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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, NW
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended July 1, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 2-69336
CRAMER, INC.
A Kansas Corporation IRS Employment I.D. #48-0638707
625 Adams Street
Kansas City, Kansas 66105 Telephone No. (913) 621-6700
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 4,041,400 shares of common stock, no
par value, as of August 1, 2001.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CRAMER, INC.
BALANCE SHEET
UNAUDITED
(Amounts in Thousands, Except Share Data)
ASSETS 7/1/01 12/31/00
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CURRENT ASSETS:
Accounts receivable, net of allowance of $50 $ 1,124 $ 1,509
Inventories 1,107 1,558
Prepaid expenses 393 336
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Total current assets 2,624 3,403
PROPERTY, PLANT AND EQUIPMENT
At cost 6,214 6,187
Accumulated depreciation 5,474 5,369
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740 818
OTHER ASSETS:
Intangible pension asset 56 56
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Total Assets $ 3,420 $ 4,277
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash Overdrafts $ 234 $ 282
Note payable 2,145 2,302
Accounts payable 717 1,004
Accrued liabilities 776 664
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Total current liabilities 3,872 4,252
NON-CURRENT LIABILITIES:
Pension benefits payable 307 316
Other 165 185
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Total non-current liabilities 472 501
STOCKHOLDERS' EQUITY:
Common stock, no par value; authorized, 6,000,000 shares;
issued and outstanding 4,041,400 shares at July 1, 2001,
issued and outstanding 4,051,400 shares at December 31, 2000 3,819 3,824
Accumulated deficit (4,439) (3,996)
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(620) (172)
Minimum pension liability adjustment (304) (304)
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Net stockholders' equity (924) (476)
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Total Liabilities and Stockholders' Equity $ 3,420 $ 4,277
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CRAMER, INC.
STATEMENTS OF OPERATIONS
UNAUDITED
(Amounts in Thousands, Except Per Share Data)
QUARTER ENDED SIX MONTHS ENDED
7/1/01 7/2/00 7/1/01 7/2/00
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NET SALES $ 2,519 $ 3,299 $ 5,817 $ 6,782
COST OF SALES 1,888 2,389 4,381 4,918
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Gross profit 631 910 1,436 1,864
OPERATING EXPENSES:
Selling expenses 497 745 1,021 1,421
General and administrative 341 317 638 631
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Total operating expenses 838 1,062 1,659 2,052
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Loss from operations (207) (152) (223) (188)
OTHER INCOME (EXPENSE):
Interest expense, net (45) (56) (99) (101)
Other, net (74) (27) (121) (29)
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Total other income (expense) (119) (83) (220) (130)
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LOSS BEFORE INCOME TAXES (326) (235) (443) (318)
INCOME TAX EXPENSE (BENEFIT) 0 0 0 0
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NET LOSS $ (326) $ (235) $ (443) $ (318)
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Net loss per share based on weighted
average number of common equivalent
shares outstanding $ (0.08) $ (0.06) (0.11) $ (0.08)
Weighted Average Common Equivalent
Shares Outstanding Basic 4,041,400 4,051,400 4,041,400 4,051,400
Diluted 4,041,400 4,051,400 4,041,400 4,051,400
These interim financial statements contain all adjustments required for them to
be comparable to the annual financial statements issued on Form 10KSB.
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CRAMER, INC.
STATEMENTS OF CASH FLOWS
UNAUDITED
(AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED
7/1/01 7/2/00
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(443) $(318)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 106 141
Changes in operating assets and liabilities:
Accounts receivable 385 (209)
Inventories 451 (172)
Prepaid expenses (57) (32)
Accounts payable and accrued expenses (223) 298
Other non-current liabilities (29) (90)
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Net cash provided by (used by) operating activities 190 (382)
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Cash flows from investing activities:
Capital expenditures (28) (227)
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Cash flows from financing activities:
Net cash provided (used) by financing activities (162) 560
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Net increase (decrease) in cash 0 (49)
Cash at beginning of year 49
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Cash at end of quarter $ 0 $ 0
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Supplemental disclosures:
Cash paid during the period for:
Interest $ 99 $ 101
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Income tax $ 0 $ 0
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
A. FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, this report on
Form 10-QSB contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially
from the forward looking statements. In connection with the "safe
harbor" provisions of the Private Securities Litigation Reform Act of
1995, Cramer, Inc. reminds readers that there are many important
factors that could cause the Company's actual results to differ
materially from those projected in forward-looking statements of the
Company made by, or on behalf of, the Company. When used in this Form
10-QSB and in other filings by the Company with the Securities and
Exchange Commission, in the Company's press releases and in oral
statements made with the approval of an authorized executive officer,
words or phrases such as "will likely result", "expects", "are expected
to", "will continue", "is anticipated", "estimate", "project" or
similar expressions are intended to identify forward-looking
statements. The Company wishes to caution readers not to place undue
reliance on such forward-looking statements.
There are a number of reasons why investors should not place undue
reliance on forward-looking statements. Among the risks and
uncertainties that could cause the Company's actual results for future
periods to differ materially from any forward-looking statements made
are the following:
- Fluctuations or reductions in product demand and market
acceptance
- The level of product development by the Company
- Capacity and supply constraints or difficulties
- The results of financing efforts
- The effect of new laws and regulations
- Unexpected additional expenses or operating losses
- Competition
- The Company's reliance on certain vendors for key components.
- The potential inability of the Company's new marketing channels
to generate sufficient sales to cover sales, marketing and
introduction costs
The foregoing list of risks and uncertainties is not meant to be
complete. For an additional discussion of risks that may impact the
Company's future operations, please review the company's Annual Report
on Form 10-KSB for the fiscal year ended December 31, 2000.
B. SUMMARY OF OPERATIONS
At $5,817,000, net sales in the first half of 2001 were $965,000 less
than in the first half of 2000. Management attributes the company's
decline in sales to an overall softening in the market for its
products, as well as a strategic discontinuance of unprofitable product
lines.
Selling, and general & administrative expenses during the first half of
2001
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decreased by $393,000 as compared to the same period in 2000. The
decrease reflects management's efforts to reduce the Company's
expenses.
Primarily as a result of the decrease in sales, the Company experienced
a $223,000 operating loss in the first half of 2001. This is an
increase of $35,000 as compared to the net operating loss incurred in
the same period in 2000.
Net sales for the second quarter of 2001 were $2,519,000, $780,000
lower than the comparable quarter of 2000.
C. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's trade accounts receivable decreased by $385,000 from
December 31, 2000 to July 1, 2001. The decrease is partially due to the
decline in sales, as well as enhanced collection efforts.
Inventories decreased by $451,000 during the first half of 2001. The
difference represents less purchasing activity in conjunction with the
decline in sales.
Capital expenditures aggregated $28,000 during the first half of 2001,
compared to $227,000 over the comparable period in 2000.
The Company's accounts payable decreased by $335,000 from the December
31, 2000 balance.
The Company's notes payable decreased by $157,000 during the first half
of 2001, compared to an increase of $560,000 over the same period of
2000. The Company continues to participate in a consolidated cash
management and credit facility with its parent, Rotherwood. (See
discussion in Note 3 to the Financial Statements in the Company's 2000
Form 10KSB.) The credit facility is subject to renewal in August of
2001. Events during the past three months have decreased the certainty
that the facility will be renewed by the current lender. In the first
place, the Company has continued to operate at a loss and remains in
violation of its financial net worth covenant under the loan. In the
second, the parent, Rotherwood Ventures LLC, which has historically
provided a $2 million letter of credit as collateral enhancement for
the Company's working capital line of credit, has now informed the
Company that it my not consent to renew the letter of credit on a
permanent basis. Additionally, the lending parameters offered by the
current lender, or through replacement financing, may not offer
sufficient liquidity to allow the Company to continue current
operations. These events increase the probability that the lender will
not renew the loan and the probability that the Company may not remain
viable as a going concern.
PART II. OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
The Company is a defendant in several lawsuits relating to product
liability claims arising from accidents allegedly occurring in
connection with the use of its products. The claims are covered by
insurance and are being defended by the Company's independent counsel,
or by counsel assigned by the insurance carriers, but are subject to
deductibles ranging from $0 to $100,000. A number of the claimants
allege substantial damages. While management believes the Company has
substantial defenses with respect to the claims, the ultimate outcome
of such litigation cannot be predicted with certainty. The Company has
reasonably estimated and accrued in its financial statements its
portion of the deductible as a product liability contingency. Such
claims are an ordinary aspect of the Company's business.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 7, 2001, the Company held its Annual Shareholders
Meeting. The Company's sharholders approved, pursuant to the Proxy
Statement, the appointment of Directors and new Auditors for fiscal
2001.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
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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.
CRAMER, INC.
(Registrant)
Date: 8/21/01 /s/ Greg Coward
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Greg Coward
President
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