MICROPAC INDUSTRIES, INC. 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.
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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 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
February 25, 2023 February 26,2022
NET SALES 100.0% 100.0%
COST AND EXPENSES:
Cost of Goods Sold 63.6% 54.0%
Research and development 10.5% 7.6%
Selling, general & administrative expenses 29.2% 29.1%
Total cost and expenses 103.3% 90.7%
OPERATING INCOME (LOSS) (3.3 )% 9.3%
Other income, net 2.2% 0.0%
INCOME (LOSS) BEFORE TAXES (1.1 )% 9.2%
(Provision) benefit for taxes .2% (1.6 )%
INCOME (LOSS) (0.9 )% 7.7%
Sales for the first quarter ended
Three customers accounted for 15%, 11% and 10% of the Company's sales for the first quarter of 2023 and three customers accounted for 18% and 11%, and 10% of the Company's sales for the first quarter of 2022. The three customers are distributors that sell to multiple customers.
Cost of goods sold for the first quarter of 2023 and 2022 totaled 63.6% and
54.0% of net sales, respectively. Cost of sales increased
Research and development cost increased
Selling, general and administrative expenses for the first quarter of 2023
totaled 29.2% of net sales, compared to 29.1% for the same period in 2022.
Selling, general and administrative expenses increased
Provisions for taxes decreased
The Company had a net loss in the first quarter of 2023 of
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
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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 the first quarter of 2023 totaled
2023 Current Backlog by Major Market
(Dollars in thousands)
Military Space Medical Commercial Total
Domestic Direct
- 490 $ 6,447
International 274 213 - 481 $ 968
$ 22,344 $ 3,713 $ 4,461 $ 2,978 $ 33,496
2023 Current Backlog by Product Line
(Dollars in thousands)
Microelectronics $ 12,102
Optoelectronics 5,677
Sensors and Displays 15,717
$ 33,496 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
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.
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The Company does not intend to update the forward-looking statements contained herein, except as may be required by law.
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