UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, NW
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 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
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CRAMER, INC.
BALANCE SHEETS
UNAUDITED
(Amounts in Thousands, Except Share Information)
ASSETS 9/29/96 12/31/95
<S> <C> <C>
CURRENT ASSETS:
Cash $ 34 $ 84
Trade receivables,
net of allowance of $21 1,072 1,102
Inventories 1,605 1,488
Prepaid expenses 193 245
Total current assets 2,904 2,919
PROPERTY AND EQUIPMENT, NET 673 608
OTHER ASSETS:
Intangible pension asset 317 317
Total assets $ 3,894 $ 3,844
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Note payable $ 830 $ 356
Current maturities of
long-term debt 97 176
Accounts payable 1,138 1,228
Accrued liabilities 637 658
Total current liabilities 2,702 2,418
NONCURRENT LIABILITIES:
Long-term debt, less
current maturities 0 486
Pension benefits payable 595 595
Other 176 135
Total noncurrent liabilities 771 1,216
STOCKHOLDERS' EQUITY:
Common stock, no par value;
authorized, 6,000,000 shares;
issued and outstanding 3,840,650
shares at September 29, 1996
and December 31, 1995 3,508 3,508
Accumulated deficit (3,028) (3,239)
480 269
Minimum pension liability
adjustment (59) (59)
Net stockholders' equity 421 210
Total liabilities and
stockholders' equity $ 3,894 $ 3,844
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CRAMER, INC.
STATEMENTS OF OPERATIONS
UNAUDITED
(Amounts in Thousands, Except Per Share Data)
Quarter Ended Nine Months Ended
9/29/96 10/1/95 9/29/96 10/1/95
<S> <C> <C> <C> <C>
NET SALES $ 2,928 $ 2,959 $ 8,727 $ 9,500
COST OF SALES 2,107 2,268 6,275 7,100
Gross profit 821 691 2,452 2,400
OPERATING EXPENSES:
Selling expenses 491 377 1,470 1,207
General and administrative 253 254 714 748
Total operating expenses 744 631 2,184 1,955
Income from operations 77 60 268 445
OTHER INCOME (EXPENSE):
Interest expense, net (23) (36) (83) (127)
Other, net (17) 82 26 (9)
Total other income (expense) (40) 46 (57) (136)
INCOME BEFORE INCOME TAXES 37 106 211 309
INCOME TAXES 0 0 0 0
NET INCOME $ 37 $ 106 $ 211 $ 309
Net income per share based on weighted
average number of common
equivalent shares outstanding $0.01 $0.03 $0.05 $0.10
Weighted average common equivalent
shares outstanding 3,840,650 3,857,110 3,840,650 3,212,110
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CRAMER, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in Thousands)
Nine Months Ended
9/29/96 10/1/95
<S> <C> <C>
Cash flows from operating activities:
Net income $ 211 $ 309
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation and amortization 133 119
Change in operating assets
and liabilities:
Accounts receivable 30 132
Inventory (117) 180
Prepaid expenses 52 156
Accounts payable and
accrued expenses (111) (825)
Other noncurrent liabilities 41 145
Net cash provided by operating
activities 239 216
Cash flows from investing activities:
Capital expenditures (198) (23)
Net cash used by investing activities (198) (23)
Cash flows from financing activities:
Principal payments on notes
payable & long-term debt (5,634) (9,911)
Proceeds from issuance of
notes payable and long-term debt 5,543 9,592
Issuance of common stock via
option exercise 0 230
Net cash used in financing activities (91) (89)
Net increase (decrease) in cash (50) 104
Cash at beginning of year 84 1
Cash at end of quarter $ 34 $ 105
Supplemental disclosures:
Cash paid during the period
for interest $ 88 $ 127
Cash paid during the period
for 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
Sales for the third quarter of 1996 were equal to those achieved
during the same period of 1995. Results for the first half of
1995 include approximately $750,000 of additional sales resulting
from a reduction in abnormally high backlog carried over from
1994. Excluding this one-time event, sales results for the first
nine months of 1996 also equal those achieved during the same
period in 1995. The Company's backlog at September 29, 1996,
$1,072,000, is almost $100,000 higher than at December 31, 1995.
Substantially all of the current backlog is scheduled to ship
within the next three months.
The Company's total gross margin in the third quarter of 1996,
$821,000, was $130,000 higher than in the same period during
1995. This 18% improvement was due to higher average selling
prices and material cost reductions. These improvements have
occurred throughout all of 1996. As a result, gross margins as a
percent of sales for the first three quarters of 1996 (28.1%)
were better than the margins achieved during the same period in
1995 (25.3%).
Selling expenses were $263,000 higher in the first three quarters
of 1996 as compared to the first three quarters of 1995. This
increase was primarily due to the costs of recruiting and
relocating new executive sales management, for advertising and
other marketing expenses associated with the introduction of new
products and price lists, and for negotiating a sales contract
directly with the General Services Administration.
Interest expense in the first three quarters of 1996 was 35%
lower than for the same period last year and was 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.
Due to the improvements in gross margin, the Company's operating
income for the third quarter of 1996 grew by 28% over income
levels achieved during the same period in 1995.
<PAGE>
Since 1995's sales include the one-time depletion of backlog
discussed above, the Company currently anticipates that its 1996
sales will be somewhat lower than in the prior year. However, the
Company expects that 1996's net income will not be significantly
different than 1995's due to its improvement in gross margins.
B. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's accounts receivable decreased by $30,000 at
September 29, 1996 as compared to December 31, 1995. This was in
accordance with expectations as the Company's sales in September
of 1996 were slightly lower than in December 1995.
Inventory balances increased by $117,000 at September 29, 1996 as
compared to December 31, 1995. This increase was due to a
decision to increase the number of finished products maintained
for the Company's various dealer stocking programs in recognition
of the success of this sales initiative.
Capital expenditures aggregated $197,000 during the first three
quarters 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.
Accounts payable decreased by $90,000 from the December 31, 1995
level. In order to improve relations with its suppliers, the
Company has increased the speed at which it pays its trade
vendors and has begun taking available cash discounts.
The Company and certain other subsidiaries of Rotherwood
Corporation (the Company's parent) participate in a combined
credit facility with Mark Twain Bank. Under this credit
facility, the Company can borrow up to the total available under
the facility, $3,750,000, less the amounts borrowed by the other
Rotherwood subsidiaries, $812,000 at September 29, 1996. At
$830,000, the Company's borrowings under the new credit facility
at September 29, 1996 were $30,000 less than the total amount due
to banks at December 31, 1995.
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 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.
<PAGE>
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
None.
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 <PAGE> 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:
I. Fluctuations or reductions in product demand
and market acceptance
II. The level of product development by the
Company
III. Capacity and supply constraints or
difficulties
IV. The results of financing efforts
V. The effect of new laws and regulations
VI. Unexpected additional expenses or operating
losses
VII. Competition
VIII. 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: November 12, 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 SEPTEMBER 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-29-1996
<CASH> 34
<SECURITIES> 0
<RECEIVABLES> 1,072
<ALLOWANCES> 21
<INVENTORY> 1,605
<CURRENT-ASSETS> 193
<PP&E> 5,289
<DEPRECIATION> 4,617
<TOTAL-ASSETS> 3,894
<CURRENT-LIABILITIES> 2,702
<BONDS> 0
0
0
<COMMON> 3,508
<OTHER-SE> (3,087)
<TOTAL-LIABILITY-AND-EQUITY> 3,894
<SALES> 8,727
<TOTAL-REVENUES> 8,727
<CGS> 6,275
<TOTAL-COSTS> 8,459
<OTHER-EXPENSES> (26)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 211
<INCOME-TAX> 0
<INCOME-CONTINUING> 211
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
