SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended July 1, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-9487
CORCOM, INC.
(Exact name of registrant as specified in its charter)
Illinois 36-2307626
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
844 E. Rockland Road, Libertyville, Illinois 60048
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 680-7400
NOT APPLICABLE
Former name, former address and former fiscal year, if changed since last
report.
Indicate by checkmark 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 last practical date.
Common Stock, No Par Value--3,706,386 Shares as of July 27, 1995
CORCOM, INC.
INDEX
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--July 1, 1995
(Unaudited) and December 31, 1994
Consolidated Condensed Statements of Operations
(Unaudited)--For the Thirteen Weeks and Twenty-Six
Weeks Ended July 1, 1995 and July 2, 1994
Consolidated Condensed Statements of Cash Flows
(Unaudited)--For the Twenty-Six Weeks Ended July 1, 1995
and July 2, 1994
Notes to Consolidated Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 11.1--Computation of Earnings per Share
Exhibit 27.1--Financial Data Schedule (EDGAR only)
PART I. FINANCIAL INFORMATION
CORCOM, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands, except Share Data)
July 1, December 31,
1995 1994
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 364 $ 202
Accounts receivable--net 4,402 4,225
Inventories--Note B 7,199 6,418
Other current assets 642 572
Total current assets 12,607 11,417
PROPERTY, PLANT AND EQUIPMENT--AT COST 17,364 16,302
Less accumulated depreciation
and amortization 13,409 12,903
3,955 3,399
TOTAL ASSETS $16,562 $14,816
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 207 $ 130
Current portion of long-term debt 54 300
Accounts payable 1,980 1,235
Other accrued liabilities 1,148 1,257
Notes payable 142 249
Total current liabilities 3,531 3,171
LONG-TERM DEBT 190 213
STOCKHOLDERS' EQUITY
Common stock, no par value:
Authorized 10,000,000 shares; issued
(including shares in treasury) -
3,662,543 shares in 1995 and 3,619,543
shares in 1994 13,844 13,749
(Accumulated deficit) (988) (2,235)
Accumulated exchange rate adjustments (15) (82)
12,841 11,432
Less cost of common stock in treasury--
157 shares in 1995 and 1994 0 0
12,841 11,432
$16,562 $14,816
<FN>
See notes to Consolidated Condensed Financial Statements.
CORCOM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(In Thousands, except Share Data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
July 1, July 2, July 1, July 2,
1995 1994 1995 1994
Net sales $7,691 $6,547 $14,611 $13,043
Costs and expenses
Cost of sales 4,739 4,372 9,203 8,891
Engineering expenses 321 291 619 590
Selling, administrative
and other expenses 1,781 1,451 3,382 2,632
Interest expense 35 42 60 128
6,876 6,156 13,264 12,241
Earnings before income taxes 815 391 1,347 802
Income taxes 74 14 100 22
Net earnings $ 741 $ 377 $1,247 $ 780
Average number of common
and common equivalent
shares outstanding 3,848,890 3,716,626 3,821,533 3,682,082
Net earnings per common
and common equivalent
share--Note C $ .19 $ .10 $ .33 $ .21
<FN>
Cash dividends have not been declared in the periods covered by these
statements.
<FN>
See notes to Consolidated Condensed Financial Statements.
CORCOM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
Twenty-Six Weeks Ended
July 1, 1995 July 2, 1994
OPERATING ACTIVITIES
Net cash flows from operating activities $1,471 $ 493
INVESTING ACTIVITIES
Additions to property, plant and
equipment, net (1,105) (258)
Proceeds from sale of property 2,548
Net cash provided by (used in) investing
activities (1,105) 2,290
FINANCING ACTIVITIES
Treasury stock purchases (11)
Stock options exercised 95 7
Repayments of notes payable and
long-term debt (603) (2,924)
Proceeds from borrowings under notes
payable and long-term debt 227 288
Change in cash overdraft 77 (70)
Net cash used in financing activies (204) (2,710)
INCREASE IN CASH AND CASH EQUIVALENTS 162 73
Cash and cash equivalents at
beginning of period 202 238
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 364 $ 311
<FN>
See notes to Consolidated Condensed Financial Statements.
CORCOM, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and in a format provided by the instructions to
Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the twenty-six weeks ended July 1, 1995 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1994.
NOTE B--INVENTORIES
Major classes of the Company's inventories are as follows (in thousands):
July 1, 1995 December 31, 1994
Finished products $2,801 $2,848
Materials and work-in-process 4,398 3,570
$7,199 $6,418
NOTE C--EARNINGS PER SHARE
Net earnings per common and common equivalent share are based upon the
weighted average number of shares of common stock and common stock equivalents
(dilutive stock options) outstanding during each period. Primary and fully
diluted amounts per share are the same for each period presented.
NOTE D--INCOME TAXES
The provision for income taxes in 1995 as a percentage of earnings before
income taxes is less than the federal statutory rate due principally to the
effect of utilization of net operating loss carryovers.
The components of the net deferred tax asset, tax effected, recognized in the
accompanying balance sheet as of July 1, 1995 are as follows (in thousands):
Deferred tax assets $4,448
Less valuation allowance (4,448)
Net deferred tax assets $ 0
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations - Second Quarter 1995 vs. Second Quarter 1994
Net sales for the second quarter 1995 were $7,691,000, an increase of 17.5%
from the $6,547,000 reported in the second quarter of 1994. This increase was
commensurate with the increase in the overall electronics market. There were
no appreciable price changes year to year.
Cost of sales for the current quarter was 61.6% of net sales compared to 66.7%
for the second quarter of 1994. The improvement is the result of lower costs
at the Company's North American manufacturing facilities coupled with the
leverage provided by the higher sales volume in 1995. A portion of the
Company's manufacturing costs are Mexican peso based. The devaluation of the
peso relative to the dollar late in 1994 has been a significant contributor
to the manufacturing cost reductions. Should the value of the peso increase
relative to the dollar, or if inflation in Mexico escalates, the Company's
manufacturing costs could rise.
Engineering expenses, at $321,000 in the second quarter of 1995, were slightly
higher than the $291,000 reported in the second quarter of 1994. This
increase was due to higher safety agency registration fees in the current
period. Selling, administrative, and other expenses increased in the second
quarter of 1995 to $1,781,000 from the $1,451,000 reported in the second
quarter of 1994. The main areas of increase were commission expense and duty
costs (both of which are volume related), income-related incentive compensation
costs, sample costs, which were higher because of an aggressive sampling
program on the Company's Chameleon line of power entry modules, and higher
health insurance costs.
Interest expense was $35,000 in the second quarter of 1995 as compared to
$42,000 in the second quarter of 1994, the result of lower borrowings in the
current period as well as a lower interest rate.
Income tax expense was $74,000 in the second quarter of 1995 as compared to
$14,000 in the second quarter of 1994. This increase was the result of higher
earnings in the current period.
Net earnings for the second quarter of 1995 were $741,000 ($0.19 per share on
average shares outstanding of 3,848,890). This compares to earnings of
$377,000 ($0.10 per share on 3,716,626 average shares outstanding) for the
second quarter of 1994.
Results of Operations - First Half 1995 vs. First Half 1994
Net sales for the first half 1995 were $14,611,000, an increase of 12.0% from
the $13,043,000 reported in the first half of 1994. This increase was
commensurate with the increase in the overall electronics market. There were
no appreciable price changes year to year.
Cost of sales for the first half of 1995 was 63.0% of net sales compared to
68.2% for the first half of 1994. The improvement is the result of lower
costs at the Company's North American manufacturing facilities coupled with
the leverage provided by the higher sales volume in 1995. A portion of the
Company's manufacturing costs are Mexican peso based. The devaluation of the
peso relative to the dollar late in 1994 has been a significant contributor to
the manufacturing cost reductions. Should the value of the peso increase
relative to the dollar, or if inflation in Mexico escalates, the Company's
manufacturing costs could rise.
Engineering expenses, at $619,000 in the first half of 1995, were slightly
higher than the $590,000 reported in the first half of 1994. This increase
was due to higher safety agency registration fees in the current period.
Selling, administrative, and other expenses increased in the first half of
1995 to $3,382,000 from the $2,632,000 reported in the first half of 1994.
The main areas of increase were commission expense and duty costs (both of
which are volume related), income-related incentive compensation costs,
sample costs, which were high because of an aggressive sampling program on the
Company's Chameleon line of power entry modules, and higher health insurance
costs. Also, a $241,000 one-time gain on the sale of real estate in 1994 was
not repeated in 1995.
Interest expense was $60,000 in the first half of 1995 as compared to
$128,000 in the first half of 1994, the result of lower borrowings in the
current period as well as a lower interest rate.
Income tax expense was $100,000 in the first half of 1995 as compared to
$22,000 in the first half of 1994. This increase was the result of higher
earnings in the current period.
Net earnings for the first half of 1995 were $1,247,000 ($0.33 per share on
average shares outstanding of 3,821,533). This compares to earnings of
$780,000 (including a one-time gain on the sale of real estate of $241,000)
($0.21 per share on 3,682,082 average shares outstanding) for the first half
of 1994.
Liquidity and Capital Resources
On April 3, 1995, the Company entered into a new loan agreement with American
National Bank and Trust Company of Chicago. This agreement is a one year,
unsecured line of credit with maximum borrowings of $4,000,000, or 80% of
eligible accounts receivable, whichever is less. Interest on this loan is the
Company's choice of either LIBOR plus one hundred fifty basis points, or the
Bank's prime rate. This agreement replaces the secured line of credit with
Norwest Business Credit, Inc. which had been established in June, 1991.
Maximum borrowings under the old agreement were $5,000,000 of which $4,600,000
was a revolving credit facility and $400,000 was a term loan. The borrowings
were collateralized by domestic inventory and receivables. The interest rate
under the old loan agreement was the Bank's prime rate plus two and one half
percent.
The Company was not borrowing any funds against its line of credit as of
July 1, 1995. This compares with borrowings of $513,000 as of December 31,
1994.
The Company does not believe that it will need to identify additional sources
of capital over the next year and feels that cash provided by operating
activities and the existing credit facility (if renewed) will be sufficient
to meet its operating needs and capital resource requirements.
PART II. OTHER INFORMATION
CORCOM, INC.
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareholders held May 18, 1995, the
following vote totals were tabulated:
1. Election of Directors
Nominees Number of Votes Votes Withheld
George B. Berry 3,038,971 4,150
Werner E. Neuman 3,036,571 6,550
David B. Pivan 3,036,071 7,050
Herbert L. Roth 3,036,071 7,050
James A. Steinback 3,038,971 4,150
Gene F. Straube 3,036,071 6,550
Renato Tagiuri 3,036,071 7,050
There were no broker non-votes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. Description
11.1 Computation of Earnings per share
27.1 Financial Data Schedule (EDGAR only)
(b) The Company did not file any reports on Form 8-K
during the thirteen week period ended July 1, 1995.
CORCOM, INC.
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.
Corcom, Inc.
Dated: July 31, 1995 Thomas J. Buns
By: Thomas J. Buns
Vice President, and Treasurer
(Principal Financial Officer)