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CVD Equipment Corp Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: August 11, 2011 09:44AM
CVD Equipment Corp (CVV) filed Quarterly Report for the period ended 2011-06-30.
Highlight of Business Operations:
During the three and six month periods ended June 30, 2011, we generated gross profits of approximately $2,873,000 and $5,157,000, respectively, resulting in gross profit margins of 38.3% and 37.6% as compared to the three and six month periods ended June 30, 2010 where we generated gross profits of approximately $1,223,000 and $2,329,000, respectively, resulting in gross profit margins of 36.2% and 32.8%. The increase in gross profit margin is primarily attributable to our continuing successful efforts in engineering and production to achieve greater efficiencies in the use of our labor costs and the utilization of volume purchase discounts on materials ordered.
As a result of the foregoing factors, operating income was approximately $1,202,000 and $2,079,000 for the three and six months ended June 30, 2011 compared to operating income of approximately $126,000 and $73,000 for the three and six months ended June 30, 2010, increases of 854.0% and 2,747.9% respectively. The increase in operating income in 2011 versus the same period in 2010 is directly attributable to the increased revenue with increased gross margins during the current three and six month periods.
Interest income for the three and six months ended June 30, 2011 was approximately $3,000 and $6,000 respectively compared to approximately $2,000 and $4,000 for the three and six months ended June 30, 2010. Interest expense for the three and six months ended June 30, 2011 was approximately $49,000 and $103,000 compared to approximately $58,000 and $116,000 for the three and six months ended June 30, 2010. The primary sources of this interest expense are the mortgages on the three buildings that we own.
As of June 30, 2011, we had aggregate working capital of approximately $22,083,000 and cash and cash equivalents of $21,714,000, compared to $11,105,000 and $6,249,000 at December 31, 2010, an increase of $10,978,000 and $15,465,000, respectively. The increase in working capital and cash and cash equivalents was primarily the result of receiving approximately $9,392,000 net proceeds from the issuance of of 967,950 shares of our common stock at $10.50 per share less $771,000 of underwriting and other costs in our public offering and advance payments on several larger orders from customers.
As of June 30, 2011, our backlog was approximately $22,208,000, an increase of $12,264,000, or 123.3%, compared to $9,944,000 at December 31, 2010. During the six months ended June 30, 2011, we received approximately $24,600,000 in new orders. 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 of revenues or profits as order cancellations or delays are possible.
On August 5, 2011, the Company entered into a $9.1 million credit agreement with HSBC Bank, USA, secured by substantially all of the Company s personal property. The agreement consists of a $7 million revolving credit loan and a $2.1 million five (5) year term loan. The revolving credit facility permits the Company to borrow on a revolving basis until August 5, 2014. Interest on the unpaid principal balance on this facility accrues at either (i) the LIBOR Rate plus 1.75% or (ii) the bank s prime rate minus .50%. The term loan is being used to pay off the existing mortgages currently held by Capital One Bank, NA. Interest on the unpaid principal balance accrues at a fixed rate of 3.045%. Borrowings under this term loan are collateralized by $1 million, provided that, so long as no event of default has occurred and is then continuing, the bank will release $200,000 of the collateral on each anniversary of the closing date. The credit agreement also contains certain financial covenants.
Stocks Discussed: CVV,