1
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 9-45123
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C.P. CLARE CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2561471
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
430 BEDFORD STREET
LEXINGTON, MASSACHUSETTS 02173
(Address of principal executive offices) (Zip Code)
(617) 863-8700
(Registrant's telephone number, including area code)
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 latest practicable date.
As of September 29, 1996, there were 9,068,301 shares of Common Stock,
$.01 par value, outstanding.
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C.P. CLARE CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION: PAGE
----
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 1
Consolidated Condensed Statements of Operations 2
Consolidated Condensed Statements of Cash Flows 3
Notes to Consolidated Condensed Financial Statements 4 - 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7 - 10
PART II OTHER INFORMATION:
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Default Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
3
CP CLARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
SEPTEMBER 29, 1996 MARCH 31, 1996
------------------ --------------
ASSETS
Current assets:
Cash, cash equivalents and investments (Note 4) $ 43,616 $ 49,082
Accounts receivable, less allowance for doubtful accounts 17,161 19,471
Inventories (Note 5) 21,048 16,972
Other current assets 3,731 2,938
-------- --------
Total current assets 85,556 88,463
Property, plant and equipment, net 30,658 24,232
Other assets 2,649 4,001
-------- --------
$118,863 $116,696
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 64 $ 1,340
Current portion of long-term debt 1,175 851
Accounts payable 9,233 7,929
Accrued expenses (Note 6) 22,667 12,306
-------- --------
Total current liabilities 33,139 22,426
Long-term debt, net of current portion 3,236 4,034
Other long-term liabilities 3,688 3,624
-------- --------
Total liabilities 40,063 30,084
Stockholders' equity:
Preferred stock, $ .01 par value-
Authorized: 2,500,000 shares
Issued and outstanding: None -- --
Common stock, $ .01 par value-
Authorized 40,000,000 shares
Issued and outstanding: 9,068,301 shares and 8,707,399 shares
as of September 29, 1996 and March 31, 1996, respectively 90 87
Additional paid-in capital 93,370 91,540
Deferred compensation (512) (607)
Accumulated deficit (14,438) (4,791)
Cumulative translation adjustment 290 383
-------- --------
Total stockholders' equity 78,800 86,612
-------- --------
$118,863 $116,696
======== ========
The accompanying notes are an integral part of these consolidated condensed
financial statements
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4
CP CLARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
SEPT. 29, 1996 OCT. 1, 1995 SEPT. 29, 1996 OCT. 1, 1995
-------------- ------------ -------------- ------------
Net sales $ 30,019 $ 31,900 $ 64,057 $ 61,886
Cost of sales 19,796 21,888 42,210 42,603
---------- ---------- ---------- ----------
Gross profit 10,223 10,012 21,847 19,283
Operating expenses:
Selling, general and administrative (Note 8) 7,929 5,848 14,236 11,435
Research and development 1,633 1,013 2,971 1,876
Restructuring costs (Note 7) 14,750 -- 14,750 --
---------- ---------- ---------- ----------
Operating (loss) income (14,089) 3,151 (10,110) 5,972
Interest income 368 277 901 313
Interest expense (117) (144) (236) (989)
Other expense, net (47) (174) (148) (299)
---------- ---------- ---------- ----------
(Loss) income before income taxes (13,885) 3,110 (9,593) 4,997
Benefit (provision) for income taxes 1,446 (1,272) (54) (2,049)
---------- ---------- ---------- ----------
Net (loss) income $ (12,439) $ 1,838 $ (9,647) $ 2,948
========== ========== ========== ==========
Net (loss) income per common and common
share equivalent (Note 3) $ (1.39) $ 0.23 $ (1.09) $ 0.42
========== ========== ========== ==========
Weighted average number of common shares and
common share equivalents outstanding (Note 3) 8,941,473 7,851,878 8,886,909 7,060,697
========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated condensed
financial statements
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5
C.P. CLARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
FOR THE SIX MONTHS ENDED
---------------------------
SEPT. 29, 1996 OCT. 1,1995
-------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (9,647) $ 2,948
Adjustments to reconcile net (loss) income to net cash provided by
(used in) operating activities:
Asset writedown included in restructuring charge 3,500 --
Provision for environmental remediation costs 1,250 --
Depreciation and amortization 2,167 2,494
Gain on sale of property, plant and equipment -- (55)
Benefit from deferred income taxes (37) (307)
Compensation expense associated with stock options 95 172
Changes in assets and liabilities:
Accounts receivable 2,312 (2,658)
Inventories (4,146) (3,067)
Other current assets (1,005) 242
Accounts payable 1,365 (451)
Accrued expenses and other liabilities 9,180 (885)
-------- --------
Net cash provided by (used in) operating activities 5,034 (1,567)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (10,682) (4,639)
Proceeds from sale of property, plant and equipment -- 55
-------- --------
Net cash used in investing activities (10,682) (4,584)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments of lines of credit (1,232) (5,560)
Net proceeds from issuance of common stock 214 34,166
Proceeds from exercise of options and warrants 910 827
Repurchase of warrants -- (3,925)
Payments of principal on long-term debt (364) (11,738)
Tax benefit of disqualifying disposition of incentive stock options 709 --
-------- --------
Net cash provided by financing activities 237 13,770
-------- --------
EFFECT OF EXCHANGE RATES ON CASH, CASH EQUIVALENTS
AND INVESTMENTS (55) 242
-------- --------
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND
INVESTMENTS (5,466) 7,861
Cash, cash equivalents and investments, beginning of period 49,082 1,181
-------- --------
Cash, cash equivalents and investments, end of period $ 43,616 $ 9,042
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 36 $ 703
======== ========
Income taxes $ 1,840 $ 1,494
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS:
Deferred compensation associated with issuance of stock options $ -- $ 651
======== ========
The accompanying notes are an integral part of these consolidated condensed
financial statements
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6
C.P. CLARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 29, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
(UNAUDITED)
1. FISCAL PERIODS
--------------
The Company's fiscal year is comprised of either 52 or 53 weeks and ends
on the Sunday closest to March 31 each year. Interim quarters are comprised of
13 weeks unless otherwise noted and end on the Sunday closest to June 30,
September 30, December 31 and March 31.
2. INTERIM FINANCIAL STATEMENTS
----------------------------
The unaudited interim financial statements presented herein have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Regulation S-X
pertaining to interim financial statements. Accordingly, these interim financial
statements do not include all information and footnotes required by generally
accepted accounting principles for complete financial statements. The financial
statements reflect all adjustments and accruals which management considers
necessary for a fair presentation of financial position as of September 29, 1996
and results of operations for the three and six months ended September 29, 1996
and October 1, 1995. The results for the interim periods presented are not
necessarily indicative of results to be expected for any future period. The
financial statements should be read in conjunction with the summary of
significant accounting policies and notes to consolidated financial statements
included in the Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996 as filed with the Securities and Exchange Commission.
3. NET (LOSS) INCOME PER COMMON AND COMMON SHARE EQUIVALENT
--------------------------------------------------------
Net (loss) per common and common share equivalent is computed using the
weighted average number of common shares outstanding during each period. Net
income per common and common share equivalent is computed using the weighted
average number of common shares and dilutive common share equivalents
outstanding during each period. Dilutive common share equivalents consist of
stock options and warrants using the modified treasury stock method. Fully
diluted earnings per share are not presented as the amounts are not materially
different.
4. CASH, CASH EQUIVALENTS AND INVESTMENTS
--------------------------------------
Cash, cash equivalents and investments are carried at cost, which
approximates market. Cash equivalents are short-term, highly liquid investments
with original maturities of less than three months. As of September 29, 1996,
cash, cash equivalents and investments consist principally of overnight and tax
exempt commercial paper and tax exempt variable rate municipal bonds. The
Company has the option to require the issuers of the tax exempt variable rate
municipal bonds to purchase these investments upon 7 days notice. As of October
1, 1995, cash, cash equivalents and investments consisted principally of
overnight commercial paper.
4
7
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
5. INVENTORIES
-----------
Inventories include materials, labor and manufacturing overhead, and are
stated at the lower of cost (first in first out) or market and consist of the
following at September 29, 1996 and March 31, 1996:
SEPTEMBER 29, MARCH 31,
1996 1996
------------- ---------
Raw material $ 9,759 $ 7,675
Work in process 6,310 3,794
Finished goods 4,979 5,503
------- -------
$21,048 $16,972
======= =======
6. ACCRUED EXPENSES
----------------
Accrued Expenses consist of the following at September 29, 1996 and March
31, 1996:
SEPTEMBER 29, MARCH 31,
1996 1996
------------- ---------
Payroll and benefits $ 4,662 $ 5,973
Accrued restructuring costs (Note 7) 11,201 -
Environmental remediation (Note 8) 4,106 2,373
Other 2,698 3,960
------- -------
$22,667 $12,306
======= =======
7. RESTRUCTURING COSTS
-------------------
In September 1996, the Company announced a restructuring of its
operations, primarily in the Company's Reed Relay business, and recorded
restructuring costs of $14,750 in the accompanying statements of operations. The
restructuring includes severance-related costs associated with a workforce
reduction of approximately 250 persons on a worldwide basis, primarily in
manufacturing. Also included in the restructuring is the write-down of certain
facilities and intangible assets to their net realizable value as a result of
facilities realignment and the consolidation of product lines.
The components of the restructuring costs are as follows:
Severance benefits and associated legal cost$ 9,000
Write-down of facilities to net realizable value 2,000
Lease termination and relocation costs 1,600
Write-down of acquired goodwill to net realizable value 1,500
Other 650
-------
Total $14,750
=======
5
8
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
8. COMMITMENTS AND CONTINGENCIES
-----------------------------
Environmental Matters
The Company accrues for estimated costs associated with known
environmental matters, when such costs can be reasonably estimated. The actual
costs to be incurred for environmental remediation may vary from estimates,
given the inherent uncertainties in evaluating and estimating environmental
liabilities, including the possible effects of changing laws and regulations,
the stage of the remediation process and the magnitude of contamination found as
remediation progresses. Management believes the ultimate disposition of known
environmental matters will not have a material adverse effect upon the
liquidity, capital resources, business or consolidated financial position of the
Company. However, one or more environmental matters could have a significant
negative impact on the Company's consolidated financial results for a particular
reporting period.
(i) United States
As of March 31, 1996, the Company had an environmental remediation
liability of $2,373 and receivable from General Instrument of $1,266 related to
the remediation of environmental contamination discovered at a Chicago facility.
In September 1996, an independent environmental consulting firm retained by the
Company completed their reassessment of the remediation requirements, including
specific testing performed on adjacent sites to the property. Based on the
consultant's report and plan of remediation, the Company accrued an additional
$750 for related remediation expenses which are included in Selling, general and
administrative expense. The Company also accrued an additional $700 receivable
related to General Instrument's portion of the remediation expenses.
During the six months ended September 29, 1996, the Company incurred
approximately $136 of remediation costs and related expenses and with the
additional accrual for remediation expenses, the Company has an environmental
remediation liability of $3,606. As of September 29, 1996, General Instrument
incurred approximately $81 of remediation costs during the six months period
then ended and with the additional accrued receivable for remediation expenses,
the receivable from General Instrument is $1,885. Management of the Company,
after consultation with its legal counsel, believes that the realization of this
amount from General Instrument is probable.
(ii) Belgium
The Company retained an independent environmental consulting firm to
assess the environmental condition of its facility located in Tongeren, Belgium.
The scope of their work was to assess potential contamination in light of
newly-adopted Belgium legal requirements and develop a plan to remediate the
property if necessary. Preliminary results show certain groundwater
contamination that may have resulted from the Company's past operations or from
neighboring manufacturing companies. The Company has recorded a liability of
$500 as of September 29, 1996 to cover the estimated cost of this remediation,
however Belgium environmental authorities have the ability to comment on the
remediation plan. These costs are included in Selling, general and
administrative expense.
6
9
C.P. CLARE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth the relative percentage that certain income
and expense items bear to net sales for the periods indicated:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------ -------------------------
SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, OCTOBER 1,
1996 1995 1996 1995
------------- ---------- ------------- ----------
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 65.9 68.6 65.9 68.8
----- ----- ----- -----
Gross profit 34.1 31.4 34.1 31.2
Operating expenses:
Selling, general and administrative 26.4 18.3 22.3 18.5
Research and development 5.4 3.2 4.6 3.0
Restructuring costs 49.1 - 23.0
----- ----- ----- -----
Operating (loss) income (46.8) 9.9 (15.8) 9.7
Interest income 1.2 0.9 1.4 0.5
Interest expense (0.4) (0.5) (0.4) (1.6)
Other expenses, net (0.2) (0.5) (0.2) (0.5)
----- ----- ----- -----
(Loss) income before income taxes (46.2) 9.8 (15.0) 8.1
Benefit (provision) for income taxes 4.8 (4.0) (0.1) (3.3)
----- ----- ----- -----
Net (loss) income (41.4)% 5.8 % (15.1)% 4.8 %
===== ===== ===== =====
Net Sales. Net sales increased 3.5% for the six months ended September 29,
1996 to $64.1 million from $61.9 million for the six months ended October 1,
1995. The increase was primarily attributable to higher unit sales volume of
semiconductor products due to greater demand for these products and increased
advanced magnetic products business sales. The increase in net sales was offset
by decreased sales of the Company's reed relays and switches.
Net sales decreased 5.9% in the second quarter of fiscal 1997 to $30.0
million from $31.9 million for the same period in fiscal 1996. The decrease was
attributable to decreased sales of the Company's reed relays and switches. The
decrease was partially offset by the higher unit sales volume of semiconductor
products.
7
10
Net sales by major product category were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
------------------------- ------------------------
SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, OCTOBER 1,
1996 1995 1996 1995
--------------------------------------------------
(IN MILLIONS)
Semiconductor products $14.7 $10.6 $30.5 $20.4
Electromagnetic and other products 15.3 21.3 33.6 41.5
Net sales to customers located outside the United States (primarily Europe
and Asia) for the six months ended September 29, 1996 decreased 0.4% to $24.8
million from $24.9 million for the six months ended October 1, 1995. Net sales
to customers located outside the United States decreased 6.9% in the second
quarter of fiscal 1997 to $11.2 million from $12.0 million in the second quarter
of fiscal 1996. The decreases for the quarter and year to date periods are
primarily due to lower sales in Europe, which was attributed to the Company's
reed relays and switches. These lower sales were partially offset by increased
sales in Asia, as the Company continues to focus on new markets and expansion of
certain existing international markets.
Gross Profit. The Company's gross profit as a percentage of sales
increased to 34.1% for the six months ended September 29, 1996 from 31.2% for
the six months ended October 1, 1995. The Company's gross profit as a percentage
of net sales improved to 34.1% on the second quarter of fiscal 1997 from 31.4%
in the same period in fiscal 1996. The increase in gross profit was primarily
attributable to a more favorable product mix, which included increased sales in
the Company's higher margin semiconductor products. The increase was partially
offset by the higher sales volume of the lower margin advanced magnetic
products.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased to $14.2 million for the six months ended
September 29, 1996 from $11.4 million for the six months ended October 1, 1995
and as a percentage of sales increased to 22.3% from 18.5%, respectively. These
expenses increased in the second quarter of fiscal 1997 to $7.9 million from
$5.8 million in the same period of fiscal 1996 and as a percentage of net sales
were 26.4% for the second quarter of fiscal 1997 as compared with 18.3% for the
same period of fiscal 1996. The largest single component of the dollar and
percentage increases was the result of the $1.3 million of environmental costs
charged during the second quarter of fiscal 1997. See Note 8 to the Notes to
Consolidated Condensed Financial Statements.
Excluding this environmental cost, selling, general and administrative
expense would have increased to $12.9 million for the six months ended September
29, 1996 from $11.4 million for the six months ended October 1, 1995 and as a
percentage of sales would have increased to 20.3% from 18.5%, respectively.
These expenses would have increased in the second quarter of fiscal 1997 to $6.7
million from $5.8 million in the same period of fiscal 1996 and as a percentage
of net sales would be 22.2% for the second quarter of fiscal 1997 as compared
with 18.3% for the same period of fiscal 1996. The increased spending primarily
relates to increased staffing, advertising expenditures, costs associated with
additional sales office locations and increased communication costs compared to
fiscal 1996.
Research and Development Expense. Research and development (R&D) expense
increased to $3.0 million for the six months ended September 29, 1996 from $1.9
million for the six months ended October 1, 1995 and as a percentage of sales
increased to 4.6% from 3.0%, respectively. For the second quarter of fiscal 1997
R&D increased to $1.6 million from $1.0 million in the same period of fiscal
1996. These increases are primarily due to increased investment in new product
development programs, specifically in semiconductor products. The Company
expects to maintain its current rate of research and development spending in
fiscal 1997, as current R&D programs are continued, specifically at the
Company's new semiconductor facility in Beverly, MA.
8
11
Restructuring. The Company recorded a non-recurring charge of $14.8
million, or $12.9 million ($1.44 per share) after income taxes to restructure
operations primarily in the Company's reed relay business. Restructuring costs
includes costs for workforce reductions and worldwide facilities realignments.
Workforce reduction costs primarily include severance costs related to
involuntary terminations. Facilities realignment costs are primarily associated
with consolidations of product lines to restructure and streamline the Company's
operations. The restructuring costs also include asset writedowns of $3.5
million.
Cash flows from operations and existing cash, cash equivalent and
investments are expected to fund all restructuring charges. See Notes 6 and 7 to
Notes to Consolidated Condensed Financial Statements.
Interest Income. Interest income increased to $0.9 million for the six
months ended September 29, 1996 from $0.3 million for the six months ended
October 1, 1995 and for the second quarter of 1997 increased to $0.4 million
from $0.3 million in the same period of fiscal 1996. Interest income is related
to the short-term investment of the Company's cash in both commercial paper and
tax exempt variable rate municipal bonds. The increases in fiscal year 1997 are
the result of the investment of the net proceeds from the Company's public
offerings of stock in fiscal year 1996.
Interest Expense. Interest expense decreased to $0.2 million for the six
months ended September 29, 1996 from $1.0 million for the six months ended
October 1, 1995. This decrease is primarily the result of the repayment of the
$7.5 million subordinated notes and the pay down of the Company's outstanding
domestic lines of credit during the first quarter of fiscal 1996. For the second
quarter of both fiscal 1997 and 1996, interest expense was comparable at $0.1
million.
Other Expense. Other expense was a loss of ($0.2) million for the six
months ended September 29, 1996 compared to a loss of $(0.3) million for the six
months ended October 1, 1995 and for the second quarter of 1997 was a loss of
$(0.1) million from a loss of $(0.2) million in the same period of fiscal 1996.
These losses are primarily the result of foreign exchange losses.
Income Taxes. In accordance with generally accepted accounting principles,
the Company has provided for income taxes in fiscal 1997 and 1996 at its
estimated annual effective tax rates. Income tax expense decreased to $0.1
million for the six months ended September 29, 1996 from $2.0 million for the
six months ended October 1, 1995, as a result of recording a benefit of $2.1
million related to the Company's restructuring and environmental costs incurred
during this quarter. The benefit is lower than the yearly effective rate because
the Company anticipates it will not be able to fully utilize the loss
carrryforwards generated as a result of the restructuring.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended September 29, 1996, the Company's cash and
cash equivalents decreased by $5.5 million. Operations provided $5.0 million of
cash during this period. The Company used $10.7 million for capital expenditures
during the six months ended September 29, 1996. Financing activities provided
$0.2 million of cash during the period, primarily due to the proceeds and tax
benefits from exercises of options and warrants, which was offset by the
repayment of short-term borrowings.
The Company believes that cash generated from operations, available cash
and amounts available under its credit agreements will be sufficient to satisfy
its working capital needs, including all restructuring charges and planned
capital expenditures for the next 12 to 24 months. However, there can be no
assurance that events in the future will not require the Company to seek
additional capital sooner or, if so required, that adequate capital will be
available on terms acceptable to the Company.
9
12
Certain Factors Affecting Future Operating Results
The information contained in and incorporated by reference in this Form
10-Q contains forward-looking statements with the meaning of Section 27A of the
Securities Act of 1933, as amended and Section 21E of the Securities Exchange
Act of 1934, as amended. The Company's actual results could differ materially
from those set forth in the forward looking statements. Factors that may affect
future operating results include successful implementation of its proposed
restructuring, the ability to develop and market new products in a timely
fashion, competitive pricing pressures, manufacturing capacity, the continued
growth of the telecommunications industry, the ability to effectively manage
operational changes and uncertainty regarding certain labor situations.
The Company recently announced a restructuring of its operations in order
to reduce operating costs, primarily in its reed relay business operations. The
proposed restructuring involves many of the Company's worldwide operations and
will involve workforce reduction and facility consolidation. The Company
conducts a large part of its manufacturing operations in foreign countries,
including Belgium and Taiwan. In certain of these countries local law imposes an
obligation to make severance payments in connection with workforce reduction.
The recently announced restructuring may lead to workforce reduction and the
related severance costs. The Company's future results are dependent on the
successful implementation of the announced restructuring. Delays in such
implementation or adverse reactions from local labor unions could lead to a work
slowdown, work stoppage or plant occupation that could disrupt product shipments
and would have a material adverse effect on the Company's future operating
results.
To remain competitive, the Company must continue to develop new process and
manufacturing capabilities to meet customer needs and introduce new products
that reduce size and increase performance. If the Company is unable to develop
such new capabilities or is unable to design, develop and introduce competitive
new products, its operating results may be adversely affected. The Company is in
the process of constructing a larger, more advanced semiconductor facility to
address current capacity constraints in the production of its semiconductor
products. The construction of this facility while the existing facility is
operating near full capacity could have an impact on production. In addition,
delays in the delivery of equipment could delay the full operation of the new
facility.
The Company has experienced fluctuation in its operating results in the
past and its operating results may fluctuate in the future. The Company has
increased the scope and geographic area of its operations. This expansion has
resulted in new and increased responsibilities for management personnel and has
placed pressures on the Company's operating systems. The Company's future
success will depend to a large part on its ability to manage these changes and
manage effectively its remote offices and facilities.
10
13
C.P. CLARE CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to routine litigation incident to the conduct of
its business. None of such proceedings is considered material to the business or
the financial condition of the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on September 17, 1996
to, (i) elect Winston R. Hindle, Jr. and Clemente C. Tiampo as the
two Class I directors to serve until the 1999 Annual Meeting of
Stockholders and until their successors are duly elected and
qualified; and (ii) to approve an amendment to the C.P. Clare 1995
Stock Option and Incentive Plan to increase the number of shares
issuable under the Plan by 1,000,000 shares. The following table
sets forth the results of the stockholder votes:
In Favor Withheld
-------- --------
Election of Winston R. Hindle, Jr. 7,562,586 237,511
Election of Clemente C. Tiampo 7,562,586 237,511
In Favor Against Abstained
-------- ------- ---------
Approval of the amendment to
the 1995 Stock Option Plan 4,230,699 3,111,568 46,527
With respect to the approval of the amendment to the 1995 Stock
Option Plan, there were 411,303 broker non-votes.
ITEM 5. OTHER INFORMATION
None
11
14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
EXHIBIT NO. DESCRIPTION
10.59 1995 Stock Option and Incentive Plan, as amended
and restated
11.1 Computation of Net (Loss) Income Per Share.
27.0 Financial Data Schedule (Edgar)
(b) Reports on Form 8-K
The Registrant filed no Current Reports on Form 8-K during the
quarter ended September 29, 1996.
12
15
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.
C.P. CLARE CORPORATION
By: /s/ Jacqueline D. Arthur
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Jacqueline D. Arthur
Vice President and
Chief Financial Officer
Date: October 24, 1996
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