Business
The Company's facilities are certified and qualified by the
The Company's core technology are microelectronic and optoelectronic designs to include the packaging and interconnecting of multi-chip microelectronics modules. Other technologies include light emitting and light sensitive materials and products, including light emitting diodes and silicon phototransistors, and electronic integration used in the Company's optoelectronic components and assemblies.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in
The core principle of revenue recognition under accounting principles generally accepted in the Unites States of America (GAAP) is that the Company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company's revenue on the majority of its customer contracts are recognized at a point in time, generally upon shipment of products. The application of GAAP related to the measurement and recognition of revenue requires us to make judgments and estimates. Specifically, the determination of whether revenues related to our revenue contracts should be recognized over time or at a point in time, as these determinations impact the timing and amount of our reported revenues and net income. Other significant judgments include the estimation of the point in the manufacturing process at which we are entitled to receive payment, as well as the progress of the job order to completion in order to determine the amount of consideration earned for contractual revenue recognized over time.
The allowance for doubtful accounts is based on our assessment of the collectability of specific customer accounts and the aging of the accounts receivable. If there is a deterioration of a major customer's credit worthiness or actual defaults are higher than our historical experience, our estimates of the recoverability of amounts due us could be adversely affected.
Inventory purchases and commitments are based upon future demand. If there is a sudden and significant decrease in demand for our products or there is a higher risk of inventory obsolescence because of changing customer requirements, we may be required to increase our inventory allowances and our gross margin could be adversely affected.
The Company recognizes deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered. If we were to determine we would not be able to realize all or part of the deferred tax asset in the future, an adjustment to the deferred tax asset would be necessary which would reduce our net income for that period.
Depreciable and useful lives estimated for property and equipment are based on initial expectations of the period of time these assets will provide benefit. Changes in circumstances related to a change in our business
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or other factors could result in these assets becoming impaired, which could adversely affect the value of these assets.
Results of Operations Three months ended Six months ended 5/28/2022 5/29/2021 5/28/2022 5/29/2021 NET SALES 100.0 % 100.0 % 100.0 % 100.0 % COST AND EXPENSES: Cost of Goods Sold 59.1 % 54.3 % 56.7 % 58.4 % Research and development 7.0 % 5.2 % 7.3 % 6.4 % Selling, general and administrative expenses 25.7 % 20.8 % 27.3 % 25.5 % Total cost and expenses 91.8 % 80.3 % 91.3 % 90.3 % OPERATING INCOME BEFORE INTEREST 8.2 % 19.7 % 8.7 % 9.7 %
AND INCOME TAXES
Interest and other income, net - - - 0.2 % INCOME BEFORE TAXES 8.2 % 19.7 % 8.7 % 9.9 % Provision for taxes 1.4 % 2.8 % 1.5 % 1.4 % NET INCOME 6.8 % 16.9 % 7.2 % 8.5 %
Sales for the three and six month periods ended
Two customers accounted for 15% and 11% of the Company's sales for the three
months ended
Cost of goods sold for the second quarters of 2022 and 2021 totaled 59.1% and
54.3% of net sales, respectively, while cost of goods sold for the six months
ended
Research and development expense increased
Selling, general and administrative expenses for the second quarter and first
six months of 2022 totaled 25.7% and 27.3% respectively of net sales compared to
20.8% and 25.5% for the same periods in 2021. In actual dollars, selling,
general and administrative expenses increased
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Provisions for taxes decreased
Net income decreased
Liquidity and Capital Resources
The Company will use a combination of cash and a commercial real estate
construction loan for the construction of a new 76,000 square foot manufacturing
center on the 9.2 acres of land in
As of
In addition, the Company continues on-going investigations for the use of cumulative cash for business expansion and improvements, such as operational improvements and new product expansion.
Cash and cash equivalents totaled
In addition to cash on hand, the Company also has the ability to borrow under a loan agreement as discussed in Note 5 to the condensed financial statements.
The Company has no significant off-balance sheet arrangements.
Outlook
New orders for year-to-date 2022 totaled
Backlog totaled
2022 Current Backlog by Major Market Military Space Medical Commercial Total
Domestic Direct
430 8,734 International 116 65 - 269 450$ 25,647 $ 2,134 $ 4,263 $ 3,011 $ 35,055 2022 Current Backlog by Product Line Microelectronics$ 12,507 Optoelectronics 5,639 Sensors and Displays 16,909$ 35,055
The Company cannot assure that the results of operations for the interim period presented are indicative of total results for the entire year due to fluctuations in customer delivery schedules, or other factors over which the Company has no control.
Impact of COVID-19 on our Business
In
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The Company continues to monitor our supply chain and orders from customers for COVID-19 pandemic related changes. We are continuing to serve our customers while taking precautions to provide a safe work environment for our employees and customers. We have been staggering some shifts and otherwise adjusting work schedules to maximize our capacity while adhering to recommended precautions. We have established and implemented a work from home provision where possible.
To date, we have not experienced significant raw material shortages; however, supply-chain disruptions could potentially delay or prevent us from fulfilling customer orders.
Cautionary Statement
This Form 10-Q contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Actual results could differ materially. Investors are warned that forward-looking statements involve risks and unknown factors including, but not limited to: our expectations regarding the potential impacts on our operations of the COVID-19 pandemic; our expectations regarding the potential impacts on our supply chain and on our customers of the COVID-19 pandemic; overall changes in governmental spending for military and space programs; customer cancellation or rescheduling of orders, problems affecting delivery of vendor-supplied raw materials and components, unanticipated manufacturing problems and availability of direct labor resources.
The Company does not intend to update the forward-looking statements contained herein, except as may be required by law.
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