The following discussion and analysis of financial condition and results of
operations is based upon and should be read in conjunction with the financial
statements of the Company and notes thereto included in this report and the
Company's Annual Report on Form 10-K for the year ended
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve a number of risks and uncertainties. There are a number of factors that could cause the Company's actual results to differ materially from those forecasted or projected in such forward-looking statements. This includes the impact of the COVID-19 pandemic, which is discussed in Item 3 of this report. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements which may be made to reflect events or changed circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Critical Accounting Policies
The critical accounting policies utilized by the Company in preparation of the
accompanying financial statements are set forth in Part II, Item 7 of the
Company's Annual Report on Form 10-K for the year ended
Overview
Products we provide include baseplates for motor controllers used in high-speed electric trains, subway cars, wind turbines, and hybrid and electric vehicles. We provide baseplates and housings used in radar, satellite and avionics applications. We provide lids and heat spreaders used with high performance integrated circuits for use in internet switches and routers. We provide baseplates and housings used in modules built with Wide Band Gap Semiconductors like SiC and GaN. CPS also assembles housings and packages for hybrid circuits. These housings and packages may include MMC components; they may include components made of more traditional materials such as aluminum, copper-tungsten, etc. Using its proprietary MMC technology, the Company also produces light-weight vehicle armor, particularly for extreme environments and heavy threat levels.
CPS's products are custom rather than catalog items. They are made to customers' designs and are used as components in systems built and sold by our customers. At any point in time our product mix will consist of some products with on-going production demand, and some products which are in the prototyping or evaluation stages at our customers. The Company seeks to have a portfolio of products which include products in every stage of the technology adoption lifecycle at our customers. CPS' growth is dependent upon the level of demand for those products already in production, as well as its success in achieving new "design wins" for future products.
As a manufacturer of highly technical and custom products, the Company incurs fixed costs needed to support the business, but which do not vary significantly with changes in sales volume. These costs include the fixed costs of applications engineering, tooling design and fabrication, process engineering, etc. Accordingly, particularly given our current size, changes in sales volume generally result in even greater changes in financial performance on a percentage basis as fixed costs are spread over a larger or smaller base. Sales volume is therefore a key financial metric used by management.
The Company believes the underlying demand for metal matrix composites is growing as the electronics and other industries seek higher performance, higher reliability, and reduced costs. CPS believes that the Company is well positioned to offer our solutions to current and new customers as these demands grow.
Our products are manufactured by proprietary processes we have developed including the QuicksetTM Injection Molding Process ('Quickset Process') and the QuickCastTM Pressure Infiltration Process ('QuickCast Process').
CPS was incorporated in
Results of Operations for the First Fiscal Quarter of 2021 (Q1 2021) Compared to the First Fiscal Quarter of 2020 (Q1 2020); (all $ in 000's)
Revenues totaled
Gross margin in Q1 2021 totaled
Selling, general and administrative (SG&A) expenses totaled
The Company experienced an operating profit of
The Company is part of the Defense Industrial Base and thus has been open and
operating throughout the COVID-19 pandemic. The COVID-19 pandemic did affect
financial results for the quarter ended
Since the outbreak of the pandemic, the Company has aggressively implemented CDC guidelines in the workplace to prevent the spread of COVID-19. For example, the Company has staggered shifts to eliminate overlap at shift changes, reorganized workstations to ensure social distancing, implemented daily screening of all employees by taking employees' temperatures, etc.
These factors combine to create a higher degree of uncertainty regarding future financial performance.
Liquidity and Capital Resources (all $ in 000's unless noted)
The Company's net cash and cash equivalents at
Accounts receivable at
Inventories totaled
The Company financed its decrease in working capital in Q1 2021 from its profit
and increased borrowings of
The Company continues to sell to a limited number of customers and the loss of any one of these customers could cause the Company to require additional external financing. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary spending could have a material adverse effect on the Company's ability to achieve its business objectives.
Management believes that a combination of existing cash balances and borrowings, if necessary, will be sufficient to fund our cash requirements for the foreseeable future. However, there is no assurance that we will be able to generate sufficient revenues or reduce certain discretionary spending in the event that planned operational goals are not met such that we will be able to meet our obligations as they become due.
Contractual Obligations (all $ in 000's unless otherwise noted)
In
In
In
The Company has one real estate lease expiring in
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