18.11.02

18.11.2002: Meldung: Spire Corp.: Quartalsbericht (engl.)

SPIRE CORP (SPIR)

Quarterly Report (SEC form 10QSB)
ITEM 2. MANAGEMENT"S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW.

Spire Solar provides solar electric systems for distributed power generation and is a leading supplier of photovoltaic module manufacturing equipment and turnkey solar energy businesses.

Spire Biomedical, Inc., a wholly owned subsidiary of Spire Corporation, provides premium medical products and biotechnology surface engineering services for improving the performance of implantable medical devices.

RESULTS OF OPERATIONS.

The following table sets forth certain items as a percentage of net sales and revenues for the periods presented:

Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ---------------------
2002 2001 2002 2001
-------- -------- -------- --------
Net sales and revenues 100% 100% 100% 100%
Cost of sales and revenues 66 71 70 74
-------- -------- -------- --------
Gross profit 34 29 30 26
Internal research and development 2 6 2 5
Selling, general and administrative expenses 32 31 33 39
-------- -------- -------- --------
Earnings (loss) from operations 1 (8) (5) (18)
Earnings (loss) before income taxes 1 (7) (5) (16)
Income tax benefit -- -- -- (1)
-------- -------- -------- --------
Net earnings (loss) 1% (7%) (5%) (16%)
======== ======== ======== ========


THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO THREE AND NINE MONTHS

ENDED SEPTEMBER 30, 2001.

NET SALES AND REVENUES

Net sales and revenues increased $308,000 or 8% for the three months ended September 30, 2002 to $4,197,000, compared to $3,889,000 for the three months ended September 30, 2001. Contract research, service and license revenues increased $201,000 to $1,468,000 for the three months ended September 30, 2002 compared to $1,267,000 for 2001. Sales of goods increased $106,000 or 4% to $2,729,000 for 2002, compared to $2,623,000 for 2001.

The following table categorizes the Company"s net sales and revenues for the periods presented:

Three Months Ended September 30,
----------------------------------
2002 2001 % Change
---------- ---------- --------
Contract research, service and
license revenues $1,468,000 $1,266,000 16%
Sales of goods 2,729,000 2,623,000 4%
---------- ----------
Net sales and revenues $4,197,000 $3,889,000 8%
========== ==========


The increase in sales of goods for the three month period ended September 30, 2002 is primarily due to increased demand for PV systems. The increase in the contract research, service and license revenues is a result of an increased demand for the Company"s processing services.

Net sales and revenues increased $2,011,000 or 20% for the nine months ended September 30, 2002 to $12,085,000, compared to $10,074,000 for the nine months ended September 30, 2001. Contract research, service and license revenues increased $1,023,000 or 27% to $4,815,000 for the nine months ended September 30, 2002 compared to $3,792,000 for 2001. Sales of goods increased $988,000 or 16% to $7,270,000 for 2002, compared to $6,282,000 for 2001.

The following table categorizes the Company"s net sales and revenues for the periods presented:

Nine Months Ended September 30,
------------------------------------
2002 2001 % Change
----------- ----------- --------
Contract research, service and
license revenues $ 4,815,000 $ 3,792,000 27%
Sales of goods 7,270,000 6,282,000 16%
----------- -----------
Net sales and revenues $12,085,000 $10,074,000 20%
=========== ===========


The increase in sales of goods for the nine month period ended September 30, 2002 is primarily due to increased demand for PV systems. The increase in contract research, service and license revenues for the nine month period ended September 30, 2002 is attributed primarily to an increase in the demand for the Company"s biomedical processing services as well as a growth in United States government research and development contracts.

Cost of Sales and Revenues

The cost of contract research, service and license revenues increased $90,000 to $863,000, decreasing to 59% of related revenues for the three months ended September 30, 2002, compared to $773,000 or 61% of related revenues for the three months ended September 30, 2001. The decrease is due to a change in product mix. Cost of goods sold decreased $110,000 to $1,891,000, but decreased to 69% of related sales, for the three months ended September 30, 2002, compared to $2,001,000 or 76% of related sales for the three months ended September 30, 2001. The cost of sales and revenues decreased $20,000 to $2,754,000, and decreased to 66% of net sales and revenues, for the quarter ended September 30, 2002, compared to $2,774,000 or 71% of net cost of sales and revenues for the quarter ended September 30, 2001.

The following table categorizes the Company"s cost of sales and revenues for the periods presented, stated in dollars and as a percentage of related sales and revenues:

Three Months Ended September 30,
-----------------------------------
2002 % 2001 %
---------- --- ---------- ---
Cost of contract research,
service and license revenues $ 863,000 59% $ 773,000 61%
Cost of goods sold 1,891,000 69% 2,001,000 76%
---------- ----------
Total cost of sales and revenues $2,754,000 66% $2,774,000 71%
========== ==========


The cost of contract research, service and license revenues increased $589,000 to $3,023,000, while decreasing to 63% of related revenues for the nine months ended September 30, 2002, compared to $2,434,000 or 64% of related revenues for the nine months ended September 30, 2001. The increase is due to higher volume of sales in the processing services. Cost of goods sold increased $439,000 to $5,459,000, but decreased to 75% of related sales, for the nine months ended September 30, 2002, compared to $5,021,000 or 80% of related sales for the nine months ended September 30, 2001, due to a change in product mix. The cost of sales and revenues increased $1,028,000 to $8,483,000, but decreased to 70% of net sales and revenues, for the nine months ended September 30, 2002, compared to $7,455,000 or 74% of net cost of sales and revenues for the nine months ended September 30, 2001.

The following table categorizes the Company"s cost of sales and revenues for the periods presented, stated in dollars and as a percentage of related sales and revenues:

Nine Months Ended September 30,
-----------------------------------
2002 % 2001 %
---------- --- ---------- ---
Cost of contract research, service
and license revenues $3,023,000 63% $2,434,000 64%
Cost of goods sold 5,459,000 75% 5,021,000 80%
---------- ----------
Total cost of sales and revenues $8,483,000 70% $7,455,000 74%
========== ==========


INTERNAL RESEARCH AND DEVELOPMENT

Internal research and development for the three months ended September 20, 2002 decreased $157,000 or 70% to $67,000, compared to $224,000 for the three months ended September 30, 2001. The decrease is due to the Company"s reduced investment in new product platforms.

Internal research and development for the nine months ended September 30, 2002 decreased $298,000 or 60% to $202,000, compared to $500,000 for the nine months ended September 30, 2001. The decrease is due to the Company"s reduced investment in new product platforms.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses for the three months ended September 30, 2002 increased $137,000 to $1,343,000, and increased to 32% of sales and revenues, compared to $1,206,000 or 31% of sales and revenues for the three months ended September 30, 2001. The increase in selling, general and administrative expenses and increase as a percentage of sales and revenues are due to the Company"s increased sales and marketing activity.

Selling, general and administrative expenses for the nine months ended September 30, 2002 increased $29,000 to $3,983,000, but decreased to 33% of sales and revenues, compared to $3,953,000 or 39% of sales and revenues for the nine months ended September 30, 2001. The decrease as a percentage of sales and revenues are due to cost reductions put in place in prior periods by the Company.

INTEREST

The Company earned $15,000 of interest income for the quarter ended September 30, 2002, compared to $60,000 of interest income for the quarter ended September 30, 2001. The Company incurred interest expense of $14,000 for the quarter ended September 30, 2002 of which zero was capitalized, compared to $23,000 in the third quarter of 2001 of which zero was capitalized. The decline of interest income is due to the Company"s utilization of available cash to fund operations.

INCOME TAXES

The Company recorded no tax benefit for the nine months ended September 30, 2002, compared to a tax benefit of $80,000 for the nine months ended September 30, 2001.

NET EARNINGS (LOSS)

The Company reported a net income for the quarter ended September 30, 2002 of $35,000, compared to a net loss of $277,000 for the quarter ended September 30, 2001. The Company reported a net loss of $568,000 for the nine months ended September 30, 2002, compared to a net loss of $1,578,000 for the same period of 2001. The loss for the nine months is attributed to manufacturing cycles in its photovoltaic equipment business, as well as the Company"s investment in a new product. The Company began selling a hemodialysis catheter through a distributor network in the second quarter of this year.

LIQUIDITY AND CAPITAL RESOURCES.

To date the Company has been able to fund its operating cash requirements by using proceeds from sale of assets, operations and available lines of credit. On July 25, 2000, the Company entered into a new revolving credit agreement with the Silicon Valley Bank. The Agreement was amended in January 2002 due to the Company"s violation of certain financial covenants, and the line of credit was extended until April 2002. The Company has negotiated an amendment to extend the agreement until April 23, 2003. The agreement provides for a $2 million revolving credit facility, based upon eligible accounts receivable requirements. The line of credit provides the Company with resources for general working capital purposes and Standby Letter of Credit Guarantees for foreign customers. The line is secured by all assets of the Company. At September 30, 2002, interest on the line was at the Bank"s prime rate plus 1/2 percent. The line contains covenants including provisions relating to profitability and liquidity. Borrowings on the line are classified as a current liability. As of September 30, 2002, the Company had no outstanding debt under this revolving credit facility.

The Company believes it has sufficient resources to finance its current operations for at least the next twelve months through working capital, its existing line of credit and available lease arrangements. Cash and cash equivalents decreased

$1,047,000 to $4,535,000 at September 30, 2002 from $5,583,000 at December 31, 2001. To date, there are no material commitments by the Company for capital expenditures. At September 30, 2002, the Company"s retained deficit was $325,000, compared to retained earnings of $225,000 as of December 31, 2001. Working capital as of September 30, 2002 decreased 1% to $6,666,000, from $6,760,000 as of December 31, 2001.

The Company announced on October 22, 2002 that it transferred its exclusive hemodialysis split-tip catheter patent to Bard Access Systems, a wholly owned subsidiary of C.R. Bard, Inc., in exchange for up to $16 million and a sublicense. The Company received $5 million upon execution of the Agreement, with another $5 million due no later that 18 months after signing, and also will receive another $6 million upon achievement of certain milestones by Bard Access Systems.

RECENT ACCOUNTING PRONOUNCEMENTS.

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. The Company has adopted SFAS 142 as of January 1, 2002. SFAS 142 requires goodwill and intangible assets with indefinite lives to no longer be amortized, but instead be tested for impairment at least annually. With the adoption of SFAS 142, the Company reassessed the useful lives and residual values of all acquired intangible assets to make any necessary amortization period adjustments. Based on that assessment, no adjustments were made to the amortization period or residual values of other intangible assets.

SFAS No. 143, "Accounting For Asset Retirement Obligations," issued in August 2001, addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and for the associated retirement costs. SFAS 143 which applies to all entities that have a legal obligation associated with the retirement of a tangible long-lived asset is effective for fiscal years beginning after June 15, 2001. The Company does not expect the implementation of SFAS 143 to have a material impact on its financial condition or results of operations.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," issued in October 2001, addresses financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144, which applies to all entities, is effective for fiscal years beginning after December 15, 2001. The Company"s adoption of SFAS 144 did not have a material impact on its financial condition or results of operations.

In April 2002 the FASB issued SFAS No. 145, "Rescission of FASB Statement Nos. 4, 44, and 64, Amendment of FASB Statement No. 13 and Technical Corrections," effective for fiscal years beginning May 15, 2002 or later. It rescinds SFAS No. 4, "Reporting Gains and Losses From Extinguishments of Debt," SFAS No. 64, "Extinguishments of Debt to Satisfy Sinking-Fund Requirements," and SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers." This Statement also amends SFAS No. 13, "Accounting for Leases to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings or describe their applicability under changed conditions. The Company does not believe the impact of adopting SFAS No. 145 will have a material impact on its financial statements.

In June 2002 the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities.". SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to an exit or disposal plan. This statement is effective for exit or disposal activities initiated after December 31, 2002. The Company does not believe the impact of adopting SFAS No. 146 will have a material impact on its financial statements.

IMPACT OF INFLATION AND CHANGING PRICES.

Historically, the Company"s business has not been materially impacted by inflation. Manufacturing equipment and solar systems are generally quoted, manufactured and shipped within a cycle of approximately nine months, allowing for orderly pricing adjustments to the cost of labor and purchased parts. The Company has not experienced any negative effects from the impact of inflation on long-term contracts. The Company"s service business is not expected to be seriously affected by inflation because its procurement-production cycle typically ranges from two weeks to several months, and prices generally are not fixed for more than one year. Research and development contracts usually include cost escalation provisions.

FOREIGN EXCHANGE FLUCTUATION.

The Company sells only in U.S. dollars, generally against an irrevocable confirmed letter of credit through a major United States bank. Therefore the Company is not directly affected by foreign exchange fluctuations on its current orders. However, fluctuations in foreign exchange rates do have an effect on the Company"s customers" access to U.S. dollars and on the pricing competition on certain pieces of equipment that the Company sells in selected markets.

RELATED PARTY TRANSACTIONS.

The Company subleases 74,000 square feet in a building from Mykrolis Corporation, which leases the building from a Trust of which Roger G. Little, Chief Executive Officer, is sole trustee and principal beneficiary. The Company believes that the terms of the sublease are commercially reasonable. The 1985 sublease originally was for a period of ten years, was extended for a five-year period expiring on November 30, 2000 and was further extended for a five-year period expiring on November 30, 2005. The agreement provides for minimum rental payments plus annual increases linked to the consumer price index. Total rent expense under this sublease was $999,000 in 2001. This amount does not take into account rent received by the Company for subleasing approximately 22,000 square feet of its 74,000 square feet to the purchaser of the Company"s optoelectronics business.

CRITICAL ACCOUNTING POLICY - REVENUE RECOGNITION.

The Company derives its revenues from three primary sources: (1) sales of solar energy manufacturing equipment and solar energy systems; (2) biomedical processing services; and (3) U.S. government funded research and development contracts.

The Company"s OEM capital equipment solar energy business builds complex customized machines to order for specific customers. Substantially all of these orders are sold on a FOB Bedford, Massachusetts basis. It is the Company"s policy to recognize revenues for this equipment as the product is shipped to the customer as customer acceptance is obtained prior to shipment and the equipment is expected to operate the same in the customer"s environment as it does in the Company"s. When an arrangement with the customer includes future obligations or customer acceptance, revenue is recognized when those obligations are met or customer acceptance has been achieved. The Company"s solar energy systems business installs solar energy systems on customer owned properties on a contractual basis. Generally, revenue is recognized once the systems have been installed and the title is passed to the customer. For arrangements with a number of elements, the Company allocates fair value to each element based on rates quoted in the contract and revenue is recognized upon delivery of the element. The Company"s biomedical subsidiary performs surface engineering services to various medical device manufacturers on a contractual basis. The Company recognizes revenue as the products are shipped back to the customer. The Company recognizes revenues and estimated profits on long term government contracts on a percentage of completion method of accounting using a cost to cost methodology. Profit estimates are revised periodically based upon changes and facts, and any losses on contracts are recognized immediately. Some of the contracts include provisions to withhold a portion of the contract value as retainage until such time as the U.S. Government performs an audit of the cost incurred under the contract. The Company"s policy is to take into revenue the full value of the contract, including any retainage, as it performs against the contract since the Company has not experienced any substantial losses as a result of an audit performed by the Government.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS.

The following table summarizes the Company"s contractual obligations at September 30, 2002 and the maturity periods and the effect that such obligations are expected to have on its liquidity and cash flows in future periods:

Payments Due by Period
-----------------------------------------------------------
Less than After
Contractual Obligation Total 1 Year 1-3 Years 4-5 Years 5 Years
---------------------------------------------------------------------------------------------
Notes payable $ -- $ -- $ -- $ -- $ --
Non-cancelable operating leases 4,837,000 1,262,000 2,400,000 1,175,000 --
Standby letters of credit -- -- -- -- --
---------- ---------- ---------- ---------- -------
Total commercial commitments $4,837,000 $1,262,000 $2,400,000 $1,175,000 --
========== ========== ========== ========== =======


On October 8, 1999, the Company entered into an Agreement with BP Solarex ("BPS") in which BPS agreed to purchase certain production equipment built by the Company, for use in the Company"s Chicago factory and in return the Company agreed to purchase solar cells of a minimum of 2 megawatts per year over a five-year term. BPS has the right to repossess the equipment should the Company not purchase its committed quantity. The proceeds from the sale of the production equipment purchased by BPS have been classified as an unearned purchase discount in the accompanying balance sheet. The Company will amortize this discount as a reduction to cost of sales as it purchases solar cells from BPS which amounted to zero during the quarter ended September 30, 2002.
Nach oben scrollen
ECOreporter Journalistenpreise
Anmelden
x