Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 04, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | CPI AEROSTRUCTURES INC | |
Entity Central Index Key | 889,348 | |
Document Type | 10-Q | |
Trading Symbol | CVU | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 8,736,114 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
CONDENSED BALANCE SHEETS (Unaud
CONDENSED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current Assets: | ||
Cash | $ 665,317 | $ 1,002,023 |
Accounts receivable, net of allowance for doubtful accounts of $470,748 as of September 30, 2016 and $75,000 as of December 31, 2015 | 9,004,826 | 7,665,837 |
Costs and estimated earnings in excess of billings on uncompleted contracts | 95,743,826 | 102,622,387 |
Prepaid expenses and other current assets | 2,655,376 | 1,065,473 |
Total current assets | 108,069,345 | 112,355,720 |
Plant and equipment, net | 2,362,655 | 2,358,736 |
Deferred income taxes | 5,351,000 | 1,890,000 |
Other assets | 204,240 | 108,080 |
Total Assets | 115,987,240 | 116,712,536 |
Current Liabilities: | ||
Accounts payable | 13,704,363 | 18,379,469 |
Accrued expenses | 1,056,659 | 1,057,682 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 830,746 | 175,438 |
Current portion of long-term debt | 1,092,237 | 1,011,491 |
Contract loss | 2,032,494 | 549,723 |
Line of credit | 21,938,685 | 23,700,000 |
Income tax payable | 24,876 | 189,000 |
Total current liabilities | 40,680,060 | 45,062,803 |
Long-term debt, net of current portion | 9,296,095 | 483,961 |
Other liabilities | 702,509 | 633,663 |
Total Liabilities | 50,678,664 | 46,180,427 |
Shareholders' Equity: | ||
Common stock - $.001 par value; authorized 50,000,000 shares, 8,722,569 and 8,583,511 shares, respectively, issued and outstanding | 8,722 | 8,584 |
Additional paid-in capital | 52,701,839 | 52,137,384 |
Retained earnings | 12,646,015 | 18,389,594 |
Accumulated other comprehensive loss | (48,000) | (3,453) |
Total Shareholders' Equity | 65,308,576 | 70,532,109 |
Total Liabilities and Shareholders' Equity | $ 115,987,240 | $ 116,712,536 |
CONDENSED BALANCE SHEETS (Unau3
CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 470,748 | $ 75,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 8,722,569 | 8,583,511 |
Common stock, outstanding | 8,722,569 | 8,583,511 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Income Statement [Abstract] | ||||
Revenue | $ 22,110,829 | $ 26,790,881 | $ 57,061,826 | $ 68,611,766 |
Cost of sales | 17,086,461 | 21,194,449 | 58,642,561 | 55,564,894 |
Gross profit (loss) | 5,024,368 | 5,596,432 | (1,580,735) | 13,046,872 |
Selling, general and administrative expenses | 2,014,147 | 1,898,965 | 6,603,321 | 5,968,123 |
Income (loss) from operations | 3,010,221 | 3,697,467 | (8,184,056) | 7,078,749 |
Interest expense | 338,156 | 218,382 | 937,523 | 703,436 |
Income (loss) before provision for (benefit from) income taxes | 2,672,065 | 3,479,085 | (9,121,579) | 6,375,313 |
Provision for (benefit from) income taxes | 986,000 | 1,033,000 | (3,378,000) | 2,011,000 |
Net income (loss) | 1,686,065 | 2,446,085 | (5,743,579) | 4,364,313 |
Other comprehensive income (loss) net of tax - Change in unrealized loss on interest rate swap | 25,936 | 1,382 | (44,547) | 3,906 |
Comprehensive income (loss) | $ 1,712,001 | $ 2,447,467 | $ (5,788,126) | $ 4,368,219 |
Income (loss) per common share - basic (in dollars per share) | $ 0.19 | $ 0.29 | $ (0.67) | $ 0.51 |
Income (loss) per common share - diluted (in dollars per share) | $ 0.19 | $ 0.28 | $ (0.67) | $ 0.51 |
Shares used in computing income (loss) per common share: | ||||
Basic (shares) | 8,678,608 | 8,564,417 | 8,628,716 | 8,544,475 |
Diluted (shares) | 8,692,420 | 8,625,308 | 8,628,716 | 8,613,316 |
CONDENSED STATEMENTS OF SHAREHO
CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Accumulated Other Comprehensive Loss [Member] | Total |
Balance, beginning at Dec. 31, 2014 | $ 8,501 | $ 51,440,770 | $ 13,373,601 | $ (9,716) | $ 64,813,156 |
Balance, beginning (in shares) at Dec. 31, 2014 | 8,500,555 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | 4,364,313 | 4,364,313 | |||
Change in unrealized loss from interest rate swap | 3,906 | 3,906 | |||
Common stock issued upon exercise of options | $ 26 | 79,974 | 80,000 | ||
Common stock issued upon exercise of options (in shares) | 25,352 | ||||
Tax benefit of stock option exercise | 33,000 | 33,000 | |||
Stock-based compensation expense | $ 37 | 491,464 | 491,501 | ||
Stock-based compensation expense (in shares) | 38,510 | ||||
Balance, ending at Sep. 30, 2015 | $ 8,564 | 52,045,208 | 17,737,914 | (5,810) | 69,785,876 |
Balance, ending (in shares) at Sep. 30, 2015 | 8,564,417 | ||||
Balance, beginning at Dec. 31, 2015 | $ 8,584 | 52,137,384 | 18,389,594 | (3,453) | $ 70,532,109 |
Balance, beginning (in shares) at Dec. 31, 2015 | 8,583,511 | 8,583,511 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Net income (loss) | (5,743,579) | $ (5,743,579) | |||
Loss on settlement and reclassification into earnings | 3,453 | 3,453 | |||
Change in unrealized loss from interest rate swap | (48,000) | (48,000) | |||
Stock-based compensation expense | $ 138 | 564,455 | 564,593 | ||
Stock-based compensation expense (in shares) | 139,058 | ||||
Balance, ending at Sep. 30, 2016 | $ 8,722 | $ 52,701,839 | $ 12,646,015 | $ (48,000) | $ 65,308,576 |
Balance, ending (in shares) at Sep. 30, 2016 | 8,722,569 | 8,722,569 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (5,743,579) | $ 4,364,313 |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 555,308 | 623,566 |
Deferred rent | 6,177 | 34,513 |
Stock-based compensation | 564,593 | 491,501 |
Bad debt expense | 395,748 | |
Deferred income taxes | (3,461,000) | 1,624,889 |
Tax benefit from stock option plans | (33,000) | |
Changes in operating assets and liabilities: | ||
Increase in accounts receivable | (1,734,738) | (2,262,043) |
(Increase) decrease in costs and estimated earnings in excess of billings on uncompleted contracts | 6,878,561 | (17,482,988) |
Increase in prepaid expenses and other assets | (1,589,903) | (81,290) |
Increase (decrease) in accounts payable and accrued expenses | (4,658,005) | 5,469,508 |
Increase (decrease) in billings in excess of costs and estimated earnings on uncompleted contracts | 655,308 | (80,535) |
Increase in accrued losses on uncompleted contracts | 1,482,771 | 594,182 |
Taxes refunded | 8,133,433 | |
Increase (decrease) in income taxes payable | (164,124) | 209,525 |
Net cash provided by (used in) operating activities | (6,812,883) | 1,605,574 |
Cash used in investing activities - purchase of plant and equipment | (93,754) | (126,953) |
Cash flows from financing activities: | ||
Payments on long-term debt | (1,514,899) | (752,994) |
Proceeds from long-term debt | 10,000,000 | |
Proceeds from line of credit | 28,638,685 | 8,200,000 |
Payments on line of credit | (30,400,000) | (8,650,000) |
Debt issue costs paid | (153,855) | |
Proceeds from exercise of stock options | 80,000 | |
Tax benefit from stock option plans | 33,000 | |
Net cash provided by (used in) financing activities | 6,569,931 | (1,089,994) |
Net increase (decrease) in cash | (336,706) | 388,627 |
Cash at beginning of period | 1,002,023 | 1,504,907 |
Cash at end of period | 665,317 | 1,893,534 |
Noncash investing and financing activities: | ||
Equipment acquired under capital lease | 465,472 | 116,184 |
Cash paid during the period for: | ||
Interest | 806,277 | 736,987 |
Income taxes | $ 260,027 | $ 29 |
INTERIM FINANCIAL STATEMENTS
INTERIM FINANCIAL STATEMENTS | 9 Months Ended |
Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
INTERIM FINANCIAL STATEMENTS | 1. INTERIM FINANCIAL STATEMENTS The condensed financial statements of CPI Aerostructures, Inc. (the “Company”) as of September 30, 2016 and for the three months and nine months ended September 30, 2016 and 2015 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). 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, 2015 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. All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected. Such adjustments are of a normal, recurring nature. 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, 2015. The results of operations for interim periods are not necessarily indicative of the operating results to be expected for the full year or any other interim period. The Company maintains its cash in four financial institutions. The balances are insured by the Federal Deposit Insurance Corporation. From time to time, the Company’s balances may exceed these limits. As of September 30, 2016, the Company had $536,000 of uninsured balances. The Company limits its credit risk by selecting financial institutions considered to be highly creditworthy. The Company predominantly recognizes revenue from contracts over the contractual period under the percentage-of-completion (“POC”) method of accounting. Under the POC method of accounting, sales and gross profit are recognized as work is performed based on the relationship between actual costs incurred and total estimated costs at the completion of the contract. Recognized revenues that will not be billed under the terms of the contract until a later date are recorded as an asset captioned “Costs and estimated earnings in excess of billings on uncompleted contracts.” Contracts where billings to date have exceeded recognized revenues are recorded as a liability captioned “Billings in excess of costs and estimated earnings on uncompleted contracts.” Changes to the original estimates may be required during the life of the contract. Estimates are reviewed monthly and the effect of any change in the estimated gross margin percentage for a contract is reflected in cost of sales in the period the change becomes known. The use of the POC method of accounting involves considerable use of estimates in determining revenues, costs and profits and in assigning the amounts to accounting periods. As a result, there can be a significant disparity between earnings (both for accounting and tax purposes) as reported and actual cash received during any reporting period. The Company continually evaluates all of the issues related to the assumptions, risks and uncertainties inherent with the application of the POC method of accounting; however, it cannot be assured that estimates will be accurate. If estimates are not accurate or a contract is terminated, the Company is required to adjust revenue in later periods. Furthermore, even if estimates are accurate, there may be a shortfall in cash flow and the Company may need to borrow money, or seek access to other forms of liquidity, to fund its work in process or to pay taxes until the reported earnings materialize as actual cash receipts. When changes are required for the estimated total revenue on a contract, these changes are recognized with an inception-to-date effect in the current period. Also, when estimates of total costs to be incurred exceed estimates of total revenue to be earned, a provision for the entire loss on the contract is recorded in the period in which the loss is determined. In June 2014, the Company concluded that the long-term future of the A-10 was uncertain when the U.S. Department of Defense released its 2015 Budget Request that called for the retirement of the entire A-10 fleet. In addition, the Company estimated that the A-10 program would be terminated prior to the completion of the Company’s orders, which was through ship set 173 instead of the expected 242 ship sets that the contract initially permitted. At that time the Company recorded a change in estimate which reduced the estimated revenue on the program to about 41% of the original estimate. The adjustment aggregated approximately $47.7 million. From June 2014 through December 2015 the Company revised estimates, based on the best available information each quarter, to properly account for the program. The Company’s estimate in March 2015 assumed that the program would be canceled at approximately 135 ship sets. In addition to revenue earned based on parts shipped, the Company would be entitled to compensation upon early termination of the program (“Termination Liability”) for certain costs incurred. The amount of Termination Liability varies based on exactly when the program is canceled and the amount of costs incurred through the date of termination. In June and September 2015, the Company estimated costs based on the best information available at each period and made adjustments as needed, including deferring certain costs based on the Termination Liability. During the three months ended March 31, 2016, and prior to the filing of the Company’s Form 10-K for the year ended December 31, 2015, the Company had information that the United States Air Force (“USAF”) was intending to increase the number of ship sets on order for the A-10. Because of the expectation that the USAF would increase its orders, the Company projected that its current order of A-l0 parts would not be cancelled before ship set 173. An increase in the number of ship sets on order would improve the Company’s estimated gross margin on the overall program. In the December 31, 2015 financial statements the Company did not adjust gross margin of the program for this potential order, as Company couldn’t determine if the realization of the new order was probable and that the improved margin would be realized. In April 2016, the Company became aware that the USAF had reevaluated its position and as such had deferred any decision regarding increasing the orders on the A-10 program. These changes in position by the USAF were supported by communications from Boeing, the Company’s customer. Based on the above facts, the Company believes that it is not probable that there will be any future orders on the A-10 beyond the 173 currently on order. As a result of the information that management became aware of in April 2016, for the quarter ended March 31, 2016 the Company estimated that the A-10 program would run through the conclusion of its current purchase order with Boeing at ship set number 173. There is no justification for the deferral of any expenses incurred or expected to be incurred related to the contract under POC or any authoritative guidance in GAAP, nor is there any justification of increasing estimated revenue on the program as the recovery of such amounts is not deemed probable. The change in estimate resulted in a reduction of revenue of approximately $8.9 million and an increase in cost of sales of approximately $4.6 million, for an aggregate charge of approximately $13.5 million in the quarter ended March 31, 2016. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (Topic 606) In April 2015, the FASB issued ASU 2015-03, “ Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | 2 stock-based compensation The Company accounts for compensation expense associated with stock options and restricted stock units (“RSUs”) based on the fair value of the options and units on the date of grant. The Company’s net income for the nine months ended September 30, 2016 and 2015 includes approximately $564,500 and $491,500, respectively, of non-cash compensation expense related to the Company’s stock compensation grants. On January 1, 2016, the Company granted 53,882 RSUs to its board of directors as partial compensation for the 2016 year. On January 1, 2015, the Company granted 51,349 RSUs to its board of directors as partial compensation for the 2015 year. RSUs granted to our board of directors vest straight line on a quarterly basis over a one year period. 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. On August 2, 2016, the Company granted a total of 98,645 shares of common stock to various employees. In the event that any of these employees voluntarily terminates his employment prior to certain dates, portions of the shares may be forfeited. In addition, if certain Company performance criterion are not achieved, portions of these shares may be forfeited. These shares will be expensed at various periods through March 2019 based upon the service and performance thresholds. For the three months ended September 30, 2016, approximately $60,700 of compensation expense is included in selling, general and administrative expenses and approximately $12,400 of compensation expense is included in cost of sales for this grant. The estimated fair value of each RSU and common share granted was determined based on the fair value of the Company’s common stock on the date of grant. A summary of the status of the Company’s stock option plans as of September 30, 2016 and changes during the nine months ended September 30, 2016 is as follows: Options Weighted Weighted Aggregate Outstanding at beginning of period 269,983 $ 11.29 Forfeited (55,000 ) 15.27 Outstanding and vested at end of period 214,983 $ 10.27 1.34 $ 11,850 During the nine months ended September 30, 2016, no stock options were granted or exercised. The intrinsic value of all options exercised during the nine months ended September 30, 2015 was approximately $230,500. |
DERIVATIVE INSTRUMENTS AND FAIR
DERIVATIVE INSTRUMENTS AND FAIR VALUE | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [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 a financial institution. 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. In March 2012, the Company entered into interest rate swaps 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 these interest rate swap contracts as cash flow hedges. The Company measures ineffectiveness by comparing the cumulative change in the forward contract with the cumulative change in the hedged item. The interest rate swap contract was terminated as of March 24, 2016. The Company paid approximately $4,000 at termination to settle the swap contract. In May 2016, the Company entered into a new 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 this contract 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. As of September 30, 2016, we had a net deferred loss associated with cash flow hedges of approximately $72,000 due to the interest rate swap, which was included in Other Liabilities. As of December 31, 2015, we had a net deferred loss associated with cash flow hedges of approximately $4,500 due to the interest rate swap, which was included in Other Liabilities. Fair Value At September 30, 2016 and December 31, 2015, 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. September 30, 2016 Carrying Amount Fair Value Debt Short-term borrowings and long-term debt $ 32,359,069 $ 32,359,069 December 31, 2015 Carrying Amount Fair Value Debt Short-term borrowings and long-term debt $ 25,195,452 $ 25,195,452 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, 2016 and December 31, 2015: Fair Value Measurements September 30, 2016 Description Total Quoted Prices Significant Significant Interest Rate Swap, net $ 72,000 — $ 72,000 — Total $ 72,000 — $ 72,000 — Fair Value Measurements December 31, 2015 Description Total Quoted Prices Significant Significant Interest Rate Swap, net $ 4,453 — $ 4,453 — Total $ 4,453 — $ 4,453 — 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 of the interest differential between the contractual swap and the replacement swap. |
COSTS AND ESTIMATED EARNINGS ON
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS | 9 Months Ended |
Sep. 30, 2016 | |
Contractors [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: September 30, 2016 U.S. Government Commercial Total Costs incurred on uncompleted Contracts $ 330,307,949 $ 146,911,809 $ 477,219,758 Estimated earnings 35,177,233 55,943,864 91,121,097 Sub-total 365,485,182 202,855,673 568,340,855 Less billings to date 318,086,991 155,340,784 473,427,775 Costs and estimated earnings in excess of billings on uncompleted contracts $ 47,398,191 $ 47,514,889 $ 94,913,080 December 31, 2015 U.S. Government Commercial Total Costs incurred on uncompleted Contracts $ 349,458,368 $ 123,078,356 $ 472,536,724 Estimated earnings 62,718,792 49,539,299 112,258,091 Sub-total 412,177,160 172,617,655 584,794,815 Less billings to date 353,601,903 128,745,963 482,347,866 Costs and estimated earnings in excess of billings on uncompleted contracts $ 58,575,257 $ 43,871,692 $ 102,446,949 The above amounts are included in the accompanying balance sheets under the following captions at September 30, 2016 and December 31, 2015: September 30, 2016 December 31, 2015 Costs and estimated earnings in excess of billings on uncompleted contracts $ 95,743,826 $ 102,622,387 Billings in excess of costs and estimated earnings on uncompleted contracts (830,746 ) (175,438 ) Totals $ 94,913,080 $ 102,446,949 U.S. Government Contracts includes contracts directly with the U.S. Government and Government subcontracts. 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, 2016, 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 $1,627,000 from that which would have been reported had the revised estimates been used as the basis of recognition of contract profits in prior years, excluding the effect of the A-10 contract. During the nine months ended September 30, 2015, the effect of such revisions was a decrease to total gross profit of approximately $333,000. Although management believes it has established adequate procedures for estimating costs to uncompleted open contracts, it is possible that additional significant costs could occur on contracts prior to completion. |
INCOME (LOSS) PER COMMON SHARE
INCOME (LOSS) PER COMMON SHARE | 9 Months Ended |
Sep. 30, 2016 | |
Earnings Per Share [Abstract] | |
INCOME (LOSS) PER COMMON SHARE | 5. income (Loss) PER COMMON SHARE Basic income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted income (loss) per common share for the nine month periods ended September 30, 2016 and 2015 is computed using the weighted-average number of common shares outstanding adjusted for the incremental shares attributed to outstanding options to purchase common stock, as well as unvested RSUs. Incremental shares of 48,469 were used in the calculation of diluted income per common share in the three months ended September 30, 2016. Incremental shares of 179,983 were not used in the calculation of diluted income per common share in the three month period ended September 30, 2016, 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. No incremental shares were used in the calculation of diluted income (loss) per common share in the nine month period ended September 30, 2016, as the effect of incremental shares would be anti-dilutive. Incremental shares of 97,839 were used in the calculation of diluted income per common share in the three months ended September 30, 2015. Incremental share of 235,649 were not used in the calculation of diluted income per common share in the three month period ended September 30, 2015, 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 142,056 were used in the calculation of diluted income per common share in the nine months ended September 30, 2015. Incremental shares of 165,766 were not used in the calculation of diluted income per common share in the nine month period ended September 30, 2015, 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. |
LINE OF CREDIT
LINE OF CREDIT | 9 Months Ended |
Sep. 30, 2016 | |
Line of Credit Facility [Abstract] | |
LINE OF CREDIT | 6. Line of credit On December 5, 2012, the Company entered into an Amended and Restated Credit Agreement (“Restated Agreement”) with Sovereign Bank, now called Santander Bank, N.A. (“Santander”), as the sole arranger, administrative agent and collateral agent, and Valley National Bank. The Restated Agreement provided for a revolving credit loan (“Revolving Facility”) commitment of $35 million. On March 24, 2016, the Company entered into a Credit Agreement with BankUnited, N.A. as the sole arranger, administrative agent and collateral agent, and Citizens Bank N.A. (the “BankUnited Facility”). The BankUnited Facility provides for a revolving credit loan commitment of $30 million (the “Revolving Loan”) and a $10 million term loan (“Term Loan”). The proceeds of the BankUnited Facility were used to pay off all amounts outstanding under the Santander Term Loan and the Revolving Facility. The Revolving Loan bears interest at a rate based upon a pricing grid, as defined in the agreement. On May 9, 2016, the Company entered into an amendment (the “Amendment”) to the BankUnited Facility. The Amendment changes the definition of EBITDA for the Leverage Coverage Ratio Covenant for the remainder of 2016 and changes the maximum leverage ratio from 3 to 1 to 3.5 to 1 for the quarters ending June 30, 2016 and September 30, 2016. Also, the Amendment increased the interest rate on the BankUnited Facility by 50 basis points and requires the repayment of a portion of the Term Loan if and to the extent that the Company receives any contract reimbursement payments from its current Request for Equitable Adjustment with Boeing on the A-10 program. As of September 30, 2016, the Company was in compliance with all of the financial covenants contained in the BankUnited Facility, as amended. As of September 30, 2016, the Company had $21.9 million outstanding under the Revolving Loan bearing interest at 4.25%. The BankUnited Facility is secured by all of our assets. |
LONG-TERM DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | 7. LONG-TERM DEBT On March 9, 2012, the Company obtained a $4.5 million term loan from Santander to be amortized over five years (the “Santander Term Facility”). The Santander Term Facility was used to purchase tooling and equipment for new programs. Additionally, the Company and Santander Bank entered into a five year interest rate swap agreement, in the notional amount of $4.5 million. Under the interest rate swap, the Company pays an amount to Santander Bank representing interest on the notional amount at a fixed rate of 4.11% and receives an amount from Santander Bank representing interest on the notional amount of a rate equal to the one-month LIBOR plus 3%. The effect of this interest rate swap was the Company paying a fixed interest rate of 4.11% over the term of the Santander Term Facility. The Santander interest rate swap agreement was terminated and the Santander Term Facility was paid off on March 24, 2016 using the proceeds from the BankUnited Facility (see Note 6). The Company paid approximately $154,000 of debt issuance costs of which approximately $96,000 is included in other current assets and $32,000 is a reduction of long-term debt. The Term Loan had an initial amount of $10 million, payable in monthly installments, as defined in the agreement, which matures on March 31, 2019. The maturities of the Term Loan are included in the maturities of long-term debt. The maturities of long-term debt (excluding unamortized debt issuance costs) are as follows : Twelve months ending September 30, 2017 $ 1,092,237 2018 1,863,842 2019 7,313,042 2020 119,490 Thereafter 31,774 $ 10,420,385 In addition to the Term Loan, included in long-term debt are capital leases and notes payable of $628,718, including a current portion of $175,570. |
MAJOR CUSTOMERS
MAJOR CUSTOMERS | 9 Months Ended |
Sep. 30, 2016 | |
Risks and Uncertainties [Abstract] | |
MAJOR CUSTOMERS | 8. MAJOR CUSTOMERS During the nine months ended September 30, 2016, the Company’s three largest commercial customers accounted for 35%, 30% and 13% of revenue, respectively. During the nine months ended September 30, 2015, the Company’s three largest commercial customers accounted for 22%, 19% and 18% of revenue, respectively. In addition, during the nine months ended September 30, 2016 and 2015, 1.12% and 0.84%, respectively, of revenue was directly from the U.S. Government. At September 30, 2016, 31%, 28%, 12% and 11% of Costs and Estimated Earnings in Excess of Billings on uncompleted Contracts were from the Company’s four largest commercial customers. At December 31, 2015, 26%, 23%, 13% and 11% of Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts were from the Company’s four largest commercial customers. At September 30, 2016 and December 31, 2015, 1.8% and 1.0%, respectively, of Costs and Estimated Earnings in Excess of Billings on Uncompleted Contracts were directly from the U.S. Government. At September 30, 2016, 34%, 25% and 20% of our accounts receivable were from our three largest commercial customers. At December 31, 2015, 30%, 18% and 16% of accounts receivable were from our three largest commercial customers. |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock options plans | A summary of the status of the Company’s stock option plans as of September 30, 2016 and changes during the nine months ended September 30, 2016 is as follows: Options Weighted Weighted Aggregate Outstanding at beginning of period 269,983 $ 11.29 Forfeited (55,000 ) 15.27 Outstanding and vested at end of period 214,983 $ 10.27 1.34 $ 11,850 |
DERIVATIVE INSTRUMENTS AND FA16
DERIVATIVE INSTRUMENTS AND FAIR VALUE (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of fair values | At September 30, 2016 and December 31, 2015, 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. September 30, 2016 Carrying Amount Fair Value Debt Short-term borrowings and long-term debt $ 32,359,069 $ 32,359,069 December 31, 2015 Carrying Amount Fair Value Debt Short-term borrowings and long-term debt $ 25,195,452 $ 25,195,452 |
Schedule of liabilities measured on recurring basis | The following table presents the fair values of those financial liabilities measured on a recurring basis as of September 30, 2016 and December 31, 2015: Fair Value Measurements September 30, 2016 Description Total Quoted Prices Significant Significant Interest Rate Swap, net $ 72,000 — $ 72,000 — Total $ 72,000 — $ 72,000 — Fair Value Measurements December 31, 2015 Description Total Quoted Prices Significant Significant Interest Rate Swap, net $ 4,453 — $ 4,453 — Total $ 4,453 — $ 4,453 — |
COSTS AND ESTIMATED EARNINGS 17
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Contractors [Abstract] | |
Schedule of costs and estimated earnings in excess of billings on uncompleted contracts | Costs and estimated earnings in excess of billings on uncompleted contracts consist of: September 30, 2016 U.S. Government Commercial Total Costs incurred on uncompleted Contracts $ 330,307,949 $ 146,911,809 $ 477,219,758 Estimated earnings 35,177,233 55,943,864 91,121,097 Sub-total 365,485,182 202,855,673 568,340,855 Less billings to date 318,086,991 155,340,784 473,427,775 Costs and estimated earnings in excess of billings on uncompleted contracts $ 47,398,191 $ 47,514,889 $ 94,913,080 December 31, 2015 U.S. Government Commercial Total Costs incurred on uncompleted Contracts $ 349,458,368 $ 123,078,356 $ 472,536,724 Estimated earnings 62,718,792 49,539,299 112,258,091 Sub-total 412,177,160 172,617,655 584,794,815 Less billings to date 353,601,903 128,745,963 482,347,866 Costs and estimated earnings in excess of billings on uncompleted contracts $ 58,575,257 $ 43,871,692 $ 102,446,949 The above amounts are included in the accompanying balance sheets under the following captions at September 30, 2016 and December 31, 2015: September 30, 2016 December 31, 2015 Costs and estimated earnings in excess of billings on uncompleted contracts $ 95,743,826 $ 102,622,387 Billings in excess of costs and estimated earnings on uncompleted contracts (830,746 ) (175,438 ) Totals $ 94,913,080 $ 102,446,949 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of maturities of long-term debt | The maturities of long-term debt (excluding unamortized debt issuance costs) are as follows : Twelve months ending September 30, 2017 $ 1,092,237 2018 1,863,842 2019 7,313,042 2020 119,490 Thereafter 31,774 $ 10,420,385 |
INTERIM FINANCIAL STATEMENTS (D
INTERIM FINANCIAL STATEMENTS (Details Narrative) | 9 Months Ended | 19 Months Ended |
Sep. 30, 2016USD ($)Number | Dec. 31, 2015USD ($) | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Number of financial institutions | Number | 4 | |
Cash, uninsured amount | $ 536,000 | |
Estimated revenue as compared to original (percentage) | 41.00% | |
Aggregate charge from change in sales contract | $ 13,500,000 | $ 47,700,000 |
Reduction in revenue | 8,900,000 | |
Change in cost of sales | $ 4,600,000 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | Aug. 02, 2016 | Jan. 02, 2016 | Jan. 02, 2015 | Sep. 30, 2016 | Sep. 30, 2016 | Sep. 30, 2015 |
Stock-based compensation | $ 564,593 | $ 491,501 | ||||
Stock option exercise intrinsic value | $ 230,500 | |||||
Restricted Stock Units (RSUs) [Member] | Director [Member] | ||||||
Restricted stock units granted | 53,882 | 51,349 | ||||
Vesting period | 1 year | 1 year | ||||
Employee Stock Option [Member] | Selling, General and Administrative Expenses [Member] | ||||||
Stock-based compensation | $ 60,700 | |||||
Employee Stock Option [Member] | Cost of Sales [Member] | ||||||
Stock-based compensation | $ 12,400 | |||||
Employee Stock Option [Member] | Employee [Member] | ||||||
Number of common shares granted | 98,645 |
STOCK-BASED COMPENSATION (Det21
STOCK-BASED COMPENSATION (Details) | 9 Months Ended |
Sep. 30, 2016USD ($)$ / sharesshares | |
Options, Outstanding [Roll Forward] | |
Outstanding at beginning | shares | 269,983 |
Forfeited | shares | (55,000) |
Outstanding and vested at end | shares | 214,983 |
Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |
Outstanding at beginning | $ / shares | $ 11.29 |
Forfeited | $ / shares | 15.27 |
Outstanding and vested at end | $ / shares | $ 10.27 |
Options, Weighted Average Remaining Contractual Term [Roll Forward] | |
Outstanding and vested at end | 1 year 4 months 2 days |
Options, Aggregate Intrinsic Value [Roll Forward] | |
Outstanding and vested at end | $ | $ 11,850 |
DERIVATIVE INSTRUMENTS AND FA22
DERIVATIVE INSTRUMENTS AND FAIR VALUE (Details Narrative) - Interest Rate Swap [Member] - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | Mar. 24, 2016 | |
Derivative contract termination amount paid | $ 4,000 | ||
Other Liabilities [Member] | |||
Cash flow hedges deferred loss, net | $ 72,000 | $ 4,500 |
DERIVATIVE INSTRUMENTS AND FA23
DERIVATIVE INSTRUMENTS AND FAIR VALUE (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Carrying Amount [Member] | ||
Short-term borrowings and long-term debt | $ 32,359,069 | $ 25,195,452 |
Fair Value [Member] | ||
Short-term borrowings and long-term debt | $ 32,359,069 | $ 25,195,452 |
DERIVATIVE INSTRUMENTS AND FA24
DERIVATIVE INSTRUMENTS AND FAIR VALUE (Details 1) - Recurring Basis [Member] - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Interest Rate Swap, net | $ 72,000 | $ 4,453 |
Total | 72,000 | 4,453 |
Significant Other Observable Inputs (Level 2) [Member] | ||
Interest Rate Swap, net | 72,000 | 4,453 |
Total | $ 72,000 | $ 4,453 |
COSTS AND ESTIMATED EARNINGS 25
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Contractors [Abstract] | ||
Decrease in gross profits due to change in contract estimates | $ 1,627,000 | $ 333,000 |
COSTS AND ESTIMATED EARNINGS 26
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Costs incurred on uncompleted Contracts | $ 477,219,758 | $ 472,536,724 |
Estimated earnings | 91,121,097 | 112,258,091 |
Sub-total | 568,340,855 | 584,794,815 |
Less billings to date | 473,427,775 | 482,347,866 |
Totals | 94,913,080 | 102,446,949 |
US Government [Member] | ||
Costs incurred on uncompleted Contracts | 330,307,949 | 349,458,368 |
Estimated earnings | 35,177,233 | 62,718,792 |
Sub-total | 365,485,182 | 412,177,160 |
Less billings to date | 318,086,991 | 353,601,903 |
Totals | 47,398,191 | 58,575,257 |
Commercial [Member] | ||
Costs incurred on uncompleted Contracts | 146,911,809 | 123,078,356 |
Estimated earnings | 55,943,864 | 49,539,299 |
Sub-total | 202,855,673 | 172,617,655 |
Less billings to date | 155,340,784 | 128,745,963 |
Totals | $ 47,514,889 | $ 43,871,692 |
COSTS AND ESTIMATED EARNINGS 27
COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS (Details 1) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Contractors [Abstract] | ||
Costs and estimated earnings in excess of billings on uncompleted contracts | $ 95,743,826 | $ 102,622,387 |
Billings in excess of costs and estimated earnings on uncompleted contracts | (830,746) | (175,438) |
Totals | $ 94,913,080 | $ 102,446,949 |
INCOME (LOSS) PER COMMON SHARE
INCOME (LOSS) PER COMMON SHARE (Details Narrative) - shares | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2015 | |
Earnings Per Share [Abstract] | |||
Incremental common shares attributable to dilutive effect of share-based payment arrangements | 48,469 | 97,839 | 142,056 |
Antidilutive securities excluded from computation of earnings per share, amount | 179,983 | 235,649 | 165,766 |
LINE OF CREDIT (Details Narrati
LINE OF CREDIT (Details Narrative) | May 09, 2016 | Mar. 24, 2016USD ($) | Sep. 30, 2016USD ($) | Dec. 31, 2015USD ($) | Dec. 05, 2012USD ($) |
Oustanding loans | $ 21,938,685 | $ 23,700,000 | |||
Bank United N.A. [Member] | Term Loan [Member] | |||||
Debt instrument, face amount | $ 10,000,000 | ||||
Revolving Credit Facility [Member] | Restated Agreement [Member] | |||||
Line of credit facility, maximum borrowing capacity | $ 35,000,000 | ||||
Revolving Credit Facility [Member] | Bank United [Member] | |||||
Line of credit facility, maximum borrowing capacity | $ 30,000,000 | ||||
Debt covenant, maximum leverage ratio | 3.5 | 3 | |||
Debt Instrument, interest rate, increase | 0.50% | ||||
Oustanding loans | $ 21,900,000 | ||||
Line of credit facility, interest rate at period end | 4.25% |
LONG-TERM DEBT (Details Narrati
LONG-TERM DEBT (Details Narrative) - USD ($) | Mar. 09, 2012 | Sep. 30, 2016 |
Payments of debt issuance costs | $ 153,855 | |
Debt issuance costs, current, net | 96,000 | |
Debt issuance costs, reduction of long-term debt | 32,000 | |
Capital lease and notes payable | 628,718 | |
Long-term debt and capital lease obligations, current | 175,570 | |
Santander Bank Term Facility [Member] | Term Loan [Member] | ||
Debt instrument, face amount | $ 4,500,000 | |
Period of amortization | 5 years | |
Santander Bank Term Facility [Member] | Original Term Loan [Member] | ||
Debt instrument, face amount | $ 10,000,000 | |
Santander Bank Term Facility [Member] | Interest Rate Swap [Member] | ||
Derivative, remaining maturity | 5 years | |
Derivative liability, notional amount | $ 4,500,000 | |
Derivative, swaption interest rate | 4.11% | |
Derivative, basis spread on variable rate | 3.00% |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) | Sep. 30, 2016USD ($) |
Twelve months ending September 30, | |
2,017 | $ 1,092,237 |
2,018 | 1,863,842 |
2,019 | 7,313,042 |
2,020 | 119,490 |
2,021 | 31,774 |
Total maturities | $ 10,420,385 |
MAJOR CUSTOMERS (Details Narrat
MAJOR CUSTOMERS (Details Narrative) - Number | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Concentration Risk [Line Items] | |||
Number of large customers contributed to revenue of entity | 3 | 3 | |
Number of large commercial customers accounted for major share in costs and estimated earnings in excess of billings on uncompleted contracts | 4 | 4 | |
Number of large customers included in accounts receivable of entity | 3 | 3 | |
Costs and Estimated Earnings in Excess of Billing - Customer #1 [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 31.00% | 26.00% | |
Costs and Estimated Earnings in Excess of Billing - Customer #2 [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 28.00% | 23.00% | |
Costs and Estimated Earnings in Excess of Billing - Customer #3 [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 12.00% | 13.00% | |
Costs and Estimated Earnings in Excess of Billing - Customer #4 [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 11.00% | 11.00% | |
Costs and Estimated Earnings in Excess of Billing - US Government [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 1.80% | ||
Costs and Estimated Earnings in Excess of Billing - US Government [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 1.00% | ||
Accounts Receivable Customer #1 [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 34.00% | 30.00% | |
Accounts Receivable Customer #2 [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 25.00% | 18.00% | |
Accounts Receivable Customer #3 [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 20.00% | 16.00% | |
Customer #1 Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 35.00% | 22.00% | |
Customer #2 Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 30.00% | 19.00% | |
Customer # 3 Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 13.00% | 18.00% | |
US Government Concentration Risk [Member] | |||
Concentration Risk [Line Items] | |||
Concentration risk, percentage | 1.12% | 0.84% |