UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1996
Commission File Number 0-11353
CIRCUIT RESEARCH LABS, INC.
(Exact name of registrant as specified in its charter)
Arizona 86-0344671
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2522 West Geneva Drive, Tempe, Arizona 85282
(Address of Principal executive office) (Zip Code)
Registrant's telephone number,
including area code
(602) 438-0888
172743 20 5
(CUSIP Number)
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by
this report.
Outstanding at
Class March 31, 1996
Common stock, $.10 par value 597,682
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
INDEX
Page
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
March 31, 1996 (Unaudited) and
December 31, 1995 3
Consolidated Condensed Statements of
Operations - Three months ended
March 31, 1996 and 1995 (Unaudited) 5
Consolidated Condensed Statements of Cash
Flows - Three months ended March 31, 1996
and 1995 (Unaudited) 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
1
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
The Consolidated Condensed Financial Statements included herein have
been prepared by the Company pursuant to the rules and regulations of
the Securities and Exchange Commission. The Consolidated Condensed
Balance Sheet as of March 31, 1996 and the Consolidated Condensed
Statements of Operations for the three months ended March 31, 1996
and 1995 and the Consolidated Condensed Statements of Cash Flows for
the three months ended March 31, 1996 and 1995 have been prepared
without audit.
Certain information and note 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 Consolidated Condensed
Financial Statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's
Annual Report for the year ended December 31, 1995.
In the opinion of management, the Consolidated Condensed Financial
Statements for the unaudited interim periods presented herein include
all adjustments, consisting only of normal recurring adjustments,
necessary to present a fair statement of the results of operations
for such interim periods. Net operating results for any interim
period may not be comparable to the same interim period in previous
years, nor necessarily indicative of the results that may be expected
for the full year.
2
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, December 31
1996 1995
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $107,155 $ 25,974
Securities available-for-sale 293,509 297,667
Accounts receivable, less allowance for
doubtful accounts of $16,520 138,690 162,242
Inventories:
Raw materials and supplies 429,983 437,368
Work in process 171,343 169,640
Finished goods 208,530 229,620
Total inventories 809,856 836,628
Prepaid expenses and other 79,821 67,243
Total current assets 1,429,031 1,389,754
PROPERTY, PLANT AND EQUIPMENT:
Land 130,869 130,869
Building and improvements 497,004 497,004
Furniture and fixtures 383,523 383,523
Machinery and equipment 602,238 564,734
Total 1,613,634 1,576,130
Less accumulated depreciation 1,000,848 981,978
Property, plant and equipment - net 612,786 594,152
OTHER ASSETS - NET 163,783 164,683
STOCKHOLDER NOTES RECEIVABLE 1,081
TOTAL $2,205,600 $2,149,670
(continued)
3
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, December 31,
1996 1995
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $114,435 $ 91,401
Accrued salaries and benefits 21,878 58,004
Accrued professional fees 11,308 27,405
Accrued customer deposits 168,072 99,818
Other accrued expenses and liabilities 39,540 26,210
Long-term debt - current portion 19,385 19,136
Total current liabilities 374,618 321,974
LONG-TERM DEBT - LESS CURRENT PORTION 125,418 138,458
STOCKHOLDERS' EQUITY:
Preferred stock, $100 par value -
authorized 500,000 shares, none issued
Common stock, $.10 par value - authorized
20,000,000 shares, 597,682 shares issued
and outstanding 59,768 59,768
Additional paid-in capital 1,247,240 1,247,240
Retained earnings 398,556 377,324
Unrealized appreciation on securities
available-for sale 4,906
Total stockholders' equity 1,705,564 1,689,238
TOTAL $2,205,60 $2,149,670
4
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
1996 1995
NET SALES $607,264 $537,185
COST OF GOODS SOLD 216,343 178,558
Gross profit 390,921 358,627
OPERATING EXPENSES:
Selling, general and administrative 275,358 246,484
Research and development 92,299 106,733
Total operating expenses 367,657 353,217
INCOME FROM OPERATIONS 23,264 5,410
OTHER INCOME (EXPENSE):
Interest and other income 5,005 6,006
Interest expense (7,037) (7,333)
Total other income (expense) (2,032) (1,327)
INCOME BEFORE INCOME TAXES 21,232 4,083
INCOME TAX EXPENSE (1,600)
NET INCOME $21,232 $ 2,483
EARNINGS PER COMMON SHARE $.04 $.00
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 597,682 597,682
5
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1996 1995
OPERATING ACTIVITIES:
NET INCOME $ 21,232 $ 2,483
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 21,595 22,239
Deferred income taxes 1,600
Changes in assets and liabilities:
Accounts receivable 23,552 31,181
Inventories 26,772 (12,582)
Prepaid expenses and other (12,578) 753
Other assets (1,825) (997)
Accounts payable, accrued expenses and
customer deposits 52,395 1,212
NET CASH PROVIDED BY OPERATING ACTIVITIES 131,143 45,889
INVESTING ACTIVITIES:
Purchase of securities (74,318)
Proceeds from sale or maturity of securities 74,008
Capital expenditures (37,504) (8,800)
Payments received on stockholders' notes 1,081 3,381
NET CASH USED IN
INVESTING ACTIVITIES (36,423) (5,729)
FINANCING ACTIVITIES:
Principal payments on long-term debt (13,539) (1,706)
NET INCREASE IN CASH AND CASH EQUIVALENTS 81,181 38,454
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 25,974 122,217
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $107,155 $160,671
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $7,037 $7,333
6
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company had net working capital of $1,054,000 and the ratio
of current assets to current liabilities was 3.81 to 1 at March 31,
1996. At December 31, 1995, the Company had net working capital of
$1,067,800 and a current ratio of 4.32 to 1.
Total inventories of $809,900 at March 31, 1996 were comparable
to total inventories of $836,600 at December 31, 1995.
The Company's credit line of $200,000 was not utilized during
the quarter, and at March 31, 1996 had no outstanding balance. The
credit agreement expires on July 1, 1996, and is collateralized by
accounts receivable and inventories, and bears interest at prime plus
1%. Management does not contemplate usage of the line for anything
other than offsetting investment maturity timing and cash flow
management.
The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 115 in May
1993 establishing certain new financial accounting and reporting
standards for investments in debt and equity securities. SFAS No.
115 requires the classification of securities at acquisition into one
of three categories: held-to-maturity, available-for-sale or trading
-- with different reporting requirements for each classification.
All of the Company's marketable securities are classified as
available-for-sale.
The Company adopted SFAS No. 115 as of January 1, 1995. At
December 31, 1995, the unrealized appreciation on securities
available-for -sale was $4,900. The estimated fair value of the
Company's securities approximates cost at March 31, 1996.
7
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the first quarter of 1996 totaled $607,300 and
were 13% higher than the first quarter sales in 1995 of $537,000. The
increase was due to the first shipments of CRL's digital processor,
the DP100.
Cost of goods sold was 36% of net sales for the first quarter
ended March 31, 1996 compared to 33% for the same period in 1995 and
illustrates that production costs were comparable to the prior year's
period.
Selling, general and administrative expenses were $275,400 in
the first quarter of 1996 compared to selling, general and
administrative expenses of $246,500 for the first quarter of 1995.
The increase of $28,900 in 1996 is the result of increased costs in
international sales and marketing.
Research and development expense in the first quarter of 1996
totaled $92,300, and was comparable to the 1995 first quarter total
of $106,700.
Interest and other income of $5,000 for the first quarter of
1996 was comparable to $6,000 for the first quarter of 1995.
Interest expense consisted of the interest cost on the
long-term mortgage collateralized by the Company's headquarters
facility.
The Company's income tax provision for the three months ended
March 31, 1996 is offset by the partial reversal of the deferred tax
valuation allowance recorded at December 31, 1995.
Net income for the first quarter was $21,200 as compared to net
income of $2,500 for the first quarter of 1995.
8
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits included herein - None.
(b) Reports on Form 8-K - None.
9
CIRCUIT RESEARCH LABS, INC. and SUBSIDIARIES
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 hereunto duly authorized.
Registrant
CIRCUIT RESEARCH LABS, INC.
DATE: MAY 14, 1996
BY /s/Gary D. Clarkson
Gary D. Clarkson
Treasurer (Authorized Officer
for signature)
9