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| CVV > SEC Filings for CVV > Form 10-Q on 14-May-2009 | All Recent SEC Filings |
14-May-2009
Quarterly Report
Except for historical information contained herein, this "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include but are not limited to: competition in the Company's existing and potential future product lines of business; the Company's ability to obtain financing on acceptable terms if and when needed; uncertainty as to the Company's future profitability, uncertainty as to the future profitability of acquired businesses or product lines, uncertainty as to any future expansion of the Company. Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.
Results of Operations
Three Months Ended March 31, 2009 vs. Three Months Ended March 31, 2008
Revenue
Revenue for the three month period ended March 31, 2009 was approximately $3,985,000 as compared to $4,043,000 for the three month period ended March 31, 2008, a decrease of 1.4%. We attribute this decrease to delayed or reduced capital expenditures by potential customers as a result of the current economic conditions.
Gross Profit
The Company generated gross profits of approximately $1,027,000 resulting in a gross profit margin of 25.8%, for the three months ended March 31, 2009 as compared to gross profits of approximately $1,217,000 and a gross profit margin of 30.1%, for the three months ended March 31, 2008. The decrease in gross profit is primarily attributable to the prior addition of engineering and production personnel we hired to support the expansion of the Application Laboratory and new product development costs in the Nanomaterials, Energy, Solar and Semiconductor fields.
Selling and shipping expenses for the three months ended March 31, 2009 and 2008 were approximately $167,000 and $182,000, respectively, representing a decrease of 8.2% compared to the prior period. This decrease is primarily attributable to a decrease in sales commissions earned during the current period.
The Company incurred approximately $970,000 of general and administrative expenses during the three months ended March 31, 2009, compared to approximately $1,032,000 incurred during the three months ended March 31, 2008 representing a decrease of 6.0%. During the three months ended March 31, 2008, the Company incurred additional workers' compensation costs of approximately $168,000 as a result of a shortfall in a self-insured workers' compensation trust fund, that the Company was a member from January 2000 through March 2006. The Company, as all members are, is jointly and severally liable for the expenses and obligations of the Fund. Although the Company has not been notified that any additional funds are required, it continues to reserve additional amounts on a quarterly basis. This decrease as well as a decrease in stock-based compensation costs was partially offset by an increase in payroll and benefit costs and an increase in research and development expenses as a result of the expansion of our Application Laboratory which allows selected customers to bring up their process tools in our Application Laboratory and work together with our scientists and engineers to optimize process performance.
Operating Income
As a result of the foregoing factors, the Company incurred an operating loss for the three months ended March 31, 2009 of approximately $110,000 as compared with an operating profit of $3,000 for the three month period ended March 31, 2008.
Interest Expense, Net
Interest income for the three months ended March 31, 2009 was approximately $12,000 compared to approximately $38,000 for the three months ended March 31, 2008. This decrease is a result of the Company investing its cash in more conservative investments such as short-term Treasury Bonds and Certificates of Deposit, with lower returns than it previously received on Money Market Funds. Interest expense for the three months ended March 31, 2009 was $65,000 compared to approximately $41,000 for the three months ended March 31, 2008. The primary sources of this interest expense are for the mortgages on the three buildings that we own. The Company has also made some equipment purchases, utilizing $500,000 of its Revolving Credit Facility and converting such amounts into term loans as an additional source of interest expense.
For the three months ended March 31, 2009, the Company recorded no current income tax expense and realized deferred tax benefits of approximately $78,000. For the three months ended March 31, 2008 the Company recorded a current income tax expense of approximately $47,000 that was reduced by a deferred tax benefit of $58,000.
Net (Loss)/Income
The Company reported a net loss of approximately $86,000 for the three month period ended March 31, 2009 compared to net income of $19,000 for the same period in 2008.This decrease was primarily attributable to the lower gross margin percentage of 25.8% in the current year compared to 30.1% for the same period in 2008.
Liquidity and Capital Resources
As of March 31, 2009, the Company had aggregate working capital of approximately $9,677,000 and cash and cash equivalents of $5,561,000 compared to $9,849,000 and $5,721,000 at December 31, 2008, a decrease of $172,000 and $160,000, respectively. The decrease in cash and cash equivalents was primarily the result of the purchase of capital equipment ($110,000) and reduction of long-term debt ($85,000).
Accounts receivable, net as of March 31, 2009 was $2,211,000 compared to $2,643,000 as of December 31, 2008. This decrease is attributable to the timing of shipments and customer payments.
As of March 31, 2009 the Company's backlog was approximately $13,872,000, a decrease of $1,399,000 or 9.2% compared to $15,271,000 at December 31, 2008. Timing for completion of the backlog varies depending on the product mix and can be as long as two years. Included in the backlog are all accepted purchase orders with the exception of those that are included in percentage-of-completion. Order backlog is usually a reasonable management tool to indicate expected revenues and projected profits, however it does not provide an assurance of future achievement or profits as order cancellations or delays are possible.
The Company believes that based on its historical growth rate, its cash and cash equivalents position at March 31, 2009 and available credit facilities, the Company's funds at March 31, 2009 will be sufficient to meet its working capital and investment requirements for the next twelve months.
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