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CPI Aero(CVU) - 2024 Q2 - Quarterly Report
CVUCPI Aero(CVU)2024-08-13 20:16

Financial Performance - Total revenue for the three months ended June 30, 2024, was 20,810,334,a1.320,810,334, a 1.3% increase from 20,547,555 for the same period in 2023[5] - Gross profit for the three months ended June 30, 2024, was 5,115,424,comparedto5,115,424, compared to 4,604,000 for the same period in 2023, representing an increase of 11.1%[5] - Net income for the three months ended June 30, 2024, was 1,409,946,upfrom1,409,946, up from 1,157,076 in the same period of 2023, reflecting a growth of 21.8%[5] - Basic income per common share for the three months ended June 30, 2024, was 0.11,comparedto0.11, compared to 0.09 for the same period in 2023, a rise of 22.2%[5] - Net income for the six months ended June 30, 2024, was 1,578,184,adecreasefrom1,578,184, a decrease from 2,140,381 in the same period of 2023[8] - Total revenue for the six months ended June 30, 2024, was 39,891,477,comparedto39,891,477, compared to 42,564,223 for the same period in 2023, representing a decline of approximately 6.3%[14] - Revenue from military subcontracts for the three months ended June 30, 2024 was 16,963,874,anincreaseof16,963,874, an increase of 461,848 or 2.8% compared to the same period last year[60] - Revenue from government military contracts for the six months ended June 30, 2024 was 5,383,228,anincreaseof5,383,228, an increase of 1,264,269 or 30.7% compared to the same period last year[62] Assets and Liabilities - Total current assets decreased to 44,084,991in2023from44,084,991 in 2023 from 46,913,731 in 2022, a decline of 6.0%[4] - Total liabilities decreased to 46,100,550in2023from46,100,550 in 2023 from 52,278,404 in 2022, a reduction of 12.5%[4] - Total shareholders' equity increased to 24,116,970in2023from24,116,970 in 2023 from 22,081,728 in 2022, an increase of 9.2%[4] - The company’s cash position decreased to 1,936,697in2023from1,936,697 in 2023 from 5,094,794 in 2022, a decline of 62.0%[4] - The company reported a decrease in accounts payable to 14,528,893in2023from14,528,893 in 2023 from 10,487,012 in 2022, an increase of 38.9%[4] - Contract assets as of June 30, 2024, were 34,183,988,downfrom34,183,988, down from 35,312,068 as of December 31, 2023[21] - Contract liabilities decreased to 2,482,535asofJune30,2024,from2,482,535 as of June 30, 2024, from 5,937,629 as of December 31, 2023[21] - Cash at the end of the period was 1,936,697,downfrom1,936,697, down from 3,080,672 at the end of the same period in 2023[8] Expenses - Total Cost of Sales for the three months ended June 30, 2024 was 15,694,910,adecreaseof15,694,910, a decrease of 248,645 or 1.6% from 15,943,555inthesameperiodin2023[64]−Selling,generalandadministrativeexpensesforthethreemonthsendedJune30,2024decreasedby15,943,555 in the same period in 2023[64] - Selling, general and administrative expenses for the three months ended June 30, 2024 decreased by 30,545 or 1.1% to 2,775,935comparedto2,775,935 compared to 2,806,480 for the same period in 2023[70] - Other cost of sales for the three months ended June 30, 2024 decreased by 333,410or98.4333,410 or 98.4% to 5,533 compared to 338,943forthesameperiodin2023[66]−InterestexpenseforthethreemonthsendedJune30,2024increasedby338,943 for the same period in 2023[66] - Interest expense for the three months ended June 30, 2024 increased by 46,316 or 8.6% to 587,971comparedto587,971 compared to 541,655 for the same period in 2023[71] - The company’s operating lease expense for the six months ended June 30, 2024, was 1,059,249,comparedto1,059,249, compared to 1,084,968 for the same period in 2023, indicating a decrease of approximately 2.4%[39] Backlog and Future Revenue - The Company's total backlog as of June 30, 2024 was 511,752,000,slightlydownfrom511,752,000, slightly down from 513,351,000 as of December 31, 2023[48] - Funded backlog as of June 30, 2024 was 87,049,000,downfrom87,049,000, down from 118,218,000 as of December 31, 2023[48] - The company expects to recognize approximately 4.1millioninrevenuefromcontractliabilitiesthatwereincludedinthebalanceasofJanuary1,2024[21]TaxandCompliance−TheCompany′seffectiveincometaxrateforthesixmonthsendedJune30,2024was19.44.1 million in revenue from contract liabilities that were included in the balance as of January 1, 2024[21] Tax and Compliance - The Company's effective income tax rate for the six months ended June 30, 2024 was 19.4%, compared to 12.2% for the same period in 2023[44] - The provision for income tax for the three months ended June 30, 2024 was 341,572, an increase from 98,789forthesameperiodin2023[43]InternalControlsandRiskManagement−Amaterialweaknessininternalcontroloverfinancialreportingwasidentified,specificallyrelatedtoincometaxaccounting,whichthecompanyisworkingtoremediatein2024[91]−Thecompanyreplaceditsoutsidetaxaccountingfirmtoimproveinternalcontrolsandhasupdateditsfinancialriskassessmenttoreflecttaxaccountingasahigh−riskarea[93]−Thecompanyisdevelopingnewcontrolstoaddresstheidentifiedmaterialweaknessininternalcontroloverfinancialreporting[92]−Therehavebeennomaterialchangesinriskfactorsthatcouldadverselyaffectthecompany′sbusinessorfinancialcondition[95]DebtandFinancing−AsofJune30,2024,thecompanyhad98,789 for the same period in 2023[43] Internal Controls and Risk Management - A material weakness in internal control over financial reporting was identified, specifically related to income tax accounting, which the company is working to remediate in 2024[91] - The company replaced its outside tax accounting firm to improve internal controls and has updated its financial risk assessment to reflect tax accounting as a high-risk area[93] - The company is developing new controls to address the identified material weakness in internal control over financial reporting[92] - There have been no material changes in risk factors that could adversely affect the company's business or financial condition[95] Debt and Financing - As of June 30, 2024, the company had 18,840,000 outstanding under the Revolving Loan, down from 20,040,000onDecember31,2023,adecreaseofapproximately6.020,040,000 on December 31, 2023, a decrease of approximately 6.0%[35] - The company’s interest rate on the Revolving Loan was 12.00% as of June 30, 2024, based on a Prime Rate of 8.50%[35] - The company has no availability for borrowings under the Revolving Loan and finances operations from internally generated cash flow[84] - The company is required to maintain a minimum debt service coverage ratio of no less than 1.5 to 1.0 and a maximum leverage ratio of no more than 4.0 to 1.0 for the trailing four fiscal quarters[83] Stock and Compensation - The company had 2,364 shares available for grant under the 2009 Performance Equity Plan as of June 30, 2024[23] - The 2016 Long Term Incentive Plan has 331,912 shares available for grant as of June 30, 2024, after increasing the reserved shares to 2,200,000[24] - Total stock-based compensation expense for the three months ended June 30, 2024, was 175,536, compared to 180,216forthesameperiodin2023,reflectingadecreaseofapproximately3.8180,216 for the same period in 2023, reflecting a decrease of approximately 3.8%[25] - At June 30, 2024, unamortized stock-based compensation costs related to restricted share arrangements amounted to 482,781[30] Cash Flow - Cash flows from operating activities resulted in a net cash used of (1,552,224)forthesixmonthsendedJune30,2024,comparedtoanetcashprovidedof(1,552,224) for the six months ended June 30, 2024, compared to a net cash provided of 875,137 in the same period of 2023[8] - Cash decreased by 3,158,097or623,158,097 or 62% to 1,936,697 at June 30, 2024, primarily due to cash flow used in operating activities and repayment of debt[80] Inflation and Economic Conditions - Inflation has not historically affected operations materially, but the company actively monitors its impact on interest rates and supply chain[88] - The company believes its existing resources will be sufficient to meet current working capital needs for at least the next 12 months[85]