For the quarterly period ended September 30, 2011
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Commission File Number 1-11398
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New York
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11-2520310
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification Number)
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60 Heartland Blvd., Edgewood, NY
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11717
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(Address of principal executive offices)
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(zip code)
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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(Do not check if a smaller reporting company)
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Item 1 – Condensed Financial Statements
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3
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4
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5
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6
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14
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22
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22
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Part II - Other Information
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23
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24
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September 30,
2011 |
December 31,
2010 |
|||||||
ASSETS
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||||||||
Current Assets:
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||||||||
Cash
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$ | 353,377 | $ | 823,376 | ||||
Accounts receivable, net
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9,187,805 | 6,152,544 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
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65,466,840 | 47,165,166 | ||||||
Prepaid expenses and other current assets
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686,767 | 606,369 | ||||||
Total current assets
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75,694,789 | 54,747,455 | ||||||
Plant and equipment, net
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1,819,466 | 881,915 | ||||||
Deferred income taxes
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889,000 | 668,000 | ||||||
Other assets
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112,080 | 159,817 | ||||||
Total Assets
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$ | 78,515,335 | $ | 56,457,187 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY
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||||||||
Current Liabilities:
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||||||||
Accounts payable
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$ | 10,548,776 | $ | 8,267,330 | ||||
Accrued expenses
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362,945 | 301,941 | ||||||
Current portion of long-term debt
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882,291 | 685,008 | ||||||
Line of credit
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12,600,000 | 800,000 | ||||||
Income tax payable
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1,670,006 | 134,006 | ||||||
Deferred income taxes
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182,000 | 182,000 | ||||||
Total current liabilities
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26,246,018 | 10,370,285 | ||||||
Long-term debt, net of current portion
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1,029,070 | 1,190,097 | ||||||
Deferred income taxes | 30,000 | --- | ||||||
Other liabilities
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125,034 | 226,362 | ||||||
Total Liabilities
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27,430,122 | 11,786,744 | ||||||
Shareholders’ Equity:
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||||||||
Common stock - $.001 par value; authorized 50,000,000 shares, issued 7,048,570 and 6,911,570 shares, respectively, and outstanding 6,915,313 and 6,789,736 shares, respectively
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7,049 | 6,912 | ||||||
Additional paid-in capital
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35,084,963 | 33,272,237 | ||||||
Retained earnings
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17,161,831 | 12,417,924 | ||||||
Accumulated other comprehensive loss
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(28,404 | ) | (45,404 | ) | ||||
Treasury stock, 133,257 and 121,834 shares, respectively (at cost)
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(1,140,226 | ) | (981,226 | ) | ||||
Total Shareholders’ Equity
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51,085,213 | 44,670,443 | ||||||
Total Liabilities and Shareholders’ Equity
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$ | 78,515,335 | $ | 56,457,187 |
For the Three Months Ended
September 30, |
For the Nine Months Ended
September 30, |
|||||||||||||||
2011
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2010
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2011
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2010
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(Unaudited)
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(Unaudited)
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|||||||||||||||
Revenue
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$ | 16,607,638 | $ | 12,976,084 | $ | 50,043,470 | $ | 36,526,238 | ||||||||
Cost of sales
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12,440,033 | 9,593,671 | 37,780,959 | 27,043,414 | ||||||||||||
Gross profit
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4,167,605 | 3,382,413 | 12,262,511 | 9,482,824 | ||||||||||||
Selling, general and administrative expenses
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1,525,386 | 1,181,369 | 5,408,273 | 4,051,737 | ||||||||||||
Income from operations
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2,642,219 | 2,201,044 | 6,854,238 | 5,431,087 | ||||||||||||
Interest expense
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111,177 | 29,681 | 216,331 | 129,656 | ||||||||||||
Income before provision for income taxes
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2,531,042 | 2,171,363 | 6,637,907 | 5,301,431 | ||||||||||||
Provision for income taxes
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726,000 | 742,000 | 1,894,000 | 1,806,000 | ||||||||||||
Net income
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$ | 1,805,042 | $ | 1,429,363 | $ | 4,743,907 | $ | 3,495,431 | ||||||||
Income per common share – basic
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$ | 0.26 | $ | 0.21 | $ | 0.69 | $ | 0.54 | ||||||||
Income per common share – diluted
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$ | 0.25 | $ | 0.21 | $ | 0.66 | $ | 0.53 | ||||||||
Shares used in computing income per common share:
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Basic
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6,915,313 | 6,650,756 | 6,853,073 | 6,417,729 | ||||||||||||
Diluted
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7,158,715 | 6,972,156 | 7,138,081 | 6,641,159 |
For the Nine Months Ended September 30,
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2011
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2010
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||||||
(Unaudited)
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||||||||
Cash flows from operating activities:
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Net income
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$ | 4,743,907 | $ | 3,495,431 | ||||
Adjustments to reconcile net income to net cash used in operating activities:
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Depreciation and amortization
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380,895 | 271,941 | ||||||
Deferred rent
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(81,328 | ) | (3,624 | ) | ||||
Stock option expense
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963,913 | 528,643 | ||||||
Deferred portion of provision for income taxes
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(194,000 | ) | (171,000 | ) | ||||
Tax benefit of stock options
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(438,000 | ) | --- | |||||
Changes in operating assets and liabilities:
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(Increase) decrease in accounts receivable
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(3,035,261 | ) | 2,924,597 | |||||
Increase in costs and estimated earnings in excess of billings on uncompleted contracts
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(18,301,674 | ) | (9,879,977 | ) | ||||
Decrease (increase) in prepaid expenses and other assets
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(32,661 | ) | 51,267 | |||||
Increase in accounts payable and accrued expenses
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2,342,450 | 715,847 | ||||||
(Decrease) increase in income taxes payable
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1,974,000 | (299,368 | ) | |||||
Net cash used in operating activities
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(11,677,759 | ) | (2,366,243 | ) | ||||
Cash used in investing activities - purchase of plant and equipment
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(742,904 | ) | (144,807 | ) | ||||
Cash flows from financing activities:
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Payments on long-term debt
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(539,286 | ) | (506,925 | ) | ||||
Proceeds from line of credit
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11,800,000 | ---- | ||||||
Repayment of line of credit
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---- | (2,200,000 | ) | |||||
Proceeds from exercise of stock options
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251,950 | 112,500 | ||||||
Proceeds from sale of common stock
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---- | 3,531,870 | ||||||
Tax benefit of stock options
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438,000 | --- | ||||||
Net cash provided by financing activities
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11,950,664 | 937,445 | ||||||
Net decrease in cash
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(469,999 | ) | (1,573,605 | ) | ||||
Cash at beginning of period
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823,376 | 2,224,825 | ||||||
Cash at end of period
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$ | 353,377 | $ | 651,220 | ||||
Supplemental disclosures of cash flow information:
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Non-cash investing and financing activities:
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Settlement of other receivables
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---- | $ | 60,000 | |||||
Equipment acquired under capital lease
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$ | 575,542 | $ | 101,694 | ||||
Accrued expenses settled in exchange for common stock
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---- | $ | 99,697 | |||||
Cash paid during the period for:
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Interest
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$ | 220,203 | $ | 127,780 | ||||
Income taxes
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$ | 180,000 | $ | 2,276,367 |
2011
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2010
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Risk-free interest rate
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2.1% and 2.1%, respectively
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2.5% and 2.6%, respectively
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Expected volatility
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101% and 101%, respectively
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97% and 97%, respectively
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Dividend yield
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0%
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0%
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Expected option term
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5 years
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5 years
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Fixed Options
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Options
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Weighted
average
Exercise
Price
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Weighted
average
remaining
contractual
term (in years)
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Aggregate
Intrinsic
Value
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||||||||||||
Outstanding at beginning of period
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780,333 | $ | 6.68 | |||||||||||||
Granted
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80,000 | 14.90 | ||||||||||||||
Exercised
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(137,000 | ) | 3.00 | |||||||||||||
Outstanding and expected to vest, at end of period
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723,333 | $ | 8.28 | 2.82 | $ | 1,406,863 | ||||||||||
Vested at end of period
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708,333 | $ | 8.32 | 2.57 | $ | 1,264,696 |
September 30, 2011
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Carrying Amount
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Fair Value
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|||||||
Debt
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Short-term borrowings and long-term debt
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$ | 14,511,361 | $ | 14,511,361 |
December 31, 2010
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Carrying Amount
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Fair Value
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|||||||
Debt
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Short-term borrowings and long-term debt
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$ | 2,675,105 | $ | 2,675,105 |
Fair Value Measurements September 30, 2011
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Description
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Total
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Quoted Prices in Active Markets for Identical assets (Level 1)
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Significant Other Observable Inputs (Level 2)
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Significant Unobservable Inputs (Level 3)
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||||||||||||
Interest Rate Swap, net
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$ | 43,036 | -- | $ | 43,036 | -- | ||||||||||
Total
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$ | 43,036 | -- | $ | 43,036 | -- | ||||||||||
Fair Value Measurements December 31, 2010
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||||||||||||||||
Description
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Total
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Quoted Prices in Active Markets for Identical assets (Level 1)
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Significant Other Observable Inputs (Level 2)
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Significant Unobservable Inputs (Level 3)
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||||||||||||
Interest Rate Swap, net
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$ | 68,794 | -- | $ | 68,794 | -- | ||||||||||
Total
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$ | 68,794 | -- | $ | 68,794 | -- |
September 30, 2011
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U.S
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||||||||||||
Government
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Commercial
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Total
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Costs incurred on uncompleted Contracts
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$ | 101,948,169 | $ | 22,085,883 | $ | 124,034,052 | ||||||
Estimated earnings
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43,868,484 | 15,397,992 | 59,266,476 | |||||||||
Sub-total
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145,816,653 | 37,483,875 | 183,300,528 | |||||||||
Less billings to date
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95,339,902 | 22,493,786 | 117,883,688 | |||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
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$ | 50,476,751 | $ | 14,990,089 | $ | 65,466,840 |
December 31, 2010
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U.S
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|||||||||||||
Government
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Commercial
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Total
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Costs incurred on uncompleted contracts
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$ | 120,072,649 | $ | 33,521,525 | $ | 153,594,174 | |||||||
Estimated earnings
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51,712,912 | 17,647,006 | 69,359,918 | ||||||||||
Sub-total
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171,785,561 | 51,168,531 | 222,954,092 | ||||||||||
Less billings to date
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138,885,635 | 36,903,291 | 175,788,926 | ||||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts
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$ | 32,899,926 | $ | 14,265,240 | $ | 47,165,166 |
Twelve months ending September, 30
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||||
2012
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$ | 882,291 | ||
2013
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777,746 | |||
2014
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199,647 | |||
2015
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27,014 | |||
2016
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24,663 | |||
$ | 1,911,361 |
·
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The exercise of options, by Northrop Grumman Corporation (“NGC”) under a previously awarded purchase order for Outer Wing Panel (“OWP”) Kits for use in the manufacture of complete wings for the E-2D Hawkeye and the C-2A Greyhound aircraft. The new orders, valued at $11.2 million, increases the firm, funded requirements under this program to approximately $35.9 million. CPI Aero began work on OWP Kits in June 2008.
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·
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Authorization from Spirit AeroSystems, Inc. (“Spirit”) for work on wing leading edge assemblies for the Gulfstream G650 aircraft through production aircraft 98. Included in new contract awards is approximately $24.5 million for the Spirit program. In March 2008, Spirit and CPI Aero entered into a long term agreement to provide Spirit with leading edges for the wing of the Gulfstream G650 business jet. Spirit designs and manufactures the G650 wing for Gulfstream Aerospace Corporation.
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·
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An $2.85 million agreement to provide structural assemblies to Sikorsky Aircraft Corp. for use as spares for its BLACK HAWK(R) military helicopter.
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Section 302 Certification by Chief Executive Officer and President
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Section 302 Certification by Chief Financial Officer (Principal Accounting Officer)
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Section 906 Certification by Chief Executive Officer and Chief Financial Officer
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Exhibit 101
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The following financial information from CPI Aerostructures, Inc Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2011 formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Statements of Income, (ii) the condensed Balance Sheet, (iii) the Condensed Statements of Cash Flows, and (iv) the Notes to the Condensed Financial Statements.*
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CPI AEROSTRUCTURES, INC.
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Dated: November 9, 2011
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By.
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/s/ Edward J. Fred
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Edward J. Fred
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Chief Executive Officer and President
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Dated: November 9, 2011
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By.
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/s/ Vincent Palazzolo
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Vincent Palazzolo
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Chief Financial Officer (Principal Accounting Officer)
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1.
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I have reviewed this Quarterly Report on Form 10-Q of CPI Aerostructures, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s first fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: November 9, 2011
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||
By: |
/S/ Edward J. Fred
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Name:Edward J. Fred
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Title: Chief Executive Officer and President
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1.
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I have reviewed this Quarterly Report on Form 10-Q of CPI Aerostructures, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s first fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
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(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Date: November 9, 2011
|
||
By: |
/S/ Vincent Palazzolo
|
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Name:Vincent Palazzolo
|
||
Title: Chief Financial Officer
|
Date: November 9, 2011
|
||
By: |
/S/ Edward J. Fred
|
|
Name:Edward J. Fred
|
||
Title: Chief Executive Officer and President
|
Date: November 9, 2011
|
||
By: |
/S/ Vincent Palazzolo
|
|
Name:Vincent Palazzolo
|
||
Title: Chief Financial Officer
|
CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Shareholders' Equity | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 50,000,000 | 7,048,570 |
Common stock, Shares issued (in shares) | 6,911,570 | 6,911,570 |
Common stock, Shares outstanding (in shares) | 6,915,313 | 6,789,736 |
Treasury stock, shares (in shares) | 133,257 | 121,834 |
CONDENSED INCOME STATEMENTS (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
CONDENSED INCOME STATEMENTS [Abstract] | ||||
Revenue | $ 16,607,638 | $ 12,976,084 | $ 50,043,470 | $ 36,526,238 |
Cost of sales | 12,440,033 | 9,593,671 | 37,780,959 | 27,043,414 |
Gross profit | 4,167,605 | 3,382,413 | 12,262,511 | 9,482,824 |
Selling, general and administrative expenses | 1,525,386 | 1,181,369 | 5,408,273 | 4,051,737 |
Income from operations | 2,642,219 | 2,201,044 | 6,854,238 | 5,431,087 |
Interest expense | 111,177 | 29,681 | 216,331 | 129,656 |
Income before provision for income taxes | 2,531,042 | 2,171,363 | 6,637,907 | 5,301,431 |
Provision for income taxes | 726,000 | 742,000 | 1,894,000 | 1,806,000 |
Net income | $ 1,805,042 | $ 1,429,363 | $ 4,743,907 | $ 3,495,431 |
Income per common share - basic (in dollars per share) | $ 0.26 | $ 0.21 | $ 0.69 | $ 0.54 |
Income per common share - diluted (in dollars per share) | $ 0.25 | $ 0.21 | $ 0.66 | $ 0.53 |
Shares used in computing income per common share: | ||||
Basic (in share) | 6,915,313 | 6,650,756 | 6,853,073 | 6,417,729 |
Diluted (in share) | 7,158,715 | 6,972,156 | 7,138,801 | 6,641,159 |
Document And Entity Information (USD $) | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | Nov. 05, 2011 | Jun. 30, 2010 | |
Entity Registrant Name | CPI AEROSTRUCTURES INC | ||
Entity Central Index Key | 0000889348 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 54,255,159 | ||
Entity Common Stock, Shares Outstanding | 6,918,646 | ||
Document Fiscal Year Focus | 2011 | ||
Document Fiscal Period Focus | Q3 | ||
Document Type | 10-Q | ||
Amendment Flag | false | ||
Document Period End Date | Sep. 30, 2011 |
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LONG-TERM DEBT | 9 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||
LONG [Abstract] | ||||||||||||||||||||||||||||||||||||
LONG-TERM DEBT | 7. LONG-TERM DEBT On October 22, 2008, the Company obtained a $3.0 million term loan from Sovereign Bank to be amortized over five years (the “Sovereign Term Facility”). Prior to entering into the term loan, the Company had borrowed $2.5 million under the Sovereign Revolving Facility to fund the initial tooling costs related to a long-term contract award. The Company used the proceeds from the Sovereign Term Facility to repay the borrowings under the Sovereign Revolving Facility and to pay for additional tooling related to the long-term contract. The Sovereign Term Facility bears interest at LIBOR (0.22% at September 30, 2011) plus 2.5% and is secured by all of the assets of the Company. The terms and conditions of the Sovereign Revolving Facility are applicable to the Sovereign Term Facility. Additionally, the Company and Sovereign Bank entered into a five-year interest rate swap agreement, in the notional amount of $3 million. Under the interest rate swap, the Company pays an amount to Sovereign Bank representing interest on the notional amount at a rate of 5.8% and receives an amount from Sovereign representing interest on the notional amount at a rate equal to the one-month LIBOR. The effect of this interest rate swap will be the Company paying a fixed interest rate of 5.8% over the term of the Sovereign Term Facility. The maturities of long-term debt are as follows:
Also included in long-term debt are capital leases and notes payable of $611,361, including a current portion of $282,291. |
DERIVATIVE INSTRUMENTS AND FAIR VALUE | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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DERIVATIVE INSTRUMENTS AND FAIR VALUE [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS AND FAIR VALUE | 3. DERIVATIVE INSTRUMENTS AND FAIR VALUE Our use of derivative instruments has been to hedge interest rates. These derivative contracts are entered into with financial institutions. We do not use derivative instruments for trading purposes and we have procedures in place to monitor and control their use. We record these derivative financial instruments on the condensed balance sheets at fair value. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Any ineffective portion of the gain or loss on the derivative instrument for a cash flow hedge is recorded in the results of operations immediately. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in the results of operations immediately. See below for a discussion of our use of derivative instruments, management of credit risk inherent in derivative instruments and fair value information. In October 2008, the Company entered into an interest rate swap with the objective of reducing our exposure to cash flow volatility arising from interest rate fluctuations associated with certain debt. The notional amount, maturity date, and currency of these contracts match those of the underlying debt. The Company has designated this interest rate swap contract as a cash flow hedge. The Company measures ineffectiveness by comparing the cumulative change in the forward contact with the cumulative change in the hedged item. No material ineffectiveness was recognized in the quarter ended September 30, 2011. As of September 30, 2011 and December 31, 2010, we had a net deferred loss associated with cash flow hedges of approximately $43,000 and $69,000, respectively, due to the interest rate swap which has been included in Other Liabilities. As a result of the use of derivative instruments, the Company is exposed to risk that the counterparties may fail to meet their contractual obligations. Recent adverse developments in the global financial and credit markets could negatively impact the creditworthiness of our counterparties and cause one or more of our counterparties to fail to perform as expected. To mitigate the counterparty credit risk, we only enter into contracts with carefully selected major financial institutions based upon their credit ratings and other factors, and continually assess the creditworthiness of counterparties. To date, all counterparties have performed in accordance with their contractual obligations. Fair Value At September 30, 2011 and December 31, 2010, the fair values of cash, accounts receivable, accounts payable and accrued expenses approximated their carrying values because of the short-term nature of these instruments.
We estimated the fair value of debt using market quotes and calculations based on market rates. The following table presents the fair values of those financial liabilities measured on a recurring basis as of September 30, 2011 and December 31, 2010:
The fair value of the Company's interest rate swap was determined by comparing the fixed rate set at the inception of the transaction to the “replacement swap rate,” which represents the market rate for an offsetting interest rate swap with the same notional amounts and final maturity date. The market value is then determined by calculating the present value interest differential between the contractual swap and the replacement swap. As of September 30, 2011 and December 31, 2010, $43,036 and $68,794, respectively, was included in Other Liabilities related to the fair value of the Company's interest rate swap, and $28,404 and $45,404, respectively, net of tax of $14,632 and $23,390, was included in Other Comprehensive Income and Accumulated Other Comprehensive Loss. The change in unrealized gain (loss) from the Company's interest rate swaps of $17,000 and $(3,508) is included in other comprehensive income for the nine months ended September 30, 2011 and 2010, respectively. Comprehensive income was $1,707,774 and $1,429,178 for the three months ended September 30, 2011 and 2010, respectively. Comprehensive income was $4,657,907 and $3,491,923 for the nine months ended September 30, 2011 and 2010, respectively. |
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MAJOR CUSTOMERS | 9 Months Ended |
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Sep. 30, 2011 | |
MAJOR CUSTOMERS [Abstract] | |
MAJOR CUSTOMERS | 8. MAJOR CUSTOMERS During the nine months ended September 30, 2011, the Company's three largest commercial customers accounted for 31%, 30% and 13% of revenue, respectively. During the nine months ended September 30, 2010, the Company's three largest commercial customers accounted for 31%, 22% and 12% of revenue, respectively. 41%, 18,%, 16% and 14% of Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts at September 30, 2011 were from the Company's four largest commercial customers. 28%, 22,%, 19% and 10% of Cost and Estimated Earnings in Excess of Billings on Uncompleted Contracts at December 31, 2010 were from the Company's four largest commercial customers. In addition, during the nine months ended September 30, 2011 and 2010, 10% and 23%, respectively, of revenue was directly from the U.S. government. 7% and 16% of Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts at September 30, 2011 and December 31, 2010, respectively, were from the U.S. government. |
INTERIM FINANCIAL STATEMENTS | 9 Months Ended |
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Sep. 30, 2011 | |
INTERIM FINANCIAL STATEMENTS [Abstract] | |
INTERIM FINANCIAL STATEMENTS | 1. INTERIM FINANCIAL STATEMENTS The condensed financial statements of CPI Aerostructures, Inc. (the “Company”) as of September 30, 2011 and for the three and nine months ended September 30, 2011 and 2010 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. The condensed balance sheet at December 31, 2010 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. |
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS | 4. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS Costs and estimated earnings in excess of billings on uncompleted contracts consist of:
Revisions in the estimated gross profits on contracts and contract amounts are made in the period in which the circumstances requiring the revisions occur. During the nine months ended September 30, 2011 and 2010, the effect of such revisions in total estimated contract profits resulted in a decrease to the total gross profit to be earned on the contracts of approximately $2,600,000 and $2,400,000, respectively, from that which would have been reported had the revised estimates been used as the basis of recognition of contract profits in prior years. Although management believes it has established adequate procedures for estimating costs to complete on uncompleted open contracts, it is possible that additional significant costs could occur on contracts prior to completion. |
INCOME PER COMMON SHARE | 9 Months Ended |
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Sep. 30, 2011 | |
INCOME PER COMMON SHARE [Abstract] | |
INCOME PER COMMON SHARE | 5. INCOME PER COMMON SHARE Basic income per common share is computed using the weighted average number of shares outstanding. Diluted income per common share for the three and nine month period ended September 30, 2011 and 2010 is computed using the weighted-average number of shares outstanding adjusted for the incremental shares attributed to outstanding options to purchase common stock. Incremental shares of 643,333 were used in the calculation of diluted income per common share in the three and nine month period ended September 30, 2011. Incremental shares of 80,000 were not included in the diluted earnings per share calculations for the three and nine month period ended September 30, 2011 as their exercise price was in excess of the Company's average stock price for the respective period and, accordingly, these shares are not assumed to be exercised for the diluted earnings per share calculation, as they would be anti-dilutive. Incremental shares of 321,400 and 223,430 were used in the calculation of diluted income per common share in the three and nine month period ended September 30, 2010. Incremental shares of 75,000 and 100,000 were not included in the diluted earnings per share calculations for the three and nine month period ended September 30, 2010, respectively, as their exercise price was in excess of the Company's average stock price for the period and, accordingly, these shares are not assumed to be exercised for the diluted earnings per share calculation, as they would be anti-dilutive. |
LINE OF CREDIT | 9 Months Ended |
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Sep. 30, 2011 | |
LINE OF CREDIT [Abstract] | |
LINE OF CREDIT | 6. LINE OF CREDIT In August 2007, we entered into a revolving credit facility with Sovereign Bank (the “Sovereign Revolving Facility”), secured by all of our assets. On May 26, 2010, the Company and Sovereign Bank entered into a third amendment to the Sovereign Revolving Facility increasing the existing revolving credit facility under the Credit Agreement from an aggregate of $3.5 million to an aggregate of $4.0 million and extending the term of the revolving credit facility from August 2011 to August 2013. In addition, the interest rate on borrowings under the revolving credit facility was decreased to (i) the greater of 3.75% or 3.25% in excess of the LIBOR Rate or (ii) the greater of 3.75% or 0.50% in excess of Sovereign Bank's prime rate, as elected by the Company in accordance with the Credit Agreement. As of December 31, 2010, because of the change in estimate on six prime government contracts which resulted in approximately $7.2 million adjustment to revenue in the fourth quarter of 2010, the Company was not in compliance with the financial covenants contained in the credit agreement. Sovereign Bank has waived these covenants as of December 31, 2010. In addition, the credit agreement's computation for the Debt Service Coverage Ratio has been amended beginning in the first quarter of 2011 so that the change in estimate adjustment doesn't result in a covenant violation in future quarters. On May 10, 2011, the Company entered into a fifth amendment to its credit agreement with Sovereign Bank, increasing the existing revolving credit facility from an aggregate of $4 million to an aggregate of $10 million and extending the term from August 2013 to August 2014. In addition, the interest rate of borrowings under the revolving credit facility will no longer be subject to a minimum rate of 3.75%. On September 1, 2011, the Company entered into a sixth amendment to its credit agreement with Sovereign Bank, dated as of August 13, 2007, as amended as of October 22, 2008, July 7, 2009, May 21, 2010, March 14, 2011 and May 10, 2011 (the “Credit Agreement”), providing for a $3 million increase until November 30, 2011 of the existing revolving credit facility under the Credit Agreement, from an aggregate of $10 million to an aggregate of $13 million. The revolving credit facility bears interest at a rate of 3.75% per annum as of September 30, 2011. As of September 30, 2011, the Company was in compliance with all of the financial covenants, as amended, contained in the credit agreement and $12.6 million was outstanding under the Sovereign Revolving Facility. |
STOCK-BASED COMPENSATION | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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STOCK-BASED COMPENSATION [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION | 2. STOCK-BASED COMPENSATION The Company accounts for compensation expense associated with stock options based on the fair value of the options on the date of grant. The Company's net income for the three and nine months ended September 30, 2011 includes approximately $22,000 and $964,000, respectively, of non-cash compensation expense related to the Company's stock options. The Company's net income for the three and nine months ended September 30, 2010 includes approximately $32,000 and $529,000, respectively, of non-cash compensation expense related to the Company's stock options. The non-cash compensation expense related to all of the Company's stock-based compensation arrangements is recorded as a component of selling, general and administrative expenses. The estimated fair value of each option award granted was determined on the date of grant using the Black-Scholes option valuation model. The following weighted-average assumptions were used for the options granted during the three and nine months ended September 30, 2011 and 2010:
A summary of the status of the Company's stock option plans as of September 30, 2011 and changes during the nine months ended September 30, 2011 is as follows:
As of September 30, 2011, there was $43,000 of unrecognized compensation cost related to non-vested stock option awards which will be amortized through March 2012. Options to acquire 25,000 shares and 55,000 shares of common stock were granted on January 1, 2011 and April 1, 2011, respectively, to members of our board of directors as part of their normal compensation. During the nine months ended September 30, 2011, 117,000 stock options were exercised for cash resulting in proceeds to the Company of $251,950. During the same period an additional 20,000 options were exercised, pursuant to provisions of the stock option plan. The Company received no cash and 11,423 shares of its common stock in exchange for the 20,000 shares issued in the exercise. The 11,423 shares that the Company received were valued at $159,000, the fair market value of the shares on the date of exercise, and were added to treasury stock. The intrinsic value of all options exercised during the nine months ended September, 30, 2011 and 2010 was approximately $1,514,000 and $12,000, respectively. |