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 30, 1997
[ ] 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
CRAMER, INC.
BALANCE SHEET
UNAUDITED
(Amounts in $000's, except share data)
ASSETS 3/30/97 12/31/96
CURRENT ASSETS:
Cash $ 68 $ 117
Trade receivables,
net of allowance of $21 990 1,034
Inventories 1,381 1,286
Prepaid expenses 283 284
______ _____
Total current assets 2,722 2,721
PROPERTY AND EQUIPMENT:
At cost 5,354 5,319
Accumulated depreciation
and amortization 4,709 4,661
Net property and _____ _____
equipment 645 658
OTHER ASSETS:
Intangible pension asset 264 264
Other 27 0
_____ ______
Total Assets $ 3,658 $ 3,643
===== =====
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Notes payable $ 1,165 $ 1,059
Current maturities of
long-term notes 40 76
Accounts payable 559 672
Accrued liabilities 567 573
_____ _____
Total current liabilities 2,331 2,380
NONCURRENT LIABILITIES:
Pension benefits payable 552 552
Other 190 159
____ ____
Total noncurrent liabilities 742 711
STOCKHOLDERS' EQUITY:
Common stock, no par value;
authorized, 6,000,000 shares;
issued and outstanding,
3,840,650 shares at March 30,
1997 and December 31, 1996 3,508 3,508
Accumulated deficit (2,881) (2,914)
_____ _____
627 594
Minimum pension liability
adjustment (42) (42)
_____ ____
Net stockholders' equity 585 552
_____ ____
Total Liabilities and
Stockholders' Equity $ 3,658 $ 3,643
===== =====
<PAGE>
CRAMER, INC.
STATEMENTS OF INCOME
UNAUDITED
(Amounts in $000's, except per share data)
QUARTER ENDED
3/30/97 3/31/96
NET SALES $ 2,859 $ 2,667
COST OF SALES 2,145 1,982
_____ _____
Gross profit 714 685
OPERATING EXPENSES:
Selling 424 423
General and administrative 249 235
____ ____
Total operating expenses 673 658
____ ____
Income from operations 41 27
OTHER INCOME (EXPENSE):
Interest expense, net (24) (36)
Other, net 16 48
_____ ____
Total other income (expense) (8) 12
_____ ____
INCOME BEFORE INCOME TAXES 33 39
INCOME TAXES 0 0
_____ ____
NET INCOME $ 33 $ 39
==== ====
Earnings per share based on
weighted average number of
common equivalent shares
outstanding, 3,840,650 for
the quarters ending 3/30/97
and 3/31/96, respectfully $ 0.01 $ 0.01
===== =====
<PAGE>
CRAMER, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in $000's)
QUARTER ENDED
3/30/97 3/31/96
Cash flows from operating
activities:
Net income $ 33 $ 39
Adjustments to reconcile net
income to net cash
provided by (used in)
operating activities:
Depreciation and amortization 48 42
Changes in operating assets
and liabilities:
Accounts receivable 44 (12)
Inventory (95) (73)
Prepaid expenses 1 (5)
Other assets (27) 0
Accounts payable and
accrued expenses (119) (109)
Other noncurrent liabilities 31 28
______ _____
Net cash provided by
(used in) operating
activities (84) (90)
______ _____
Cash flows from investing activities:
Capital expenditures (35) (95)
Cash flows from financing activities:
Principal payments on notes payable
and long-term notes (2,994) (2,737)
Proceeds from issuance of notes
payable and long-term notes 3,064 2,927
______ ______
Net cash provided by (used in)
financing activities 70 190
______ ______
Net increase (decrease) in cash (49) 5
Cash at beginning of year 117 84
_______ _______
Cash at end of quarter $ 68 $ 89
====== ======
Supplemental disclosures:
Cash paid during the quarter for:
Interest $ 24 $ 23
Income tax $ 0 $ 1
<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 risk and uncertainties. The Company's actual results
could differ materially. In connection with the "safe harbor"
provisions of the Private Securities Litigation Reform Act of
1995, Cramer, Inc. reminds readers that there are many 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 other 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.
A. SUMMARY OF OPERATIONS
At $2,859,000, net sales for the first quarter of 1997 were 7%
larger than for the same period in 1996. The increase in net
sales reflects a general strengthening in the Company's seating
business. The intake of new orders were $2,914,000 in the first
quarter of 1997, an increase of 5% as compared to the first
quarter of 1996. At March 30, 1997, the Company's backlog was
$986,000, an increase of $14,000 from the level at December 31,
1996. Substantially all of the Company's backlog is scheduled to
ship within the next three months.
<PAGE>
The Company's gross margin in the first quarter of 1997 increased
by $29,000 from the level in the first quarter of 1996. As a
percentage of sales, margins in the first quarter of 1997 were
25% as compared to 26% in the first quarter of 1996. The
decrease in margins reflects higher raw material and component
prices.
Despite the increase in volume, selling expenses were tightly
controlled and were virtually unchanged in the first quarter of
1997 as compared to the first quarter of 1996. General and
administrative expenses increased by $14,000. The increase
consists primarily of an additional engineer expenses necessary
to implement a formal quality improvement program and expand new
product development.
Primarily as a result of the increase in sales volume, income
from operations was $41,000 in the first quarter of 1997, an
increase of 51% as compared to the first quarter of 1996.
Interest expense decreased by $12,000 or 33% in the first quarter
of 1997 as compared to the same period last year. The decrease
reflects slightly lower average borrowing levels and the impact
of the Company's borrowing at a lower rate in 1997 due to its
participation in a consolidated Rotherwood (the Company's parent)
banking arrangement. This arrangement was initiated in the 2nd
quarter of 1996. (See discussion in Note 3 to the Financial
Statements in the 1996 Form 10KSB.)
Other nonoperating income in 1996 included $19,000 of insurance
proceeds in settlement of a claim for damages arising from
vandalism to the Company's heating system during February of
1996.
While the results of the first quarter of 1997 were lower than in
the same period in 1996, management believes that 1997's year-end
results will improve on those realized in 1996. Intake of new
orders and sales are expected to continue to increase from the
1996 level as the Company realizes the benefits of new products
introduced and of the marketing and distribution enhancements
made last year. Overall profitability should be enhanced as a
result of realizing benefits from cost reductions and of planned
sales price increases. Profitability on individual orders should
be further enhanced as the increased production volume will allow
lower allocation of fixed costs to individual orders.
B. FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
The Company's trade accounts receivable decreased by $44,000 from
December 31, 1996 to March 30, 1997. The decrease was in line
with management's expectations and reflects the lower sales
volume in February and March of 1997 as compared to November and
December of 1996.
<PAGE>
Inventories increased by $95,000 during the first quarter of
1997. The increase is primarily in raw materials and work in
progress, both of which had been deliberately reduced during
December 1996 in preparation for the Company's year-end physical
inventory. Furthermore, the Company began increasing selected
raw material levels at the end of the first quarter in order to
prepare for expected sales increases in the 2nd quarter of 1997.
Capital expenditures aggregated $35,000 during the quarter and
consisted of factory tooling to enhance the Company's
manufacturing capacity. Purchases of capital assets are
anticipated to increase in the second and third quarters with the
completion of tooling necessary to support new product
introductions and to improve manufacturing processes.
During the first quarter the Company purchased the U.S.
distribution rights to a product that competes with its Kik-step
stool. A portion of the purchase price represents payment of a
non-compete agreement with the principal party associated with
the other product. This amount, $27,000, was recorded as an
other non-current asset and is being amortized to expense over a
3 year period.
The Company's accounts payable decreased by $113,000 from the
December 31, 1996 level. The reduction was the result of the
Company negotiating cash discounts for accelerated payments with
several of its key vendors. This is part of the Company's
ongoing program to strengthen its relationships with its primary
material suppliers.
As a result of the decrease in accounts payable, short term notes
payable increased by $106,000 during the first quarter of 1997.
During the first quarter of 1997 the Company reduced its long-term
notes by $36,000 in accordance with established payment
schedules.
The Company continues to participate in a consolidated cash
management and credit facility with its parent, Rotherwood. (See
discussion in Note 3 to the Financial Statements in the 1996 Form
10KSB.) Management believes that the Company's access to this
facility, along with existing cash balances and cash generated
from future operations, will be adequate to meet future operating
requirements and liquidity needs.
<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 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 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
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
March 31, 1997. Dismissal of Ernst & Young L.L.P. as the
Company's independent auditors.
April 21, 1997. Appointment of Deloitte & Touche L.L.P. as the
Company's independent auditors.
<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: May 8, 1997 /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 MARCH 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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