<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, 1996
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)
16160 CAPUTO DRIVE
MORGAN HILL, CA 95037
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 779-8088
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, 1996
COMMON STOCK, $.10 PAR VALUE 3,629,376
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COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Statements of Operations- 2
Three months ended March 31, 1996 and 1995
Consolidated Condensed Balance Sheets- 3
March 31, 1996 and December 31, 1995
Consolidated Condensed Statements of Cash Flows- 4
Three months ended March 31, 1996 and 1995
Notes to Consolidated Condensed Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 6
CONDITION AND RESULTS OF OPERATIONS
PART II.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 7
SIGNATURE
</TABLE>
1
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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, MARCH 31,
1996 1995
------------- -------------
<S> <C> <C>
Net sales $ 6,040 $ 6,083
Cost of sales 3,082 2,717
------- -------
Gross profit 2,958 3,366
------- -------
Research and development expenses 152 184
Selling expenses 2,491 2,809
General and administrative expenses 1,395 1,895
Amortization of intangible assets 75 85
------- -------
Operating loss (1,155) (1,607)
Interest income 30 78
Interest expense (208) (77)
Other income, net 1,298 283
------- -------
Loss from operations before income taxes (35) (1,323)
Provision for income tax expense (256) (6)
------- -------
Net loss $ (291) $(1,329)
======= =======
Net loss per share $ (.08) $ (.37)
======= =======
Average number of shares outstanding 3,629 3,629
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
2
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COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1996 1995
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,998 $ 2,780
Accounts receivable, net 6,301 4,211
Other receivables 406 302
Inventories 5,285 5,200
Prepaid expenses 280 239
------- -------
Total current assets 15,270 12,732
Property, plant and equipment, net 3,385 3,359
Intangible assets, net 164 167
Excess cost over net assets acquired, net 4,209 4,281
Other assets 529 530
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$23,557 $21,069
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes and advances payable to related parties $ 3,448 $ 2,948
Accounts payable 6,266 5,853
Accrued expenses 6,022 5,600
Tax liabilities 6,572 6,605
-------- --------
Total current liabilities 22,308 21,006
Note and advances payable to related parties 4,000 2,450
Other long-term liabilities 1,946 1,943
-------- --------
Total liabilities 28,254 25,399
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Stockholders' equity (deficit):
Common stock, $.10 par value per share 447 447
Additional paid-in capital 68,580 68,580
Foreign currency translation adjustments 636 712
Accumulated deficit (69,698) (69,407)
Cost of shares held in treasury (4,662) (4,662)
-------- --------
Total stockholders' deficit (4,697) (4,330)
-------- --------
$ 23,557 $ 21,069
======== ========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
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COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net cash used by operating activities $(1,639) $(4,208)
Cash flows from investing activities:
Purchases of fixed and intangible assets (193) (189)
Proceeds from sale of properties - 739
------- -------
Net cash used by investing activities (193) 550
Cash flows from financing activities:
Borrowings from related parties 2,050 --
Repayments of other long-term liabilities -- (26)
------- -------
Net cash used by financing activities 2,050 (26)
Net increase (decrease) in cash and cash
equivalents 218 (3,684)
Cash and cash equivalents at beginning of
period 2,780 9,952
------- -------
Cash and cash equivalents at end of period $ 2,998 $ 6,268
======= =======
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
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COOPER DEVELOPMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. INVENTORIES
Inventories as of March 31, 1996 consist of the following
(in thousands):
<TABLE>
<CAPTION>
<S> <C>
Raw materials $2,482
Finished goods 3,539
------
6,021
Less inventory reserves 736
------
$5,285
======
</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,
1996 and December 31, 1995 and the consolidated condensed results of their
operations and cash flows for the three months ended March 31, 1996 and 1995.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared with Three Months Ended
March 31, 1995
The Company's net sales of $6,040,000 for the three months ended March
31, 1996 were even with net sales for three months ended March 31, 1995.
Increased sales of the Company's products outside of the United States
were offset by lower sales of its skin care products in the United States. The
gross profit margin was 49% for the three months ended March 31, 1996 as
compared to 55% for the three months ended March 31, 1995. The decrease in gross
profit margin is primarily attributable to lower sales of its skin care products
in the United States which carry higher margins than its cosmetic products .
Selling costs for the three months ended March 31, 1996 decreased
$318,000 over the three months ended March 31, 1995 primarily due to lower
advertising and promotional expenses.
General and administrative expenses decreased primarily due to lower
legal expenses.
Other income, net for the three months ended March 31, 1996 includes
$1,200,000 of insurance proceeds covering past product liability claims. Other
income, net for the three months ended March 31, 1995 includes a $350,000 gain
from the sale of property held by the Company's wholly-owned subsidiary, CDSA.
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, 1996, current liabilities exceeded current assets
by $7,038,000 and cash required by operations was $1,639,000 for the three
months ended March 31, 1996.
The Company expects a continuing deficiency in cash generated from
operations in 1996. To meet its operating needs the Company may issue
additional equity or debt securities, or sell certain product lines or one or
more of its subsidiary corporations; control growth of or reduce expenditures;
or obtain financing from stockholders, financial institutions or other sources.
The Company is currently negotiating with the principal stockholders a note and
warrant purchase agreement of $2,000,000 of which $670,000 has been advanced to
date. No assurances can be given that the Company will be successful entering
into such a note and warrant purchase agreement or in selling its assets or that
financing will be available on terms acceptable to the Company.
During 1995, the Company restructured its operations and recorded a
charge of $1,395,000. For the three months ended March 31, 1996, the Company
paid $413,000 of these restructuring charges. As of March 31, 1996, the balance
of the restructuring charges to be paid amounted to $507,000.
6
<PAGE>
PART II
ITEM 6.
a) Exhibits:
27 Financial Data Schedule
b) Reports on Form 8-K.
The Company filed the following reports on Form 8-K during the quarter for which
this report is filed:
Date of Report Item
-------------- ----
January 17, 1996 Item 5, Other Events
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 14, 1996 By: /S/ MICHAEL J. BRADEN
------------------------
Michael J. Braden
Vice President and
Chief Financial Officer
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,998
<SECURITIES> 0
<RECEIVABLES> 7,888
<ALLOWANCES> 1,587
<INVENTORY> 5,285
<CURRENT-ASSETS> 15,270
<PP&E> 5,490
<DEPRECIATION> 2,105
<TOTAL-ASSETS> 23,557
<CURRENT-LIABILITIES> 22,308
<BONDS> 0
0
0
<COMMON> 447
<OTHER-SE> (5,143)
<TOTAL-LIABILITY-AND-EQUITY> 23,557
<SALES> 6,040
<TOTAL-REVENUES> 6,040
<CGS> 3,082
<TOTAL-COSTS> 3,082
<OTHER-EXPENSES> 301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 208
<INCOME-PRETAX> (35)
<INCOME-TAX> 256
<INCOME-CONTINUING> (291)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (291)
<EPS-PRIMARY> .0
<EPS-DILUTED> (.08)
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