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 September 30, 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 latest practicable date.
Common Stock, No Par Value--3,734,386 Shares as of October 7, 1995.
CORCOM, INC.
INDEX
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--September 30, 1995
(Unaudited) and December 31, 1994
Consolidated Condensed Statements of Operations
(Unaudited)--For the Thirteen Weeks and Thirty-Nine
Weeks Ended September 30, 1995 and October 1, 1994
Consolidated Condensed Statements of Cash Flows
(Unaudited)--For the Thirty-Nine Weeks Ended
September 30, 1995 and October 1, 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 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)
September 30, December 31,
1995 1994
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 169 $ 202
Accounts receivable--net 4,773 4,225
Inventories--Note B 7,831 6,418
Other current assets 597 572
Total current assets 13,370 11,417
PROPERTY, PLANT AND EQUIPMENT--AT COST 17,236 16,302
Less accumulated depreciation
and amortization 13,449 12,903
3,787 3,399
TOTAL ASSETS $17,157 $14,816
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash overdraft $ 189 $ 130
Current portion of long-term debt 54 300
Accounts payable 1,554 1,235
Other accrued liabilities 1,442 1,257
Notes payable 66 249
Total current liabilities 3,305 3,171
LONG-TERM DEBT 176 213
STOCKHOLDERS' EQUITY
Common stock, no par value:
Authorized 10,000,000 shares; issued
(including shares in treasury) -
3,734,543 shares in 1995 and 3,619,543
shares in 1994 13,935 13,749
(Accumulated deficit) (235) (2,235)
Accumulated exchange rate adjustments (24) (82)
13,676 11,432
Less cost of common stock in treasury--
157 shares in 1995 and 1994 0 0
13,676 11,432
TOTAL LIABILITIES & EQUITY $17,157 $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 Thirty-Nine Weeks Ended
Sept 30, Oct 1, Sept 30, Oct 1,
1995 1994 1995 1994
Net sales $7,729 $6,569 $22,340 $19,612
Costs and expenses
Cost of sales 4,815 4,457 14,018 13,348
Engineering expenses 327 261 946 851
Selling, administrative
and other expenses 1,776 1,492 5,158 4,124
Interest expense 5 22 65 150
6,923 6,232 20,187 18,473
Earnings before income
taxes 806 337 2,153 1,139
Income taxes 53 31 153 53
Net earnings $ 753 $ 306 $2,000 $1,086
Average number of common
and common equivalent
shares outstanding 3,922,580 3,769,372 3,837,496 3,714,499
Net earnings per common
and common equivalent
share--Note C $ 0.19 $ 0.08 $ 0.52 $ 0.29
<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)
Thirty-Nine Weeks Ended
September 30, October 1,
1995 1994
OPERATING ACTIVITIES
Net cash flows from operating activities $1,404 $1,203
INVESTING ACTIVITIES
Additions to property, plant and
equipment, net (1,216) (804)
Proceeds from sale of property 2,548
Net cash provided by (used in) investing
activities (1,216) 1,744
FINANCING ACTIVITIES
Treasury stock purchases (11)
Stock options exercised 186 18
Repayments of notes payable and
long-term debt (693) (3,066)
Proceeds from borrowings under notes
payable and long-term debt 227 376
Change in cash overdraft 59 (130)
Net cash used in financing activities (221) (2,813)
INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (33) 134
Cash and cash equivalents at beginning
of year 202 238
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 169 $ 372
<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 with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes 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 thirty-nine weeks
ended September 30, 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, at the lower of first-in,
first-out cost or market, are as follows (in thousands):
September 30, 1995 December 31, 1994
Finished products $3,444 $2,848
Materials and work-in-process 4,387 3,570
$7,831 $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.
NOTE D--INCOME TAXES
The provision for income taxes in 1995 as a percentage of earnings before
income taxes is substantially 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 September 30, 1995 are as follows
(in thousands):
Deferred tax assets $ 4,303
Less valuation allowance (4,303)
Net deferred tax assets $ 0
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations - Third Quarter 1995 vs. Third Quarter 1994
Net sales for the third quarter 1995 were $7,729,000, an increase of 17.7%
from the $6,569,000 reported in the third quarter of 1994. This increase was
principally a result of an increase in the overall electronics market. There
were no appreciable price changes year to year.
Cost of sales for the current quarter was 62.3% of net sales compared to
67.8% for the third quarter of 1994. The improvement was 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 $327,000 in the third quarter of 1995, were
higher than the $261,000 reported in the third quarter of 1994. This increase
was due to higher safety agency registration fees and model shop expenses in
the current period. Selling, administrative, and other expenses increased in
the third quarter of 1995 to $1,776,000 from the $1,492,000 reported in the
third quarter of 1994. The main areas of increase were volume-related
commission expense and income-related incentive compensation costs.
Interest expense was $5,000 in the third quarter of 1995 as compared to
$22,000 in the third quarter of 1994, the result of lower borrowings in the
current period as well as a lower interest rate.
Income tax expense was $53,000 in the third quarter of 1995 as compared to
$31,000 in the third quarter of 1994. This increase was the result of higher
earnings in the current period.
Net earnings for the third quarter of 1995 were $753,000 ($0.19 per share on
average shares outstanding of 3,922,580). This compares to earnings of
$306,000 ($0.08 per share on 3,769,372 average shares outstanding) for the
third quarter of 1994.
Results of Operations - Nine Months 1995 vs. Nine Months 1994
Net sales for the nine month period to date in 1995 were $22,340,000, an
increase of 13.9% from the $19,612,000 reported for the same period of 1994.
This increase was principally the result of an increase in the overall
electronics market. There were no appreciable price changes year to year.
Cost of sales for the current period was 62.7% of net sales compared to 68.1%
for the first three quarters of 1994. The improvement was 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 $946,000 in the first three quarters of 1995, were
slightly higher than the $851,000 reported in the first three quarters of
1994. This increase was due mainly to higher safety agency registration fees
in the current period. Selling, administrative, and other expenses increased
in the first three quarters of 1995 to $5,158,000 from the $4,124,000 reported
in the first three quarters 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 self-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 $65,000 in the first three quarters of 1995 as compared
to $150,000 in the first three quarters of 1994, the result of lower
borrowings in the current period as well as a lower interest rate.
Income tax expense was $153,000 in the first three quarters of 1995 as
compared to $53,000 in the first three quarters of 1994. This increase was
the result of higher earnings in the current period.
Net earnings for the first three quarters of 1995 were $2,000,000 ($0.52 per
share on average shares outstanding of 3,837,496). This compares to earnings
of $1,086,000 (including a one time gain on the sale of real estate of
$241,000) ($0.29 per share on 3,714,499 average shares outstanding) for the
first three quarters 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 had not borrowed any funds against its line of credit as of
September 30, 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 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 quarterly period ended September 30, 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: October 25, 1995 s/s Thomas J. Buns
By: Thomas J. Buns
Vice President, and Treasurer
(Principal Financial Officer)