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 September 28, 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 commons stock, no par value as of October 29,
1997.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CRAMER, INC.
BALANCE SHEETS
UNAUDITED
(Amounts in Thousands, Except Share Information)
ASSETS 9/28/97 12/31/96
CURRENT ASSETS:
Cash $ 121 $ 117
Trade receivables, net of
allowance of $21 1,065 1,034
Inventories 1,419 1,286
Prepaid expenses 236 284
Total current assets 2,841 2,721
PROPERTY AND EQUIPMENT
At cost 5,443 5,319
Accumulated depreciation 4,820 4,661
Net property and equipment 623 658
OTHER ASSETS:
Intangible pension asset 264 264
Other 22 0
Total assets $ 3,750 $ 3,643
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Note payable $ 1,210 $ 1,059
Current maturities of long-term debt 0 76
Accounts payable 572 672
Accrued liabilities 627 573
Total current liabilities 2,409 2,380
NONCURRENT LIABILITIES:
Pension benefits payable 452 552
Other 197 159
Total noncurrent liabilities 649 711
STOCKHOLDERS' EQUITY:
Common stock, no par value;
authorized, 6,000,000 shares;
issued and outstanding 3,840,650
shares at September 28, 1997 and
December 31, 1996 3,508 3,508
Accumulated deficit (2,774) (2,914)
734 594
Minimum pension liability adjustment (42) (42)
Net stockholders' equity 692 552
Total liabilities and stockholders'
equity $ 3,750 $ 3,643
<PAGE>
CRAMER, INC.
STATEMENTS OF OPERATIONS
UNAUDITED
(Amounts in Thousands, Except Per Share Data)
Quarter Nine Months
Ended Ended
9/28/97 9/29/96 9/28/97 9/29/96
NET SALES $ 3,092 $ 2,928 $ 9,195 $ 8,727
COST OF SALES 2,276 2,107 6,771 6,275
Gross profit 816 821 2,424 2,452
OPERATING EXPENSES:
Selling expenses 462 491 1,416 1,470
General and administrative 259 253 785 714
Total operating expenses 721 744 2,201 2,184
Income from operations 95 77 223 268
OTHER INCOME (EXPENSE):
Interest expense, net (17) (23) (64) (83)
Other, net (24) (17) (19) 26
Total other income
(expense) (41) (40) (83) (57)
INCOME BEFORE INCOME TAXES 54 37 140 211
INCOME TAXES 0 0 0 0
NET INCOME $ 54 $ 37 $ 140 $ 211
Net income per share based on weighted
average number of common
equivalent shares
outstanding $0.01 $0.01 $0.04 $0.05
Weighted average common
equivalent shares
outstanding 3,840,650 3,840,650 3,840,650 3,840,650
<PAGE>
CRAMER, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in Thousands)
Nine Months Ended
9/28/97 9/29/96
Cash flows from operating activities:
Net income $140 $211
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 164 133
Change in operating assets and liabilities:
Accounts receivable (31) 30
Inventory (133) (117)
Prepaid expenses 48 52
Accounts payable and accrued expenses (46) (111)
Other noncurrent liabilities (62) 41
Net cash provided by operating activities 80 239
Cash flows from investing activities:
Capital expenditures for plant and equipment (124) (198)
Acquisitions of other noncurrent assets (27) 0
Net cash used by investing activities (151) (198)
Cash flows from financing activities:
Principal payments on notes payable
& long-term debt (3,088) (5,634)
Proceeds from issuance of notes
payable and long-term debt 3,163 5,543
Net cash provided by (used in)
financing activities 75 (91)
Net increase (decrease) in cash 4 (50)
Cash at beginning of year 117 84
Cash at end of quarter $ 121 $ 34
Supplemental disclosures:
Cash paid during the period for interest $ 64 $ 88
Cash paid during the period for 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 $9,195,000, net sales for the first three quarters
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
35% 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 $9,263,000 in the first three
quarters of 1997, an increase of 3% as compared to the
first three quarters of 1996. At September 28, 1997,
the Company's backlog was $947,000, an amount <PAGE> that is
substantially the same as the level at December 31,
1996. Substantially all of the Company's backlog is
scheduled to ship within the next three months.
As a percentage of net sales, gross margins in the
first three quarters of 1997 were 26% as compared to
28% in the first three quarters of 1996. The decrease
in margins reflects (1) increased costs for
manufacturing supplies and higher raw material and
component prices, (2) an increase in property and
casualty insurance rates, and (3) 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 three quarters of 1997
decreased by $54,000 as compared to the first three
quarters 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 $19,000, or 23%, in the
first three quarters of 1997 as compared to the same
period last year. This difference 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 three quarters
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.
The Company's results from operations and net income
for the first three quarters of 1997 are less than the
same amounts in the prior year. However, actions
undertaken at the end of the second quarter of 1997
have started to improve the Company's results. (See
discussion in Management Discussion and Analysis in the
June 29, 1997 Form 10QSB.) Income from operations and
net income in the quarter ending September 28, 1997
were $95,000 and $54,000, improvements of 23% and 46%,
respectively, from the same amounts in the quarter
ended September 29, 1996. Management expects the
improvement in the Company's performance to accelerate
in the last quarter of the fiscal year.
<PAGE>
B. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's trade accounts receivable increased by
$31,000 from December 31, 1996 to September 28, 1997.
The increase was in line with management's expectations
and reflects the higher sales volume in September 1997
as compared to December 1996.
Inventories increased by $133,000 during the first
three quarters of 1997. The increase is primarily in
raw materials and work in progress, which is a normal
trend during the year.
Capital expenditures aggregated $124,000 during the
first three quarters 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.
During the first quarter of 1997, the Company purchased
the U.S. distribution rights to a product that competes
with its Kik-Step (Registered Trademark) 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 three year period.
The Company's accounts payable decreased by $100,000
during the first three quarters 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 $75,000
during the first three quarters of 1997.
During the first three quarters of 1997, the Company
reduced its long-term notes by $76,000 in accordance
with established payment schedules. All long-term
notes to banks and similar parties was retired as of
September 28, 1997.
To comply with ERISA minimum funding requirements, the
Company made a $108,000 contribution to the Pension
Plan Trust in the third quarter of 1997.
The Company continues to participate in a consolidated
cash management and credit facility with its parent,
Rotherwood Corporation. (See discussion in Management
Discussion and Analysis in the 1996 Form 10-KSB.)
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.
<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
None.
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: 11/5/97 /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 28, 1997 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-31-1997
<PERIOD-END> SEP-28-1997
<CASH> 121
<SECURITIES> 0
<RECEIVABLES> 1065
<ALLOWANCES> 21
<INVENTORY> 1419
<CURRENT-ASSETS> 236
<PP&E> 5443
<DEPRECIATION> 4820
<TOTAL-ASSETS> 3750
<CURRENT-LIABILITIES> 2409
<BONDS> 0
0
0
<COMMON> 3508
<OTHER-SE> (2816)
<TOTAL-LIABILITY-AND-EQUITY> 3750
<SALES> 9195
<TOTAL-REVENUES> 9195
<CGS> 6771
<TOTAL-COSTS> 8972
<OTHER-EXPENSES> 19
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 64
<INCOME-PRETAX> 140
<INCOME-TAX> 0
<INCOME-CONTINUING> 140
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
