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
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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 and the Russian invasion of
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 Silicon Carbide ("SiC") and Gallium Nitride ("GaN"), collectively Metal Matrix Composites ("MMC"). 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, cold rolled steel and Kovar. 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 such as engineering, tooling design and fabrication, process engineering, and others. 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 MMC, housings for hybrid circuits and our proprietary armor solution 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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CPS was incorporated in
Results of Operations for the First Fiscal Quarter of 2022 (Q1 2022) Compared to the First Fiscal Quarter of 2021 (Q1 2021); (all $ in 000's)
Revenues totaled
Gross margin in Q1 2022 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 Company believes the worst of the pandemic is now behind us and expects to show continued improvement in upcoming quarters.
The Company has had extremely minimal sales to both
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 cash and cash equivalents at
Accounts receivable at
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Inventories totaled
The Company financed its increase in working capital in Q1 2022 from its profit and usage of cash on hand. The Company expects it will continue to be able to fund its operations for the remainder of 2022 from operations and 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 existing cash balances 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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