UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended March 31, 2001
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-16088
CERAMICS PROCESS SYSTEMS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 04-2832509
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
111 South Worcester Street, P.O. Box 338,
Chartley, Massachusetts 02712
(Address of Principal Executive Offices) (Zip Code)
Registrant`s Telephone Number, including Area Code:
(508) 222-0614
Former Name, Former Address and Former Fiscal Year if Changed
since Last Report:
Not Applicable.
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period than the registrant was required
to file such reports), and (2) has been subject to the filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer`s classes of common stock, as of the latest practicable
date. Number of shares of common stock outstanding as of March
31, 2001: 12,289,653.
CERAMICS PROCESS SYSTEMS CORPORATION
Form 10-Q
For The Fiscal Quarter Ended March 31, 2001
Index
PART I: FINANCIAL INFORMATION Page
Item 1: Consolidated Financial Statements
Consolidated Balance Sheets as of
March 31, 2001 and December 30, 2000
(unaudited) 3
Consolidated Statements of Operations
for the fiscal quarters ended
March 31, 2001 and April 1, 2000
(unaudited) 5
Consolidated Statements of Cash Flows
for the fiscal quarters ended March
31, 2001 and April 1, 2000 (unaudited) 6
Notes to Consolidated Financial
Statements 7
Item 2: Management`s Discussion and Analysis
of Financial Condition and Results of
Operations 9
PART II: OTHER INFORMATION
Items 1-6 11
Signatures 11
PART I FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets
(Unaudited)
March 31, December 30,
2001 2000
ASSETS ------------ ------------
Current assets:
Cash and cash equivalents $313,707 $672,391
Net accounts receivable (net of
allowance for doubtful accounts of
$12,585 and $0 at March 31, 2001
and December 30, 2000 respectively) 686,595 800,223
Inventories 642,591 567,132
Prepaid expenses 44,826 5,142
------------ ------------
Total current assets 1,687,719 2,044,888
Property and equipment:
Production equipment 1,953,821 1,880,486
Furniture and office equipment 188,010 188,010
Accumulated depreciation (1,112,540) (1,029,006)
and amortization
------------ ------------
Net property and equipment 1,029,291 1,039,490
------------ ------------
Total Assets $2,717,010 $3,084,378
============ ============
See accompanying notes to consolidated financial statements.
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Balance Sheets (unaudited)
(continued)
March 31, December 30,
LIABILITIES AND STOCKHOLDERS' 2001 2000
EQUITY ------------ ------------
Current liabilities:
Accounts payable $244,893 $299,656
Accrued expenses 179,567 144,440
Deferred revenue 9,884 9,884
Current portion of obligations
under capital leases 46,244 52,061
------------ ------------
Total current liabilities 480,588 506,041
Deferred revenue 124,000 124,000
Obligations under capital
leases less current portion 12,695 20,762
------------ ------------
Total liabilities 617,283 650,803
------------ ------------
Stockholders' Equity
Common stock, $0.01 par value.
Authorized 15,000,000 shares;
issued 12,314,102
and 12,310,352 shares
at March 31,2001 and
December 30, 2000 respectively. 123,141 123,104
Additional paid-in capital 32,657,246 32,656,608
Accumulated deficit (30,619,825) (30,285,302)
Less treasury stock, at cost,
22,883 common shares at March 31,
2001 and December 30, 2000 (60,835) (60,835)
------------ ------------
Total stockholders' equity 2,099,727 2,433,575
------------ ------------
Total liabilities and stockholders'
equity $2,717,010 $3,084,378
============ ============
See accompanying notes to consolidated financial statements.
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Operations
(Unaudited)
Fiscal Quarters Ended
March 31, April 1,
2001 2000
Total Revenue $964,579 $1,354,459
Operating expenses:
Cost of product sales 991,141 1,027,710
Selling, general, and
administrative 312,482 232,811
------------- -------------
Total operating expenses 1,303,623 1,260,521
------------- -------------
Operating income (loss) (339,044) 93,938
Other income, net 4,521 14,963
------------- -------------
Net income (loss) before taxes (334,523) 108,901
Net income (loss) (334,523) 108,901
============= =============
Net income (loss) per
basic common share $(0.03) 0.01
------------- -------------
Weighted average number of
basic common shares
outstanding 12,289,653 12,286,178
============= =============
Net income (loss) per
diluted common share $(0.03) 0.01
============= =============
Weighted average number of
diluted common shares
outstanding 12,289,653 12,581,786
============= =============
See accompanying notes to consolidated financial statements.
CERAMICS PROCESS SYSTEMS CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
Fiscal Quarters Ended
March 31, April 1,
2001 2000
------------- -------------
Cash flows from operating activities:
Net income (loss) $(334,523) $108,901
Adjustments to reconcile net income
(loss) to cash used in operating
activities:
Depreciation & amortization 83,534 55,257
Allowance for doubtful accounts 12,585 -
Changes in assets and liabilities
Accounts receivable 101,043 (124,093)
Inventories (75,459) (145,136)
Prepaid expenses (39,684) (13,059)
Accounts payable (54,763) 75,072
Accrued expenses 35,127 34,938
------------- -------------
Net cash used in operating
activities (272,140) (8,120)
------------- -------------
Cash flows from investing activities:
Purchases of property and equipment (73,335) (112,295)
Disposal of property and equipment - 94,065
Sale of marketable securities - 306,672
------------- -------------
Net cash provided by (used in)
investing activities (73,335) 288,442
------------- -------------
Cash flows from financing activities:
Payment of capital lease obligations (13,884) (12,544)
Proceeds from issuance of common
stock 675 180
------------- -------------
Net cash used in
financing activities (13,209) (12,364)
------------- -------------
Net increase (decrease) in cash (358,684) 267,958
Cash at beginning of period 672,391 1,033,522
------------- -------------
Cash at end of period $313,707 $1,301,480
============= =============
See accompanying notes to consolidated financial statements.
CERAMICS PROCESS SYSTEMS CORPORATION
Notes to Consolidated Financial Statement
(Unaudited)
(1) Nature of Business
- ------------------
Ceramics Process Systems Corporation (the `Company` or `CPS`) serves
the wireless communications infrastructure market, high-performance
microprocessor market, motor controller market, and other microelectronic
markets by developing, manufacturing, and marketing advanced metal-matrix
composite components to house, interconnect and thermally manage
microelectronic devices. The Company's products are typically in the
form of housings, packages, lids, substrates, thermal planes, or heat
sinks, and are used in applications where thermal management and/or
weight are important considerations.
The Company`s products are manufactured by proprietary processes the
Company has developed including the QuicksetTM Injection Molding Process
(`Quickset Process`) and the QuickCastTM Pressure Infiltration Process
(`QuickCast Process`).
The Company was incorporated on June 19, 1984.
(2) Interim Consolidated Financial Statements
-----------------------------------------
As permitted by the rules of the Securities and Exchange Commission
applicable to quarterly reports on Form 10-Q, these notes are condensed and
do not contain all disclosures required by generally accepted accounting
principles.
The accompanying financial statements for the fiscal quarters ended
March 31, 2001 and April 1, 2000 are unaudited. In the opinion of
management,the unaudited consolidated financial statements of CPS reflect
all adjustments necessary to present fairly the financial position and
results of operations for such periods.
The consolidated financial statements include the accounts of CPS
and its wholly-owned subsidiary, CPS Superconductor Corporation. All
significant intercompany balances and transactions have been eliminated.
The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year.
(3) Net Income (Loss) Per Common and Common Equivalent Share
- ------------------------------------------------------
Basic EPS excludes the effect of any dilutive options, warrants
or convertible securities and is computed by dividing net income (loss)
by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity. Diluted EPS is computed
by dividing net income (loss) by the sum of the weighted average number
of common shares and common share equivalents computed using the average
market price for the period under the treasury stock method
requirements.
The following table presents the calculation of both basic and
diluted EPS:
For the periods ended
March 31, April 1,
2001 2000
(Unaudited) (Unaudited)
----------- -----------
Basic EPS Computation:
Numerator:
Net income (loss) ($334,523) $108,901
Denominator:
Weighted average
common shares
outstanding 12,289,653 12,286,178
Basic EPS ($0.03) $0.01
Diluted EPS Computation:
Numerator:
Net income (loss) ($334,523) $108,901
Denominator:
Weighted average common
shares outstanding 12,289,653 12,286,178
Stock options 295,608
---------- ---------
Total Shares 12,289,653 12,581,786
Diluted EPS ($0.03) $0.01
The common stock equivalents of the Company consist of stock options.
The Company was in a net loss position at March 31, 2001; therefore,
common stock equivalents were not used to compute diluted loss per share
since the effect would have been antidilutive. Options to purchase
779,603 shares of common stock at a weighted-average price of $0.98, were
outstanding at March 31, 2001. As of April 1, 2000 the Company had 59,500
securities in the form of options to purchase common stock that were
antidilutive.
(4) Inventory
---------
Inventories consist of the following:
March 31, Dec 30,
2001 2000
--------- ----------
Raw materials $ 47,386 $ 89,047
Work in process 248,542 262,313
Finished goods 346,663 215,772
--------- ----------
$ 642,591 $ 567,132
========= ==========
(5) Accrued Expenses
- ----------------
Accrued expenses consist of the following:
March 31, December 30,
2001 2000
--------- ----------
Accrued legal and
accounting $ 16,902 $ 37,500
Accrued payroll 118,768 49,336
Accrued other 43,897 57,604
--------- ----------
$ 179,567 $ 144,440
========= ==========
ITEM 2 MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements
that involve a number of risks and uncertainties. There are a number of
factors that could cause the Company`s actual results to differ materially
from those forecasted or projected in such forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date hereof. The Company undertakes
no obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or changed
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Results of Operations: First Quarter of 2001 Compared to First Quarter of
2000.
- ---------------------
The Company entered the first quarter of 2001 with staffing and expense
levels appropriate to support customer forecasts which were slightly above
fourth quarter 2000 revenues. As the quarter progressed demand dropped
below customer forecasts as customers delayed shipment releases; few orders
were cancelled outright. Demand in the first month of the quarter was near
forecast, but in subsequent months fell increasingly below forecast. As a
result, first quarter 2001 revenues were 29% lower than the same period a
year ago. Despite lower product shipments, the Company continued to
receive and fulfill prototype and evaluation orders for new products during
the first quarter.
In March 2001 management concluded that demand would remain weak, at least
through the second quarter of 2001 and that it was necessary to reduce
costs in the Company to a level consistent with lower levels of demand in the
short-term. Cost reduction actions taken near the end of the first quarter
included reducing employment levels, particularly in manufacturing, and
placing tighter controls on expenses. In addition, budgeted capital
expenditures were reduced to conserve cash. These actions were completed
by the end of the first quarter so their effects will be seen in the second
quarter and beyond. The first quarter loss of $335 thousand results
primarily from lower demand than forecast, resulting in inefficiencies from
lower utilization levels. Severance costs also contributed to the loss.
Gross margins were negative during the first quarter at (3%) of
revenues compared to positive margins of 24% of revenues in the same period
a year ago primarily as a result of low labor utilization in our
manufacturing operations.
Sales, General and Administrative expenses (SG&A) increased to $312
thousand in the first quarter of 2001 from $233 thousand in the first
fiscal quarter of 2000 primarily as a result of a higher staffing level
in sales and severance costs incurred in connection with headcount
reductions initiated near the end of the first quarter.
Total operating expenses in the first quarter of 2001 were $1,304
thousand, a 3% increase over operating expenses in the first quarter of
2000 of $1,261 thousand. The increase was primarily the result of a 4%
increase in direct labor costs partially offset by a decrease in
material costs.
Other income decreased to $5 thousand in the first quarter of 2001
compared to $15 thousand in the first fiscal quarter of 2000 primarily
as a result of lower interest income.
The cumulative effect of these revenues and costs resulted in a net
loss of $335 thousand or ($0.03) per basic and dilutive common share in
the first quarter of 2001 versus net income of $109 thousand, or $0.01
per basic and dilutive common share, in the first fiscal quarter of 2000.
Liquidity
- -------------------
The Company`s cash balance and cash equivalents at March 31, 2001
was $314 thousand compared to cash balance and cash equivalents at
December 30, 2000 of $672 thousand, a decrease of 53%.
Accounts receivable declined to $687 thousand at March 31, 2001 from
$800 thousand at December 30, 2000. This change reflects lower shipments
in March 2001 compared with December 2000 and an allowance for doubtful
accounts of $13 thousand as of March 31, 2001.
Inventory increased to $642 thousand at the end of the first fiscal
quarter of 2000 from $567 thousand at December 30, 2000. The higher
inventory level primarily results from customers delaying shipment
releases. The Company builds product to meet specific demand, however,
customers frequently modify desired shipment timing with little notice.
In the first quarter of 2001 the Company purchased $73 thousand of
production equipment.
The Company financed its working capital during the first fiscal
quarter of 2001 with funds generated by operations and existing cash
balances. The Company expects it will continue to be able to fund its
working capital requirements for the remainder of 2001 from its existing
cash balance and from funds generated by operations.
The Company continues to sell to a limited number of customers and
loss of any one of these customers could cause the Company to require
external financing. Failure to generate sufficient revenues, raise
additional capital or reduce certain discretionary spending could have a
material adverse effect on the Company's ability to achieve its business
objectives.
PART II OTHER INFORMATION
Item 1 through Item 5: None
Item 6: Exhibits and Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Ceramics Process Systems Corporation
(Registrant)
Date: May 14, 2001 /s/Grant C. Bennett
Grant C. Bennett
President and Treasurer
(Principal Executive
Officer)