<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 DECEMBER 31, 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
--- ---
3,645,024 shares of the issuer's $.05 par value common stock, its only class of
common stock, were outstanding as of January 31, 1996.
Page 1 of 13
<PAGE> 2
PART I. FINANCIAL INFORMATION
QUARTERLY REPORT ON FORM 10-Q
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Quarter Ended December 31, 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 13
<PAGE> 3
CEM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31 AND JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
December 31 June 30
------------ ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..................... $ 2,899,000 $ 2,078,000
Short-term available-for-sale investments..... 3,500,000 3,000,000
Short-term held-to-maturity investments....... 0 1,000,000
Trade receivables............................. 7,320,000 6,733,000
Inventories................................... 5,059,000 4,997,000
Deferred taxes and other...................... 769,000 658,000
------------ ------------
Total current assets....................... 19,547,000 18,466,000
LONG-TERM HELD-TO-MATURITY INVESTMENTS........... 2,027,000 2,031,000
PROPERTY, PLANT AND EQUIPMENT, NET............... 5,716,000 5,868,000
OTHER ASSETS..................................... 347,000 288,000
------------ ------------
$ 27,637,000 $ 26,653,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses......... $ 2,150,000 $ 2,788,000
Deferred income............................... 1,075,000 1,099,000
Income taxes payable.......................... 411,000 532,000
------------ ------------
Total current liabilities.................. 3,636,000 4,419,000
LONG-TERM DEBT, NET OF CURRENT MATURITIES........ 1,504,000 1,578,000
DEFERRED TAXES................................... 91,000 64,000
SHAREHOLDERS' EQUITY............................. 22,406,000 20,592,000
------------ ------------
$ 27,637,000 $ 26,653,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 3 of 13
<PAGE> 4
CEM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Net sales........................................ $ 8,731,000 $ 8,332,000
Cost of goods sold............................... 3,490,000 3,472,000
------------ ------------
Gross profit.................................. 5,241,000 4,860,000
Selling, general and administrative expenses..... 3,085,000 2,935,000
Research and development expenses................ 687,000 590,000
------------ ------------
Income from operations........................ 1,469,000 1,335,000
Investment income................................ 111,000 44,000
Other income (expense), net...................... (39,000) (4,000)
------------ ------------
Income before income taxes.................... 1,541,000 1,375,000
Provision for income taxes....................... 540,000 490,000
------------ ------------
Net income.................................... $ 1,001,000 $ 885,000
============ ============
Net income per common and
common equivalent share....................... $ .27 $ .24
============ ============
Weighted average common and
common equivalent shares outstanding.......... 3,741,000 3,734,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 4 of 13
<PAGE> 5
CEM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Net sales........................................ $ 16,192,000 $ 15,478,000
Cost of goods sold............................... 6,684,000 6,488,000
------------ ------------
Gross profit.................................. 9,508,000 8,990,000
Selling, general and administrative expenses..... 5,743,000 5,576,000
Research and development expenses................ 1,387,000 1,208,000
------------ ------------
Income from operations........................ 2,378,000 2,206,000
Investment income................................ 213,000 99,000
Other income (expense), net...................... (8,000) 9,000
------------ ------------
Income before income taxes.................... 2,583,000 2,314,000
Provision for income taxes....................... 905,000 809,000
------------ ------------
Net income.................................... $ 1,678,000 $ 1,505,000
============ ============
Net income per common and
common equivalent share....................... $ .45 $ .40
============ ============
Weighted average common and
common equivalent shares outstanding.......... 3,753,000 3,752,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 5 of 13
<PAGE> 6
CEM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES........ $ 648,000 $ 767,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of available-for-sale investments........ 503,000 2,100,000
Maturity of held-to-maturity investments...... 1,000,000 0
Purchase of available-for-sale investments.... (1,000,000) (500,000)
Purchase of held-to-maturity investments...... 0 (1,004,000)
Capital expenditures, net..................... (338,000) (549,000)
------------ ------------
Net cash provided by investing activities.. 165,000 47,000
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt.......... (12,000) (11,000)
Proceeds from issuance of common stock........ 418,000 223,000
Repurchase of common stock.................... (397,000) (1,868,000)
------------ ------------
Net cash provided by (used in)
financing activities.................... 9,000 (1,656,000)
------------ ------------
EFFECTS OF EXCHANGE RATES ON CASH................ (1,000) 14,000
------------ ------------
Net increase (decrease) in
cash and cash equivalents..................... 821,000 (828,000)
Cash and cash equivalents at
beginning of period........................... 2,078,000 2,502,000
------------ ------------
Cash and cash equivalents at end of period....... $ 2,899,000 $ 1,674,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
Page 6 of 13
<PAGE> 7
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 December 31 and June 30, 1995
are as follows:
<TABLE>
<CAPTION>
December 31 June 30
------------ ------------
<S> <C> <C>
Parts and raw materials........................................................ $ 2,606,000 $ 2,559,000
Work-in-process and finished goods............................................. 2,453,000 2,438,000
------------ ------------
$ 5,059,000 $ 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 7 of 13
<PAGE> 8
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
------------------------------------------
12/31/95 12/31/94 % Change
-------- -------- --------
<S> <C> <C> <C>
Net sales....................................................... 100.0% 100.0% 4.8%
Cost of goods sold.............................................. 40.0 41.7 0.5
----- -----
GROSS PROFIT................................................. 60.0 58.3 7.8
Selling, general and administrative expenses.................... 35.3 35.2 5.1
Research and development expenses............................... 7.9 7.1 16.4
----- -----
INCOME FROM OPERATIONS....................................... 16.8 16.0 10.0
Investment income............................................... 1.3 0.5 152.3
Other income (expense), net..................................... (0.5) 0.0 875.0
----- -----
INCOME BEFORE INCOME TAXES................................... 17.6 16.5 12.1
Provision for income taxes...................................... 6.2 5.9 10.2
----- -----
NET INCOME................................................... 11.4% 10.6% 13.1
===== =====
</TABLE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 1995:
Sales growth primarily resulted from increased unit sales of the Company's
microwave digestion system in Asia and Germany. Results in the United States
were mixed, due in part to weakness in government related business because of
the budget impasse. In the U.S. sales for environmental applications, which had
been declining, stabilized; and the demand in the process control food market
showed improvement compared to the first quarter of fiscal 1996. Initial
Environmental Protection Agency action for our new microwave extraction system,
which was expected in December 1995, was delayed due to the government
shutdown. The timing of this regulatory action remains uncertain. Foreign sales
increased as a percentage of total sales from 44% to 48%.
Gross profit margins increased as a result of the increase in sales from the
Company's European subsidiaries which, on a consolidated basis, generally carry
higher margins than U.S. sales.
The Company continues to control its selling, general and administrative
expenses which increased proportionally with sales and remained relatively flat
as a percentage of sales. Research and development expenses increased as the
Company plans to introduce a new product in the second half of fiscal 1996. The
new product will be based on a unique platform which will provide laboratory
and industrial users with new capabilities for preparing samples and conducting
other routine procedures faster, safer and more reliably.
The increase in investment income resulted from long-term investments that were
not present in the prior year.
Page 8 of 13
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following table sets forth, for the six-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>
Six Months Ended
------------------------------------------
12/31/95 12/31/94 % Change
-------- -------- --------
<S> <C> <C> <C>
Net sales................................................... 100.0% 100.0% 4.6%
Cost of goods sold.......................................... 41.3 41.9 3.0
------ ------
GROSS PROFIT............................................. 58.7 58.1 5.8
Selling, general and administrative expenses................ 35.4 36.0 3.0
Research and development expenses........................... 8.6 7.8 14.8
------ ------
INCOME FROM OPERATIONS................................... 14.7 14.3 7.8
Investment income........................................... 1.3 0.6 115.2
Other income (expense), net................................. 0.0 0.0 NM
------ ------
INCOME BEFORE INCOME TAXES............................... 16.0 14.9 11.6
Provision for income taxes.................................. 5.6 5.2 11.9
------ ------
NET INCOME............................................... 10.4% 9.7% 11.5
====== ======
</TABLE>
RESULTS OF OPERATIONS - SIX MONTHS ENDED DECEMBER 31, 1995:
Sales growth primarily resulted from the same factors that affected the second
quarter of fiscal 1996. Foreign sales increased as a percentage of total sales
from 41% to 48%.
Selling, general and administrative expenses increased slightly 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
internal development efforts on new products. The Company expects research and
development 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 9 of 13
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES:
At December 31, 1995, the Company had cash and short-term investments of
approximately $6.4 million as compared to $6.1 million at June 30, 1995. The
increase in cash primarily resulted from operating activities. The increase in
accounts receivable, and decrease in accounts payable and accrued expenses
reflects temporary timing differences. Long-term investments were unchanged at
$2.0 million.
During the six months ended December 31, 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 December 31, 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 and 5 are not applicable and are omitted.
ITEM 4. Submission of Matters to a Vote of Security Holders
At the Registrant's Annual Meeting of Shareholders held on November 8,
1995, the following matters were submitted to a vote of the
shareholders of the Registrant:
1. Election of four nominees to the Board of Directors of the
Registrant for terms ending at the Annual Meeting of Shareholders
in 1996:
<TABLE>
<CAPTION>
Shares
Voted Shares Shares
Nominee in Favor Withheld Not Voted
------- -------- -------- ---------
<S> <C> <C> <C>
Michael J. Collins 3,137,218 5,872 476,073
Ronald A. Norelli 3,137,218 5,872 476,073
John L. Chanon 3,137,218 5,872 476,073
John D. Correnti 3,136,018 7,072 476,073
</TABLE>
2. Approval of amendments to the CEM Corporation 1993 Nonqualified
Stock Option Plan for Non-Employee Directors by a vote of
2,609,173 shares in favor and 442,293 shares against, with 91,624
shares abstaining and 281,174 shares of broker non-votes.
3. Ratification of the selection of Coopers & Lybrand, L.L.P. as
independent public accountants to audit the Corporation's financial
statements for the fiscal year ending June 30, 1996, which was
approved by a vote of 3,136,128 shares in favor and 1,283 shares
against, with 5,679 shares abstaining.
Page 10 of 13
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(10) CEM Corporation 1993 Nonqualified Stock Option Plan for
Non-Employee Directors, as amended.
(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
December 31, 1995.
Page 11 of 13
<PAGE> 12
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: February 8, 1996 CEM CORPORATION
BY: /s/ Richard N. Decker
---------------------------
Richard N. Decker
Secretary, Treasurer and
Chief Financial Officer
Page 12 of 13
<PAGE> 13
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
ITEM 6(A)
Quarterly Report on Form 10-Q
For the quarter ended December 31, 1995 Commission File Number: 0-15383
CEM CORPORATION
EXHIBIT INDEX
Exhibit Number: Exhibit Description
- --------------- ----------------------------------------------------
10 CEM Corporation 1993 Nonqualified Stock Option Plan
for Non-Employee Directors, as amended
11 Computation of Earnings per Share
27 Financial Data Schedule (filed in electronic format
only)
Page 13 of 13
<PAGE> 1
EXHIBIT 10
CEM CORPORATION
1993 NONQUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE. This Plan is intended to provide Directors who are
not employees of the Company a sense of proprietorship and personal involvement
in the development and financial success of the Company and to encourage such
Directors to remain with and to devote their best efforts to the Company.
2. DEFINITIONS. Whenever used in the Plan, unless the context
clearly indicates otherwise, the following terms shall have the following
meanings:
(a) "Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Board" or "Board of Directors" means the Board
of Directors of the Company.
(c) "Common Stock" means the Common Stock, $.05 par
value, of the Company and any other stock or securities resulting from
the adjustment thereof or substitution therefor as described in
Section 8 below.
(d) "Company" means CEM Corporation, a North Carolina
corporation, and any corporation succeeding to the Company's rights
and obligations hereunder.
(e) "Director" means a member of the Board of Directors
of the Company who is not a regular employee of the Company or its
subsidiaries.
(f) "Disability" means the condition which results when
an individual has become permanently and totally disabled within the
meaning of Section 105(d)(4) of the Internal Revenue Code of 1986.
(g) "Fair Market Value", with respect to a share of the
Common Stock on a particular date, shall be (i) if such Common Stock
is listed on a national securities exchange or a foreign securities
exchange or traded on the National Market System, the closing sale
price of the Common Stock on said date on the national securities
exchange, the foreign securities exchange or the National Market
System on which the Common Stock is principally traded, or, if no
sales occur on said date, then on the next preceding date on which
there were such sales of Common Stock, or (ii) if the Common Stock
shall not be listed on a national securities exchange or a foreign
securities exchange or traded on the National Market System, the mean
between the closing bid and asked prices last reported by the National
Association of Securities Dealers, Inc. for the over-the-counter
market on said date or, if no bid and asked prices are reported on
said
<PAGE> 2
date, then on the next preceding date on which there were such
quotations, or (iii) if at any time quotations for the Common Stock
shall not be reported by the National Association of Securities
Dealers, Inc. for the over-the-counter market and the Common Stock
shall not be listed on any national securities exchange or any foreign
securities exchange or traded on the National Market System, the fair
market value based on quotations for the Common Stock by market makers
or other securities dealers as determined by the Board of Directors in
such manner as the Board may deem reasonable.
(h) "Option" means a stock option granted pursuant to
this Plan.
(i) "Optionee" means the person to whom an Option is
granted.
(j) "Option Price" is defined in Section 6.
(k) "Plan" means this 1993 Nonqualified Stock Option Plan
for Non-Employee Directors, as in effect from time to time.
(l) "Stock Option Agreement" means the written agreement
between an Optionee and the Company evidencing the grant of an Option
under the Plan and setting forth or incorporating the terms and
conditions thereof.
3. ADMINISTRATION. The Plan shall be administered by the Board
of Directors. The Board shall have all of the powers necessary to enable it
properly to carry out its duties under the Plan, including but not limited to
the power and duty to construe and interpret the Plan and to determine all
questions that shall arise under the Plan, which interpretations and
determinations shall be conclusive and binding upon all persons. Subject to
the express provisions of the Plan, the Board may establish from time to time
such regulations, provisions and procedures which in its opinion may be
advisable in the administration of the Plan.
Notwithstanding the foregoing or any other provision of this Plan to
the contrary, no discretion concerning decisions regarding the Plan shall be
afforded to a person who is not a "disinterested person" (as defined in the
rules and regulations of the Securities and Exchange Commission under Section
16 of the Act, as in effect from time to time). In the event that it is
necessary for the proper administration of the Plan to exercise any such
discretion, and the Board is so precluded from exercising such discretion, the
Board may delegate any authority to exercise such discretion to a person or
committee of persons, each of whom is a "disinterested person" as so defined.
4. ELIGIBILITY; OPTION GRANTS.
(a) Each Director first elected after August 1, 1995
shall automatically be granted an option to purchase 5,000 shares
(subject to adjustment or substitution pursuant to Section 8 hereof
from the date hereof, irrespective of whether such option has been
2
<PAGE> 3
granted) of the Common Stock on the date of election to the Board;
provided, that any Director first elected after August 1, 1995 but
prior to approval of this Section 4(a) at the 1995 Annual Meeting of
Shareholders of the Company shall automatically be granted an option
to purchase 5,000 shares (subject to adjustment or substitution
pursuant to Section 8 hereof from the date hereof, irrespective of
whether such option has been granted) of the Common Stock on the date
of approval of this Section 4(a) by the shareholders.
(b) All Directors shall automatically be granted options
to purchase the following number of shares (subject to adjustment or
substitution pursuant to Section 8 hereof from the date hereof,
irrespective of whether such option has been granted) of the Common
Stock on each of the following grant dates:
Grant Date Number of Shares
---------- ----------------
February 1, 1994 500
February 1, 1995 500
February 1, 1996 1,000
February 1, 1997 1,000
February 1, 1998 1,000
(c) Such automatic grants shall be made pro rata to all
Directors if on the date of a grant there shall not be a number of
shares sufficient to make all such grants.
5. SHARES AVAILABLE FOR OPTION. The Board of Directors shall
reserve for the purposes of the Plan, and by adoption of the Plan does hereby
reserve, out of the authorized but unissued Common Stock, a total of 25,000
shares of Common Stock of the Company (subject to adjustment or substitution
pursuant to Section 8 hereof). In the event that an Option granted under the
Plan to any Director expires or is terminated unexercised as to any shares
covered thereby, such shares shall not thereafter be available for the granting
of Options under the Plan and the reserve for such shares shall be terminated.
6. OPTION PRICE. The price at which each share of Common Stock
(subject to adjustment pursuant to Section 8 hereof) may be purchased upon the
exercise of an Option (the "Option Price") shall be the Fair Market Value of
the shares of Common Stock subject to the Option on the date such Option is
granted.
7. EXERCISE OF OPTIONS.
(a) Each option granted under the Plan by its terms shall
require the Director granted such option to remain available to serve
as a Director of the Company for one year from the date of the grant
of such option before the right to exercise any part of such option
will accrue. A Director may thereafter exercise any or all of such
option until the expiration or termination of the option; provided,
that not less than 100 shares
3
<PAGE> 4
may be purchased at any one time unless the number of shares purchased
is the total number at such time purchasable under the option.
Subject to earlier termination as provided herein, all options granted
under this Plan shall expire ten years from the date of grant thereof.
(b) If an optionee shall cease to be a Director of the
Company otherwise than by such optionee's death or Disability, then,
subject to Subsection 7(a) hereof, the option shall be exercisable at
any time prior to the earlier of (i) the expiration date of such
option or (ii) that date which is three months from the date such
optionee ceases to be a Director, such three month period to include
the date on which such termination occurs. If an optionee ceases to
be a Director of the Company as a result of such optionee's death or
Disability, then, subject to Subsection 7(a) hereof, the option shall
be exercisable at any time prior to the earlier of (i) the expiration
date of such option or (ii) that date which is one year from the date
such optionee ceases to be a Director. In the event of the death of
an optionee, then, subject to Subsection 7(a) hereof, such optionee's
option shall be exercisable to the extent herein otherwise provided by
the executor or personal representative of the optionee's estate or by
any person who acquired the right to exercise such option by bequest
under the optionee's will or by inheritance.
(c) Each Option granted under the Plan by its terms shall
not be transferable by the Optionee otherwise than by will, or if the
Optionee dies intestate, by the laws of descent and distribution, and
such Option shall be exercisable during such Optionee's lifetime only
by such Optionee. In the event of the death of an Optionee, then such
Optionee's Options shall be exercisable to the extent herein provided
by the executor or personal representative of the Optionee's estate or
by any person who acquired the right to exercise such Option by
bequest under the Optionee's will or by inheritance.
(d) Each Option shall be confirmed by a Stock Option
Agreement executed by the Company and by the Optionee to whom such
Option is granted.
(e) The Option Price for each share of Common Stock
purchased pursuant to the exercise of each Option shall, at the time
of the exercise of the Option, be paid in full in cash or equivalent.
An Option shall be deemed exercised only when written notice of such
exercise, together with payment of the Option Price, is received from
the Optionee by the Company at its principal office. No Optionee
shall have any rights as a shareholder of the Company with respect to
Common Stock issuable pursuant to such Optionee's Option until such
Option is duly exercised.
(f) To the extent that an Option is not exercised within
the period of time prescribed therefor as set forth in the Plan, the
Option shall lapse and all rights of the Optionee thereunder shall
terminate.
4
<PAGE> 5
8. ADJUSTMENT OF NUMBER OF SHARES. In the event that a dividend
shall be declared upon the Common Stock payable in shares of Common Stock, the
number of shares of Common Stock then subject to any Option and the number of
shares reserved for issuance pursuant to the Plan shall be adjusted by adding
to each such share the number of shares which would be distributable thereon if
such share had been outstanding on the date fixed for determining the
shareholders entitled to receive such stock dividend. In the event that the
outstanding shares of Common Stock generally shall be changed into or exchanged
for a different number or kind of shares of stock or other securities of the
Company or of another corporation, or changed into or exchanged for cash or
property or the right to receive cash or property (but not including any
dividend payable in cash or property other than a liquidating distribution),
whether through reorganization, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of Common Stock subject to any Option, and for each share of Common Stock
reserved for issuance pursuant to the Plan, the number and kind of shares of
stock or other securities or cash or property or right to receive cash or
property into which each outstanding share of Common Stock shall be so changed
or for which each such share shall be exchanged. In the case of any such
substitution or adjustment as provided for in this Section 8, the Option Price
for each share covered thereby prior to such substitution or adjustment shall
be the Option Price for all shares of stock or other securities or cash or
property or right to receive cash or property which shall have been substituted
for such share or to which such share shall have been adjusted pursuant to this
Section 8. No adjustment or substitution provided for in this Section 8 shall
require the Company in any Stock Option Agreement to issue a fractional share
and the total substitution or adjustment with respect to each Stock Option
Agreement shall be limited accordingly.
9. AMENDMENT OF PLAN. The Board of Directors shall have the
right to amend, suspend or terminate the Plan at any time; provided that,
except as and to the extent authorized and permitted by Section 8 above, (a) no
amendment, suspension or termination shall adversely affect the rights of any
Optionee as to any outstanding Option without the consent of such Optionee,
subject to any limitation on such rights set forth in the Plan or such
Optionee's Stock Option Agreement except for any amendment the Board deems
necessary to preserve or provide exemptions from the applicability of Section
16(b) of the Act to the grant, lapse, disposition, cancellation or exercise of
Options; and (b) no amendment relating to the determination of the Optionees or
of the grant dates or of the number of Options granted to any Optionee, or of
the requirement that no discretion concerning decisions regarding the Plan
shall be afforded to a person who is not a "disinterested person," shall be
made more than once every six months, other than to comport with changes in the
Internal Revenue Code of 1986 or the rules thereunder.
10. RESALES OF SHARES. The Company may impose such restrictions
on the sale or other disposition of shares issued pursuant to the exercise of
Options as the Board deems necessary to comply with applicable securities laws.
Certificates for shares issued upon the exercise of Options may bear such
legends as the Company deems necessary to give notice of such restrictions.
5
<PAGE> 6
11. COMPLIANCE WITH LAW AND OTHER CONDITIONS. No shares shall be
issued pursuant to the exercise of any Option granted under the Plan prior to
compliance by the Company, to the satisfaction of its counsel, with any
applicable laws. The Company shall not be obligated to (but may in its
discretion) take any action under applicable federal or state securities laws
(including registration or qualification of the Plan, the Options or the Common
Stock) necessary for compliance therewith in order to permit the issuance of
shares upon the exercise of Options or the immediate resale thereof by
Optionees, except for actions (other than registration or qualification) that
may be taken by the Company without unreasonable effort or expense and without
the incurrence of any material exposure to liability.
12. NONQUALIFIED OPTIONS. Options granted under the Plan will not
be treated as "incentive stock options" under Section 422 of the Internal
Revenue Code of 1986.
13. EFFECTIVE DATE. The Plan shall be effective on September 16,
1993, subject to approval of the Plan by a plurality of the shares voting on
the approval of the Plan at the 1993 Annual Meeting of Shareholders, which was
obtained on November 16, 1993. The amendments to Section 4 hereof and this
Section 13 shall be effective on August 3, 1995, subject to approval of such
amendments by a plurality of the shares voting on the approval of the
amendments at the 1995 Annual Meeting of Shareholders. No Options shall be
granted under Sections 4(a) and 4(b) hereof, as amended, if approval shall not
be obtained prior to the completion of the 1995 Annual Meeting of Shareholders.
6
<PAGE> 1
Exhibit 11
CEM CORPORATION
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
NET INCOME....................................... $ 1,001,000 $ 885,000
============ ============
Weighted average number of shares outstanding.... 3,609,000 3,621,000
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.......................... 132,000 113,000
------------ ------------
Weighted average number of shares outstanding,
as adjusted................................... 3,741,000 3,734,000
============ ============
PRIMARY EARNINGS PER SHARE....................... $ .27 $ .24
============ ============
NET INCOME....................................... $ 1,001,000 $ 885,000
============ ============
Weighted average number of shares outstanding.... 3,609,000 3,621,000
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.......................... 132,000 113,000
------------ ------------
Weighted average number of shares outstanding,
as adjusted................................... 3,741,000 3,734,000
============ ============
EARNINGS PER COMMON SHARE,
ASSUMING FULL DILUTION........................ $ .27 $ .24
============ ============
</TABLE>
Page 1 of 2
<PAGE> 2
Exhibit 11
CEM CORPORATION
COMPUTATION OF EARNINGS PER SHARE
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
NET INCOME....................................... $ 1,678,000 $ 1,505,000
============ ============
Weighted average number of shares outstanding.... 3,625,000 3,652,000
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.......................... 128,000 100,000
------------ ------------
Weighted average number of shares outstanding,
as adjusted................................... 3,753,000 3,752,000
============ ============
PRIMARY EARNINGS PER SHARE....................... $ .45 $ .40
============ ============
NET INCOME....................................... $ 1,678,000 $ 1,505,000
============ ============
Weighted average number of shares outstanding.... 3,625,000 3,652,000
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.......................... 128,000 100,000
------------ ------------
Weighted average number of shares outstanding,
as adjusted................................... 3,753,000 3,752,000
============ ============
EARNINGS PER COMMON SHARE,
ASSUMING FULL DILUTION........................ $ .45 $ .40
============ ============
</TABLE>
Page 2 of 2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CEM CORPORATION FOR THE SIX MONTHS ENDED DECEMBER 31,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996<F1>
<PERIOD-START> JUL-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,899,000
<SECURITIES> 3,500,000
<RECEIVABLES> 7,320,000
<ALLOWANCES> 0
<INVENTORY> 5,059,000
<CURRENT-ASSETS> 19,547,000
<PP&E> 5,716,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 27,637,000
<CURRENT-LIABILITIES> 3,636,000
<BONDS> 1,504,000
<COMMON> 182,000
0
0
<OTHER-SE> 22,224,000
<TOTAL-LIABILITY-AND-EQUITY> 27,637,000
<SALES> 16,192,000
<TOTAL-REVENUES> 16,192,000
<CGS> 6,684,000
<TOTAL-COSTS> 6,684,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,583,000
<INCOME-TAX> 905,000
<INCOME-CONTINUING> 1,678,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,678,000
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
<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>
