x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2002

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  __________________  to  __________________

Commission File Number 1-9511

DELAWARE

94-2490990

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

350 Woodview Avenue, Morgan Hill, California

95037

(Address of principal executive offices)

(Zip Code)

(408) 782-6686

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed, since last year)

YES

x

NO

o

September 30,
2002

December 31,
2001

(unaudited)

ASSETS

CURRENT ASSETS

Cash

$

1,225

$

1,001

Accounts receivable – net of allowances of $1,277 and $971, respectively

13,165

12,760

Inventories

34,360

32,356

Other current assets

1,595

1,980

Total current assets

50,345

48,097

PROPERTY, PLANT, AND EQUIPMENT—NET

2,595

2,137

OTHER ASSETS

8,429

10,002

$

61,369

$

60,236

LIABILITIES

CURRENT LIABILITIES

Current maturities of long-term obligations

$

59

$

26

Accounts payable – trade

7,524

10,603

Other current liabilities

2,063

2,241

Total current liabilities

9,646

12,870

LONG-TERM OBLIGATIONS

Secured note payable to bank

24,182

21,785

Other long-term liabilities

359

206

24,541

21,991

STOCKHOLDERS’ EQUITY

Preferred stock, $.001 par value: 5,000,000 shares authorized: none issued or outstanding:

—  

—  

Common stock, $.001 par value: 20,000,000 shares authorized; 4,390,864 and 4,366,880
   issued and outstanding, respectively

16,837

16,823

Accumulated comprehensive loss

(955

)

(968

)

Retained earnings

11,300

9,520

27,182

25,375

$

61,369

$

60,236

Three Months Ended
September 30,

Nine Months Ended
September 30,

2002

2001

2002

2001

Net sales

$

39,514

$

35,886

$

122,596

$

114,014

Cost of sales, including distribution costs

32,901

31,484

101,777

97,453

Gross profit

6,613

4,402

20,819

16,561

Selling, general and administrative expenses

5,604

5,705

16,485

17,640

Operating income (loss)

1,009

(1,303

)

4,334

(1,079

)

Other income (expense)

Interest

(328

)

(542

)

(1,121

)

(1,915

)

Other

—  

1,296

(10

)

1,344

(328

)

754

(1,131

)

(571

)

Income (loss) before income taxes

681

(549

)

3,203

(1,650

)

Income tax provision (benefit)

229

(95

)

1,423

(413

)

NET INCOME (LOSS)

$

452

$

(454

)

$

1,780

$

(1,237

)

Net income (loss) per share:

Basic

$

0.10

$

(0.10

)

$

0.41

$

(0.28

)

Diluted

$

0.10

$

(0.10

)

$

0.40

$

(0.28

)

Shares used in computing net income (loss) per share:

Basic

4,390,864

4,366,880

4,385,681

4,357,964

Diluted

4,507,431

4,366,880

4,478,856

4,357,964

2002

2001

Cash flows from operating activities:

Net income (loss)

$

1,780

$

(1,237

)

Adjustments to reconcile net earnings (loss) to net cash used in operating activities:

Depreciation and amortization

619

975

Gain on sale of property and equipment

—  

(1,163

)

Changes in assets and liabilities:

Increase in accounts receivable

(405

)

(1,548

)

Decrease (increase) in inventories

(2,004

)

2,449

Decrease (increase) in prepaids and other current assets

385

(89

)

Increase (decrease) in accounts payable

(3,079

)

1,389

Decrease in other current liabilities

(145

)

(188

)

Total adjustments

(4,629

)

1,825

Net cash provided by (used in) operating activities

(2,849

)

588

Cash flows from investing activities:

Proceeds from sale of property and equipment

—  

2,688

Capital expenditures

(1,056

)

(366

)

Decrease in other assets

1,552

610

Net cash provided by investing activities

496

2,932

Cash flows from financing activities:

Net borrowings (repayments) under line-of-credit agreement

2,397

(1,892

)

Net borrowings (repayments) of other long-term debt

153

(1,214

)

Issuance of common stock pursuant to employee stock option and purchase plans

14

23

Redemption of redeemable preferred stock of subsidiary

—  

(48

)

Net cash provided by (used in) financing activities

2,564

(3,131

)

Effect of exchange rate changes on cash

13

(254

)

NET INCREASE IN CASH

224

135

Cash beginning of period

1,001

539

Cash end of period

$

1,225

$

674

1.

The accompanying condensed consolidated interim financial statements have been prepared in accordance with accounting principles and SEC rules applicable to interim financial information.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements.  In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments and accruals) necessary for a fair presentation of the Company’s financial position as of September 30, 2002 and the results of its operations and cash flows for the three and nine months ended September 30, 2002 and 2001.  The accounting policies followed by the Company are set forth in Note A to the Company’s financial statements in its Annual Report on Form 10-K for its fiscal year ended December 31, 2001.

2.

The Company’s business is seasonal and its results of operations for the three and nine months ended September 30, 2002 and 2001 are not necessarily indicative of the results to be expected for the full year ending December 31, 2002.  See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Seasonality and Inflation” in Item 2 of Part I of this Report.

3.

Basic earnings per share are computed using the weighted average number of common shares outstanding during the period.  Diluted earnings per share are computed using the weighted average number of common and potentially dilutive securities outstanding during the period.  Potentially dilutive securities consist of the incremental common shares issuable upon the exercise of stock options (using the treasury stock method).  Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.  For the three and nine month periods ended September 30, 2002, a total of 430,500 common shares issuable on exercise of stock options were excluded from the computation of diluted earnings per share because their exercise prices were greater than the average market price of the Company’s common stock during these periods.  For the three and nine month periods ended September 30, 2001, a total of 751,500 common shares issuable on exercise of stock options were excluded from the computation of diluted earnings per share as their inclusion would have been anti-dilutive due to the net losses incurred in those periods.

Numerator:

Net income (loss)

$

452

$

(454

)

$

1,780