the sub-advisor services, the Company (not the Hennessy Funds) pays a sub-advisor fee to the sub-advisors, which is based on the amount of each applicable Hennessy Funds average daily net assets.
(4) Investment in Available for Sale Security
On October 30, 2007, the Company invested $0.5 million in the Hennessy Micro Cap Growth Fund, LLC (the Micro
Cap Fund). The Micro Cap Fund was closed on December 14, 2012 and the investment was liquidated, resulting in a realized loss of $0.1 million. The loss was included in other expense on the income statement for the three months ended
December 31, 2012.
(5) Bank Loan
The Company has an outstanding bank loan with U.S. Bank National Association. On October 26, 2012, the loan, which then
had an outstanding principal balance of $1.9 million, was amended and restated to provide an additional $16.3 million to purchase the assets related to the management of the FBR Funds. The balance of the loan immediately following the
amendment and restatement was $18.4 million. On November 1, 2013, in connection with the contingent payment for the purchase of assets related to the FBR Funds, the Company entered into an amendment to the loan agreement with U.S Bank
National Association that increased its total outstanding loan balance by $13.3 million to $30.0 million. The amended loan agreement requires 47 monthly payments in the amount of $312,500 plus interest at the banks prime rate
(currently 3.25%, in effect since December 17, 2008) plus 0.75% (effective interest rate of 4.00%) and is secured by the Companys assets. The final installment of the
then-outstanding
principal and
interest are due October 26, 2017. The note maturity schedule is as follows:
- 10 -
|
|
|
|
|
Years ended September 30:
|
|
|
|
2014
|
|
$
|
3,125,000
|
|
2015
|
|
|
3,750,000
|
|
2016
|
|
|
3,750,000
|
|
2017
|
|
|
3,750,000
|
|
2018
|
|
|
15,625,000
|
|
|
|
|
|
|
Total
|
|
$
|
30,000,000
|
|
|
|
|
|
|
The amended and restated loan as of October 26, 2012 was considered substantially different
from the original loan per the conditions set forth in Emerging Issues Task Force (EITF) 96-19 Debtors Accounting for a Modification or Exchange of Debt Instruments. The Company did an evaluation of the debt modification under EITF
96-19 and determined that the financial impact of the modification on the prior principal was not material to the overall financial statements and accordingly no adjustment was made. The amended loan as of November 1, 2013 was not considered
substantially different from the original loan and therefore an evaluation under EITF 96-19 was not necessary.
The amended
loan agreement includes certain reporting requirements and loan covenants requiring the maintenance of certain financial ratios. The Company is in compliance with the loan covenants as of December 31, 2013 and September 30, 2013.
In connection with securing the financings discussed above, the Company incurred loan costs in the amount of $376,226. These costs are
included in other assets and the balance is being amortized on a straight-line basis over 60 months. Amortization expense during the
three-month
periods ended December 31, 2013 and 2012 was $18,455 and
$8,600, respectively. The unamortized balance of the loan fees was $331,564 as of December 31, 2013.
(6) Income Taxes
The provision for income taxes was comprised of the following for the three months ended December 31, 2013 and 2012:
|
|
|
|
|
|
|
|
|
|
|
12/31/2013
|
|
|
12/31/2012
|
|
Current
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
630,900
|
|
|
$
|
199,000
|
|
State
|
|
|
212,400
|
|
|
|
(1,700
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
843,300
|
|
|
|
197,300
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
Federal
|
|
|
441,400
|
|
|
|
299,600
|
|
State
|
|
|
87,600
|
|
|
|
87,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
529,000
|
|
|
|
387,100
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,372,300
|
|
|
$
|
584,400
|
|
|
|
|
|
|
|
|
|
|
- 11 -
The tax effects of temporary differences that give rise to significant portions of deferred tax
assets and liabilities as of December 31, 2013 and September 30, 2013 are presented below:
|
|
|
|
|
|
|
|
|
|
|
12/31/2013
|
|
|
9/30/2013
|
|
Current deferred tax assets:
|
|
|
|
|
|
|
|
|
Accrued compensation
|
|
$
|
43,000
|
|
|
$
|
19,900
|
|
Deferred rent
|
|
|
6,300
|
|
|
|
12,600
|
|
State taxes
|
|
|
72,100
|
|
|
|
129,300
|
|
Capital loss carryforward
|
|
|
10,600
|
|
|
|
110,400
|
|
|
|
|
|
|
|
|
|
|
Gross deferred tax assets
|
|
|
132,000
|
|
|
|
272,200
|
|
Less: Disallowed capital loss
|
|
|
(10,600
|
)
|
|
|
(110,400
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
|
121,400
|
|
|
|
161,800
|
|
|
|
|
|
|
|
|
|
|
Noncurrent deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
(48,700
|
)
|
|
|
(46,000
|
)
|
Management contracts
|
|
|
(6,265,200
|
)
|
|
|
(5,779,000
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(6,313,900
|
)
|
|
|
(5,825,000
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities
|
|
$
|
(6,192,500
|
)
|
|
$
|
(5,663,200
|
)
|
|
|
|
|
|
|
|
|
|
The Companys effective tax rates for the three months ended December 31, 2013 and 2012 were 48.5%
and 43.2%, respectively, and differ from the federal statutory rate of 34% for the following principal reasons:
|
|
|
|
|
|
|
|
|
|
|
12/31/2013
|
|
|
12/31/2012
|
|
Federal tax at statutory rate
|
|
|
34.00
|
%
|
|
|
34.00
|
%
|
True-up of prior year tax provision
|
|
|
8.02
|
%
|
|
|
|
|
State tax at statutory rate
|
|
|
5.83
|
%
|
|
|
5.83
|
%
|
Permanent differences
|
|
|
0.65
|
%
|
|
|
0.14
|
%
|
Disallowed capital loss
|
|
|
|
|
|
|
3.23
|
%
|
|
|
|
|
|
|
|
|
|
Effective Tax Rate
|
|
|
48.50
|
%
|
|
|
43.20
|
%
|
|
|
|
|
|
|
|
|
|
The effective tax rate, which is normally about 40%, was higher for the period ended December 31, 2013 as
a result of a
one-time
tax charge to
true-up
the prior year tax provision due to the inability to deduct for income tax purposes certain compensation expenses under
Section 162(m) of the United States Internal Revenue Code of 1986, as amended. The effective tax rate was higher for the period ended December 31, 2012 due to a disallowed capital loss carryforward created by a realized loss on the sale of
the available for sale investment.
- 12 -
(7) Earnings per Share and Dividends per Share
Basic earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock
outstanding, while diluted earnings per share is determined by dividing net earnings by the weighted average number of shares of common stock outstanding adjusted for the dilutive effect of common stock equivalents.
All common stock equivalents were dilutive and therefore included in the diluted earnings per share calculation for the three months ended
December 31, 2013. There were 433,438 common stock equivalents, consisting of unexercised options, excluded from the per share calculation for the three months ended December 31, 2012 because they were anti-dilutive.
A quarterly cash dividend of $0.03125 per share was paid on December 9, 2013 to shareholders of record as of November 15, 2013.
(8) Stock-Based Compensation
On January 17, 2013, the Company established, and a shareholder vote approved, the 2013 Omnibus Incentive Plan (the
Plan) providing for the issuance of options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other equity awards for the purpose of attracting and retaining executive officers, key employees,
outside directors and advisors and increasing shareholder value. The Plan replaced the 2001 Omnibus Plan that the Company had previously adopted and had in place. The maximum number of shares that may be issued under the Plan is 50% of the number of
outstanding shares of common stock of the Company, subject to adjustment by the compensation committee of the Board of Directors of the Company upon the occurrence of certain events. The number of shares of common stock subject to awards that remain
outstanding under the 2001 Omnibus Plan reduces the number of shares available for issuance under the Plan. The 50% limitation does not invalidate any awards made prior to a decrease in the number of outstanding shares, even if such awards result or
may result in shares constituting more than 50% of the outstanding shares being available for issuance under the Plan. Shares available under the Plan that are not awarded in one particular year may be awarded in subsequent years.
The compensation committee of the Board of Directors of the Company has the authority to determine the awards granted under the Plan,
including among other things, the individuals who receive the awards, the times when they receive them, vesting schedules, performance goals, whether an option is an incentive or nonqualified option and the number of shares subject to each award.
However, no participant may receive options or stock appreciation rights under the Plan for an aggregate of more than 50,000 shares in any calendar year. The exercise price and term of each option or stock appreciation right is fixed by the
compensation committee except that the exercise price for each stock option that is intended to qualify as an incentive stock option must be at least equal to the fair market value of the stock on the date of grant and the term of the option cannot
exceed 10 years. In the case of an incentive stock option granted to a 10% or more shareholder, the exercise price must be at least 110% of the fair market value on the date of grant and cannot exceed five years. Incentive stock options may be
granted only within ten years from the date of adoption of the Plan. The aggregate fair market value (determined at the time the option is granted) of shares with respect to which incentive stock options may be granted to any one individual, which
stock options are exercisable for the first time during any calendar year, may not exceed $100,000. An optionee may, with the consent of the compensation committee, elect to pay for the shares to be received upon exercise of his or her options in
cash, shares of common stock or any combination thereof.
- 13 -
The exercise price of all options granted under the 2001 Omnibus Plan was equal to the market
price of the underlying common stock on the grant date and all options were granted and fully vested on the grant date. There were no options granted under the Plan or the 2001 Omnibus Plan during the three months ended December 31, 2013 and
2012, respectively.
Under the Plan, participants may be granted restricted stock units (RSUs), representing an unfunded,
unsecured right to receive a share of the Companys common stock on the date specified in the recipients award. The Company issues new shares of its common stock when it is required to deliver shares to an RSU recipient. The RSUs granted
under the Plan vest over four years, at a rate of 25 percent per year. The Company recognizes compensation expense on a straight-line basis over the four-year vesting term of each award. There were 29,800 RSUs granted during the three months ended
December 31, 2013 under the Plan and none granted during the three months ended December 31, 2012 under the 2001 Omnibus Plan. RSU activity for the three months ended December 31, 2013 was as follows:
Restricted Stock Unit Activity
Three Months Ended December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
Number of
Restricted
Share Units
|
|
|
Weighted Avg.
Fair Value
Per Share at
Each Date
|
|
Non-vested Balance at September 30, 2013
|
|
|
59,375
|
|
|
$
|
8.61
|
|
Granted
|
|
|
29,800
|
|
|
|
9.01
|
|
Vested (1)
|
|
|
(5,612
|
)
|
|
|
8.74
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested Balance at December 31, 2013
|
|
|
83,563
|
|
|
$
|
8.74
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The restricted share units vested includes partially vested shares. Shares of common stock have not been issued for the partially vested shares, but the related compensation costs have been charged to expense. There
were no shares of common stock issued for restricted stock units vested in the three months ended December 31, 2013.
|
- 14 -
Restricted Stock Unit Compensation
Three Months Ended December 31, 2013
(in thousands)
|
|
|
|
|
Total expected compensation expense related to Restricted Stock Units
|
|
$
|
2,935
|
|
Compensation expense recognized as of December 31, 2013
|
|
|
(2,204
|
)
|
|
|
|
|
|
Unrecognized compensation expense related to RSUs at December 31, 2013
|
|
$
|
731
|
|
|
|
|
|
|
As of December 31, 2013, there was $0.7 million of total RSU compensation expense related to
non-vested awards not yet recognized, which is expected to be recognized over a weighted-average vesting period of 45 months.
(9) Commitments and Contingencies
The Companys headquarters is located in leased office space under a single non-cancelable operating lease at 7250
Redwood Blvd., Suite 200, in Novato, California. The lease expires on March 31, 2017, with one five-year extension available thereafter. The Company also has leased office space under a single non-cancelable operating sub-lease at 100 Federal
Street, 29
th
Floor, Boston, Massachusetts 02110. The
sub-lease
expires on January 15, 2015, but is subject to earlier termination in the event the
prime lease is earlier terminated. There were no other commitments or contingencies as of December 31, 2013.
As of December 31,
2013, there were no material changes in the leasing arrangements that would have a significant effect on future minimum lease payments reported in the Companys Annual Report on
Form 10-K
for the
fiscal year ended September 30, 2013.
(10) Fair Value Measurements
The Company applies the FASB standard Fair Value Measurements for all financial assets and liabilities, which
establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The standard defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date. It also establishes a fair value hierarchy consisting of the following three levels that prioritize the inputs to the valuation
techniques used to measure fair value:
|
|
|
Level 1 quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date.
|
|
|
|
Level 2 from other than quoted market prices that are observable for the asset or liability, either directly or indirectly (namely, similar assets or from markets that are not active).
|
- 15 -
|
|
|
Level 3 unobservable and shall be used to measure fair value to the extent that observable inputs are not available (namely, reflecting an entitys own assumptions).
|
Based on the definitions, the following table represents the Companys assets categorized in the Level 1 to 3 hierarchies as of
December 31, 2013:
Fair Value Measurements at Reporting Date
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Money market fund deposits
|
|
$
|
1,470
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,470
|
|
Mutual fund investments
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,477
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,470
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,470
|
|
Investments in marketable securities
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,477
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) New Accounting Pronouncements
In July 2012, the FASB issued amendments to Accounting Standards Update (ASU) No. 2012-02 Testing
Indefinite-Lived Intangible Assets for Impairment. The objective of the amendments is to reduce the cost and complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for
impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The amendments permit an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived
intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, IntangiblesGoodwill and OtherGeneral Intangibles Other than
Goodwill. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Previously, an entity was required to test at least annually. The guidance provided by this update was effective for fiscal years beginning
after September 15, 2012 (the Companys fiscal year 2013). The standard was adopted October 1, 2012, and may allow the Company to forego its next annual impairment analysis if the more-likely-than-not threshold is met as of
September 30, 2014, which would cause a reduction in the Companys expenses.
In February 2013, the FASB issued an update to ASU
No. 2013-02 Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The amendment improves the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to report
the effect of the reclassification on a respective line item in the financials. The guidance provided by this update was effective for reporting periods beginning on or after December 15, 2012 (the second quarter of the Companys fiscal
year 2013). The adoption of this standard did not impact the Companys financial condition, results of operations or cash flows.
- 16 -
In July 2013, the FASB issued an update to 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. The amendment provides that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented
in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The guidance provided by this update is effective for reporting periods beginning on or after
December 15, 2013 (the second quarter of the Companys fiscal year 2014). The adoption of this standard is not expected to impact the Companys financial condition, results of operations or cash flows.
There have been no other significant changes in the Companys critical accounting policies and estimates during the three months ended
December 31, 2013 as compared to what was previously disclosed in the Companys Annual Report on Form 10-K for the year ended September 30, 2013.
- 17 -