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CVV > SEC Filings for CVV > Form 10-Q on 15-May-2014All Recent SEC Filings

Show all filings for CVD EQUIPMENT CORP

Form 10-Q for CVD EQUIPMENT CORP


15-May-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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. Past results are no guaranty of future performance.

Results of Operations

Three Months Ended March 31, 2014 vs. Three Months Ended March 31, 2013

Revenue

Revenue for the three month period ended March 31, 2014 was approximately $4,385,000 as compared to $3,450,000 for the three month period ended March 31, 2013, an increase of 27.1 %. The increase is directly attributable to the work performed on the increased orders received at the end of 2013 and the first three months of 2014. During the three months ended March 31, 2014, we received approximately $15,725,000 in new orders, compared to the approximately $3,174,000 in new orders we received during the three months ended March 31, 2013, an increase of 395.4%. Our backlog levels increased to approximately $15,257,000 as of March 31, 2014. Timing for completion of the backlog varies depending on the product mix and can be as long as two years, and does not provide an assurance of future achievement of revenues or profits as order cancellations or delays are possible.

Gross Profit

We generated a gross profit of approximately $1,783,000, resulting in a gross profit margin of 40.7%, for the three months ended March 31, 2014 as compared to gross profits of approximately $787,000 and a gross profit margin of 22.8%, for the three months ended March 31, 2013. The increased gross margin we are now experiencing is a result of the increased efficiencies of working in our new facility.


Selling, General and Administrative Expenses

Selling and shipping expenses for the three months ended March 31, 2014 and 2013 were approximately $358,000 and $244,000, respectively, representing an increase of 46.7% compared to the prior period. This increase can be primarily attributed to the increase in personnel during the current period.

We incurred approximately $1,475,000 of general and administrative expenses during the three months ended March 31, 2014, compared to approximately $1,413,000 incurred during the three months ended March 31, 2013, representing an increase of 4.4%. This increase is primarily attributable to the increase administrative personnel and related costs during the current period.

Operating Loss

As a result of the foregoing factors, primarily the increased revenue and higher gross margins, we reduced our loss from operations to approximately ($50,000) for the three months ended March 31, 2014 compared to a loss from operations of approximately ($870,000) for the three months ended March 31, 2013.

Interest Expense, Net

Interest income for the three months ended March 31, 2014 was approximately $6,000 compared to approximately $8,000 for the three months ended March 31, 2013. Interest expense for the three months ended March 31, 2014 was approximately $29,000 compared to approximately $53,000 for the three months ended March 31, 2013. The decrease is a result of having paid off the mortgage held by G.E. Capital when we sold the building and property of our prior headquarters in April, 2013.

Income Taxes

For the three months ended March 31, 2014 and the three months ended March 31, 2013, there was no current income tax expense. In March of 2014, New York State eliminated the state income tax for qualified manufacturing companies such as
CVD. Due to this change in tax law, the Company was required to write off state-level deferred tax assets of $381,000 which would have been used to offset future taxes payable to New York State. As a result we incurred net income tax expense of $219,000 for the three months ended March 31, 2014 compared to a deferred tax benefit of $462,000 for the three months ended March 31, 2013. This deferred tax benefit primarily resulted from the earnings of research and development credits, the different treatment of stock based compensation for financial statement and tax purposes and future benefit related to periodic net operating losses

Net Loss

As a result of the foregoing factors, for the three months ended March 31, 2014, we reported a net loss of approximately ($268,000) compared to net loss of approximately ($440,000) for the three months ended March 31, 2013.


Liquidity and Capital Resources

As of March 31, 2014, we had aggregate working capital of approximately $18,458,000 compared to $18,444,000 at December 31, 2013, an increase of $14,000, and cash and cash equivalents of $11,969,000, compared to $11,248,000 at December 31, 2013, an increase of $721,000. The increase in working capital and cash and cash equivalents was primarily a result of the timing of both shipments and customer payments on outstanding balances.

Accounts receivable, net, as of March 31, 2014 was approximately $1,958,000 compared to $2,883,000 as of December 31, 2013. This decrease is primarily attributable to the timing of shipments and customer payments.

On April 5, 2013, we closed on the sale of our former corporate headquarters located at 1860 Smithtown Avenue, Ronkonkoma, New York. The selling price for the premises was $3,875,000, exclusive of closing costs.

We believe we have a sufficient amount of cash on hand and cash flows from operations to meet our working capital and investment requirements for the next twelve months.

We may also raise additional funds in the event we determine in the future to effect one or more acquisitions of businesses, technologies or products. In addition, we may elect to raise additional funds even before we need them if the conditions for raising capital are favorable. Any equity or equity-linked financing could be dilutive to existing shareholders.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements at this time.

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