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 29, 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 Thousands, Except Share Data)
ASSETS 6/29/97 12/31/96
CURRENT ASSETS:
Cash $ 98 $ 117
Accounts receivable, net of
allowance of $21 1,003 1,034
Inventories 1,323 1,286
Prepaid expenses 274 284
Total current assets 2,698 2,721
PROPERTY, PLANT AND EQUIPMENT, NET 627 658
Other assets:
Intangible pension asset 264 264
Other 25 0
Total Assets $ 3,614 $ 3,643
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable $ 1,179 $ 1,059
Current portion of long-term debt 10 76
Accounts payable 595 672
Accrued liabilities 544 573
Total current liabilities 2,328 2,380
NONCURRENT LIABILITIES:
Pension benefits payable 452 552
Other 196 159
Total noncurrent liabilities 648 711
STOCKHOLDERS' EQUITY:
Common stock, no par value;
authorized, 6,000,000 shares;
issued and outstanding
3,840,650 shares at June 29, 1997,
and December 31, 1996 3,508 3,508
Accumulated deficit (2,828) (2,914)
680 594
Minimum pension liability
adjustment (42) (42)
Net stockholders' equity 638 552
Total Liabilities and
Stockholders' Equity $3,614 $3,643
<PAGE>
CRAMER, INC.
STATEMENTS OF INCOME
UNAUDITED
(Amounts in Thousands, Except Per Share Data)
<TABLE>
QUARTER ENDED SIX MONTHS ENDED
6/29/97 6/30/96 6/29/97 6/30/96
<CAPTION>
<S> <C> <C> <C> <C>
NET SALES $3,244 $3,132 $6,103 $5,799
COST OF SALES 2,350 2,186 4,495 4,168
Gross profit 894 946 1,608 1,631
OPERATING EXPENSES:
Selling expenses 530 556 954 979
General and administrative 277 226 526 461
Total operating expenses 807 782 1,480 1,440
Income from operations 87 164 128 191
OTHER INCOME (EXPENSE):
Interest expense, net (23) (24) (47) (60)
Other, net (11) (5) 5 43
Total other income
(expense) (34) (29) (42) (17)
INCOME BEFORE INCOME TAXES 53 135 86 174
INCOME TAX EXPENSE 0 0 0 0
NET INCOME $ 53 $ 135 $ 86 $ 174
Net income per share
based on weighted
average number of
common equivalent
shares outstanding $ 0.01 $ 0.04 $ 0.02 $ 0.05
Weighted Average Common
Equivalent Shares
Outstanding 3,840,650 3,840,650 3,840,650 3,840,650
<TABLE\>
<PAGE>
CRAMER, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in Thousands)
Six Months Ended
6/29/97 6/30/96
Cash flows from operating activities:
Net income $ 86 $ 174
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 101 84
Changes in operating assets
and liabilities:
Accounts receivable 31 (98)
Inventories (37) 32
Prepaid expenses 10 (2)
Accounts payable and
accrued expenses (106) (27)
Other noncurrent liabilities (63) 11
Net cash provided by
operating activities 22 174
Cash flows from investing activities:
Capital expenditures (69) (161)
Cash flows from financing activities:
Principal payments on notes payable
and long-term debt (4,284) (4,312)
Proceeds from issuance of notes
payable and long-term debt 4,312 4,272
Net cash provided by
(used in) financing activities 28 (40)
Net decrease in cash (19) (27)
Cash at beginning of year 117 84
Cash at end of quarter $ 98 $ 57
Supplemental disclosures:
Cash paid during the period for:
Interest $ 45 $ 57
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", "expects", "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 $6,103,000, net sales for the first half of 1997 were 5%
higher than for the same period in 1996. The increase in
net sales reflects a general strengthening in the Company's
seating business and a 16% reduction in the costs of product
returns, defects or price adjustments. This reduction is a
result of the Company's formal quality initiatives
instituted in the second half of 1996.
Intake of new orders was $6,182,000 in the first half of
1997, an increase of 3% as compared to the first half of
1996. At June 29, 1997, the Company's backlog was $983,000,
an increase of $11,000 from the level at December 31, 1996.
Substantially all of the Company's backlog is scheduled to
ship within the next three months.
<PAGE>
As a percentage of net sales, gross margins in the first
half of 1997 were 26% as compared to 28% in the first half
of 1996. The decrease in margins reflects (a) increased
costs for manufacturing supplies and higher raw material and
component prices, and (b) an increase in the proportion of
products that are sold freight prepaid with the cost of
delivery included in the price of the product.
Selling expenses in the first half of 1997 decreased by
$24,000 as compared to the first half of 1996. The decrease
primarily reflects the reclassification of certain selling
costs to administrative departments and the absence of
expenses to recruit and relocate new executive sales
management which were incurred in 1996. General and
administrative expenses increased due to additional
engineering expenses necessary to implement a formal quality
improvement program and expand new product development.
Interest expense decreased by $13,000, or 22%, in the first
half of 1997 as compared to the same period last year. This
difference arose primarily in the first quarter and reflects
the lower interest rates available to the Company due to its
participation in a consolidated Rotherwood banking
arrangement initiated in the second quarter of 1996. (See
discussion in Management Discussion and Analysis in the 1996
Form 10KSB.)
Other nonoperating income in the first half of 1996 included
$34,000 of insurance proceeds in settlement of a claim for
damages arising from vandalism to the Company's heating
system during February of 1996.
For the first half of 1997, the Company's income from
operations and net income were $63,000 and $88,000 lower
than in the same period in 1996. A general price increase
was implemented effective July 1, 1997. In addition, the
Company has accelerated its on-going cost reduction program.
Formal training programs also have been initiated for the
Company's purchasing management in order to improve
procurement practices. Management expects improved
performance in the second half of 1997 as compared to the
first half of the year.
B. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's trade accounts receivable decreased by $31,000
from December 31, 1996 to June 29, 1997. The decrease
reflects the Company's improvement in cash collections.
Days sales in receivables decreased from 29.4 at December
1996 to 28.1 at June 1997.
Inventories increased by $37,000 during the first half of
1997. The increase is primarily in raw materials and work
in progress, which is a normal trend during the year.
Capital expenditures aggregated $69,000 during the first
half of 1997 and consisted of factory tooling to enhance the
Company's manufacturing capacity. The rate of purchases of
capital assets is not anticipated to change significantly
during the remainder of 1997.
<PAGE>
During the first half of 1997, 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 payment 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 $77,000 during
the first half of 1997. 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.
Primarily as a result of the decrease in accounts payable,
short term notes payable increased by $120,000 during the
first half of 1997.
During the first half of 1997 the Company reduced its long-
term notes by $66,000 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 Management Discussion and Analysis 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
for the foreseeable future.
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.
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 21, 1997, the Company solicited proxies
concerning the election of Directors at a meeting held
on May 20, 1997.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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: 8\11\97 /S/ Gary A. Rubin
Gary A. Rubin
Vice President, Finance & CFO
</TABLE>
<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, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-END> JUN-29-1997
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<ALLOWANCES> 21
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<PP&E> 5389
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0
0
<COMMON> 3508
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<OTHER-EXPENSES> (42)
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</TABLE>
