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 March 29, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-9487
CORCOM, INC.
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(Exact name of registrant as specified in its charter)
Illinois 36-2307626
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
844 E. Rockland Road, Libertyville, Illinois 60048
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 680-7400
Not Applicable
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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 reg-
istrant 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--3,819,843 Shares as of April 18, 1997
Exhibit Index on Page 9
CORCOM, INC.
INDEX
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--March 29, 1997
(Unaudited) and December 31, 1996
Consolidated Condensed Statements of Income
(Unaudited)--For the Thirteen Weeks Ended
March 29, 1997 and March 30, 1996
Consolidated Condensed Statements of Cash Flows
(Unaudited)--For the Thirteen Weeks Ended
March 29, 1997 and March 30, 1996
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 9
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)
March 29, December 31,
ASSETS 1997 1996
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CURRENT ASSETS (Unaudited)
Cash & cash equivalents $ 5,831 $ 4,789
Accounts receivable - net 5,609 4,688
Inventories - Note B 6,530 6,691
Deferred income tax asset, net 1,690 2,000
Other current assets 572 682
Total current assets 20,232 18,850
PROPERTY, PLANT AND EQUIPMENT - AT COST 18,852 18,391
Less allowances for depreciation &
amortization 14,271 14,014
4,581 4,377
TOTAL ASSETS $24,813 $23,227
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 58 $ 59
Accounts payable 2,625 1,368
Other accrued liabilities 1,421 1,728
Total current liabilities 4,104 3,155
LONG-TERM DEBT 87 102
STOCKHOLDERS' EQUITY
Common Stock, no par value; 10,000,000
shares authorized; issued - 3,833,743
shares in 1997 and 3,815,543 in 1996 14,083 14,057
Retained earnings 6,764 6,023
Accumulated exchange rate adjustments (225) (110)
20,622 19,970
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $24,813 $23,227
See notes to Consolidated Condensed Financial Statements.
CORCOM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
(In Thousands, except Share Data)
------Thirteen Weeks Ended-------
March 29, 1997 March 30, 1996
-------------- ---------------
Net sales $8,993 $8,313
Costs and expenses:
Cost of sales 5,624 5,130
Engineering expenses 338 311
Selling, administrative & other expenses 1,976 1,869
Interest expense 3 4
Interest income (49) (19)
7,892 7,295
Earnings before income taxes 1,101 1,018
Income tax provision (benefit) 360 (246)
Net earnings $ 741 $1,264
Average number of common and common
equivalent shares outstanding 3,971,246 3,939,928
Net earnings per common and
common equivalent share - Note C $0.19 $0.32
Cash dividends have not been declared in the periods covered by these state-
ments.
See notes to Consolidated Condensed Financial Statements.
CORCOM, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In Thousands)
------Thirteen Weeks Ended----
March 29, March 30,
1997 1996
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OPERATING ACTIVITIES
Net cash flows from operating
activities $1,556 $1,513
INVESTING ACTIVITIES
Additions to property, plant and
equipment, net (524) (213)
FINANCING ACTIVITIES
Stock options exercised 26 43
Repayments of notes payable and
long term debt (16) (14)
TOTAL FINANCING ACTIVITIES 10 29
INCREASE IN CASH AND CASH EQUIVALENTS 1,042 1,329
Cash and cash equivalents at beginning
of period 4,789 887
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,831 $2,216
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 thirteen weeks
ended March 29, 1997 are not necessarily indicative of the results that may
be expected for the year ending December 31, 1997. 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,
1996.
NOTE B - INVENTORIES
Major classes of the Company's inventories are as follows (in thousands):
March 29, December 31,
1997 1996
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Finished products $2,241 $2,693
Raw materials and work-in-process 4,289 3,998
$6,530 $6,691
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 components of the net deferred tax asset, tax effected, recognized in the
accompanying balance sheet as of March 29, 1997 are as follows (in thousands):
Deferred tax asset $1,975
Less valuation allowance (285)
Net deferred tax asset $1,690
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations - First Quarter 1997 vs. First Quarter 1996
Corcom's net sales for the first quarter of 1997 were $8,993,000, an increase
of 8.2% from the $8,313,000 reported for the first quarter of 1996. This in-
crease was the result of revenue growth in the Company's North American and
European commercial filter businesses. North American revenue represented
over 73% of total revenue in the first quarter of 1997 and was up 10.2% over
the comparable number in 1996 as a result of the continued strength of the do-
mestic market for passive components. European sales, which represent ap-
proximately 25% of total first quarter 1997 revenue, was up 5.6% in 1997 over
1996. There were no appreciable price changes year to year.
Cost of sales for the current quarter equaled 62.5% of net sales compared to
61.7% for the year ago period. Certain peso-based costs at the Company's main
manufacturing plant in Juarez, Mexico have increased year to year as a result
of the inflation in this currency over the past year. Since a portion of the
Company's costs are peso-based, the Company's manufacturing costs could rise
further if the value of the peso increases relative to the dollar, or if in-
flation in Mexico escalates.
Engineering expenses, at $338,000 in the first quarter of 1997, were slightly
higher than the $311,000 reported in the first quarter of 1996 as a result of
higher prototype costs in the current period. Selling, administrative and
other expenses rose in 1997 to $1,976,000 from the $1,869,000 reported in the
first quarter of 1996. The largest component of this increase was the higher
sales and commission expenses on the higher revenue level.
Interest expense was negligible in the first quarter of 1997 as it was in
1996. Interest income increased to $49,000 in the first quarter of 1997 as
compared to $19,000 in the year-ago period as a result of the higher cash bal-
ances in the current period.
The Company's pre-tax earnings for the first quarter of 1997 were $1,101,000
as compared with $1,018,000 for the first quarter of 1996. The reasons for
the improvement are discussed above.
The income tax provision in the first quarter of 1997, at $360,000, represents
a normal statutory provision based on current pretax earnings. This compares
to an income tax benefit of $246,000 in the first quarter of 1996. The prin-
cipal component of this benefit was a reversal of part of the valuation allow-
ance against the deferred tax asset related to existing tax net operating loss
(NOL) carryforwards at the beginning of 1996. This was a one-time benefit ex-
perienced in 1996 only and was not repeatable in 1997.
After tax, the Company's net earnings for the first quarter of 1997 were
$741,000 ($.19 per share). This compares to net earnings in the year ago pe-
riod of $1,264,000 ($.32 per share), including the tax benefit experienced in
that year. The average number of common and common equivalent shares out-
standing as of March 29, 1997 were 3,971,246, an increase of 31,318 from the
3,939,928 shares reported as of March 30,1996. The increase was the joint re-
sult of the issuance of additional shares on exercise of stock options by cer-
tain key employees over the past year, and the dilutive effect of existing un-
exercised stock options.
Liquidity and Capital Resources
As of March 29, 1997, the Company had cash reserves on hand of $5,831,000, an
increase of $1,042,000 over the $4,789,000 reported at the beginning of the
year. In addition to current cash reserves, the Company's loan agreement with
American National Bank and Trust Company of Chicago is still in place. 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. Inter-
est 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 runs through
April 30, 1998. There were no borrowings against this agreement as of March
29, 1997.
On March 26, 1997, the Company announced that the Board of Directors had ap-
proved a stock repurchase program for up to 200,000 shares of the Company's
common stock. It was announced that the stock purchases would be made from
time to time, depending on market conditions, in the open market and in pri-
vately negotiated transactions. The Company had not made any repurchases un-
der this program as of March 29, 1997.
The Company does not believe it will need to identify additional sources of
capital over the next year and feels that current cash reserves, cash provided
by operating activities, and the existing credit facility 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
thirteen week period ended March 29, 1997.
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.
Dated: April 24, 1997
Corcom, Inc.
/S/ Thomas J. Buns
By: Thomas J. Buns
Vice President and Treasurer
(Principal Financial Officer)