<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
Commission File Number 0--11727
Cooper Development Company
(Exact name of registrant as specified in its charter)
Delaware 94--2876745
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2420 Sand Hill Road, Suite 300
Menlo Park, CA 94025
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (415) 233-2727
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1995
Common Stock, $.10 Par Value 3,629,376
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COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<S> <C> <C>
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Condensed Statements of Operations --
Three months ended March 31, 1995 and Three months
Ended April 30, 1994 3
Consolidated Condensed Balance Sheets --
March 31, 1995 and December 31, 1994 4
Consolidated Condensed Statements of Cash Flows --
Three months ended March 31, 1995 and Three months
Ended April 30, 1994 5
Notes to Consolidated Condensed Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II.
ITEM 5. Other Information 8
SIGNATURE 9
</TABLE>
2
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COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
Consolidated Condensed Statements of Operations
(In thousands, except per share figures)
(Unaudited)
<TABLE>
<CAPTION>
Three months Three months
ended ended
March 31, April 30,
1995 1994
---- ----
<S> <C> <C>
Net sales $ 6,083 $ 4,509
Cost of sales 2,717 1,897
------- -------
Gross profit 3,366 2,612
------- -------
Research and development expenses 184 162
Selling expenses 2,809 2,332
General and administrative expenses 1,895 1,866
Amortization of intangible assets 85 69
------- -------
Operating loss (1,607) (1,817)
Interest income 78 159
Interest expense (77) (61)
Other income, net 283 188
------- -------
Loss from operations before income taxes (1,323) (1,531)
Provision for income tax expense (6) (11)
------- -------
Net loss $(1,329) $(1,542)
======= =======
Net loss per share $ (.37) $ (.42)
======= =======
Average number of shares outstanding 3,629 3,629
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
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COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
Consolidated Condensed Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,268 $ 9,952
Accounts receivable, net 4,926 4,139
Other receivables 335 429
Inventories 6,804 6,009
Prepaid expenses 268 190
-------- --------
Total current assets 18,601 20,719
Property, plant and equipment, net 2,508 2,808
Intangible assets, net 116 116
Excess cost over net assets acquired, net 4,584 4,667
Other assets 508 515
-------- --------
$ 26,317 $ 28,825
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 1,000 $ 1,000
Notes payable to related parties 2,948 2,948
Accounts payable 3,536 3,822
Accrued expenses 4,732 5,633
Tax liabilities 6,251 6,386
-------- --------
Total current liabilities 18,467 19,789
Other long-term liabilities 2,088 2,195
-------- --------
Total liabilities 20,555 21,984
-------- --------
Stockholders' equity:
Common stock, $.10 par value per share 447 447
Additional paid-in capital 68,580 68,580
Foreign currency translation adjustments 506 250
Accumulated deficit (58,997) (57,668)
Cost of shares held in treasury (4,662) (4,662)
Unrealized loss on marketable securities (112) (106)
-------- --------
Total stockholders' equity 5,762 6,841
-------- --------
$ 26,317 $ 28,825
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
Consolidated Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, April 30,
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net cash used by operating activities $(4,208) $(2,306)
Cash flows from investing activities:
Cash acquired in CDSA transaction, net of
amount disbursed -- 781
Purchases of fixed and intangible assets (189) (134)
Proceeds from sale of properties 739 260
------- -------
Net cash provided by investing activities 550 907
Cash flows from financing activities:
Repayments of other long-term liabilities (26) (229)
------- -------
Net cash used by financing activities (26) (1,303)
Net decrease in cash and cash equivalents (3,684) (1,628)
Cash and cash equivalents at beginning of period 9,952 19,558
------- -------
Cash and cash equivalents at end of period $ 6,268 $17,930
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
<PAGE>
COOPER DEVELOPMENT COMPANY AND SUBSIDIAREIS
Notes to Consolidated Condensed Financial Statements
(Unaudited)
Note 1. Inventories
Inventories as of March 31, 1995 consist of the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Raw materials $3,064
Work-in-process 47
Finished goods 4,281
------
Less inventory reserves 588
------
$6,804
======
</TABLE>
Note 2. Management Representation
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all the adjustments necessary to present
fairly the Company's consolidated condensed financial position as of March 31,
1995 and December 31, 1994 and the consolidated condensed results of their
operations and cash flows for the three months ended March 31, 1995 and three
months ended April 30, 1994.
6
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
On December 20, 1994 the Company elected to change its fiscal year from
October 31 to December 31. The management discussion that follows compares the
three months ended March 31, 1995 to the three months ended April 30, 1994, the
closest previous quarter reported upon.
Three Months Ended March 31, 1995 Compared with Three Months Ended
April 30, 1994
The Company's net sales for the three months ended March 31, 1995 were
$6,083,000 compared to net sales of $4,509,000 for the three months ended April
30, 1994. The increase is primarily due to higher sales volume of the Company's
anti-stress face and bath pacs and higher export sales. The gross profit margin
was 55% for the three months ended March 31, 1995 as compared to 58% for the
three months ended April 30, 1994. The gross profit margin decrease is primarily
attributable to the increase in export sales to distributors which carry lower
selling prices.
Selling costs for the three months ended March 31, 1995 increased $477,000
over the three months ended April 30, 1994 primarily due to higher marketing and
advertising costs and sales related expenses.
Other income (net) includes for the three months ended March 31, 1995 a
$350,000 gain from the sale of property held by the Company's wholley-owned
subsidiary, CDSA. Other income (net) for the three months ended April 30, 1994
includes a gain of $131,000 related to the sale of substantially all of the
assets of the Company's facility in the Bahamas.
Capital Resources and Liquidity
The Company has experienced operating cash flow deficiencies for a number
of years and has relied upon asset sales and financing from stockholders to fund
liquidity needs. At March 31, 1995, current assets exceeded current liabilities
by $134,000 and cash required by operations was $4,208,000 for the three months
ended March 31, 1995.
The Company expects a continuing deficiency in cash generated from
operations in 1995. The Company anticipates that its current capital resources,
together with additional proceeds from the sale of non-operating assets, will be
sufficient to meet its short and long term liquidity and capital expenditure
requirements. To meet its operating needs and to fund various alternatives,
including but not limited to, acquiring certain product lines, businesses and or
starting up its own manufacturing facility, the Company may issue additional
equity or debt securities, or securities in one or more of its subsidiary
corporations; control growth of or reduce expenditures; or obtain financing from
stockholders, financial institutions or other sources. In addition, the Company
is continuing its efforts to increase revenues and improve margins and
operational efficiencies. No assurances can be given that the Company will be
successful in selling its non-operating assets or that financing will be
available on terms acceptable to the Company.
The Company has incurred significant expense in connection with its attempt
to gain control of Avanza Corp. ("Avanza") and to finance the ongoing legal
challenges to Avanza's and certain of its officers and directors actions in
opposition thereto and may continue to incur additional expense in the future.
A $1,000,000 note incurred in conjunction with the acquisition of Cooper
Development S.A. was due and paid on April 27, 1995.
7
<PAGE>
PART II
ITEM 5. Other Information
a) Settlement of Litigation
In June 1988, Berlex Laboratories, Inc. ("Berlex") filed a number of related
actions in the Superior Court of New Jersey, the United States District Court
for the District of New Jersey, the United States District Court for the
District of Delaware, the United States District Court for the District of
Massachusetts, and the United States District Court for the District of the
Virgin Islands. Defendants in those actions are Cooper Holdings, Inc., Cooper
Development Company, The Cooper Companies, Inc., Cooper Life Sciences, Inc., The
First National Bank of Boston ("Trustee"), solely in its capacity as Trustee to
the Cooper Laboratories, Inc. Liquidating Trust ("Trust") and various other
individual and corporate defendants (collectively, "Defendants").
On April 17, 1995, the Company entered into an agreement with Berlex settling
all claims brought against the Company. The original claim sought cost recovery
for environmental claims and indemnification, if the need arose, with regard to
a pharmaceutical product. CDC paid Berlex a de minimis sum and Berlex agreed to
release CDC and dismiss all the pending court actions against the Company,
including environmental claims related to a Virgin Islands facility.
b) Submission of Matters to Vote of Security Holders
On April 26, 1995, the Company held an Annual Meeting of Stockholders for the
purpose of electing four directors to the Board of Directors. The four nominees
for election as directors were James E. Gilleran, Theodore H. Kruttschnitt,
Parker G. Montgomery and Jackson L. Schultz, all of whom were then current
members of the Board of Directors. Each of the nominees was relected by at
least 3,361,764 votes, representing 93% of the 3,629,376 shares outstanding and
99% of the 3,405,531 shares cast. Voting results for the individual nominees
follows:
<TABLE>
<CAPTION>
Nominee Votes in Favor Votes Against
------- -------------- -------------
<S> <C> <C>
James E. Gilleran 3,363,426 42,105
Theodore H. Kruttschnitt 3,363,531 42,000
Parker G. Montgomery 3,361,764 43,767
Jackson L. Schultz 3,363,411 42,120
</TABLE>
c) Transfer to Nasdaq Small Cap Market
On March 24, 1995 trading of the Company's common stock transferred from the
Nasdaq National Market System to the Nasdaq Small Cap Market.
ITEM 6.
a) Exhibits - None
b) Reports on Form 8-K.
There were no reports on Form 8-K filed during the quarter for which this report
is filed.
8
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
Cooper Development Company
--------------------------
(Registrant)
Date: May 11, 1995 By: MICHAEL J. BRADEN/S/
----------------------------
Michael J. Braden
Vice President and
Chief Financial Officer
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 6,268
<SECURITIES> 0
<RECEIVABLES> 6,305
<ALLOWANCES> 1,379
<INVENTORY> 6,804
<CURRENT-ASSETS> 18,601
<PP&E> 4,078
<DEPRECIATION> 1,570
<TOTAL-ASSETS> 26,317
<CURRENT-LIABILITIES> 18,467
<BONDS> 0
<COMMON> 447
0
0
<OTHER-SE> 5,315
<TOTAL-LIABILITY-AND-EQUITY> 26,317
<SALES> 6,083
<TOTAL-REVENUES> 6,083
<CGS> 2,717
<TOTAL-COSTS> 2,717
<OTHER-EXPENSES> 30
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 77
<INCOME-PRETAX> (1,323)
<INCOME-TAX> 6
<INCOME-CONTINUING> (1,329)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,329)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> 0
</TABLE>
