UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, NW
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from __________ to __________
Commission file number 2-69336
CRAMER, INC.
A Kansas Corporation IRS Employment I.D. #48-0638707
625 Adams Street
Kansas City, Kansas 66105 Telephone No. (913) 621-6700
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
3,840,650 shares of common stock, no par value.
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
ITEM 1. FINANCIAL STATEMENTS
<CAPTION>
CRAMER, INC.
BALANCE SHEET
UNAUDITED
(Amounts in Thousands, Except Share Data)
<S> <C> <C>
ASSETS 6/30/96 12/31/95
Current assets:
Cash $ 57 $ 84
Accounts receivable, net of allowance of $21 1,200 1,102
Inventories 1,456 1,488
Prepaid expenses 247 245
Total current assets 2,960 2,919
Property, plant and equipment, net 684 608
Other assets:
Intangible pension asset 317 317
Total Assets $ 3,961 $ 3,844
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ 1,067 $ 560
Current portion of long-term debt 74 176
Accounts payable 1,113 1,024
Accrued liabilities 542 658
Total current liabilities 2,796 2,418
Noncurrent liabilities:
Long-term debt, less current portion 40 486
Pension benefits payable 595 595
Other 146 135
Total noncurrent liabilities 781 1,216
Stockholders' Equity:
Common stock, no par value; authorized,
6,000,000 shares; issued and outstanding
3,840,650 shares at June 30, 1996,
and December 31, 1995 3,508 3,508
Accumulated deficit (3,065) (3,239)
443 269
Minimum pension liability adjustment (59) (59)
Net stockholders' equity 384 210
Total Liabilities and Stockholders' Equity $ 3,961 $ 3,844
</TABLE>
<PAGE>
<TABLE>
CRAMER, INC.
STATEMENTS OF INCOME
UNAUDITED
(Amounts in Thousands, Except Per Share Data)
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
6/30/96 7/2/95 6/30/96 7/2/95
<S> <C> <C> <C> <C>
Net sales $ 3,132 $ 3,077 $ 5,799 $ 6,541
Cost of sales 2,186 2,287 4,168 4,832
Gross profit 946 790 1,631 1,709
Operating expenses:
Selling expenses 556 394 979 830
General and
administrative 226 238 461 494
Total operating expenses 782 632 1,440 1,324
Income from operations 164 158 191 385
Other income (expense):
Interest expense, net (24) (44) (60) (91)
Other, net (5) (57) 43 (91)
Total other income
(expense) (29) (101) (17) (182)
Income before income taxes 135 57 174 203
Income tax expense 0 0 0 0
Net income $ 135 $ 57 $ 174 $ 203
Net income per share
based on weighted
average number of
common equivalent
shares outstanding $ 0.04 $ 0.02 $ 0.05 $ 0.07
Weighted Average Common Equivalent
Shares Outstanding 3,840,650 2,779,610 3,840,650 2,748,538
</TABLE>
<PAGE>
<TABLE>
CRAMER, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in Thousands)
<CAPTION>
Six Months Ended
6/30/96 7/2/95
<S> <C> <C>
Cash flows from operating activities:
Net income $ 174 $ 203
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 84 79
Changes in operating assets and
liabilities:
Accounts receivable (98) 189
Inventories 32 143
Prepaid expenses (2) 96
Accounts payable and accrued expenses (27) (598)
Other noncurrent liabilities 11 37
Net cash provided by operating
activities 174 149
Cash flows from investing activities:
Capital expenditures (161) (17)
Cash flows from financing activities:
Principal payments on notes payable
and long-term debt (4,312) (6,871)
Proceeds from issuance of notes payable
and long-term debt 4,272 6,623
Issuance of capital stock via option
exercise 0 230
Net cash provided by (used in)
financing activities (40) (18)
Net increase (decrease) in cash (27) 114
Cash at beginning of year 84 1
Cash at end of quarter $ 57 $ 115
Supplemental disclosures:
Cash paid during the period for:
Interest $ 57 $ 83
Income tax $ 1 0
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Except for the historical information contained herein, this
report on Form 10-QSB contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ
materially. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in the section entitled
"Factors That May Affect Future Results of Operations, as well as those
discussed elsewhere in the Company's reports filed with the Securities
and Exchange Commission.
A. SUMMARY OF OPERATIONS
Net sales in the first half of 1996 were consistent with net
sales for the first half of 1994 but are 12% lower than net sales
in the first half of 1995. Net sales in the first quarter of 1995
were abnormally large and were achieved by a reduction in backlog
that had built up in the latter portions of 1994 when the Company
was experiencing operating difficulties. Net sales in the second
quarter of 1995 and 1996 reflect more typical operations and the
net sales in Q2 1996 are approximately 2% higher than during the
same period in 1995. Intake of new orders in the first half of
1996 was $6,006,000, an increase of 3% from the amount in the first
half of 1995. The Company's backlog at June 30, 1996, $1,093,000,
is consistent with the Company's operating plans for 1996 and is
$120,000 higher than at December 31, 1995. Substantially all of the
current backlog is scheduled to ship in the next three months.
As a percent of sales, gross margins for the first half of 1996
(28.1%) were better than the margins achieved during the same period
in 1995 (26.1%). The increase in margin occurred primarily because
of higher average selling prices and material cost reductions
achieved in the latter half of 1995.
Selling expenses were $149,000 higher in the first half of 1996
as compared to the first half of 1995. This increase is primarily due
to the costs of recruiting and relocating new executive sales
management and for advertising and other expenses associated with
the introduction of new products and for negotiating a sales contract
directly with the General Services Administration. At $60,000,
interest expense in the first half of 1996 was 35% lower than for
the same period last year and is due to a reduction in average borrowings
as compared to the prior year and lower interest rates available
under the Company's new credit arrangement (see discussion below).
During the first half of 1996, the Company received $25,000 in
credit from a vendor in settlement of prior years' quality issues.
The Company also received $34,000 from its insurance carrier in
settlement of a claim for damages arising from vandalism to the
Company's heating system. Both of these amounts were recorded as
other nonoperating income.
The Company's net income for the first half of 1996, $174,000,
was slightly below its operating plans and was the result of somewhat
lower than forecasted sales. The Company currently anticipates that
its 1996 sales will be approximately the same as in <PAGE> 1995. However,
the Company expects that 1996's net income will exceed 1995's as it will
realize a full year's benefit of sales price increases and cost
reductions achieved in the summer of 1995.
B. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's accounts receivable increased by $98,000, or 8%, at
June 30, 1996 as compared to December 31, 1995. This was in accordance
with expectations as the Company's sales in June of 1996 were
substantially higher than in December 1995. Due to management's
continued emphasis on increasing inventory turnover, inventory balances
decreased by $32,000 during the first half of 1996.
Capital expenditures aggregated $161,000 during the first half of
1996 and consisted of factory tooling and office equipment. Purchase
of capital equipment increased significantly from prior year
levels as the Company returned to normal operating practices
concerning equipment replacement. Purchases of such assets had
been curtailed in 1995 due to the Company's financial constraints.
Current accrued liabilities decreased by $116,000 from the
December 31, 1995 level. This reduction was principally due to
payments made by the Company for accrued pensions and other employee
benefits.
In the second quarter of 1996, the Company and certain other
subsidiaries of Rotherwood Corporation (the Company's parent),
negotiated a new credit facility with Mark Twain Bank. The
new credit facility provides all of the participating Rotherwood
Companies with access to a credit line of $3,750,000 with interest
charged on outstanding borrowings at a rate of one-eighth of a percent
less than the bank's prime. This is a reduction in interest
rates as compared to the Company's prior banking arrangement. The
Company used its borrowings under the new credit facility to retire all
outstanding long-term debt payable to banks and the working capital line
with United Missouri Bank.
The combined credit facility is secured by all of the participating
Rotherwood Companies' inventory, accounts receivable, and equipment. The
current portion of the security pledged by the other Rotherwood
subsidiaries exceeded $4,000,000 at June 30, 1996. In addition,
Rotherwood's principal stockholder has pledged publicly traded equity
securities with a market value in excess of $4,000,000 as additional
collateral for the loan. As part of the credit facility, each
Rotherwood subsidiary has guaranteed repayment of the other subsidiaries'
debts to Mark Twain. Management believes that the reduction in
interest rates and the access to a larger credit line more than
offsets the risk that it would suffer losses under the guarantee
provisions of the credit facility in the event that one or more of the
other Rotherwood companies would default under their portion of
the credit facility.
There is a risk that Cramer will not have access to sufficient
funds for its operations if other Rotherwood companies have previously
borrowed significantly more of the funds under the credit
facility than anticipated. However, the $3,750,000 credit line
is <PAGE> substantially in excess of the total prospective borrowing needs
of Cramer and the other Rotherwood companies over the next 12
months. Furthermore, Cramer management participates in regular
assessments of the borrowing needs of all Rotherwood companies
and would be aware of anticipated credit shortages in time to
arrange new or additional sources of capital. Therefore, the
Company believes that the new, combined credit facility, coupled
with anticipated cash flow from operations, will be sufficient to meet
current operating requirements over the next 12 month period.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in several lawsuits relating
to product liability claims arising from accidents allegedly occurring in
connection with the use of its products. The claims are covered by
insurance and are being defended by the Company's independent counsel, or
by counsel assigned by the insurance carriers, but are subject to deductibles
ranging from $0 to $100,000. A number of the claimants allege substantial
damages. While management believes the Company has substantial defenses
with respect to the claims, the ultimate outcome of such litigation cannot be
predicted with certainty. The Company has reasonably estimated and accrued
in its financial statements its portion of the deductible as a product
liability contingency. Such claims are an ordinary aspect of the Company's
business.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 22, 1996, the Company solicited proxies concerning the
election of Directors at a meeting held on May 21, 1996.
<PAGE>
ITEM 5. OTHER INFORMATION
Factors That May Affect Future Results Of Operations:
In connection with the "safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, Cramer, Inc. is
hereby filing cautionary statements identifying important factors that
could cause the Company's actual results to differ materially from those
projected in forward-looking statements of the Company made by, or on
behalf of, the Company. When used in this Form 10-QSB and in future
filings by the Company with the Securities and Exchange Commission, in
the Company's press releases and in oral statements made with the approval
of an authorized executive officer, words or phrases such as "will likely
result," "are expected to," "will continue," "is anticipated," "estimate,"
"project" or similar expressions are intended to identify forward-looking
statements. The Company wishes to caution readers not to place undue
reliance on such forward-looking statements.
There are a number of reasons why investors should not
place undue reliance on forward-looking statements. Among the risks and
uncertainties that could cause the Company's actual results for future
periods to differ materially from any forward-looking statements made
are the following:
Fluctuations or reductions in product demand and
market acceptance
The level of product development by the Company
Capacity and supply constraints or difficulties
The results of financing efforts
The effect of new laws and regulations
Unexpected additional expenses or operating
losses
Competition
The Company's reliance on certain vendors for key
components.
The foregoing list of risks and uncertainties is not
meant to be complete.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
none
<PAGE>
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.
CRAMER, INC.
(Registrant)
Date: July 30, 1996 /s/ Gary A. Rubin
Gary A. Rubin
Vice President, Finance & CFO
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 57
<SECURITIES> 0
<RECEIVABLES> 1200
<ALLOWANCES> 21
<INVENTORY> 1456
<CURRENT-ASSETS> 247
<PP&E> 5252
<DEPRECIATION> 4568
<TOTAL-ASSETS> 3961
<CURRENT-LIABILITIES> 2796
<BONDS> 0
0
0
<COMMON> 3508
<OTHER-SE> (3124)
<TOTAL-LIABILITY-AND-EQUITY> 3961
<SALES> 5799
<TOTAL-REVENUES> 5799
<CGS> 4168
<TOTAL-COSTS> 5608
<OTHER-EXPENSES> (43)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60
<INCOME-PRETAX> 174
<INCOME-TAX> 0
<INCOME-CONTINUING> 174
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
