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. 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.
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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 Second Fiscal Quarter of 2021 (Q2 2021) Compared to the Second Fiscal Quarter of 2020 (Q2 2020); (all $ in 000s)
Total revenue was
Gross margin in Q2 2021 totaled
Selling, general and administrative expenses (SG&A) were
In Q2, 2021, the Company incurred interest expense of
The Company experienced operating income of
Results of Operations for the First Six Months of 2021 Compared to the First Six Months of 2020 (all $ in 000s)
Total revenue was
Gross margin in the first six months of 2021 totaled
Selling, general and administrative (SG&A) expenses were
During the first half of 2021, the Company incurred interest expense of
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In the first six months of 2021 the Company had operating income of
Liquidity and Capital Resources (all $ in 000s unless noted)
The Company's cash and cash equivalents at
Accounts receivable at
Days Sales Outstanding (DSO) increased from 62 days at the end of 2020 to 69
days at the end of Q2 2021. The increase in DSO was due to higher sales to two
large customers with longer payment terms. The accounts receivable balances at
Inventories totaled
On
The Company financed its increase in working capital in Q2 2021 from its profit and the ATM offering. The Company expects it will continue to be able to fund its operations for the remainder of 2021 from existing cash balances.
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.
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Contractual Obligations
In
In
In
The Company has one real estate lease expiring in
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