UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, NW
Washington, DC 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 March 31, 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. #48-0638707625
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
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CRAMER, INC.
BALANCE SHEET
UNAUDITED
(Amounts in $000's, except share data)
<CAPTION>
ASSETS 3/31/96 12/31/95
<S> <C> <C>
Current assets:
Cash $ 89 $ 84
Trade receivables, net of allowance of $21 1,114 1,102
Inventories 1,561 1,488
Prepaid expenses 250 245
Total current assets 3,014 2,919
PROPERTY AND EQUIPMENT:
At cost 5,187 5,092
Accumulated depreciation and amortization 4,526 4,484
Net property and equipment 661 608
OTHER ASSETS:
Intangible asset - related to pension 317 317
Total Assets $ 3,992 $ 3,844
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Notes payable $ 791 $ 560
Current maturities of long-term debt 174 176
Accounts payable - trade 939 1,024
Accrued liabilities 634 658
Total current liabilities 2,538 2,418
NONCURRENT LIABILITIES:
Long-term debt, less current maturities 447 486
Pension benefits payable 595 595
Other 163 135
Total noncurrent liabilities 1,205 1,216
<PAGE>
STOCKHOLDERS' EQUITY:
Common stock, no par value; authorized, 6,000,000 shares;
issued 3,840,650 shares at March 31, 1996 and
December 31, 1995 3,508 3,508
Accumulated deficit (3,200) (3,239)
308 269
Minimum pension liability adjustment (59) (59)
Net stockholders' equity 249 210
Total Liabilities and
Stockholders' Equity $ 3,992 $ 3,844
</TABLE>
<PAGE>
<TABLE>
CRAMER, INC.
STATEMENTS OF INCOME
UNAUDITED
(Amounts in $000's, except per share data)
<CAPTION>
QUARTER ENDED
3/31/96 4/2/95
<S> <C> <C>
NET SALES $ 2,667 $ 3,464
COST OF SALES 1,982 2,545
Gross profit 685 919
OPERATING EXPENSES:
Selling expenses 423 436
General and administrative 235 256
Total operating expenses 658 692
Income from operations 27 227
OTHER INCOME (EXPENSE):
Interest expense, net (36) (47)
Other, net 48 (34)
Total other income (expense) 12 (81)
INCOME BEFORE INCOME TAXES 39 146
INCOME TAX EXPENSE (BENEFIT) 0 0
NET INCOME $ 39 $ 146
Earnings per share based on weighted
average number of common equivalent
shares outstanding, 3,840,650 and
2,773,776 for the quarters ending
3/31/96 and 4/2/95, respectfully $ 0.01 $ 0.05
</TABLE>
<PAGE>
<TABLE>
CRAMER, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in $000's)
<CAPTION>
QUARTER ENDED
3/31/96 4/2/95
<S> <C> <C>
Cash flows from operating activities:
Net income $ 39 $ 146
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 42 40
Changes in operating assets
and liabilities:
Accounts receivable (12) (67)
Inventory (73) 149
Prepaid expenses (5) 32
Accounts payable and accrued expenses (109) (293)
Other noncurrent liabilities 28 21
Net cash provided by (used in)
operating activities (90) 28
Cash flows from investing activities:
Capital expenditures (95) (4)
Cash flows from financing activities:
Principal payments on notes payable
and long-term debt (2,737) (3,330)
Proceeds from issuance of notes payable
and long-term debt 2,927 3,286
Issuance of capital stock 0 20
Net cash provided by (used in)
financing activities 190 (24)
Net increase in cash 5 0
Cash at beginning of year 84 1
Cash at end of quarter $ 89 $ 1
Supplemental disclosures:
Cash paid during the quarter for:
Interest $ 23 $ 43
Income tax $ 1 $ 0
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
A. Summary of Operations
Net sales in the first quarter 1996 are consistent with
net sales for the first quarter of 1995 but are 23%
lower than net sales in the first quarter 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.
Intake of new orders in the first quarter of 1996 was
$2,834,000, a decrease of 6% from the amount in the
first quarter of 1995. While lower in absolute
quantity, net sales and orders were at a higher
relative price than in prior years. The Company's
backlog at March 31, 1996, $1,038,000, is consistent
with the Company's operating plans for 1996 and is
$55,000 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
quarter of 1996 (25.7%) were slightly lower than the
margins achieved during the same period in 1995
(26.5%). The decrease in margin occurred primarily
because the benefit of higher average selling prices
were mitigated by the reduction in sales volume, since
fixed costs had to be allocated over a smaller
production volume. Furthermore, the Company is
currently accruing its anticipated costs under the
self-insured retention provisions of its product
liability insurance policy. In 1995, such accruals did
not begin until the third quarter. If the Company had
recorded this product liability accrual in the first
quarter of 1995, the gross margin percentage for that
period would have been only 25.4%.
In total, operating expenses were $34,000 lower in the
first quarter of 1996 as compared to the first quarter
of 1995. This reduction is primarily due to lower
commissions corresponding to the decrease in the
Company's sales level. At $39,000, interest expense in
the first quarter of 1996 was 25% lower than for the
same period last year and is due to the reduction in
average borrowings as compared to the prior year.
During the first quarter of 1996, the Company received
$25,000 in credit from a vendor in settlement of prior
years' quality issues. The Company also received
$19,000 from its insurance carrier in settlement of a
claim for damages arising from vandalism to the
Company's heating system. During February 1996, both
of these amounts were recorded as other nonoperating
income.
The Company's net income for the first quarter of 1996,
$39,000, was consistent with operating plans. The
Company currently expects that its sales and net income
for the second quarter of 1996 will be consistent with
or slightly higher than the <PAGE> $3,077,000 in sales and
$57,000 of net income achieved in the second quarter of
1995. For the 1996 fiscal year, the Company expects
sales to be approximately the same as in 1995. 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 were virtually
unchanged at March 31, 1996 as compared to December 31,
1995. This was in-line with expectations as the
Company's sales in March of 1996 were substantially the
same as in December 1995. Inventories increased by
$73,000 during the first quarter of 1996. The increase
is primarily in work in progress, which had been
deliberately reduced during December of 1995 in
preparation for the Company's year-end physical
inventory.
Capital expenditures aggregated $95,000 during the
quarter and consisted of factory tooling and office
equipment purchased to enhance the productivity of the
Company's employees. 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.
The Company's accounts payable decreased by $85,000
from the December 31, 1995 level. This reduction was
made as part of the Company's on-going plan to
strengthen its ties with key supplier partners by
reducing the aging of amount owed to these parties.
As a result of the increase in inventory, capital asset
additions and the reduction in vendor payables,
short-term bank borrowings increased by $231,000 during
the quarter.
During the first quarter of 1996, the Company reduced
its long-term debts by $41,000 in accordance with
established payment conditions.
Subsequent to the first quarter of 1996, the Company
and certain other subsidiaries of Rotherwood (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 of 2 1/8% as
compared to the Company's current banking arrangement.
The Company used its borrowings <PAGE> 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
exceeds $4,000,000 at March 31, 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 all funds under the
credit facility. 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.
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 Company's 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 <PAGE> 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
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
<PAGE>
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: _____________ ______________________________
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 MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 89
<SECURITIES> 0
<RECEIVABLES> 1114
<ALLOWANCES> 21
<INVENTORY> 1561
<CURRENT-ASSETS> 250
<PP&E> 5187
<DEPRECIATION> 4526
<TOTAL-ASSETS> 3992
<CURRENT-LIABILITIES> 2538
<BONDS> 0
0
0
<COMMON> 3508
<OTHER-SE> (3259)
<TOTAL-LIABILITY-AND-EQUITY> 3992
<SALES> 2667
<TOTAL-REVENUES> 2667
<CGS> 1982
<TOTAL-COSTS> 2640
<OTHER-EXPENSES> (48)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36
<INCOME-PRETAX> 39
<INCOME-TAX> 0
<INCOME-CONTINUING> 39
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
