<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period Commission File Number 1-11398
ended March 31, 1997
CPI AEROSTRUCTURES, INC.
Incorporated under the laws 11-2520310
of the State of New York (I.R.S. Employer Identification Number)
200 A EXECUTIVE DRIVE, EDGEWOOD, NY 11717
Telephone number (516) 586-5200
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 5,876,710 as of March 31, 1997.
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CPI AEROSTRUCTURES, INC.
INDEX
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<TABLE>
<CAPTION>
Part I. Financial Information:
Item 1 - Financial Statements:
<S> <C> <C>
Balance Sheets as of March 31, 1997 (Unaudited) and 3
December 31, 1996
Statements of Income for the Three Months ended March 31, 1997 (Unaudited) 4
and 1996 (Unaudited)
Statements of Cash Flows for the Three Months ended March 31, 1997 (Unaudited) 5
and 1996 (Unaudited)
Notes to Financial Statements (Unaudited) 6-7
Item 2 - Management's Discussion and Analysis of Financial Condition 8-9
and Results of Operations
Part II. Other
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
2
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CPI AEROSTRUCTURES, INC.
BALANCE SHEETS
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<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(Unaudited)
- -------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 589,859 $ 899,798
Accounts receivable 1,338,012 248,838
Costs and estimated earnings in excess of billings on uncompleted 11,753,141 11,706,261
contracts (Note 2)
Other current assets 57,658 80,743
- -------------------------------------------------------------------------------------------------------------
Total current assets 13,738,670 12,935,640
Property, Plant and Equipment, net 149,127 160,037
Other Assets 29,226 29,226
- -------------------------------------------------------------------------------------------------------------
Total Assets $13,917,023 $13,124,903
=============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,843,159 $ 1,292,859
Accrued expenses 13,922 118,193
Income taxes payable 142,000 -
Deferred income taxes 741,000 741,000
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 2,740,081 2,152,052
Deferred income taxes 27,000 27,000
- -------------------------------------------------------------------------------------------------------------
Total liabilities 2,767,081 2,179,052
- -------------------------------------------------------------------------------------------------------------
Commitments
Shareholders' Equity (Note 2):
Common stock - $.001 par value; authorized 10,000,000 shares,
5,876,710 issued and outstanding 5,877 5,877
Additional paid-in capital 9,146,628 9,146,628
Retained earnings 1,997,437 1,793,346
- -------------------------------------------------------------------------------------------------------------
Total shareholders' equity 11,149,942 10,945,851
- -------------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $13,917,023 $13,124,903
=============================================================================================================
See Notes to Financial Statements
</TABLE>
3
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CPI AEROSTRUCTURES, INC.
STATEMENTS OF INCOME
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<TABLE>
<CAPTION>
1997 1996
For the Three Months Ended March 31, (Unaudited)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue $2,170,716 $1,550,619
Cost of sales 1,496,400 973,149
- ---------------------------------------------------------------------------------------------------------
Gross profit 674,316 577,470
Selling, general and administrative expenses 336,130 334,375
- ---------------------------------------------------------------------------------------------------------
Income from operations 338,186 243,095
- ---------------------------------------------------------------------------------------------------------
Other (income) expense:
Interest income (8,577) (30,021)
Interest expense 672 57,579
- ---------------------------------------------------------------------------------------------------------
Total other (income) expenses, net (7,905) 27,558
- ---------------------------------------------------------------------------------------------------------
Income before provision for income taxes 346,091 215,537
Provision for income taxes 142,000 75,000
- ---------------------------------------------------------------------------------------------------------
Net income $ 204,091 $ 140,537
=========================================================================================================
Basic earnings per share: $ .03 $ .04
- ---------------------------------------------------------------------------------------------------------
Diluted earnings per share: $ .03 $ .04
- ---------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 5,876,710 3,728,304
- ---------------------------------------------------------------------------------------------------------
Weighted average shares and common share equivalents outstanding 7,032,500 3,733,114
=========================================================================================================
See Notes to Financial Statements
</TABLE>
4
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CPI AEROSTRUCTURES, INC.
STATEMENTS OF CASH FLOWS
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<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 204,091 $ 140,537
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 20,371 19,455
Changes in operating assets and liabilities:
(Increase) in accounts receivable (1,089,174) (134,253)
(Increase) decrease in prepaid expenses and other current assets 23,085 (7,155)
Increase in costs and estimated earnings in excess of billings on
uncompleted contracts (46,880) (239,368)
(Increase) decrease in other assets - 15,033
Increase in accounts payable 550,300 193,376
Decrease in accrued expenses (104,271) (69,614)
Increase in income taxes payable 142,000 -
- ----------------------------------------------------------------------------------------------------------------------
Net cash (used in) operating activities (300,478) (81,989)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment (9,461) (39,638)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (9,461) (39,638)
- ----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Long-term debt and officer note payments - (161,281)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities - (161,281)
- ----------------------------------------------------------------------------------------------------------------------
Net (decrease) in cash (309,939) (282,908)
Cash at beginning of year 899,798 998,517
- ----------------------------------------------------------------------------------------------------------------------
Cash at end of period 589,859 $ 715,609
======================================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 672 $ 80,064
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Income taxes $ 14,481 $ 10,300
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See Notes to Financial Statements
</TABLE>
5
<PAGE>
CPI AEROSTRUCTURES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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<TABLE>
<CAPTION>
<S> <C> <C>
1. INTERIM Financial statements as of March 31, 1997 and for the three months ended March 31, 1997
FINANCIAL and 1996 are unaudited, however, in the opinion of management of the Company, reflect
STATEMENTS 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 Costs and estimated earnings in excess of billings on uncompleted contracts consist of:
ESTIMATED
EARNINGS IN
EXCESS OF March 31, 1997
BILLINGS ON ----------------------------------------------------------------------------------------
UNCOMPLETED U.S.
CONTRACTS: Government Commercial Total
----------------------------------------------------------------------------------------
Costs incurred on uncompleted
contracts $1,856,041 $23,510,260 $25,366,301
Estimated earnings 697,891 13,336,663 14,034,554
-----------------------------------------------------------------------------------------
2,553,932 36,846,923 39,400,855
Less billings to date 1,997,799 25,649,915 27,647,714
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Costs and estimated earnings
in excess of billings on
uncompleted contracts $556,133 $11,197,008 $11,753,141
========================================================================================
December 31, 1996
----------------------------------------------------------------------------------------
U.S.
Government Commercial Total
----------------------------------------------------------------------------------------
Costs incurred on uncompleted
contracts $1,084,838 $22,784,815 $23,869,653
Estimated earnings 461,236 12,891,832 13,353,068
----------------------------------------------------------------------------------------
1,546,074 35,676,647 37,222,721
Less billings to date 836,512 24,679,948 25,516,460
-----------------------------------------------------------------------------------------
Costs and estimated earnings
in excess of billings on
uncompleted contracts $709,562 $10,996,699 $11,706,261
========================================================================================
</TABLE>
6
<PAGE>
CPI AEROSTRUCTURES, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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3. EARNINGS PER Basic earnings per share calculations are computed
COMMON SHARE: by dividing net income, by the weighted
average number of common shares outstanding.
Diluted 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.
7
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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, 1997 were $2,170,716
compared to $1,550,619 for the same period last year, representing an increase
of $620,097, or 40%. 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 military
contracts, which were originally awarded in late 1995 increased throughout 1996,
has increased as the Company continued deliveries of spare parts for the C-5
aircraft and delivered parts for the A-10 aircraft during the three months ended
March 31, 1997. 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 1996. Commercial aircraft programs
represented 54% of total revenues for the three months ended March 31, 1997
compared to 79% for the same period in 1996.
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 $96,846, or 17%, from the three months ended March 31,
1996 to the three months ended March 31, 1997. Gross profit as a percentage of
revenues for the three months ended March 31, 1997 was 31% compared to 37% for
the same period last year.
Selling, general, and administrative expenses increased by $1,755 or 1%, from
the three months ended March 31, 1996 to the three months ended March 31, 1997.
Interest expense decreased by $56,907 for the three months ended March 31, 1997,
primarily attributable to the extinguishment of the Company's debt to Chrysler
Capital Corporation in June, 1996.
The resulting net income for the three months ended March 31, 1997, was $204,091
versus $140,537 for the same period last year. Earnings per share were $.03 for
the three months ended March 31, 1997, based upon the weighted average common
shares outstanding of 5,876,710 as compared to earnings per share of $.04 for
the three months ended March 31, 1996 based upon the weighted average common
shares outstanding of 3,733,114.
Material Changes in Financial Condition
At March 31, 1997 and December 31, 1996, the Company had working capital of
$10,998,589 and $10,783,588, respectively, an increase of $215,001. This
increase is primarily attributable to an increase in accounts receivable of
$1,089,174 due to extensive progress payment billings on government contracts
and increased net income. The Company has financed its working capital
requirements during the past two years through the Company's 1995 warrant
exercise, the Company's 1996 private placement, 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.
8
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CPI AEROSTRUCTURES, INC.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
===============================================================================
Net cash used in operating activities for the three months ended March 31, 1997
was $300,478. This decrease in cash was primarily the result of an increase in
accounts receivable of $1,089,174, an increase in costs and estimated earnings
in excess of billing of $46,880, and an increase in approved expenses of
$104,271, offset by net income of $204,091, an increase in accounts payable of
$550,300, and an increase in income taxes payable of $142,000. 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.
9
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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, 1997.
10
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CPI AEROSTRUCTURES, INC.
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SIGNATURE
---------
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.
CPI AEROSTRUCTURES, INC.
Dated: May 12, 1997
By: /s/ Arthur August
--------------------------
Arthur August
President
(Principal Executive Officer)
Dated: May 12, 1997 By: /s/ Theodore J. Martines
------------------------
Theodore J. Martines
Executive Vice President
(Principal Financial Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000889348
<NAME> CPI AEROSTRUCTURES, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 589,859
<SECURITIES> 0
<RECEIVABLES> 1,338,012
<ALLOWANCES> 0
<INVENTORY> 11,753,141
<CURRENT-ASSETS> 57,658
<PP&E> 530,033
<DEPRECIATION> 380,907
<TOTAL-ASSETS> 13,917,023
<CURRENT-LIABILITIES> 2,740,081
<BONDS> 0
0
0
<COMMON> 5,877
<OTHER-SE> 11,149,942
<TOTAL-LIABILITY-AND-EQUITY> 13,917,023
<SALES> 2,170,716
<TOTAL-REVENUES> 2,170,716
<CGS> 1,496,400
<TOTAL-COSTS> 1,496,400
<OTHER-EXPENSES> 336,130
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 672
<INCOME-PRETAX> 346,091
<INCOME-TAX> 142,000
<INCOME-CONTINUING> 204,091
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 204,091
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
