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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period Commission File Number 1-11398
ended March 31, 1996
CPI AEROSTRUCTURES, INC.
(Exact Name of Small Business Issuer as Specified in its Character)
New York 11-2520310
--------------------------------- ------------------------------------
(State or Other Jurisdiction (IRS Employer Identification Number)
of Incorporation or Organization)
200A EXECUTIVE DRIVE, EDGEWOOD, NY 11717
(Address of Principal Executive Offices)
Telephone number (516) 586-5200
(Issuer's Telephone Number Including Area Code)
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 such period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- -----
The number of shares of common stock, par value $.001 per share, outstanding was
3,728,304 as of March 31, 1996.
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CPI AEROSTRUCTURES, INC.
INDEX
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Part I. Financial Information:
Item 1 - Financial Statements:
Balance Sheets as of March 31, 1996 (Unaudited) and
December 31, 1995
Statements of Income for the Three Months ended March 31, 1996
(Unaudited) and 1995 (Unaudited) 4
Statements of Cash Flows for the Three Months ended March 31, 1996
(Unaudited) and 1995 (Unaudited) 5
Notes to Financial Statements (Unaudited) 6-7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
Part II. Other
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures 11
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CPI AEROSTRUCTURES, INC.
BALANCE SHEETS
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<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
(Unaudited)
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 715,609 $ 998,517
Accounts receivable 1,699,301 1,565,048
Costs and estimated earnings in excess of billings on uncompleted 9,916,758 9,677,390
contracts (Note 2)
Other current assets 336,354 329,199
- - ----------------------------------------------------------------------------------------------------------------------
Total current assets 12,668,022 12,570,154
Property, Plant and Equipment, net 216,567 196,384
Deferred Income Taxes 113,000 113,000
Other Assets 60,486 75,519
- - ----------------------------------------------------------------------------------------------------------------------
Total Assets $13,058,075 $12,955,057
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,353,661 $ 1,160,285
Accrued expenses 190,674 260,288
Current portion of long-term debt 2,197,932 630,525
Deferred income taxes 445,000 445,000
- - ----------------------------------------------------------------------------------------------------------------------
Total current liabilities 4,187,267 2,496,098
Long-term Debt 1,541 1,730,229
- - ----------------------------------------------------------------------------------------------------------------------
Total liabilities 4,188,808 4,226,327
- - ----------------------------------------------------------------------------------------------------------------------
Commitments
Shareholders' Equity (Note 2):
Common stock - $.001 par value; authorized 10,000,000 shares,
$3,728,304 issued and outstanding 3,728 3,728
Additional paid-in capital 7,436,079 7,436,079
Retained earnings 1,429,460 1,288,923
- - ----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 8,869,267 8,728,730
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Total Liabilities and Shareholders' Equity $13,058,075 $12,955,057
======================================================================================================================
</TABLE>
See Notes to Financial Statements
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CPI AEROSTRUCTURES, INC.
STATEMENTS OF INCOME
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<TABLE>
<CAPTION>
1996 1995
For the Three Months Ended March 31, (Unaudited)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue $1,550,619 $1,283,037
Cost of sales 973,149 719,777
- - ----------------------------------------------------------------------------------------------------------------------
Gross profit 577,470 563,260
Selling, general and administrative expenses 334,375 328,471
- - ----------------------------------------------------------------------------------------------------------------------
Income from operations 243,095 234,789
- - ----------------------------------------------------------------------------------------------------------------------
Other (income) expense:
Interest income (30,021) (27,273)
Interest expense 57,579 108,927
- - ----------------------------------------------------------------------------------------------------------------------
Total other expenses, net 27,558 81,654
- - ----------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes 215,537 153,135
Provision for income taxes 75,000 65,000
- - ----------------------------------------------------------------------------------------------------------------------
Net income $ 140,537 $ 88,135
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Primary earnings per share: $ .04 $ .02
- - ----------------------------------------------------------------------------------------------------------------------
Net earnings $ .04 $ .02
- - ----------------------------------------------------------------------------------------------------------------------
Weighted average shares and common share equivalents outstanding 3,733,114 3,722,685
======================================================================================================================
</TABLE>
See Notes to Financial Statements
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CPI AEROSTRUCTURES, INC.
STATEMENTS OF CASH FLOWS
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<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1996 1995
(Unaudited)
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 140,537 $ 88,135
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 19,455 31,082
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (134,253) 747,245
(Increase) decrease in prepaid expenses and other current assets (7,155) 65,933
Increase in costs and estimated earnings in excess of billings on
uncompleted contracts (239,368) (625,044)
(Increase) decrease in other assets 15,033 (26,202)
Increase in accounts payable 193,376 29,366
Decrease in accrued expenses (69,614) (127,525)
Increase in income taxes payable - 65,000
- - ----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (81,989) 247,930
- - ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (39,638) --
- - ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (39,638) --
- - ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Long-term debt and officer note payments (161,281) (215,581)
Proceeds from exercise of stock options/warrants - 145,177
- - ----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (161,281) (73,404)
- - ----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash (282,908) 174,526
Cash at beginning of year 998,517 1,796,095
- - ----------------------------------------------------------------------------------------------------------------------
Cash at end of period $ 715,609 1,970,621
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 80,064 $ 152,879
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Income taxes $ 10,300 $ --
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</TABLE>
See Notes to Financial Statements
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CPI AEROSTRUCTURES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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1. INTERIM FINANCIAL STATEMENTS:
The financial statements as of March 31, 1996 and for the three months ended
March 31, 1996 and 1995 are unaudited, however, in the opinion of management
of the Company, reflect all adjustments (consisting solely of normal
recurring adjustments) necessary to present fairly the financial position of
the Company and the results of operations for such interim periods are not
necessarily indicative of the results to be obtained for a full year.
2. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED
CONTRACTS:
Costs and estimated earnings in excess of billings on uncompleted contracts
consist of:
<TABLE>
<CAPTION>
March 31, 1996
---------------------------------------------------------------------------------------
U.S.
Government Commercial Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Costs incurred on uncompleted
contracts $351,187 $20,478,662 $20,829,849
Estimated earnings 136,338 11,264,882 11,401,220
----------------------------------------------------------------------------------------
487,525 31,743,544 32,231,069
Less billings to date 289,853 22,024,458 22,314,311
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Costs and estimated earnings
in excess of billings on
uncompleted contracts $197,672 $9,719,086 $9,916,758
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December 31, 1995
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U.S.
Government Commercial Total
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Costs incurred on uncompleted
contracts $631,426 $19,738,969 $20,370,395
Estimated earnings 201,250 10,777,343 10,978,593
- - --------------------------------------------------------------------------------------------
832,676 30,516,312 31,348,988
Less billings to date 716,030 20,955,568 21,671,598
----------------------------------------------------------------------------------------
Costs and estimated earnings
in excess of billings on
uncompleted contracts $116,646 $9,560,744 $9,677,390
============================================================================================
</TABLE>
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CPI AEROSTRUCTURES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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3. EARNINGS PER COMMON SHARE:
The earnings per share calculations are computed by dividing net income,
increased by proforma reductions in interest expense (net of tax) resulting
from the assumed exercise of stock options and warrants and the resulting
assumed reduction of outstanding indebtedness, by the weighted average
number of common and common equivalent shares outstanding.
<PAGE>
CPI AEROSTRUCTURES, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Material Changes in Results of Operations
The Company's revenues for the three months ended March 31, 1996 were $1,550,619
compared to $1,283,037 for the same period last year, representing an increase
of $267,582, or 21%. This increase is due in part to an accelerated delivery
schedule of Apron assemblies which the Company builds for Rohr Industries, for
use on the MD-90 aircraft. Additionally, revenue from the Company's new military
contracts, which it was awarded in late 1995 has begun, as the Company commenced
deliveries of spare parts for the C-5 aircraft during the three months ended
March 31, 1996. It is anticipated that because of these new contracts, and
specifically the increased magnitude of the C-5 contract, the Company's revenues
should remain at a higher level than 1995. Commercial aircraft programs
represented 79% of total revenues for the three months ended March 31, 1996
compared to 95% for the same period in 1995.
The above statements discussed in this Report include forward looking statements
that involve risks and uncertainties, including the timely delivery and
acceptance of the Company's products and the other risks detailed from time to
time in the Company's SEC reports.
Gross profit increased by $14,210, or 3%, from the three months ended March 31,
1996 to the three months ended March 31, 1995. Gross profit as a percentage of
revenues for the three months ended March 31, 1996 was 37% compared to 44% for
the same period last year.
Selling, general, and administrative expenses increased by $5,904 or 2%, from
the three months ended March 31, 1995 to the three months ended March 31, 1996.
Interest expense decreased by $51,348, or 47%, for the three months ended March
31, 1996, primarily attributable to a reduction in debt to Chrysler Capital
Corporation, ("Chrysler") and the extinguishment of the Company's debt to Chase
Manhattan for the mortgage on its building, which was sold in December, 1995.
The resulting net income for the three months ended March 31, 1996, was $140,537
versus $88,135 for the same period last year. Earnings per share were $.04 for
the three months ended March 31, 1996, based upon the weighted average common
shares outstanding of 3,733,114 as compared to earnings per share of $.02 for
the three months ended March 31, 1995 based upon the weighted average common
shares outstanding of 3,722,685.
Material Changes in Financial Condition
At March 31, 1996 and December 31, 1995, the Company had working capital of
$8,498,755 and $10,074,056, respectively, a decrease of $1,575,301. This
decrease is primarily attributable to the reclassification of the Company's debt
to Chrysler from long term to short term, as the maturity date for this debt is
January 31, 1997. The Company has financed its working capital requirements
during the past three years through borrowings primarily from Chrysler, the
Company's initial public offering and subsequent warrant exercise, and operating
cash flow. Historically, a large portion of the Company's cash has been used for
costs and estimated earnings in excess of billings. Costs and estimated earnings
in excess of billings includes the aggregate of costs and related profit which
has been incurred and earned in performance of work for which the Company has
firm contracts, but has not yet been billed to the customer.
Costs and estimated earnings are recoverable upon shipment of products,
presentation of billings in accordance with contract terms or completion of a
contract.
<PAGE>
CPI AEROSTRUCTURES, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
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Net cash used in operating activities for the three months ended March 31, 1996
was $81,989. This decrease in cash was primarily the result of net income of
$140,537 and an increase in accounts receivable of $134,253 offset by an
increase in costs and estimated earnings in excess of billings of $239,368, and
an increase in accounts payable of $193,376. The Company's continued requirement
to incur significant costs in connection with commercial contracts in advance of
receipt of associated cash has caused the increase in costs and estimated
earnings in excess of billings on uncompleted contracts.
<PAGE>
CPI AEROSTRUCTURES, INC.
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ITEM 6. Exhibits and Reports on Form 8-K
a) No Exhibits
b) No reports on Form 8-K were filed with the Securities and
Exchange Commission during the three month period ended March
31, 1996.
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CPI AEROSTRUCTURES, INC.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
CPI AEROSTRUCTURES, INC.
Dated: May 10, 1996 By: /S/ Arthur August
-------------------------------------
Arthur August
President
(Principal Financial Officer)
Dated: May 10, 1996 By: /S/ Theodore J. Martines
-------------------------------------
Theodore J. Martines
Executive Vice President
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000889348
<NAME> CPI AEROSTRUCTURES, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 715,609
<SECURITIES> 0
<RECEIVABLES> 1,699,301
<ALLOWANCES> 0
<INVENTORY> 9,916,758
<CURRENT-ASSETS> 336,354
<PP&E> 515,866
<DEPRECIATION> 299,299
<TOTAL-ASSETS> 13,058,075
<CURRENT-LIABILITIES> 4,187,267
<BONDS> 0
0
0
<COMMON> 3,728
<OTHER-SE> 8,865,539
<TOTAL-LIABILITY-AND-EQUITY> 13,058,075
<SALES> 1,550,619
<TOTAL-REVENUES> 1,550,619
<CGS> 973,149
<TOTAL-COSTS> 973,149
<OTHER-EXPENSES> 334,375
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57,579
<INCOME-PRETAX> 215,537
<INCOME-TAX> 75,000
<INCOME-CONTINUING> 140,537
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140,537
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
