Twelve Months Ended November 30, 2022 November 30, 2021 Net Sales 100.0 % 100.0 % Cost of goods sold 55.7 % 55.7 % Research and Development 7.9 % 6.4 % Selling, General, and Administrative 27.8 % 23.7 % Cost & Expenses 91.4 % 85.8 % Operating Income 8.6 % 14.2 % Other income (expense), net 4.0 % (0.5 )% Income before Income Taxes 12.6 % 13.7 % Provision for taxes 2.6 % 2.5 % Net Income 10.0 % 11.2 %
The Company designs, manufactures and distributes various types of microelectronic circuits including solid state relays and power controllers, optoelectronic components, and sensor and display components and assemblies. The Company's products are used as components and assemblies in a broad range of military, space, medical and industrial systems, including aircraft instrumentation and navigation systems, satellite systems, power supplies, electronic controls, computers, medical devices, and high-temperature (200o C) products.
The Company's facilities are certified and qualified by the
The Company's core technology is 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.
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Company sales totaled
At
New orders for 2022 totaled
Approximately
The backlog represents a good mix of the company's products and technologies
with 9% in the commercial market, 16% in the medical market, 64% in the military
market, and 11% in the space market on
2022 Current Backlog by Major Market Military Space Medical Commercial Total
Domestic Direct
- 278 7,009 International 206 47 - 581 834$ 20,792 $ 3,648 $ 5,322 $ 2,924 $ 32,686 2022 Current Backlog by Product Line Microelectronics$ 10,665 Optoelectronics 5,417 Sensors and Displays 16,604$ 32,686
Cost of goods sold, as a percentage of net sales, was 55.7% in 2022 and 2021. In
actual dollars, cost of sales increased
In 2022, the Company's investment in technology through research and
development, which was expensed, totaled approximately
In addition to the Company's investment in research and development, various
customers paid the Company approximately
Selling, general, and administrative expenses totaled 27.8% of net sales in 2022
compared to 23.7% in 2021. In dollars expensed, selling, general and
administrative expenses totaled
Other income (expense) and net interest income for fiscal 2022 totaled
Income before taxes for fiscal 2022 was approximately
Provisions for income tax for fiscal 2022 totaled
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Net income totaled approximately
Impact of COVID-19 on our Business
In
To date, we have not experienced significant raw material shortages; however, supply-chain disruptions could potentially delay or prevent us from fulfilling customer orders.
Liquidity and Capital Resources
The Company obtained 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
On
Construction Loans. Subject to the terms of the Loan Agreement, Frost will lend
to the Company an aggregate amount not to exceed
Principal and interest shall be due and payable monthly in an amounts determined
by Lender required to fully amortize the outstanding principal balance of this
Note over a period of twenty-five (25) years, payable on the twenty-sixth (26th)
day of each and every calendar month, beginning
The interest rate of (3.40%) per annum includes an Interest-Only Period.
Interest only shall be due and payable monthly as it accrues on the twenty-sixth
(26th) day of each and every calendar month, beginning
The loan shall be secured by a "Deed of Trust, Security Agreement - Financing
Statement" covering the 9.2 acre tract in
Revolving Credit Loans. Subject to the terms of the Revolving Loan Agreement,
Frost will lend to the Company, on a revolving basis, amounts not to exceed a
total principal balance of
The interest on the outstanding and unpaid principal balance shall be computed at a per annum rate equal to the lesser of (a) a rate equal to the Prime Rate per annum; provided, however, in no event shall the resulting rate be less than three and one-quarter percent (3.25%).
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.
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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 is working with a local contractor on the design and building of the
new facility estimated at a cost of
Per the loan covenant, the Company must maintain a ratio of Free Cash Flow to
Debt Service of not less than 1.20 to 1.00. As of
Company management believes it will meet its 2023 capital requirements through
the use of cash derived from operations for the year and/or usage of the
Company's cash and cash equivalents. There were no significant outstanding
commitments for equipment purchases or improvements at
The Company has no significant off-balance sheet arrangements.
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 recognizerevenue 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 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.
New Accounting Pronouncements
In
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