-----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, Dmwipc8+fVUEFxJ0I7nIB+6zYiqJ0H9WXyq+eOcVqgg+o7xMkEhNi3g+059P3OYJ 70E3DqlPBsyoNJjqUdWrXw== /in/edgar/work/0000814676-00-500002/0000814676-00-500002.txt : 20001114 0000814676-00-500002.hdr.sgml : 20001114 ACCESSION NUMBER: 0000814676-00-500002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERAMICS PROCESS SYSTEMS CORP/DE/ CENTRAL INDEX KEY: 0000814676 STANDARD INDUSTRIAL CLASSIFICATION: [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: 761454 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 q3r5.txt 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 September 30, 2000 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 Facsimile Number: 508-222-0220, E-Mail Address: info@alsic.com. 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 September 30, 2000: 12,287,469. CERAMICS PROCESS SYSTEMS CORPORATION Form 10-Q For The Fiscal Quarter Ended September 30, 2000 Index PART I: FINANCIAL INFORMATION Page Item 1: Consolidated Financial Statements 3-9 Consolidated Balance Sheets as of September 30, 2000 and January 1, 2000 3-4 Consolidated Statements of Operations for the fiscal quarters and nine-month periods ended September 30, 2000 and October 2, 1999 5 Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2000 and October 2, 1999 6 Notes to Consolidated Financial Statements 7-9 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 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 September 30, January 1, 2000 2000 ------------ ----------- ASSETS Current assets: Cash and cash equivalents $ 994,268 $1,033,522 Short-term investments 306,672 Accounts receivable, trade 464,200 387,569 Accounts receivable, other 15,000 109,065 Inventories 425,666 307,348 Prepaid expenses 20,834 30,193 ---------- ---------- Total current assets 1,919,968 2,174,369 ---------- ---------- Property and equipment: Production equipment 1,691,375 2,013,331 Furniture and office equipment 186,690 202,523 Accumulated depreciation and amortization (810,814) (1,204,000) ---------- ---------- Net property and equipment 1,067,251 1,011,854 ---------- ---------- Total assets $2,987,219 $3,186,223 ========== ========== See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Balance Sheets (continued) September 30, January 1, 2000 2000 ------------ ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 128,286 $ 142,667 Accrued expenses 130,472 157,300 Deferred revenue 9,884 9,884 Current portion of capital lease obligations 56,622 52,255 ------------ ------------ Total current liabilities 325,264 362,106 Deferred revenue 124,000 124,000 Long-term portion of capital lease obligations 29,870 72,900 ------------ ------------ Total Liabilities 479,134 559,006 ------------ ------------ Stockholders' Equity Common stock, $0.01 par value. 15,000,000 shares authorized 12,310,352 and 12,308,852 shares issued September 30, 2000 and January 1, 2000, respectively. 123,104 123,089 Additional paid-in capital 32,656,608 32,656,353 Accumulated deficit (30,210,792) (30,091,390) Less treasury stock, at cost, 22,883 common shares (60,835) (60,835) ------------ ------------ Total Stockholders' Equity 2,508,085 2,627,217 ------------ ------------ Total Liabilities and Stockholders' Equity $ 2,987,219 $ 3,186,223 ============ ============ See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Operations Fiscal Quarters Ended Nine-Month Periods Ended --------------------- ------------------------ Sept. 30, Oct. 2, Sept. 30, Oct. 2, 2000 1999 2000 1999 Revenue: ---------- ----------- ---------- --------- Product sales $ 1,056,557 $ 1,197,188 $ 3,757,091 $ 3,863,767 ---------- ----------- ---------- --------- Total revenue 1,056,557 1,197,188 3,757,091 3,863,737 ========== =========== ========== ========== Operating expenses: Cost of sales 1,149,696 1,025,218 3,214,015 2,919,985 Selling, general, and administrative 224,258 228,996 723,666 726,906 ---------- ----------- ---------- ---------- Total operating expenses 1,373,954 1,254,214 3,937,681 3,646,891 ---------- ----------- ---------- ---------- Operating income (loss) (317,397) (57,026) (180,590) 216,846 Other income, net 19,302 113,288 61,188 135,702 ---------- ----------- ---------- ---------- Income (loss) before taxes (298,095) 56,262 (119,402) 352,548 ---------- ---------- ---------- ---------- Income taxes - - - (5,929) ---------- ---------- ---------- ---------- Net income (loss) $ (298,095) $ 56,262 $(119,402) $ 358,477 ========== ========== ========== ========== Net income (loss) per basic common share $ (0.02) $ 0.00 $ (0.01) $ 0.03 ---------- ---------- ---------- ---------- Weighted average number of basic common shares outstanding 12,287,469 12,285,969 12,286,907 12,285,969 ========== ========== ========== ========== Net income (loss) per diluted common share $ (0.02) $ 0.00 $ (0.01) $ 0.03 ---------- ---------- --------- --------- Weighted average number of diluted common shares outstanding 12,287,469 12,521,839 12,286,907 12,541,280 ========== ========== ========== ========== See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Cash Flows Nine-Month Periods Ended Sept. 30, Oct. 2, 2000 1999 --------- -------- Cash flows from operating activities: Net income (loss) $ (119,402) $ 358,477 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 165,400 144,434 Gain on disposal of equipment (18,331) (104,225) Changes in assets and liabilities: Accounts receivable (76,631) (207,439) Inventories (118,318) (42,388) Prepaid expenses 9,359 (19,693) Accounts payable (14,381) 2,010 Accrued expenses (26,828) (19,753) Deferred revenue (8,381) --------- -------- Net cash (used in) provided by operating activities (199,132) 103,042 --------- -------- Cash flows from investing activities: Proceeds from sale of assets 127,865 14,770 Additions to property and equipment (236,266) (408,090) Marketable Securities 306,672 Deposits 3,565 --------- -------- Net cash provided by (used in) investing activities 198,271 (389,755) --------- -------- Cash flows from financing activities: Principal payments for capital lease obligations (38,663) (34,745) Proceeds from issuance of common stock 270 - --------- -------- Net cash used in financing activities (38,393) (34,745) --------- -------- Net decrease in cash (39,254) (321,458) Cash at beginning of period 1,033,522 1,498,774 --------- --------- Cash at end of period $ 994,268 $1,177,316 ========= ========= 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, flip-chip integrated circuit, motor controller and other microelectronic markets by developing, manufacturing, and marketing advanced metal-matrix composite 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 and 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 nine month periods ended September 30, 2000 and October 2, 1999 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. Certain reclassifications have been made to the 1999 unaudited financial statements to conform to the 2000 presentation. 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 income available to common stockholders 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 Nine month Quarters Ended Periods ended Sept.30, Oct. 2, Sept.30, Oct. 2, 2000 1999 2000 1999 ----------- ---------- ---------- ---------- Basic EPS Computation: Numerator: Net income (loss) $ (298,095) $ 56,262 $ (119,402) $ 358,477 Denominator: Weighted average common shares outstanding 12,287,469 12,285,969 12,286,907 12,285,969 Basic EPS $ (0.02) $ 0.00 $ (0.01) $ 0.03 Diluted EPS Computation: Numerator: Net income (loss) $ (298,095) $ 56,262 $ (119,402) $ 358,477 --------- -------- --------- --------- Total net income (loss) $ (298,095) $ 56,262 $ (119,402) $ 358,477 Denominator: Weighted average common shares outstanding 12,287,469 12,285,969 12,286,907 12,285,969 stock options 235,870 255,311 ---------- --------- ---------- ---------- Total Shares 12,287,469 12,521,839 12,286,907 12,541,280 Diluted EPS $(0.02) $0.00 $(0.01) $ 0.03 The diluted share base for the three and nine months ended September 30, 2000 excludes approximately 774,000 potential shares related to employee stock options. These shares are excluded due to their antidilutive effect as a result of the Company's loss from continuing operations during 2000. The diluted share base for the three and nine months ended October 2, 1999 excludes approximately 193,000 and 200,000 potential shares of common stock that are antidilutive. (4) Inventory --------- Inventories consist of the following: September 30, January 1, 2000 2000 --------- ---------- Raw materials $ 94,616 $ 71,134 Work in process 322,714 236,214 Finished goods 8,336 --------- ---------- $ 425,666 $ 307,348 ========= ========== (5) Accrued Expenses ---------------- Accrued expenses consist of the following: September 30, January 1, 2000 2000 --------- ---------- Accrued legal and accounting $ 34,125 $ 37,000 Accrued payroll 76,144 87,814 Accured other 20,203 32,486 --------- ---------- $ 130,472 $ 157,300 ========= ========== (6) Recent Accounting Pronouncements - -------------------------------- In December 1999, the United States Securities and Exchange Commission issued Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides the staff's views in applying generally accepted accounting principles to selected revenue recognition issues, as well as examples of how the staff applies revenue recognition guidance to specific circumstances. In June 2000, SEC issued staff accounting bulletin 101B delaying the implementation of SAB 101 for six months. The application of the guidance in SAB 101 will be required by the fourth quarter of 2000. The effect of applying this guidance, in any, will be reported as a cumulative effect adjustment resulting from a change in accounting principal. Our evaluation of SAB 101 is not yet complete. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," (FAS 133) which, as amended, is currently effective January 1, 2001 for the Corporation. FAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction, and if it is, the type of hedge transaction. Management believes adoption of this standard and related transition adjustments will not have a material impact on the Corporation's consolidated financial position, results of operations or cash flows. 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 - Third Fiscal Quarter of 2000 Compared to Third Fiscal Quarter of 1999 - ---------------------- Revenue in Q3 2000 of $1,057 thousand was 12% lower than revenue in Q3 1999 of $1,197 thousand. The decline in product revenue in Q3 2000 compared to Q3 1999 was primarily the result of a decline in shipments to the Company's largest customer partially offset by increased shipments to new customers. Historically the Company's largest customer has been a producer of cellular telephone basestations. The Company's sales to this customer declined by 61% from Q3 1999 to Q3 2000. The Company believes the wireless infrastructure market is growing, and continues to be an attractive market, however, demand has proven to be very volatile from quarter to quarter. The Company anticipates that this volatility will continue in the future. In addition, product transitions at the Company's customer will affect demand for the Company's products on a quarter to quarter basis. Although sales to the Company's largest customer declined as described above, during this same time period sales to other customers increased by 74%. In Q3 2000, the Company's largest customer accounted for 28% of total revenue, compared to Q3 1999 in which the Company's largest customer accounted for 64% of total revenue. The Company's broadening customer base makes the Company less dependent on any single customer. AlSiC lids and heat spreaders for flip-chip integrated circuit applications account for a majority of the increase in sales to other customers. Although the Company experienced some start-up costs such as labor and material inefficiences in Q3 2000 associated with the significant change in product mix, management believes that costs will decline and that it can profitably serve this market segment. Management believes the market for AlSiC lids and heat spreaders for flip-chip applications will continue to grow as high-density and higher speed integrated circuits are introduced. Total operating expenses in Q3 2000 were $1,374 thousand, a 9% increase over operating expenses of $1,254 thousand in Q3 1999. Total operating expenses consist of cost of sales and sales, general and administrative expenses. Cost of sales was $1,150 thousand in Q3 2000 compared to $1,025 thousand in Q3 1999, an increase of 12%. The increase in cost of sales was primarily driven by 1) a 22% increase in the materials costs, and 2) a 12% increase in direct labor costs. Manufacturing overhead remained relatively constant, increasing 3% in Q3 2000 compared to Q3 1999. Gross margins declined in Q3 2000 compared to Q3 1999 as the Company experienced start-up costs such as labor and material inefficiencies associated with this significant change in product mix. Although most of the decline in gross margins results from increased materials and labor costs, the decline in total revenue coupled with the slight increase in manufacturing overhead, which is largely a fixed cost, also contributed to lower gross margins. Sales, general and administrative expenses were $224 thousand in Q3 2000 compared to $229 thousand in Q3 1999, a decrease of 2%. Results of Operations - First Nine Months of 2000 Compared to First Nine Months of 1999 - -------------- Revenue for the first nine months of 2000 of $3,757 thousand was 3% lower than revenue in the first nine months of 1999 of $3,864 thousand. Revenues from the Company's largest customer declined by 12% while revenue from other customers increased by 15% during this time period. Total operating expenses in the first nine months of 2000 were $3,938 thousand, a 8% increase over operating expenses of $3,647 thousand in the first nine months of Q3 1999. Total operating expenses consist of cost of sales and sales, general and administrative expenses. Cost of sales were $3,214 thousand in the first nine months of 2000 compared to $2,920 thousand in the first nine months of 1999, an increase of 10%. In the first nine months of 2000 the Company added personnel in the quality and engineering functions in anticipation of future growth, increasing fixed costs at a greater rate than revenues increased, resulting in reduced gross profits. Shipments of new products grew significantly in the first nine months of 2000 compared to the first nine months of 1999, partially but not fully offsetting a reduction in shipments of existing products to a single major customer. The product mix changed significantly, particularly in Q3 2000, and the Company experienced some labor and material inefficiencies as it ramped up these new products. AlSiC lids and heat sinks for flip-chip applications account for the majority of new products in the first nine months of 2000 compared to the same period a year ago. Sales, general and administrative expenses were $724 thousand in the first nine months of 2000 compared to $727 thousand in the first nine months of 1999, a decrease of less than 1%. The cumulative effect of these revenues and costs resulted in a net loss of ($119) thousand, or ($0.01) per basic share, ($0.01) per diluted share, in the first nine months of 2000, compared to net income of $358 thousand, or $0.03 per basic share, $0.03 per diluted share in the first nine months of 1999. Financial Liquidity - ------------------- The Company`s cash and short-term investments balance at September 30, 2000 was $994 thousand compared to a balance at January 1, 2000 of $1,340 thousand. In the first nine months of 2000 operations consumed cash of $199 thousand. Purchases of production equipment consumed cash of $236 thousand and the sale of obsolete equipment generated $128 thousand, resulting in net cash consumption associated with the purchase and sale of production equipment of $108 thousand. The equipment additions provide the Company with increased capacity for future growth and with increased ability to serve a broader range of customers. Inventories increased to $426 thousand at September 30, 2000 from $307 thousand at January 1, 2000. Management expects that inventory levels will fluctuate from quarter to quarter depending on specific timing of customer releases and management actions to smooth demand on the production floor. Accounts Receivable trade increased to $464 thousand at September 30, 2000 from $388 thousand at January 1, 2000. Shipments to customers increased towards the end of Q3 2000 resulting in an increase in accounts receivables. The Company financed its working capital requirements during the third fiscal quarter of 2000 with funds generated from sales and cash on hand. Management considers future cash flow from operations and available cash to be adequate to meet its working capital requirements for the foreseeable future. Recent Accounting Pronouncements - -------------------------------- In December 1999, the United States Securities and Exchange Commission issued Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 provides the staff's views in applying generally accepted accounting principles to selected revenue recognition issues, as well as examples of how the staff applies revenue recognition guidance to specific circumstances. In June 2000, SEC issued staff accounting bulletin 101B delaying the implementation of SAB 101 for six months. The application of the guidance in SAB 101 will be required by the fourth quarter of 2000. The effect of applying this guidance, in any, will be reported as a cumulative effect adjustment resulting from a change in accounting principal. Our evaluation of SAB 101 is not yet complete. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," (FAS 133) which, as amended, is currently effective January 1, 2001 for the Corporation. FAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction, and if it is, the type of hedge transaction. Management believes adoption of this standard and related transition adjustments will not have a material impact on the Corporation's consolidated financial position, results of operations or cash flows. 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: November 13, 2000 /s/Grant C. Bennett Grant C. Bennett President and Treasurer (Principal Executive Officer) EX-27 2 q3fds.frm
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 September 30, 2000. 9-MOS Jan-02-2000 Dec-30-2000 Sep-30-2000 994,268 0 479,200 0 425,666 1,919,968 1,067,251 810,814 2,987,219 325,264 0 0 0 12,287,469 0 2,987,219 3,757,091 3,757,091 3,214,015 3,937,681 0 0 0 (119,402) 0 (119,402) 0 0 0 (119,402) (0.01) (0.01)
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