<PAGE> 1
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 April 2, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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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) has 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: 4,051,400 shares of common stock, no
par value as of May 8, 2000.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRAMER, INC.
BALANCE SHEETS
UNAUDITED
(Amounts in Thousands, Except Share Data)
<TABLE>
<CAPTION>
ASSETS 4/2/00 12/31/99
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CURRENT ASSETS:
<S> <C> <C>
Cash $ 123 $ 49
Accounts receivable, net of allowance of $21 1,617 1,263
Inventories 1,632 1,355
Prepaid expenses 399 309
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Total current assets 3,771 2,976
PROPERTY, PLANT AND EQUIPMENT:
At cost 6,144 6,046
Accumulated depreciation 5,324 5,271
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820 775
OTHER ASSETS:
Intangible pension asset 108 108
Goodwill 167 171
Other non current assets 152 160
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Total Assets $ 5,018 $ 4,190
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable $ 2,809 $ 2,088
Accounts payable 698 466
Accrued liabilities 481 477
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Total current liabilities 3,988 3,031
NONCURRENT LIABILITIES:
Pension benefits payable 292 301
Other 173 210
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Total noncurrent liabilities 465 511
STOCKHOLDERS' EQUITY:
Common stock, no par value; authorized, 6,000,000 shares; issued and
outstanding 4,051,400 shares at April 2, 2000,
and December 31, 1999 3,824 3,824
Accumulated deficit (3,062) (2,979)
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762 845
Minimum pension liability adjustment (197) (197)
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Net stockholders' equity 565 648
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Total Liabilities and Stockholders' Equity $ 5,018 $ 4,190
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</TABLE>
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CRAMER, INC.
STATEMENTS OF OPERATIONS
UNAUDITED
(Amounts in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
QUARTER ENDED
4/2/00 4/4/99
-------- --------
<S> <C> <C>
NET SALES $ 3,483 $ 3,201
COST OF SALES 2,529 2,286
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Gross profit 954 915
OPERATING EXPENSES:
Selling expenses 676 584
General and administrative 314 298
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Total operating expenses 990 882
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Income (loss) from operations (36) 33
OTHER EXPENSE:
Interest expense, net (45) (25)
Other, net (2) (8)
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Total other expense (47) (33)
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INCOME (LOSS) BEFORE INCOME TAXES (83) 0
INCOME TAX EXPENSE (BENEFIT) 0 0
-------- --------
NET INCOME (LOSS) $ (83) $ (0)
======== ========
Net income (loss) per share based on weighted
average number of common equivalent
shares outstanding - basic and diluted $ (0.02) $ 0.00
Weighted Average Common Equivalent
Shares Outstanding: Basic 4,051,400 4,051,400
Diluted 4,051,400 4,051,400
</TABLE>
There is no difference between Net Income and Total Comprehensive Income for the
quarters ending April 2, 2000 and April 4, 1999.
These interim financial statements include all adjustments required for them to
be comparable to the annual financial statements issued on Form 10KSB.
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CRAMER, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
(Amounts in Thousands)
<TABLE>
<CAPTION>
QUARTER ENDED
4/2/00 4/4/99
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (83) $ 0
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 53 49
Changes in operating assets and liabilities:
Accounts receivable (354) (294)
Inventories (277) 80
Prepaid expenses (90) (95)
Other assets 12 12
Accounts payable and accrued expenses 236 171
Other non-current liabilities (46) (14)
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Net cash used in operating activities (549) (91)
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Cash flows from investing activities:
Capital expenditures (98) (115)
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Cash flows from financing activities:
Principal payments on notes payable (3,621) (1,008)
Proceeds from issuance of notes payable 4,342 1,191
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Net cash provided by financing activities 721 183
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Net increase (decrease) in cash 74 (23)
Cash at beginning of year 49 63
-------- --------
Cash at end of quarter $ 123 $ 40
======== ========
Supplemental disclosures:
Cash paid during the period for:
Interest $ 45 $ 25
======== ========
Income tax $ 0 $ 0
======== ========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
A. FORWARD LOOKING STATEMENTS
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.
B. IMPACT OF THE YEAR 2000
As of the filing date of this report, the impact of the year 2000 has
not had a material adverse impact on the Company's business or results
of operations. The total cost of the Company's year 2000 efforts was
approximately $15,000. These amounts included the purchase of software
and hardware and the cost of employees and consultants working on Year
2000 projects. All costs were funded from cash flows from operations
C. SUMMARY OF OPERATIONS
At $3,483,000, net sales in the first quarter of 2000 were $282,000
more than
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in the first quarter of 1999. The company's growth in sales, 8.8%,
exceeded the rate of growth in the industry as a whole. As a
percentage of net sales, gross margins in the first quarter of 2000
were 27.4% as compared to 28.6% in the first quarter of 1999. The
decrease in gross margins reflects increased labor costs arising from
the Company's initial implementation of new work cells, which are a
part of its lean manufacturing program. Virtually all of the company's
manufacturing facility was redesigned so that all of the manufacturing
steps for products within related "families" were completed in
self-contained work cells. While labor costs were higher in the first
quarter of 2000 as production personnel had to learn new techniques to
accommodate the changed facilities, management believes that this is a
temporary matter and that the use of work cells will lead to greater
production efficiency later in the year.
The Company's backlog of unfilled orders at the end of the quarter was
$1,081,000. Substantially the Company's entire quarter-end backlog is
scheduled to ship in the next 3 months.
Selling, and general and administrative expenses during the first
quarter of 2000 increased by $108,000 as compared to the same period
in 1999. The increase is primarily due to greater sales costs arising
from the Company's efforts to enter into new direct to end user sales
channels. These costs included the staffing of a telemarketing center,
printing and postage for literature mailed directly to end users, and
advertisements in selected national publications.
Primarily as a result of the increase in sales and administrative
costs, the Company experienced a $36,000 operating loss in the first
quarter of 2000. This is a decrease of $69,000 as compared to the same
period in 1999.
Interest expense increased by $20,000 in the first quarter of 2000 as
compared to the first quarter of 1999. While, the increase is
principally due to the increase in average borrowing levels, interest
rates are slightly higher in 2000 as compared to 1999.
The Company experienced a net loss in the first quarter of 2000 due to
the costs of initiating new sales channels. However, management notes
that the Company's core sales to catalog and wholesales distributors
and to contract furniture dealers remains profitable. Management
believes that the initial investments being made in developing new
sales channels are necessary if these channels are to develop as
planned. Once established, these new sales channels are expected to
increase the Company's sales by reaching customers who are not
currently aware of the unique features of the Company's products.
Furthermore, sales from the new channels are expected to yield
significantly higher gross margins than the Company's current dealer
and catalog channels.
D. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
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The Company's trade accounts receivable increased by $354,000 from
December 31, 1999 to April 2, 2000. The increase is due to the timing
of sales in the final weeks of the respective periods. Sales in the
final month of 1999 aggregated $1,121,000 while sales in the final
month of Q1'2000 aggregated $1,498,000; an increase of $377,000.
Inventories increased by $277,000 during the first quarter of 2000.
The increase occurred because Management elected to build a stock of
assembled kiksteps to support anticipated sales to be generated from
the Company's new consumer web site. Raw materials also increased as a
result of the purchase of materials necessary to manufacture a single
$270,000 order due to be shipped to a branch of the U.S. Government in
the second quarter. All raw materials were purchased at one time in
order to obtain the best possible price.
Capital expenditures aggregated $98,000 during the first quarter of
2000. Approximately $45,000 consisted of the programming and
development costs for significantly enhancing the Company's two web
sites. Another $20,000 consists of improvements in electrical wiring
and fixtures made in the Company's manufacturing facility as part of
the development of new work cells. The remaining increase consists of
improvements and additions to tooling used in manufacturing the
company's products.
The Company's accounts payable increased by $234,000 from the December
31, 1999 balance. The increase is a result of increased purchases of
raw materials to support the increased business activity in the final
weeks of the first quarter of 2000 and the buildup of inventory
discussed above.
The Company's notes payable increased by $721,000 during the first
quarter of 2000. The increase is principally due to the increases in
inventory and accounts receivable discussed above as well as the
quarter's operating loss. 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 Company's 1999 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.
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
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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
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None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ------ -------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
None
ITEM 5. OTHER INFORMATION
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None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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None.
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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: 5/15/00 \s\Gary A. Rubin
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Gary A. Rubin
Vice President, Finance & CFO
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> APR-02-2000
<CASH> 123
<SECURITIES> 0
<RECEIVABLES> 1,617
<ALLOWANCES> 21
<INVENTORY> 1,632
<CURRENT-ASSETS> 399
<PP&E> 6,144
<DEPRECIATION> 5,324
<TOTAL-ASSETS> 5,019
<CURRENT-LIABILITIES> 3,990
<BONDS> 0
0
0
<COMMON> 3,824
<OTHER-SE> (3,262)
<TOTAL-LIABILITY-AND-EQUITY> 5,019
<SALES> 3,483
<TOTAL-REVENUES> 3,483
<CGS> 2,529
<TOTAL-COSTS> 3,519
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
