-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DTJetakH0yGKQ3ileMwCM7h3C3ApzchsunaPjX/C0mpzm3tqRktU1A3X/3u0gmBR /dr4l1EA3eWHpRAyls6KEQ== 0000814676-99-000008.txt : 19990818 0000814676-99-000008.hdr.sgml : 19990818 ACCESSION NUMBER: 0000814676-99-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990703 FILED AS OF DATE: 19990817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERAMICS PROCESS SYSTEMS CORP/DE/ CENTRAL INDEX KEY: 0000814676 STANDARD INDUSTRIAL CLASSIFICATION: POTTERY & RELATED PRODUCTS [3260] IRS NUMBER: 042832509 STATE OF INCORPORATION: DE FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-16088 FILM NUMBER: 99694467 BUSINESS ADDRESS: STREET 1: 111 SOUTH WORCESTER STREET STREET 2: PO BOX 338 CITY: CHARTLEY STATE: MA ZIP: 02712 BUSINESS PHONE: 508-222-0614 MAIL ADDRESS: STREET 1: 111 SOUTH WORCESTER STREET STREET 2: PO BOX 338 CITY: CHARTLEY STATE: MA ZIP: 02712 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended July 3, 1999 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to Commission file number 0-16088 CERAMICS PROCESS SYSTEMS CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 04-2832509 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 111 South Worcester Street, P.O. Box 338, Chartley, Massachusetts 02712 (Address of Principal Executive Offices) (Zip Code) Registrant`s Telephone Number, including Area Code: (508) 222-0614 Former Name, Former Address and Former Fiscal Year if Changed since Last Report: Not Applicable. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant was required to file such reports), and (2) has been subject to the filing requirements for the past 90 days. [X] Yes [ ] No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer`s classes of common stock, as of the latest practicable date. Number of shares of common stock outstanding as of July 3, 1999: 12,285,969. CERAMICS PROCESS SYSTEMS CORPORATION Form 10-Q For The Fiscal Quarter Ended July 3, 1999 Index PART I: FINANCIAL INFORMATION Page Item 1: Consolidated Financial Statements 3 Consolidated Balance Sheets as of July 3, 1999 and December 26, 1998 3 Consolidated Statements of Operations for the fiscal quarters and six month periods ended July 3, 1999 and June 27, 1998 5 Consolidated Statements of Cash Flows for the six month periods ended July 3, 1999 and June 27, 1998 6 Notes to Consolidated Financial Statements 7 Item 2: Management`s Discussion and Analysis of Financial Condition and Results of Operations 10 PART II: OTHER INFORMATION Items 1-6 12 Signatures 12 PART I FINANCIAL INFORMATION ITEM 1 FINANCIAL STATEMENTS CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Balance Sheets (continued on next page) July 3, December 26, 1999 1998 ASSETS ---------- ---------- Current assets: Cash and cash equivalents $1,457,913 $1,498,774 Trade receivables 559,728 547,134 Inventories 421,629 204,200 Prepaid expenses 31,854 1,830 ---------- ---------- Total current assets 2,471,124 2,251,938 ---------- ---------- Property and equipment: Production equipment 1,773,062 1,569,021 Furniture and office equipment 179,472 155,232 Accumulated depreciation and amortization (1,092,062) (1,000,637) ---------- ---------- Net property and equipment 860,472 723,616 ---------- ---------- Deposits 8,707 8,772 ---------- ---------- Total assets $3,340,303 $2,984,326 ========== ========== See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Balance Sheets (continued) LIABILITIES AND STOCKHOLDERS` EQUITY July 3, December 26, 1999 1998 --------- ----------- Current liabilities: Accounts payable $ 213,315 $ 96,753 Accrued expenses 148,779 184,032 Deferred revenue 137,572 142,266 Current portion of obligations under capital leases 49,536 46,959 ------------ ------------ Total current liabilities 549,202 470,010 Obligations under capital leases less current portion 99,725 125,155 ------------ ------------ Total liabilities 648,927 595,165 ------------ ------------ Stockholders` Equity Common stock, $0.01 par value. Authorized 15,000,000 shares; issued 12,308,852 shares at July 3, 1999 and 7,824,582 at December 27, 1997 123,089 123,089 Additional paid-in capital 32,656,353 32,656,353 Accumulated deficit (30,027,231) (30,329,446) ------------ ------------ 2,752,211 (1,458,802) Less treasury stock, at cost, 22,883 common shares at July 3, 1999 and December 26, 1998 (60,835) (60,835) ------------ ------------ Total stockholders' equity 2,691,376 2,389,161 ------------ ------------ Total liabilities and stockholders` equity $ 3,340,303 $ 2,984,326 ============ ============ See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Operations Fiscal Six month Quarters Ended Periods Ended July 3, June 27, July 3, June 27, 1999 1998 1999 1998 Revenue: ---------- ---------- ---------- ---------- Product sales $1,421,136 $1,085,936 $2,666,550 $2,419,149 License revenue 0 740,750 0 740,750 ---------- ---------- ---------- ---------- Total revenue 1,421,136 1,826,686 2,666,550 3,159,899 ========== ========== ========== ========== Operating expenses: Cost of product sales 1,062,085 733,261 1,894,768 1,461,068 Selling, general, and administrative 237,254 169,488 497,910 327,445 ---------- ---------- ---------- ---------- Total operating expenses 1,299,339 902,740 2,392,678 1,788,513 ---------- ---------- ---------- ---------- Operating income 121,796 923,937 273,872 1,371,386 Other income (expense), net 12,314 (49,677) 22,414 (104,310) ---------- ---------- ---------- ---------- Income before taxes 134,110 874,260 296,286 1,267,076 ---------- ---------- ---------- ---------- Income taxes (15,771) 89,897 (5,929) 97,753 ---------- ---------- --------- ---------- Net income $ 149,881 $ 784,363 $ 302,215 $1,169,323 ========== ========== ========== ========== Net income per basic common share $ 0.01 $ 0.08 $ 0.03 $ 0.13 ---------- ---------- ---------- ---------- Weighted average number of basic common shares outstanding 12,308,852 9,496,117 12,308,852 8,721,231 ========== ========== ========= ========= Net income per diluted common share $ 0.01 $ 0.07 $ 0.02 $ 0.10 ---------- ---------- ----------- --------- Weighted average number of diluted common shares outstanding 12,515,749 12,310,768 12,503,941 12,503,427 ========== ========== ========= ========== See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Cash Flows Six month period ended July 3, June 27, 1999 1998 --------- --------- Cash flows from operating activities: Net income $ 302,215 $1,169,323 Adjustments to reconcile net income to cash provided by operating activities Depreciation and amortization 91,425 87,780 Changes in assets and liabilities: Accounts receivables, trade ( 12,594) 389,534 Inventories (217,429) (418,154) Prepaid expenses (30,024) 2,461 Accounts payable 116,562 (49,829) Accrued expenses (35,253) (42,282) Deferred revenue (4,694) ( 8,427) --------- ---------- Net cash provided by operating activities 210,208 1,130,406 --------- ---------- Cash flows from investing activities: Additions to property and equipment (228,281) (252,533) Deposits 65 (3,500) --------- ---------- Net cash used in investing activities (228,216) (256,033) --------- --------- Cash flows from financing activities: Principal payments of capital lease obligations (22,853) (20,541) Proceeds from issuance of common stock 3,364 Principal payments of notes payable (344,830) --------- --------- Net cash used in financing activities ( 22,853) (362,007) --------- --------- Net increase (decrease) in cash and cash equivalents ( 40,861) 512,366 Cash and cash equivalents at beginning of period 1,498,774 561,166 --------- ---------- Cash and cash equivalents at end of period $1,457,913 $1,073,532 ========= ========== See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION Notes to Consolidated Financial Statement (Unaudited) (1) Nature of Business - ------------------ Ceramics Process Systems Corporation (the `Company` or `CPS`) serves the wireless communications, satellite communications, motor controller and other microelectronic markets by developing, manufacturing, and marketing advanced metal-matrix composite and ceramic components to house, interconnect and thermally manage microelectronic devices. The Company`s products are typically in the form of housings, packages, lids, substrates, thermal planes or heat sinks, and are used in applications where thermal management and or weight are important considerations. The Company`s products are manufactured by proprietary processes the Company has developed including the QuicksetTM Injection Molding Process (`Quickset Process`) and the QuickCastTM Pressure Infiltration Process (`QuickCast Process`). The Company was incorporated on June 19, 1984. (2) Interim Consolidated Financial Statements ----------------------------------------- As permitted by the rules of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, these notes are condensed and do not contain all disclosures required by generally accepted accounting principles. The accompanying financial statements for the fiscal quarters and six month periods ended July 3, 1999 and June 27, 1998 are unaudited. In the opinion of management, the unaudited consolidated financial statements of CPS reflect all adjustments necessary to present fairly the financial position and results of operations for such periods. The consolidated financial statements include the accounts of CPS and its wholly-owned subsidiary, CPS Superconductor Corporation. All significant intercompany balances and transactions have been eliminated. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. (3) Net Income/Loss Per Common and Common Equivalent Share - ------------------------------------------------------ Basic EPS excludes the effect of any dilutive options, warrants or convertible securities and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Diluted EPS is computed by dividing net income by the sum of the weighted average number of common shares and common share equivalents computed using the average market price for the period under the treasury stock method. Fiscal Six month Quarters Ended Periods ended July 3, June 27, July 3, June 27, 1999 1998 1999 1998 ----------- ---------- ---------- ---------- Basic EPS Computation: Numerator: Net income $149,881 $784,363 $ 302,215 $1,169,323 Denominator: Weighted average common shares outstanding 12,308,852 9,496,117 12,308,852 8,721,231 Basic EPS $0.01 $0.08 $0.03 $0.13 Diluted EPS Computation: Numerator: Net income $149,881 $784,363 $ 302,215 $1,169,323 Interest on convertible debt 0 42,027 0 87,290 --------- -------- --------- --------- Total net income $149,881 $826,390 $ 302,215 $1,256,613 Denominator: Weighted average common shares outstanding 12,308,852 9,496,117 12,308,852 8,721,231 Stock options 206,897 216,475 195,089 219,001 Convertible debt 0 2,598,176 0 3,563,195 ---------- --------- ---------- ---------- Total Shares 12,515,749 12,310,768 12,503,941 12,503,427 Diluted EPS $0.01 $0.07 $0.02 $0.10 As of July 3, 1999 and June 27, 1998, the Company had 193,000 and 121,000 securities in the form of stock options to purchase common stock that were antidilutive, respectively. (4) Inventory --------- Inventories consist of the following: July 3, December 26, 1999 1998 --------- ---------- Raw materials $ 141,871 $ 107,259 Work in process 279,758 96,941 --------- ---------- $ 421,629 $ 204,200 ========= ========== (5) Accrued Expenses ---------------- Accrued expenses consist of the following: July 3, December 26, 1999 1998 --------- ---------- Accrued legal and accounting $ 15,000 $ 47,500 Accrued payroll 108,386 107,383 Accrued other 25,393 29,149 --------- ---------- $ 148,779 $ 184,032 ========= ========== (6) Supplemental Cash Flow Information - ---------------------------------- In the second fiscal quarter of 1999, the Company paid interest on leases for production equipment in the amount of $4,150 compared to $5,322 in the second fiscal quarter of 1998. ITEM 2 MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. Results of Operations - Second Fiscal Quarter of 1999 (Q2 1999) Compared to - --------------------------------------------------------------------------- the Second Fiscal Quarter of 1998 (Q2 1998) - ------------------------------------------- Total revenue decreased to $1,421 thousand in Q2 1999 from $1,827 thousand in Q2 1998, a 22% decrease. Revenue from product shipments increased 31% to $1,421 thousand in Q2 1999 from $1,086 thousand in Q2 1998 while revenue from licensing agreements declined to zero in Q2 1999 compared to revenue of $741 thousand in Q2 1998. Although the Company believes it will receive royalty payments from certain existing licensees in the future, the Company's primary focus is in manufacturing and selling metal matrix composites; selling of additional licenses is not a focus of management. The growth in product revenue in Q2 1999 compared to Q2 1998 was primarily due to increased shipments of the Company's metal-matrix composites for use as heat spreaders on microprocessors. Unit shipments in Q2 1999 were 42% higher than unit shipments in Q2 1998. Total operating expenses increased 44% to $1,299 in Q2 1999 compared to $903 thousand in Q2 1998. Cost of sales increased 45% while selling, general and administrative expenses increased 40% over this period. Gross margins on product sales in Q2 1999 were 25% compared to gross margins in Q2 1998 of 32%. This decline in gross margin is the result of changes in product mix and increased manufacturing expenses, primarily in the quality function, which the Company believes are essential to support future growth. The increase in selling, general and administrative expenses are the result of additional personnel and travel expense in the sales function. As a result of changes in tax code relating to the Alternative Minimum Tax as applied to small businesses, income taxes in the second fiscal quarter of 1999 were $0 compared to $90 thousand in the second fiscal quarter of 1998. The cumulative effect of these revenues and costs resulted in net income of $150 thousand, or $0.01 per basic common share, in Q2 1999 versus net income of $784 thousand, or $0.08 per basic common share, in Q2 1998. Results of Operations - First Six Months 1999 Compared to First Six - ------------------------------------------------------------------- Months of 1998 - -------------- Total revenue decreased 16% to $2,667 thousand in the first six months of 1999 from $3,160 in the first six months of 1998. Revenue from product shipments increased 10% in the first six months of 1999 to $2,667 thousand, from $2,419 thousand in the first six months of 1998. Revenue from licensing agreements declined to zero in the first six months of 1999 compared to $741 thousand in the first six months of 1998. The growth in product revenue in the first six months of 1999 compared to Q2 1998 was primarily due to increased shipments of the Company's metal-matrix composites for use as heat spreaders in microprocessors, partially offset by declines in unit shipments in the wireless communications area. Unit shipments in the first six months of 1999 were 8% higher than unit shipments in the first six months of 1998. Total operating expenses in the first six months of 1999 were $2,393 thousand, a 34% increase over operating expenses in the first six months of 1998 of $1,789 thousand. Cost of sales increased 29% while selling, general and administrative expenses increased 54% over the same period. Gross margins on product sales in the first six months of 1999 was 29% compared with gross margins in the first six months of 1998 of 40%. This decline in gross margin is the result of changes in product mix and increased manufacturing expenses, primarily in the quality function, which the Company believes are essential to support future growth. The increase in selling, general and administrative expenses are the result of additional personnel and travel expense in the sales function. Income taxes in the first six months of 1999 were ($6) thousand compared to $98 thousand in the the first six months of 1998. The cumulative effect of these revenues and costs resulted in net income of $302 thousand, or $0.03 per basic common share, in the first six months of 1999 versus net income of $1,169 thousand, or $0.13 per basic common share, in the first six months of 1998. Financial Condition - ------------------- The Company's financial condition and liquidity remained fairly constant as of the end of Q2 1999 compared to the end of fiscal 1998. The Company's cash balance as of July 3, 1998 was $1,458 thousand compared with the cash balance as of December 26, 1998 of $1,499 thousand, a 3% decline. In both 1998 and in the the first six months of of 1999, operations generated cash; in the the first six months of 1999 investments in equipment slightly exceeded the cash generated by operations. Inventories increased to $422 thousand at July 3, 1999 from $204 thousand at December 26, 1998. Raw material inventory increased to $141 thousand from $107 thousand, and work in process inventory increased to $280 thousand from $97 thousand over the same period. Management believes the increase in raw material inventory is appropriate to support the increased production volume. Work in process inventory varies with product mix and timing of customer demand. Accounts Receivable increased to $560 thousand at July 3, 1999 from $547 thousand at December 26, 1998. The Company financed its working capital requirements during Q2 1999 with funds generated by operations. The Company expects it will continue to be able to fund its working capital requirements for the remainder of 1999 through operations. Year 2000 Issue - --------------- The Company has identified three areas of possible exposure to Year 2000 problems: 1) Application programs (financial, CAD/CAM and management information programs) used by the company, 2) Embedded programs in production and analytical equipment used by the Company, and 3) Programs used by vendors, customers and other third parties with whom the Company does business. The Company has completed an assessment of its exposure in each of these three areas and has developed a plan and timetable to address issues identified, and has completed the plan in the first and second areas. The assessment indicated the area of greatest risk is the area of application programs. In the process of addressing the Year 2000 issue, the Company has concurrently sought to upgrade certain computer systems to provide greater functionality. In 1998, the Company purchased and installed new financial, accounting, and selected manufacturing computer systems which are Year 2000 compliant and which provide greater functionality. For the application programs which the Company does not intend to replace but which are not currently Year 2000 compliant, the Company has identified patches and upgrades which the company has implemented. Regarding the second area, the Company has tested production and analytical equipment to determine if Year 2000 problems exist, and has implemented upgrades, manual workarounds, or replaced the equipment where problems have been identified. In the process of addressing the Year 2000 issue, the Company has concurrently sought to upgrade production capability and accordingly has purchased certain new pieces of equipment which are Year 2000 compliant and which provide greater production capability. The Company believes all production and analytical equipment currently in use is Year 2000 compliant. Regarding the third area, the Company is interviewing vendors and customers to determine their exposure to Year 2000 issues. The Company has not yet established a contingency plan in the event of noncompliance by its customers and vendors. PART II OTHER INFORMATION Item 1 through Item 5: None Item 6: Exhibits and Reports on Form 8-K (a) Exhibits: (b) Reports on Form 8-K: None SIGNATURES Pursuant to the requirements 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. Ceramics Process Systems Corporation (Registrant) Date: August 16, 1999 /s/Grant C. Bennett Grant C. Bennett President and Treasurer (Principal Executive Officer) EX-27 2
5 This schedule contains summary financial information extracted from consolidated financial statements of Ceramics Process Systems Corporation and is qualified in its entirety by reference to such Form 10-Q for period ending July 3, 1999. 3-MOS JAN-01-2000 JUL-03-1999 1457913 0 559728 0 421629 2471124 860472 1092062 3340303 549202 0 0 0 12285969 0 3340303 1421136 1421136 1062085 1299339 0 0 0 134110 (15771) 149881 0 0 0 149881 .01 .01
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