SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 10, 1997
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Craig Consumer Electronics, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-27882 95-04228391
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
13845 Artesia Boulevard, Cerritos, California 90703-9000
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 562-926-9944
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Not Applicable
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
On March 10, 1997, in connection with the completion of the
Registrant's 1996 audit, the Registrant, together with its independent certified
public accounts, determined that adjustments to 1995 earnings were to be made as
a result of certain bookkeeping errors. The Registrant, upon becoming aware of
certain errors, undertook an investigation which resulted in the determination
to make the following adjustments. As to 1995, the adjustment reduced previously
reported net earnings and earnings per share by $763,000 and $0.32,
respectively. Accordingly, the Company will amend its 1995 financial statements
to present net income and earnings per share of $29,000 and $0.01, respectively.
Adjustments made to earnings during 1995 have a corresponding
beneficial effect for 1996 and possibly subsequent results of operations,
therefore the lack of any material current financial impact.
Although there is no impact on what would otherwise be the
presentation of the Registrant's current financial condition, earnings are also
to be adjusted to a limited extent for two quarters during 1996 (particularly,
the second and third quarters). The restated earnings for the applicable
quarters are as follows:
As Reported As Restated
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Quarter ended June 30, 1996
Cost of sales $ 9,824,000 $ 10,101,000
Net loss $ (535,000) $ (737,000)
Loss per share $ (0.20) $ (0.27)
Quarter ended September 30, 1996
Cost of sales $ 21,123,000 $ 21,336,000
Net income $ 579,000 $ 387,000
Earnings per share $ 0.16 $ 0.11
These quarterly adjustments account for the Company's conservative
treatment for reserves associated with the "Net Realizable Value" of goods to be
reconditioned in China and returned for resale.
The specific transactions for which certain errors and adjustments
were made are as follows:
The Registrant determined to adjust 1995 earnings downward by $131,557 as a
result of an error in the accounting for certain inventory returned to the
Registrant's Chinese joint venture for refurbishment. Particularly,
inventory was returned during October 1995 to a Chinese joint venture in
which the Registrant has an interest, but then returned to the Registrant's
own warehouse due to problems with customs. The goods were re-shipped to
the Chinese joint venture in December of 1995. Problems arose because,
through inadvertence, no entry was made to record the receipt of goods when
returned. As a result, when the goods were reshipped, another entry was
made that had the result of overstating inventory held by the Chinese joint
venture for refurbishment.
During 1996, a write-off of inventory totaling $171,531 occurred as a
result of defective inventory which had been previously sent back to the
Registrant's vendor in Hong Kong for refund, without making a corresponding
accounting entry to reduce the amount of Overseas Inventory at the
Registrant's joint venture.
An additional downward reduction of $340,334 was made as a result of Hong
Kong inventory having been improperly booked as such (i.e., as product
remaining in inventory) although the goods were the subject of sales
transactions and were intended for delivery directly from Hong Kong to the
particular customer (instead of in transit to the Registrant).
The final adjustment resulted from an inappropriate entry crediting the
"Cost of Goods Sold" account instead of the "Inventory In Transit" account
totaling $145,903 (again on goods shipped from Asia). There is no support
for this journal entry and Management's investigation revealed the entry
was the result of misjudgment by the staff person making the entry. As with
most of the adjustments, this created a timing but not a realization
problem with respect to the financial reports. More frequent reconciliation
of inventory and inventory in transit to costs of goods sold and sales
should foreclose any delay in discerning any similar incorrect journal
entries.
A minor adjustment with respect to reserves for vacation accrual is also to
be made for 1995.
The release of the Registrant's 1996 financial results, had been delayed
due to the time and effort involved to investigate and accurately
understand and document the foregoing described adjustments.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Craig Consumer Electronics, Inc.
Date: March 14, 1997 By: /s/ Richard I. Berger
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Richard I. Berger
Its Chairman of the Board of Directors
and President (Principal Executive)
Date: March 14, 1997 By: /s/ Donna Richardson
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Donna Richardson
Treasurer & Chief Financial Officer
(Principal Accounting Officer)
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