<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
--------- --------
Commission File Number: 0-15383
CEM CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1019741
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
3100 Smith Farm Road, Matthews, NC 28105
- ---------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Post Office Box 200, Matthews, North Carolina 28106
- --------------------------------------------------------------------------------
(Mailing address of principal executive offices)
(704) 821-7015
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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
----- -----
3,633,362 shares of the issuer's $.05 par value common stock, its only class of
common stock, were outstanding as of October 31, 1995.
Page 1 of 11
<PAGE> 2
PART I. FINANCIAL INFORMATION
QUARTERLY REPORT ON FORM 10-Q
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended September 30, 1995
CEM Corporation
Matthews, North Carolina
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995.
Page 2 of 11
<PAGE> 3
CEM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 AND JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
September 30 June 30
------------ -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................... $ 1,923,000 $ 2,078,000
Short-term investments ...................... 3,500,000 4,000,000
Trade receivables ........................... 6,583,000 6,733,000
Inventories ................................. 5,368,000 4,997,000
Deferred taxes and other .................... 653,000 658,000
----------- -----------
Total current assets ..................... 18,027,000 18,466,000
Long-Term Investments .......................... 2,029,000 2,031,000
Property, Plant and Equipment, Net ............. 5,903,000 5,868,000
Other Assets ................................... 355,000 288,000
----------- -----------
$26,314,000 $26,653,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses ....... $ 1,837,000 $ 2,788,000
Deferred income ............................. 1,109,000 1,099,000
Income taxes payable ........................ 579,000 532,000
----------- -----------
Total current liabilities ................ 3,525,000 4,419,000
Long-Term Debt, Net of Current Maturities ...... 1,524,000 1,578,000
Deferred Taxes ................................. 96,000 64,000
Shareholders' Equity ........................... 21,169,000 20,592,000
----------- -----------
$26,314,000 $26,653,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 3 of 11
<PAGE> 4
CEM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Net sales........................................ $ 7,461,000 $ 7,146,000
Cost of goods sold............................... 3,194,000 3,016,000
------------ ------------
Gross profit.................................. 4,267,000 4,130,000
Selling, general and administrative expenses..... 2,658,000 2,641,000
Research and development expenses................ 700,000 618,000
------------ ------------
Income from operations........................ 909,000 871,000
Investment income................................ 102,000 55,000
Other income , net............................... 31,000 13,000
------------ ------------
Income before income taxes.................... 1,042,000 939,000
Provision for income taxes....................... 365,000 319,000
------------ ------------
Net income.................................... $ 677,000 $ 620,000
============ ============
Net income per common and
common equivalent share....................... $ .18 $ .16
============ ============
Weighted average common and
common equivalent shares outstanding.......... 3,748,000 3,777,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4 of 11
<PAGE> 5
CEM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Net cash provided by (used in)
operating activities ....................... $ (164,000) $ 443,000
----------- -----------
Cash flows from investing activities:
Sale of available-for-sale investments ..... 500,000 1,000,000
Sale of held-to-maturity investments ....... 1,000,000 0
Purchase of available-for-sale investments.. (1,000,000) 0
Purchase of held-to-maturity investments ... 0 (1,004,000)
Capital expenditures, net .................. (299,000) (375,000)
----------- -----------
Net cash provided by (used in)
investing activities ................. 201,000 (379,000)
----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt ....... 0 (10,000)
Proceeds from issuance of common stock ..... 206,000 36,000
Repurchase of common stock ................. (397,000) (1,176,000)
----------- -----------
Net cash used in financing activities ... (191,000) (1,150,000)
----------- -----------
Effects of exchange rates on cash ............. (1,000) 4,000
----------- -----------
Net decrease in cash and cash equivalents ..... (155,000) (1,082,000)
Cash and cash equivalents at
beginning of period ........................ 2,078,000 2,502,000
----------- -----------
Cash and cash equivalents at end of period .... $ 1,923,000 $ 1,420,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 5 of 11
<PAGE> 6
CEM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of results for the interim periods.
2. INVENTORIES
The components of inventories at current cost at September 30 and June 30, 1995
are as follows:
<TABLE>
<CAPTION>
September 30 June 30
------------ ------------
<S> <C> <C>
Parts and raw materials.......................... $ 2,980,000 $ 2,559,000
Work-in-process and finished goods............... 2,388,000 2,438,000
------------ ------------
$ 5,368,000 $ 4,997,000
============ ============
</TABLE>
3. NET INCOME PER SHARE
The computation of net income per common share is based on the weighted average
number of common shares outstanding for each period after adding dilutive
common stock equivalents. Common stock equivalents consist of dilutive stock
options using the treasury stock method. Fully diluted net income per share is
not presented because it approximates net income per common share.
Page 6 of 11
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following table sets forth, for the three-month periods indicated, the
percentages which certain components of the condensed consolidated statements
of income bear to net sales and the percentage of change of such components from
the same period of the prior year.
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------
9/30/95 9/30/94 % Change
------------- ------------- --------------
<S> <C> <C> <C>
Net sales....................................... 100.0% 100.0% 4.4%
Cost of goods sold.............................. 42.8 42.2 5.9
----- -----
GROSS PROFIT................................. 57.2 57.8 3.3
Selling, general and administrative expenses.... 35.6 37.0 0.6
Research and development expenses............... 9.4 8.6 13.3
----- -----
Income from operations....................... 12.2 12.2 4.4
Investment income............................... 1.4 0.8 85.5
Other income, net............................... 0.4 0.2 138.5
----- -----
Income before income taxes................... 14.0 13.2 11.0
Provision for income taxes...................... 4.9 4.5 14.4
----- -----
Net income................................... 9.1% 8.7% 9.2
===== =====
</TABLE>
RESULTS OF OPERATIONS
Sales growth primarily resulted from increased unit sales of the Company's
microwave extraction system. The Company is continuing to pursue Environmental
Protection Agency ("EPA") approval in the United States for this system's use
in environmental applications. Higher international demand for digestion systems
also contributed to sales growth. Foreign sales increased as a percentage of
total sales from 38% to 46% due to a sluggish U.S. market and stronger economic
conditions in Asia and Europe.
Gross profit margins declined slightly from the prior year as a result of the
increase in foreign sales which generally have lower margins than U.S. sales.
Selling, general and administrative expenses remained flat and decreased as a
percentage of sales due to the Company's efforts to control these costs.
Research and development expenses increased as the Company continued its
commitment to new product development and enhancements. The Company expects
these expenses to remain between 8% and 10% of net sales for the foreseeable
future.
The increase in investment income resulted from long-term investments that were
not present in the prior year.
The Company's effective tax rate did not change significantly and approximated
the federal statutory rate. Management does not expect the rate to change
significantly in fiscal 1996.
Page 7 of 11
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES:
At September 30, 1995, the Company had cash and short-term investments of
approximately $5.4 million as compared to $6.1 million at June 30, 1995.
Long-term investments were unchanged at $2.0 million. The primary reasons for
the decrease in cash and short-term investments were the stock repurchase
program, lower accounts payable and accrued expenses and higher inventory
requirements. The decline in accounts payable and accrued expenses reflects
temporary timing differences while the increase in inventory is due to new
products. These factors also caused the decline in cash provided by operating
activities.
During the three months ended September 30, 1995, the Company used
approximately $0.4 million to acquire 30,000 shares of the Company's common
stock under the stock repurchase program. As of September 30, 1995,
approximately $2.0 million remains authorized for the repurchase of the
Company's common stock.
Management believes that working capital, planned capital expenditures, debt
servicing and stock repurchases can be funded currently with cash on hand and
cash generated from operations. The Company has never paid, and does not
anticipate paying, cash dividends in the foreseeable future.
PART II. OTHER INFORMATION
ITEMS 1, 2, 3, 4 and 5 are not applicable and are omitted.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(11) Statement of Computation of Earnings per Share
(27) Financial Data Schedule (filed in electronic format only)
This schedule shall not be deemed filed for purposes of
Section 11 of the Securities Act of 1933 or Section 18 of
the Securities Exchange Act of 1934 or otherwise be
subject to the liabilities of such sections, nor shall it
be deemed a part of any registration statement to
which it relates.
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed during the quarter ended
September 30, 1995.
Page 8 of 11
<PAGE> 9
CEM CORPORATION
SIGNATURE
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.
Date: November 7, 1995 CEM CORPORATION
BY: /s/ Richard N. Decker
-------------------------
Richard N. Decker
Secretary, Treasurer and
Chief Financial Officer
Page 9 of 11
<PAGE> 10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
ITEM 6(a)
Quarterly Report on Form 10-Q
For the quarter ended September 30, 1995 Commission File Number: 0-15383
CEM CORPORATION
EXHIBIT INDEX
Exhibit Number: Exhibit Description
- --------------- -------------------
11 Computation of Earnings per Share
27 Financial Data Schedule (filed in electronic format only)
Page 10 of 11
<PAGE> 1
Exhibit 11
CEM CORPORATION
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Net income....................................... $ 677,000 $ 620,000
============ ============
Weighted average number of shares outstanding.... 3,617,000 3,691,000
Number of shares purchasable upon exercise of options,
reduced by the number of shares which could have
been purchased with proceeds from exercise of such
options at average market price............... 131,000 86,000
----------- -----------
Weighted average number of shares outstanding,
as adjusted................................... 3,748,000 3,777,000
============ ============
Primary earnings per share....................... $ .18 $ .16
============ ============
Net income....................................... $ 677,000 $ 620,000
============ ============
Weighted average number of shares outstanding.... 3,617,000 3,691,000
Number of shares purchasable upon exercise of
options, reduced by the number of
shares which could have been purchased with
proceeds from exercise of such options at the
greater of period-end market price or
average market price.......................... 140,000 97,000
------------ ------------
Weighted average number of shares outstanding,
as adjusted................................... 3,757,000 3,788,000
============ ============
Earnings per common share,
assuming full dilution........................ $ .18 $ .16
============ ============
</TABLE>
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CEM CORPORATION FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996<F1>
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,923,000
<SECURITIES> 3,500,000
<RECEIVABLES> 6,583,000
<ALLOWANCES> 0
<INVENTORY> 5,368,000
<CURRENT-ASSETS> 18,027,000
<PP&E> 5,903,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,314,000
<CURRENT-LIABILITIES> 3,525,000
<BONDS> 1,524,000
<COMMON> 181,000
0
0
<OTHER-SE> 20,988,000
<TOTAL-LIABILITY-AND-EQUITY> 26,314,000
<SALES> 7,461,000
<TOTAL-REVENUES> 7,461,000
<CGS> 3,194,000
<TOTAL-COSTS> 3,194,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,042,000
<INCOME-TAX> 365,000
<INCOME-CONTINUING> 677,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 677,000
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
<FN>
<F1>Certain information in the financial data schedule above has been condensed for
interim financial reporting pursuant to the rules and regulations of the
Securities and Exchange Commission.
</FN>
</TABLE>
