The LGL (US:LGL)2021-03-29 19:59Business Segments and Operations - The LGL Group, Inc. operates through two segments: Electronic Components and Electronic Instruments, focusing on high-reliability frequency and spectrum control products [19]. - The company remains dependent on a single line of business, with virtually all revenues in 2020 and 2019 derived from electronic components [61]. - The company expects that the electronic components product line will continue to account for substantially all revenues in 2021 [61]. Revenue and Customer Concentration - In 2020, the largest customer accounted for $5,324,000, or 17.1% of total revenues, while the second largest customer accounted for $4,351,000, or 14.0% of total revenues [37]. - The largest customer accounted for $5,324,000, or 17.1% of total revenues in 2020, up from $3,187,000, or 10.0% in 2019 [65]. - The second largest customer contributed $4,351,000, or 14.0% of total revenues in 2020, compared to $5,522,000, or 17.3% in 2019 [65]. - As of December 31, 2020, four largest customers represented approximately $1,856,000, or 43.1% of accounts receivable, compared to 40% in 2019 [66]. - Foreign revenues accounted for 23.8% and 26.6% of consolidated revenues in 2020 and 2019, respectively, indicating a significant reliance on international sales [92]. Financial Performance - Total revenues for 2020 were $31,162,000, a decrease of 2.3% from $31,897,000 in 2019 [133]. - Net income for 2020 was $968,000, down from $7,016,000 in 2019, representing a decline of 86.2% [133]. - The company’s operating income for 2020 was $1,415,000, a decrease of 58.8% from $3,439,000 in 2019 [133]. - Consolidated gross margin decreased to 35.1% compared to 39.2% for the prior year, impacted by a shift in product mix and increased production costs due to COVID-19 [152]. Cash Flow and Liquidity - Cash and cash equivalents increased to $18,331,000 in 2020 from $12,453,000 in 2019, a growth of 47.2% [133]. - Cash provided by operating activities was $3,192,000 for 2020, an increase from $2,666,000 in 2019, primarily due to favorable changes in accounts receivable and inventory levels [164]. - Cash used in investing activities decreased significantly to $428,000 in 2020 from $6,163,000 in 2019, reflecting reduced capital expenditures and investments [165]. - Cash provided by financing activities increased to $3,114,000 in 2020 from $442,000 in 2019, mainly due to the sale of securities under the ATM Offering [166]. Research and Development - Research and development expenses were approximately $2,142,000 in 2020, compared to $2,004,000 in 2019, indicating a focus on revitalizing intellectual property [41]. - MtronPTI's product development emphasizes smaller packages, lower power, and new materials to enhance performance in harsh environments [27]. Compliance and Regulations - The company is subject to significant government regulations and audits, which may increase compliance costs and impact financial results [54]. - The company is required to comply with the Cybersecurity Maturity Model Certification (CMMC) program, which may increase compliance costs and affect operating margins [81]. - The company must maintain effective internal control over financial reporting to ensure accurate and timely financial results, as required by the Sarbanes-Oxley Act [97]. COVID-19 Impact - The outbreak of COVID-19 has disrupted supply chains, affecting the availability of components and raw materials, leading to potential redesigns and shipment delays [50]. - The ongoing effects of the COVID-19 pandemic have caused disruptions, including the temporary closure of the Noida facility, which resumed full operations by June 2020 [99]. - The company anticipates that the impact of COVID-19 on future results will depend on developments related to the pandemic and government responses [140]. - Management continues to monitor the impacts of COVID-19 on customers and suppliers, ensuring sufficient liquidity for ongoing working capital and capital expenditure requirements for the next 12 months [168]. Shareholder and Governance - The company’s officers, directors, and 10% or greater stockholders control approximately 43.8% of the voting power, which may affect corporate governance and stockholder interests [108]. - The Audit Committee consists of members who are financially literate and independent, with Mr. Hunter serving as Chairman and qualifying as the financial expert [193]. - The company adopted a code of ethics applicable to all employees, including principal executive and financial officers [192]. Stock and Equity - The company authorized a stock repurchase program for up to 540,000 shares, with 81,584 shares repurchased at a cost of $580,000 as of December 31, 2020 [126]. - The total number of common stock outstanding as of March 16, 2021, is 5,327,966 shares [206]. - The equity compensation plan has 58,050 options outstanding with a weighted average exercise price of $8.55, and 290,091 shares available for future issuance [208].