-----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, MYMWVxeLoNaT3BzufpOxhtz6E0DHJqrBG0l6lKmYSkb5UrZ9ED/0kaB/QTOGtMqD u8+n/qWPh8uFjd2Thg7uvQ== 0000814676-99-000009.txt : 19991115 0000814676-99-000009.hdr.sgml : 19991115 ACCESSION NUMBER: 0000814676-99-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991002 FILED AS OF DATE: 19991112 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: 99748012 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 October 2, 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 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 October 2, 1999: 12,285,969 CERAMICS PROCESS SYSTEMS CORPORATION Form 10-Q For The Fiscal Quarter Ended October 2, 1999 Index PART I: FINANCIAL INFORMATION Page Item 1: Consolidated Financial Statements 3-9 Consolidated Balance Sheets as of October 2, 1999 and December 26, 1998 3-4 Consolidated Statements of Operations for the fiscal quarters and nine-month periods ended October 2, 1999 and September 26, 1998 5 Consolidated Statements of Cash Flows for the nine-month periods ended October 2, 1999 and September 26, 1998 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 October 2, December 26, 1999 1998 ------------ ----------- ASSETS Current assets: Cash $1,177,316 $1,498,774 Accounts receivable, trade 721,591 514,152 Accounts receivable, other 118,417 32,982 Inventories 246,588 204,200 Prepaid expenses 21,522 1,830 ---------- ---------- Total current assets 2,285,434 2,251,938 ---------- ---------- Property and equipment: Production equipment 1,951,210 1,569,021 Furniture and office equipment 181,134 155,232 Accumulated depreciation and amortization (1,145,071) (1,000,637) ---------- ---------- Net property and equipment 987,273 723,616 ---------- ---------- Deposits 5,207 8,772 ---------- ---------- Total assets $3,277,914 $2,984,326 ========== ========== See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Balance Sheets (continued) October 2, December 26, 1999 1998 ------------ ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 94,743 $ 96,753 Accrued expenses 164,279 184,032 Deferred revenue 133,885 142,266 Current portion of obligations under capital leases 50,877 46,959 ------------ ------------ Total current liabilities 443,784 470,010 Obligations under capital leases less current portion 86,492 125,155 ------------ ------------ Total Liabilities 530,276 595,165 ------------ ------------ Stockholders' Equity Common stock, $0.01 par value. Authorized 15,000,000 shares; issued 12,308,852 shares at December 26, 1998, outstanding 12,308,852 shares at October 2, 1999 123,089 123,089 Additional paid-in capital 32,656,353 32,656,353 Accumulated deficit (29,970,969) (30,329,446) Less treasury stock, at cost, 22,883 common shares at October 2, 1999 and December 26, 1998 (60,835) (60,835) ------------ ------------ Total Stockholders' Equity 2,747,638 2,389,161 ------------ ------------ Total Liabilities and Stockholders' Equity $ 3,277,914 $ 2,984,326 ============ ============ See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Operations Fiscal Quarters Ended Nine-Month Periods Ended Oct. 2, Sept. 26, Oct. 2, Sept. 26, 1999 1998 1999 1998 Revenue: ---------- ----------- ---------- --------- Product sales $ 1,197,188 $ 1,260,767 $ 3,863,737 $ 3,679,916 License agreements - - - 740,750 ---------- ----------- ---------- --------- Total revenue 1,197,188 1,260,767 3,863,737 4,420,666 ========== =========== ========== ========== Operating expenses: Cost of sales 1,025,218 798,503 2,919,985 2,259,571 Selling, general, and administrative 228,996 162,961 726,906 486,163 ---------- ----------- ---------- ---------- Total operating expenses 1,254,214 961,464 3,646,891 2,745,734 ---------- ----------- ---------- ---------- Operating income (loss) (57,026) 299,303 216,846 1,674,932 Other income (exp.), net 113,288 96,978 135,702 ( 11,575) ---------- ----------- ---------- ---------- Income before taxes 56,262 396,281 352,548 1,663,357 ---------- ---------- ---------- ---------- Income taxes - 30,274 (5,929) 128,027 ---------- ---------- ---------- ---------- Net income $ 56,262 $ 366,007 $ 358,477 $1,535,330 ========== ========== ========== ========== Net income per basic common share $ 0.005 $ 0.029 $ 0.029 $ 0.154 ---------- ---------- ---------- ---------- Weighted average number of basic common shares outstanding 12,308,852 12,307,186 12,308,852 9,916,550 ========== ========== ========== ========== Net income per diluted common share $ 0.004 $ 0.029 $ 0.028 $ 0.127 ---------- ---------- --------- --------- Weighted average number of diluted common shares outstanding 12,544,722 12,506,198 12,564,163 12,729,075 ========== ========== ========== ========== See accompanying notes to consolidated financial statements. CERAMICS PROCESS SYSTEMS CORPORATION Consolidated Statements of Cash Flows Nine-Month Periods Ended Oct. 2, Sept. 26, 1999 1998 --------- -------- Cash flows from operating activities: Net income $ 358,477 $1,535,330 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 144,434 134,579 Gain on disposal of equipment (104,225) (53,000) Changes in assets and liabilities: Accounts receivable (292,874) (115,084) Inventories (42,388) (184,228) Prepaid expenses (19,693) 7,644 Other current assets (4,700) Accounts payable 2,010 (47,601) Accrued expenses (19,753) (176,513) Deferred revenue (8,381) (16,083) --------- -------- Net cash provided by operating activities 17,607 1,080,344 --------- -------- Cash flows from investing activities: Additions to property and equipment (408,090) (273,619) Disposal of property and equipment 100,205 5,000 Deposits 3,565 --------- -------- Net cash used in investing activities (304,320) (268,619) --------- -------- Cash flows from financing activities: Principal payments for capital lease obligations (34,745) (31,229) Principal payments of Notes Payable (344,830) Proceeds from issuance of common stock 3,364 --------- -------- Net cash used in financing activities (34,745) (372,695) --------- -------- Net increase (decrease) in cash (321,458) 439,030 Cash at beginning of period 1,498,774 561,166 --------- --------- Cash at end of period $1,177,316 $1,000,196 ========= ========= 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 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 October 2, 1999 and September 26, 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 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 Oct. 2, Sept. 26, Oct. 2, Sept. 26, 1999 1998 1999 1998 ----------- ---------- ---------- ---------- Basic EPS Computation: Numerator: Net income $ 56,262 $366,007 $ 358,477 $1,535,330 Denominator: Weighted average common shares outstanding 12,308,852 12,307,186 12,308,852 9,916,550 Basic EPS $0.005 $0.029 $0.029 $0.154 Diluted EPS Computation: Numerator: Net income $ 56,262 $366,007 $ 358,477 $1,535,330 Interest on convertible debt - - - 87,290 --------- -------- --------- --------- Total net income $ 56,262 $366,007 $ 358,477 $1,622,620 Denominator: Weighted average common shares outstanding 12,308,852 12,307,186 12,308,852 9,916,550 stock options 235,870 199,012 255,311 214,349 Convertible debt - - - 2,598,176 ---------- --------- ---------- ---------- Total Shares 12,544,722 12,506,198 12,564,163 12,729,075 Diluted EPS $0.004 $0.029 $0.028 $0.127 (4) Inventory --------- Inventories consist of the following: October 2, December 26, 1999 1998 --------- ---------- Raw materials $ 111,155 $ 107,299 Work in process 135,433 96,941 --------- ---------- $ 246,588 $ 204,200 ========= ========== (5) Accrued Expenses ---------------- Accrued expenses consist of the following: October 2, December 26, 1999 1998 --------- ---------- Accrued legal and accounting $ 24,062 $ 47,500 Accrued payroll and other 140,217 136,532 --------- ---------- $ 164,279 $ 184,032 ========= ========== 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 1999 Compared to Third Fiscal Quarter of 1998 - ---------------------- Revenue from product sales decreased 5% in Q3 1999 compared to Q3 1998. The decline in product revenue in Q3 1999 compared to Q3 1998 was primarily the result of a decline in shipments to a single major customer partially offset by increased shipments to new customers. Total operating expenses in Q3 1998 were $1.3 million, a 30% increase over operating expenses of $961 thousand in Q3 1998. Total operating expenses consist of cost of sales and sales, general and administrative expenses. Cost of sales were $1025 thousand in Q3 1999 compared to $799 thousand in Q3 1998, an increase of $227 thousand. The increase in cost of sales was primarily driven by 1) increased personnel expense in the quality and engineering functions, and 2) a significant increase in the number of new products in Q3 1999 compared to Q3 1998. During 1999, the Company has added indirect personnel in the quality and engineering functions to strengthen the Company's ability to grow and serve a broader range of customers. As a result fixed costs have increased in 1999, and the increase in fixed costs coupled with the decline in revenues in Q3 1999 resulted in reduced gross margins in Q3 1999 compared to Q3 1998. Shipments of new products grew significantly in Q3 1999 compared to Q3 1998, but these shipments did not totally offset reduced shipments to a single major customer. Although the average unit prices of many new products were higher than existing products, the higher prices were more than offset by higher direct labor and material costs, resulting in reduced gross margins. However, the Company expects that as the production volume increases for these new products the cost of manufacturing on a unit basis will decline. Sales, general and administrative expenses were $229 thousand in Q3 1999 compared to $163 thousand in Q3 1998, an increase of $66 thousand. This increase is primarily attributable to increased personnel costs and travel expenses in the sales function, primarily to support increased sales activities in Europe and Japan. Income taxes in Q3 1999 were $0 thousand compared to $30 thousand in Q3 1998 as a result of changes in the tax code for 1999 relating to small businesses and the alternative minimum tax. Results of Operations - First Nine Months of 1999 Compared to First Nine Months of 1998 - -------------- Revenue from product sales increased 5% in the first nine months of 1999 compared to the first nine months of 1998. No revenue was earned from license agreements in the first nine months of 1999 compared to revenue of $741 thousand in the first nine months of 1998. Although the Company expects to receive royalties from existing license agreements in the future, selling of additional licenses to other companies to use the Company's proprietary technology is not a focus of management. Total operating expenses in the first nine months of 1999 were $3.6 million, a 33% increase over operating expenses of $2.7 in the first nine months of Q3 1998. Total operating expenses consist of cost of sales and sales, general and administrative expenses. Cost of sales were $2.9 million in the first nine months of 1999 compared to $2.3 million in the first nine months of 1998, an increase of $660 thousand. In the first nine months of 1999 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. The Company believes the personnel additions are essential to support a broader range of customers in the future, and the Company does not expect to continue to add fixed costs at the same rate in the future. Shipments of new products grew significantly in the first nine months of 1999 compared to the first nine months of 1998, offsetting a reduction in shipments of existing products to a single major customer, the net result being an increase of 4% in total unit shipments in the first nine months of 1999 compared to the first nine months of 1998. Although the average unit prices of many new products were higher than existing products, the higher prices were more than offset by higher direct labor and material costs, resulting in reduced gross margins. However, the Company expects that as the production volume increases for these new products the cost of manufacturing on a unit basis will decline. Sales, general and administrative expenses were $727 thousand in the first nine months of 1999 compared to $486 thousand in the first nine months of 1998, an increase of $241 thousand. This increase is attributable to increased personnel costs and travel expenses in the sales function, primarily to support increased sales activities in Europe and Japan. Income taxes in the first nine months of 1999 were ($6) thousand, compared to $128 thousand in the first nine months of 1998 as a result of changes in the tax code for 1999 relating to small businesses and the alternative minimum tax. The cumulative effect of these revenues and costs resulted in net income of $358 thousand, or $0.03 per basic share, $0.03 per diluted share, in the first nine months of 1999, compared to net income of $1,535 thousand, or $0.15 per basic share, $0.13 per diluted share in the first nine months of 1998. Financial Condition - ------------------- The Company`s cash balance at October 2, 1999 was $1,177 thousand compared to $1,499 thousand at December 26, 1998. In the first nine months of 1999 operations generated cash of $17 thousand. The Company consumed cash of $408 thousand by purchasing production equipment. These 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 $246 thousand at October 2, 1999 from $204 thousand at December 26, 1998. Raw material inventory increased to $111 thousand from $107 thousand, and work in process inventory increased to $135 thousand from $97 thousand over the same period. Accounts Receivable increased to $840 thousand at October 2, 1999 from $547 thousand at December 26, 1998. Shipments to customers increased towards the end of the third quarter resulting in an increase in accounts receivables. The Company financed its working capital requirements during the third fiscal quarter of 1999 with funds generated by operations. Management considers cash flow from operations and available cash to be adequate to meet its working capital requirements for the foreseeable future. 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 Companies does business. The Company has completed an assessment of its exposure in each of these three areas and has addressed the issues identified. The assessment indicated the area of greatest risk was in 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 and 1999, the Company purchased and installed new financial, accounting, and selected manufacturing computer systems which are Year 2000 compliant and which provide greater functionality. Regarding the second area, the Company has tested production and analytical equipment one machine at a time to determine where Year 2000 problems exist. The Company has purchased some new capital equipment which is Year 2000 compliant, to replace equipment which was not Year 2000 compliant and this equipment has been installed in an orderly manner without disrupting production. Based on its testing, the Company believes there are no remaining issues in this second area but there is no guarantee this will be the case. Regarding the third area the Company has qualified multiple vendors for all critical materials and has implemented an inventory policy the Company believes will reduce risk if vendors do have unanticipated short-term supply interruptions as the year 2000 begins. 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 11, 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 statments of Ceramics Process Systems Corporation and is qualified in its entirety by reference to such Form 10-Q for period ending October 2, 1999. 3-MOS JAN-01-2000 OCT-02-1999 1177316 0 840008 0 246588 2285434 987273 1145071 3277914 443784 0 0 0 12285969 0 3277914 1197188 1197188 1025218 1254214 0 0 0 56262 0 56262 0 0 0 56262 0.005 0.004
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