FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Quarterly Report Under Section 13 Or 15(d)
Of The Securities Exchange Act Of 1934
For the Quarter Ended: September 28, 1996 Commission File No: 0-6933
CAMBEX CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-244-2959
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
360 Second Avenue, Waltham, Massachusetts
(Address of principal executive offices)
02154
(Zip Code)
Registrant's telephone number, including area code: (617)-890-6000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
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CAMBEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 28, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
ASSETS
SEPTEMBER 28, DECEMBER 31,
1996 1995
------------- -------------
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 382,440 $ 588,322
ACCOUNTS RECEIVABLE, LESS RESERVES OF
$135,000 ON SEPTEMBER 28, 1996 AND
$136,000 ON DECEMBER 31, 1995 4,854,087 2,628,778
CURRENT PORTION OF INVESTMENT IN SALES-TYPE LEASES,
NET OF UNEARNED INTEREST INCOME OF $43,000 ON
SEPTEMBER 28, 1996 AND $31,000 ON DECEMBER 31, 1995 433,022 393,284
INVENTORIES 11,144,117 12,030,324
PREPAID TAXES 4,130,731 6,388,659
PREPAID EXPENSES 161,130 178,991
-------------- --------------
TOTAL CURRENT ASSETS $ 21,105,527 $ 22,208,358
-------------- --------------
LONG-TERM INVESTMENT IN SALES-TYPE LEASES, NET
OF UNEARNED INTEREST INCOME OF $14,000 ON
SEPTEMBER 28, 1996 AND $19,000 ON DECEMBER 31, 1995 $ 312,999 $ 362,992
LEASED EQUIPMENT, AT COST, NET OF ACCUMULATED
DEPRECIATION OF $218,000 ON SEPTEMBER 28, 1996
AND $245,000 ON DECEMBER 31, 1995 $ 226,040 $ 300,174
PROPERTY AND EQUIPMENT, AT COST:
MACHINERY AND EQUIPMENT $ 7,375,588 $ 7,257,673
FURNITURE AND FIXTURES 294,811 303,428
LEASEHOLD IMPROVEMENTS 608,654 606,454
-------------- --------------
$ 8,279,053 $ 8,167,555
LESS - ACCUMULATED DEPRECIATION AND AMORTIZATION 7,187,007 6,706,326
-------------- --------------
NET PROPERTY AND EQUIPMENT $ 1,092,046 $ 1,461,229
OTHER ASSETS
TECHNOLOGY LICENSE/MARKETING AGREEMENT,
NET OF ACCUMULATED AMORTIZATION OF $7,933,000
ON SEPTEMBER 28, 1996 AND $6,658,000 ON DECEMBER 31, 1995 $ 566,668 $ 1,841,671
OTHER 37,830 37,875
-------------- --------------
TOTAL ASSETS $ 23,341,110 $ 26,212,299
============== ==============
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CONSOLIDATED BALANCE SHEETS
SEPTEMBER 28, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
SEPTEMBER 28, DECEMBER 31,
1996 1995
------------- --------------
CURRENT LIABILITIES:
REVOLVING CREDIT AGREEMENT $ 1,440,000 $ 3,200,000
ACCOUNTS PAYABLE 4,911,758 4,538,852
OBLIGATIONS FOR TRADE-IN MEMORY 1,620,201 1,939,657
ACCRUED EXPENSES 4,137,235 3,717,691
------------- --------------
TOTAL CURRENT LIABILITIES $ 12,109,194 $ 13,396,200
------------- --------------
REVOLVING CREDIT AGREEMENT $ 840,000 $ --
DEFERRED REVENUE $ 1,089,626 $ 917,087
STOCKHOLDERS' INVESTMENT:
PREFERRED STOCK, $1.00 PAR VALUE PER SHARE
AUTHORIZED - 3,000,000 SHARES
ISSUED - NONE -- --
COMMON STOCK, $.10 PAR VALUE PER SHARE -
AUTHORIZED - 25,000,000 SHARES
ISSUED - 10,556,888 SHARES ON SEPTEMBER 28, 1996 AND
10,452,987 SHARES ON DECEMBER 31, 1995 $ 1,055,689 $ 1,045,299
CAPITAL IN EXCESS OF PAR VALUE 15,658,820 15,446,004
CUMULATIVE TRANSLATION ADJUSTMENT 170,482 287,763
RETAINED EARNINGS (DEFICIT) (6,727,935) (4,025,288)
LESS - COST OF SHARES HELD IN TREASURY -
1,534,356 ON SEPTEMBER 28, 1996 AND
1,534,356 ON DECEMBER 31, 1995 (854,766) (854,766)
------------- --------------
TOTAL STOCKHOLDERS' INVESTMENT $ 9,302,290 $ 11,899,012
------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $ 23,341,110 $ 26,212,299
============= ==============
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CAMBEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996 AND AUGUST 31, 1995
(UNAUDITED)
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 28, AUGUST 31, SEPTEMBER 28, AUGUST 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
REVENUES $ 4,192,637 $ 3,306,751 $ 19,335,991 $ 24,985,279
COST OF SALES 2,588,188 5,808,302 10,404,423 17,997,523
DECLINE IN VALUE OF IBM TRADE-IN MEMORY - 4,647,499 - 4,647,499
------------ ------------- ------------- -------------
GROSS PROFIT (LOSS) $ 1,604,449 $ (7,149,050) $ 8,931,568 $ 2,340,257
OPERATING EXPENSES:
RESEARCH AND DEVELOPMENT $ 886,381 $ 1,838,594 $ 2,969,174 $ 4,857,500
SELLING 1,679,713 2,133,059 5,483,343 6,270,650
GENERAL AND ADMINISTRATIVE 484,262 653,676 1,713,160 1,990,505
------------ ------------- ------------- -------------
$ 3,050,356 $ 4,625,329 $ 10,165,677 $ 13,118,655
------------ ------------- ------------- -------------
OPERATING INCOME (LOSS) $(1,445,907) $(11,774,379) $ (1,234,109) $(10,778,398)
OTHER INCOME (EXPENSE):
INTEREST EXPENSE $ (61,681) $ (53,676) $ (196,814) $ (190,880)
INTEREST INCOME 28,317 35,257 84,889 80,114
OTHER INCOME (EXPENSE) (439,536) (560,592) (1,356,613) (1,049,811)
------------ ------------- ------------- -------------
INCOME (LOSS) BEFORE INCOME TAXES $(1,918,807) $(12,353,390) $ (2,702,647) $(11,938,975)
PROVISION (CREDIT) FOR INCOME TAXES $ 0 $ (2,049,000) $ 0 $ (1,884,000)
------------ ------------- ------------- -------------
NET INCOME (LOSS) $(1,918,807) $(10,304,390) $ (2,702,647) $(10,054,975)
============ ============= ============= =============
NET INCOME (LOSS) PER COMMON SHARE $ (0.21) $ (1.18) $ (0.30) $ (1.15)
============ ============= ============= =============
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 9,000,000 8,750,000 8,975,000 8,750,000
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CAMBEX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1996 AND AUGUST 31, 1995
FOR THE NINE MONTHS ENDED
SEPTEMBER 28, AUGUST 31,
1996 1995
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (2,702,647) $(10,054,975)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization $ 1,841,578 $ 1,903,369
Provision for losses on accounts receivable -- --
Provision for losses on inventory -- 1,881,428
Amortization of prepaid expenses 14,074 15,423
Common stock issued in lieu of cash 161,715 206,810
Decline in value of IBM trade-in memory -- 4,647,499
Change in assets and liabilities:
Decrease (increase) in accounts receivable (2,225,309) 2,082,777
Decrease in inventory 886,207 1,452,233
Decrease (increase) in investment in sales-type leases 10,255 (152,863)
Decrease (increase) in prepaid taxes 2,257,928 (3,610,212)
Decrease in prepaid expenses 3,787 262,946
Decrease in other assets 45 47
Increase in accounts payable 372,906 570,121
Increase (decrease) in obligations for trade-in memory (319,456) 1,157,000
Increase in accrued liabilities 419,544 354,954
Increase (decrease) in deferred revenue 172,539 (149,916)
------------- ------------
Total adjustments $ 3,595,813 $ 10,621,616
------------- ------------
Net cash provided by operating activities $ 893,166 $ 566,641
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Equipment $ (123,258) $ (329,137)
------------ ------------
Net cash used in investing activities $ (123,258) $ (329,137)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of notes payable $ -- $ (92,074)
Proceeds from sale of common stock 61,491 825,320
Net borrowings (repayments) under revolving credit agreement (920,000) 550,000
------------- ------------
Net cash Provided by (used in) financing activities $ (858,509) $ 1,283,246
Effect of exchange rate changes on cash (117,281) 141,514
------------ ------------
Net increase (decrease) in cash and cash equivalents $ (205,882) $ 1,662,264
Cash and cash equivalents at beginning of period $ 588,322 $ 1,584,089
------------- ------------
Cash and cash equivalents at end of period $ 382,440 $ 3,246,353
============= ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 196,814 $ 178,624
Income Taxes 12,263 25,696
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FORM 10-Q
CAMBEX CORPORATION AND SUBSIDIARIES
For The Quarter Ended: September 28, 1996 Commission File No: 0-6933
Notes & Comments:
(1)Significant Accounting Policies
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All
material intercompany transactions and balances have been eliminated
in consolidation.
The Company has deferred revenue associated with the sale of certain
products which have future performance obligations, principally
relating to reinstallation of IBM memory.
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to
make the information presented not misleading. The information
furnished includes all adjustments and accruals consisting only of
normal recurring accrual adjustments which are, in the opinion of
management, necessary for a fair presentation of results for the
interim period. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and
the notes thereto included in the Company's latest annual report on
Form 10-K.
Inventories, which include raw materials, labor and manufacturing
overhead are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
September 28, December 31,
1996 1995
Raw materials $2,454,117 $ 2,600,433
Work-in-process 980,000 1,017,749
Finished goods 6,400,000 7,097,086
Trade-in memory 1,343,000 1,315,056
$11,144,117 $12,030,324
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FORM 10-Q
CAMBEX CORPORATION AND SUBSIDIARIES
For The Quarter Ended: September 28, 1996 Commission File: 0-6933
Notes & Comments (Continued):
(2) Income and Dividends Per Share
Per share amounts are based on the weighted average number of
shares outstanding during each year plus applicable common
stock equivalents. There were no material differences for per
share amounts assuming full dilution in either year.
(3) Management's Discussion and Analysis of Financial Condition and
Results of Operations
As a result of changing the fiscal year-end to December 31 from
August 31, the financial comparison presented is between the
current third quarter ended September 28, 1996, and the fourth
quarter of the prior fiscal year, ended August 31, 1995.
Revenues for the third quarter ended September 28, 1996
increased 27% from the comparable quarter of the prior year
(from $3,307,000 to $4,193,000). The fourth quarter of the
prior year was impacted by an unprecedented slowdown and price
erosion in the ES/9000 mainframe computer market. Although the
market has stabilized, the Company is still unable to predict
whether or when the market will return to its former position.
The gross profit for the quarter ended September 28, 1996 was
$1,604,000 compared to a negative gross profit of $7,149,000
for the comparable quarter of the prior year. The prior year's
amounts include a $4,647,000 decline in the value of its IBM
trade-in memory and a $1,900,000 inventory valuation reduction.
Operating expenses for the quarter ended September 28, 1996,
decreased 34% from the comparable quarter of the prior year due
principally to the cost savings achieved through several
expense control actions. Research and development expenses
decreased 52% due to completion of major projects in fiscal
1995 in addition to the expense control actions.
Other expense for the third quarter ended September 28, 1996
and the fourth quarter of the prior year included approximately
$425,000 in amortization expenses relating to the Company's
technology license/marketing agreement.
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FORM 10-Q
CAMBEX CORPORATION AND SUBSIDIARIES
For The Quarter Ended: September 28, 1996 Commission File: 0-6933
Notes & Comments (Continued):
The Company's present operating plans indicate that cash flow
generated from operations will be adequate to meet its
obligations.
During the second quarter, the Company agreed with its Bank to
extend and modify its Revolving Credit Agreement dated
April 15, 1993, as amended as of August 31, 1994. Under the
terms of the Modification Agreement, the current loan, which
was $3,200,000 as of the end of the first quarter, is termed
out as follows: After an initial payment of $320,000, the
Company will pay $120,000 monthly for a period of twenty-four
months. The balance as of the end of the third quarter was
$2,280,000. When the Company receives its anticipated tax
refund from the Internal Revenue Service for the fiscal years
1991 to 1994, the Company will apply such refund against the
loan principal, thereby reducing the term out period.
Interest on the indebtedness will be paid monthly at the
aggregate of the Bank's Base Rate, approximately the "Prime
Rate", plus one percent, currently aggregating to 9.25%.
The Company granted to its Bank a security interest in the
Company's accounts receivable, inventory and general
intangibles.
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FORM 10-Q
CAMBEX CORPORATION AND SUBSIDIARIES
For The Quarter Ended: September 28, 1996 Commission File: 0-6933
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 thereunto duly authorized.
CAMBEX CORPORATION
By: /s/ Joseph F. Kruy
Joseph F. Kruy
President
By: /s/ Sheldon M. Schenkler
Sheldon M. Schenkler
Chief Financial Officer
Dated: November 12, 1996
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<PERIOD-END> SEP-28-1996
<CASH> 382
<SECURITIES> 0
<RECEIVABLES> 4989
<ALLOWANCES> 135
<INVENTORY> 11144
<CURRENT-ASSETS> 21106
<PP&E> 8279
<DEPRECIATION> 7187
<TOTAL-ASSETS> 23341
<CURRENT-LIABILITIES> 12109
<BONDS> 0
0
0
<COMMON> 1056
<OTHER-SE> 8246
<TOTAL-LIABILITY-AND-EQUITY> 23341
<SALES> 19336
<TOTAL-REVENUES> 19336
<CGS> 10404
<TOTAL-COSTS> 10404
<OTHER-EXPENSES> 11438
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 197
<INCOME-PRETAX> (2703)
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<EPS-PRIMARY> (0.30)
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