10QSB 1 edgq011.txt CVD EQUIPMENT CORPORATION 10 QSB 1 US SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended ___3-31-01____ ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE EXCHANGE ACT For the transition period from _________________to_________________ Commission file number _____________2-97210-NY_______________________ CVD EQUIPMENT CORPORATION (Exact name of small business issuer as specified in its charter) NEW YORK (State or other jurisdiction of incorporation or organization) 11-2621692 (IRS Employer Identification Number) 1881 LAKELAND AVENUE, RONKONKOMA, NY 11779 (Address of principal executive offices) 631-981-7081 (Issuers Telephone Number) (Former name, former address, and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ___ No ___ APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 3,008,000 SHARES OF COMMON STOCK, $.01 PAR VALUE AS OF 5-11-01 2 CVD EQUIPMENT CORPORATION NOTE TO FINANCIAL STATEMENTS FOR THE QUARTER ENDING MARCH 31, 2001 BASIS OF FINANCIAL STATEMENTS The financial data is subject to year end audit and does not claim to be a complete presentation since note disclosure under generally accepted accounting procedures is not included. Note disclosures required under generally accepted accounting procedures are included in the Company's audited financial statements filed as part of Form 10-KSB for the year ended December 31, 2000. Form 10-QSB should be read in conjunction with these financial statements. The results of operations for the three months are not necessarily indicative of those for the full year. In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to fairly present the financial position and the results of operation for the periods indicated. 3 MANAGEMENT'S DISCUSSION INTRODUCTION Statements contained in this Report on Form 10-QSB that are not historical facts are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including without limitation, statements regarding industry trends, strategic business development, pursuit of new markets, competition, results from operations, and are subject to the safe harbor provisions created by that statute. A forward-looking statement may contain words such as "intends", "plans", "anticipates", "believes", "expect to", or words of similar import. Management cautions that forward-looking statements are subject to risks and uncertainties that could cause the Company's actual results to differ materially from those projected. These risks and uncertainties include, but are not limited to, marketing success, product development, production, technological difficulties, manufacturing costs, and changes in economic conditions in the markets the Company serves. The Company undertakes no obligation to release revisions to forward-looking statements to reflect subsequent events, changed circumstances, or the occurrence of unanticipated events. FORWARD LOOKING STATEMENTS Certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward looking statements. These forward looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward looking statements, include, but are not limited to: competition in the Company's existing and potential future product lines of business; the Company's ability to obtain financing on acceptable terms if and when needed; uncertainty as to the Company's future profitability, uncertainty as to the future profitability of acquired businesses or product lines, uncertainty as to any future expansion of the company. Other factors and assumptions not identified above were also involved in the derivation of these forward looking statements, and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward looking statements. REVENUE RECOGNITION CVD recognizes and identifies on its financial statements revenue on a percent complete methodology for contracts falling under SOP 81-1 and recognizes revenues on a completed contract methodology for contracts falling under SAB 101. CVD feels this is the most accurate and consistent with the requirements of the two regulations. 4 MANAGEMENT'S DISCUSSION CONTINUED MARKETING Our marketing efforts continue to be productive and our quotation activity remains strong. CVD continues to work at expanding its product offerings as well as exploring new market segment opportunities. In 2000, the semiconductor industry grew at an unprecedented rate. New end products and a drive to manufacture smaller chips on larger wafers, reducing manufacturing costs fueled growth. The semiconductor industry however is historically cyclic in nature and has now slowed. CVD believes that it has structured itself with our three divisions to partially compensate for this cyclic nature and smooth out the ups and downs. The CVD division deals with large capital equipment, which sometimes suffers in a down cycle. However, the CVD division also sells to research facilities and universities that are not normally influenced in a significant way during a slow market. The SDC division supplies Gas and Chemical Delivery Systems, which can be impacted during a down market. However, the field service group within that division, usually adds significant field service work in a down market. And finally, the ECS division is usually impacted in a positive fashion in a down market, as customers look to refurbished equipment as an alternate way to enhance their productivity. 5 ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2001 REVENUE An increase in volume resulted in first quarter 2001 revenue being $3,474,816, a 96% increase from first quarter 2000 revenue of $1,775,430. COSTS AND EXPENSES The cost of revenue increased to $2,192,681 in the first quarter of 2001 as compared to $1,203,911 in the first quarter of 2000. Of this $988,770 increase, approximately $710,000 is attributed to material, $28,000 to manufacturing supplies, $11,500 to freight in and $207,000 to salaries. Selling and shipping expenses increased to $186,123 in the first quarter of 2001 from $122,402 in the first quarter of 2000. Of this $63,721 increase, approximately $15,000 is attributed to salaries, $27,000 to commissions, $9,000 to advertising and $9,000 to freight expense. General and Administrative expenses increased to $497,273 in the first quarter of 2001 from $345,652 in the first quarter of 2000. Of this $151,621 increase, approximately $23,000 is attributed to legal fees, $61,000 to salaries, $8,000 to consultants and $32,000 to bad debt. Interest expense decreased by $654 from $17,972 for the first quarter 2000 to $17,318 for the first quarter 2001, because the company's average outstanding debt decreased. Interest income decreased by $5,572 from $10,798 first quarter 2000 to $5,226 first quarter 2001, because the company sold some investments. LIQUIDITY AND CAPITAL RESOURCES By the end of the first quarter of 2001, the Company's cash position decreased to $241,776 from $600,621 at the beginning of the year. The decrease in cash is largely attributed to tax payments made for year end tax liabilities of $396,000. At the end of first quarter of 2001, the Company's account receivable position increased to $2,415,141 from $ 2,002,540 at the beginning of the year. This increase was attributable to timing of customer payments and billings. At the close of the first quarter of 2001, the Company's backlog decreased to $4,629,565 from $5,508,802 at the beginning of the quarter. This decrease is attributed to an increase in shipments. 6
CVD EQUIPMENT CORPORATION BALANCE SHEETS MARCH 31, 2001 MARCH 31 DECEMBER 31 2001 2000 (UNAUDITED) (AUDITED) ------------ ------------ ASSETS CURRENT ASSETS CASH AND CASH EQUIVALENTS $ 241,776 $ 600,621 ACCOUNTS RECEIVABLE 2,415,141 2,002,540 COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS 1,523,485 1,483,459 INVENTORY 467,931 454,898 OTHER CURRENT ASSETS 31,434 32,155 ------------ ------------ TOTAL CURRENT ASSETS 4,679,767 4,573,673 PROPERTY, PLANT AND EQUIPMENT 2,221,411 2,258,512 DEFERRED TAX ASSET 238,349 306,623 OTHER ASSETS 143,668 148,130 ------------ ------------ TOTAL ASSETS $ 7,283,195 $ 7,286,938 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES ACCOUNTS PAYABLE $ 516,627 $ 607,777 ACCRUED EXPENSES 485,659 685,839 BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS 39,248 146,613 CURRENT MATURITIES OF LONG-TERM DEBT 18,454 18,135 ------------ ------------ TOTAL CURRENT LIABILITIES 1,059,988 1,458,364 LONG-TERM DEBT 954,580 959,570 ------------ ------------ 2,014,568 2,417,934 ------------ ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY COMMON STOCK - $0.01 PAR - SHARES AUTHORIZED 10,000,000; ISSUED & OUTSTANDING 3,008,000 & 3,000,800 30,080 30,008 ADDITIONAL PAID-IN CAPITAL 2,859,295 2,848,420 RETAINED EARNINGS 2,379,252 1,990,576 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 5,268,627 4,869,004 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 7,283,195 $ 7,286,938 ============ ============
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CVD EQUIPMENT CORPORATION STATEMENTS OF INCOME AND COMPREHENSIVE INCOME MARCH 31, 2001 THREE MONTHS ENDED MARCH 31 2001 2000 (UNAUDITED) (UNAUDITED) ------------ ------------ REVENUES REVENUE ON COMPLETED CONTRACTS $ 1,801,188 $ 1,321,507 REVENUE ON UNCOMPLETED CONTRACTS 1,673,628 453,923 ------------ ------------ TOTAL REVENUES 3,474,816 1,775,430 ------------ ------------ COSTS OF REVENUES COST ON COMPLETED CONTRACTS 1,347,480 935,426 COST ON UNCOMPLETED CONTRACTS 845,201 268,485 ------------ ------------ TOTAL COSTS OF REVENUES 2,192,681 1,203,911 ------------ ------------ GROSS PROFIT 1,282,135 571,519 ------------ ------------ OPERATING EXPENSES SELLING AND SHIPPING 186,123 122,402 GENERAL AND ADMINISTRATIVE 497,273 345,652 ------------ ------------ TOTAL OPERATING EXPENSES 683,396 468,054 ------------ ------------ OPERATING INCOME 598,739 103,465 ------------ ------------ OTHER INCOME (EXPENSE) INTEREST INCOME 5,226 10,798 INTEREST EXPENSE (17,318) (17,972) OTHER INCOME 4,747 3,080 ------------ ------------ TOTAL OTHER INCOME (7,345) (4,094) ------------ ------------ INCOME BEFORE TAXES 591,394 99,371 INCOME TAX (PROVISION) BENEFIT (202,720) (23,252) ------------ ------------ NET INCOME $ 388,674 $ 76,119 ============ ============ EARNINGS PER SHARE BASIC $0.13 $0.03 DILUTED $0.12 $0.02 WEIGHTED AVERAGE SHARES BASIC 3,002,450 2,926,750 DILUTED 3,308,743 3,079,390
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CVD EQUIPMENT CORPORATION STATEMENT OF CASH FLOWS MARCH 31, 2001 THREE MONTHS ENDED MARCH 31 2001 2000 (UNAUDITED) (UNAUDITED) ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME $ 388,674 $ 76,119 ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES: DEFERRED TAX 68,274 (12,795) DEPRECIATION AND AMORTIZATION 66,889 61,820 (INCREASE) DECREASE IN: ACCOUNTS RECEIVABLES (412,603) 251,779 COST IN EXCESS OF BILLINGS ON UNCOMPLETED CONTRACTS (40,026) (4,477) INVENTORY (13,033) 233,112 PREPAID INCOME TAXES - 12,808 OTHER CURRENT ASSETS 721 3,482 OTHER ASSETS (7,660) 7,129 INCREASE (DECREASE) IN: ACCOUNTS PAYABLE (91,149) (33,208) ACCRUED EXPENSES (200,182) 47,785 BILLINGS IN EXCESS OF COSTS ON UNCOMPLETED CONTRACTS (107,365) 58,536 ------------ ------------ NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (347,460) 702,090 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES CAPITAL EXPENSE.EQUIPMENT (17,664) (12,910) NET CASH USED IN INVESTING ACTIVITIES (17,664) (12,910) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES PROCEEDS - CURRENT 320 294 PAYMENTS - LONGTERM (4,989) (4,635) PROCEEDS FROM EXERCISE OF STOCK OPTIONS 10,948 1,000 ------------ ------------ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 6,279 (3,341) ------------ ------------ NET DECREASE (INCREASE) IN CASH AND CASH EQUIVALENTS (358,845) 685,839 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE QUARTER 600,621 91,714 ------------ ------------ CASH AND CASH EQUIVALENTS AT THE END OF THE QUARTER $ 241,776 $ 777,553 ============ ============
9 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 11th day of May 2001. CVD EQUIPMENT CORPORATION By: /s/ Leonard A. Rosenbaum Leonard A. Rosenbaum President and Chief Executive Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this report signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. /s/ Leonard A. Rosenbaum President, Chief Executive Officer and Director Leonard A. Rosenbaum /s/ Mitchell Drucker Chief Financial Officer Mitchell Drucker