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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 July 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 August 1, 2000.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRAMER, INC.
BALANCE SHEET
UNAUDITED
(Amounts in Thousands, Except Share Data)
<TABLE>
<CAPTION>
ASSETS 7/2/00 12/31/99
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<S> <C> <C>
CURRENT ASSETS:
Cash $ 10 $ 49
Accounts receivable, net of allowance of $21 1,472 1,263
Inventories 1,527 1,355
Prepaid expenses 341 309
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Total current assets 3,350 2,976
PROPERTY, PLANT AND EQUIPMENT
At cost 6,273 6,046
Accumulated depreciation 5,390 5,271
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883 775
OTHER ASSETS:
Intangible pension asset 160 108
Goodwill 161 171
Other non current assets 148 160
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Total Assets $ 4,650 $ 4,190
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable $ 2,658 $ 2,088
Accounts payable 721 466
Accrued liabilities 520 477
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Total current liabilities 3,899 3,031
NON-CURRENT LIABILITIES:
Pension benefits payable 282 301
Other 139 210
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Total non-current liabilities 421 511
STOCKHOLDERS' EQUITY:
Common stock, no par value; authorized, 6,000,000 shares;
issued and outstanding 4,051,400 shares at July 2, 2000,
and December 31, 1999 3,824 3,824
Accumulated deficit (3,297) (2,979)
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527 845
Minimum pension liability adjustment (197) (197)
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Net stockholders' equity 330 648
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Total Liabilities and Stockholders' Equity $ 4,650 $ 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 SIX MONTHS ENDED
7/2/00 7/4/99 7/2/00 7/4/99
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<S> <C> <C> <C> <C>
NET SALES $ 3,299 $ 3,293 $ 6,782 $ 6,494
COST OF SALES 2,389 2,347 4,918 4,633
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Gross profit 910 946 1,864 1,861
OPERATING EXPENSES:
Selling expenses 745 718 1,421 1,302
General and administrative 317 338 631 636
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Total operating expenses 1,062 927 2,052 1,928
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Loss from operations (152) (110) (188) (77)
OTHER INCOME (EXPENSE):
Interest expense, net (56) (30) (101) (55)
Other, net (27) (2) (29) (10)
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Total other income (expense) (32) (32) (130) (65)
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LOSS BEFORE INCOME TAXES (235) (142) (318) (142)
INCOME TAX EXPENSE (BENEFIT) 0 0 0 0
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NET LOSS $ (235) $ (142) $ (318) $ (142)
=========== =========== ========== ============
Net loss per share based on weighted
average number of common equivalent
shares outstanding $ (0.06) $ (0.04) (0.08) $ (0.04)
Weighted Average Common Equivalent
Shares Outstanding Basic 4,051,400 4,051,400 4,051,400 4,051,400
Diluted 4,051,400 4,051 400 4,051,400 4,051,400
</TABLE>
There is no difference between Net Loss and Total Comprehensive Loss for the
quarter or six-month periods ending July 2, 2000 and July 4, 1999.
These interim financial statements contain 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>
Six Months Ended
7/2/00 7/4/99
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (318) $ (142)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 141 126
Changes in operating assets and liabilities:
Accounts receivable (209) (360)
Inventories (172) 119
Prepaid expenses (32) (165)
Accounts payable and accrued expenses 298 179
Other non-current liabilities (90) (56)
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Net cash provided by (used by) operating activities (382) (299)
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Cash flows from investing activities:
Capital expenditures (227) (146)
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Cash flows from financing activities:
Principal payments on notes payable and long-term debt (2,736) (2,306)
Proceeds from issuance of notes payable and long-term debt 3,306 2,756
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Net cash provided by financing activities 570 450
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Net increase (decrease) in cash (39) 5
Cash at beginning of year 49 63
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Cash at end of quarter $ 10 $ 68
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Supplemental disclosures:
Cash paid during the period for:
Interest $ 101 $ 55
========= ========
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 risks and
uncertainties. The Company's actual results could differ materially
from the forward looking statements. 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 potential inability of the Company's new marketing channels to
generate sufficient sales to cover sales, marketing and
introduction costs
The foregoing list of risks and uncertainties is not meant to be
complete.
B. SUMMARY OF OPERATIONS
At $6,782,000, net sales in the first half of 2000 were $288,000 more
than in the first half of 1999. Management attributes the company's
growth in sales, 4%, to the success of programs that increased sales
contacts with key personnel at the Company's catalog distributors and
also provided these distributors with more targeted incentive
programs. As a percentage of net sales, gross margins in the first
half of 2000 were 27.5% as compared to 28.7% in the first half of
1999. The decrease in gross margins reflects (1) a
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slight increase in discounts provided to customers and (2) increased
labor costs in the first quarter of the year arising from the
Company's initial implementation of new work "cells"(see the company's
first quarter report for further details).
The Company's backlog of unfilled orders at the end of the quarter was
$746,000. Substantially the Company's entire quarter-end backlog is
scheduled to ship in the next 3 months.
Selling, and general & administrative expenses during the first half
of 2000 increased by $114,000 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 $188,000 operating loss in the first
half of 2000. This is an increase of $111,000 as compared to the net
operating loss incurred in the same period in 1999.
Interest expense increased by $46,000 in the first half of 2000 as
compared to the first half 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 half 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.
C. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's trade accounts receivable increased by $209,000 from
December 31, 1999 to July 2, 2000. The increase is partially due to
the timing of sales in the final weeks of the respective periods.
Weekly sales in the final month of 1999 aggregated $1,121,000 while
sales in the final month of the quarter ended July 2, 2000 aggregated
$1,245,000; an increase of $124,000. The remainder of the increase is
due to delay in receiving full payment of a single $270,000 sale in
the May of 2000. Approximately $110,000 of the
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amount due was not received until the first week of July 2000.
Inventories increased by $172,000 during the first half of 2000. The
difference represents normal fluctuations in the Company's inventory
balances.
Capital expenditures aggregated $227,000 during the first half of
2000. Approximately $45,000 consisted of the programming and
development costs for significantly enhancing the Company's two web
sites. Another $72,000 consists of improvements in electrical wiring
and fixtures made in the Company's manufacturing facility as part of
the development of new work cells. $25,000 was expended to purchase
new data processing equipment used in setting up the Company's
telemarketing center. The remaining increase consists of improvements
and additions to tooling used in manufacturing the company's products.
The Company's accounts payable increased by $255,000 from the December
31, 1999 balance. The increase is due to actions by the company to
improve cash flow by more aggressive payment terms with vendors.
The Company's notes payable increased by $570,000 during the first
half of 2000. The increase is principally due to the increases in
accounts receivable, inventory and property plant and equipment
discussed above as well as the Company'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.) The credit
facility was increased to $3,000,000 during the 2nd quarter of 2000
and the note matures during the 3rd quarter of this year. Based upon
its preliminary discussions with its bank, management anticipates no
difficulties in renewing this credit facility. Management also
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
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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
On April 21, 2000, the Company solicited proxies concerning the
election of Directors at a meeting held on May 16, 2000.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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: 8/14/00 /s/ Gary Rubin
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Gary A. Rubin
Vice President, Finance & CFO
