UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 28, 1996
---------------
PRAEGITZER INDUSTRIES, INC.
State of Oregon 34-027932 93-0790158
- --------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File No.) Identification No.)
1270 S.E. Monmouth Cut-Off Road, Dallas, Oregon 97338-9532
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(503) 623-9273
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name and former address and former fiscal year,
if changed since last report)
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<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Pages 4 through 12 of this Form 8-K/A contain the audited financial
statements of Trend Circuits, Inc. for the two years ended December 31, 1995.
(b) Pro Forma Financial Information.
Pages 13 through 15 of this Form 8-K/A contain unaudited interim financial
statements for the six months ended June 30, 1996 and 1995, and an unaudited
balance sheet of Trend Circuits, Inc. dated as of June 30, 1996. Pages 16
through 18 contain unaudited Pro Forma Combined Statements of Operations for the
Registrant and Trend Circuits, Inc. for the year ended June 30, 1996.
(c) Exhibits.
None
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<PAGE>
Independent Auditor's Report
To the Board of Directors and Stockholders of
Trend Circuits, Inc.
We have audited the accompanying combined balance sheets of Trend Circuits,
Inc. as of December 31, 1995 and 1994, and the related statements of income,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion such financial statements present fairly, in all material
respects, the financial position of Trend Circuits, Inc. as of December 31, 1995
and 1994 and the results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
As discussed in Note 11 to the financial statements, on March 31, 1996, the
Company and certain of its stockholders entered into various agreements with the
Company's controlling stockholder and Chief Executive Officer, including an
agreement to purchase 5,096 shares of common stock from the Company's
controlling stockholder. As also discussed in Note 11, on August 16, 1996, the
Company's stockholders agreed, subject to certain conditions, to merge with
another company.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
August 16, 1996
-3-
<PAGE>
<TABLE>
<CAPTION>
TREND CIRCUITS, INC.
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
- ------------------------------------------------------------------------------------------------------------
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 39,752 $ 43,798
Accounts receivable, less allowance for doubtful accounts 3,300,167 2,064,876
of $45,000
Inventories 626,297 515,038
Prepaid expenses 135,685 150,382
------------ -----------
Total current assets 4,101,901 2,774,094
PROPERTY AND EQUIPMENT - Net 4,043,179 2,967,635
NOTES RECEIVABLE - Related parties 186,703 187,026
OTHER ASSETS 76,104 43,257
DEFERRED INCOME TAXES 54,056 20,509
------------ -----------
TOTAL $ 8,461,943 $ 5,992,521
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 400,000 $ 600,000
Current portion of long-term obligations 3,277,214 522,623
Accounts payable 927,968 729,121
Accrued employee costs 676,981 374,024
Accrued commissions 200,001 138,608
Other accrued expenses 145,304 65,091
Income taxes payable 32,298 10,702
------------ -----------
Total current liabilities 5,659,766 2,440,169
LONG-TERM OBLIGATIONS 907,901 1,446,328
DEFERRED INCOME TAXES 30,385 22,294
STOCKHOLDERS' EQUITY:
Common stock, $10 par value; 10,000 shares authorized; 76,140 70,440
7,614 and 7,044 shares outstanding in 1995 and 1994,
respectively
Additional paid-in capital 575,705 468,905
Retaining earnings 1,212,046 1,544,385
------------ -----------
Total stockholders' equity 1,863,891 2,083,730
------------ -----------
TOTAL $ 8,461,943 $ 5,992,521
============ ===========
</TABLE>
See notes to financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
TREND CIRCUITS, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995 AND 1994
- -------------------------------------------------------------------------------
1995 1994
<S> <C> <C>
NET SALES $ 22,462,072 $ 15,423,103
COST OF GOODS SOLD 14,569,708 10,751,445
------------ ------------
Gross profit 7,892,364 4,671,658
------------ ------------
EXPENSES:
Sales and marketing 2,726,720 2,328,691
General and administrative 2,369,221 1,571,441
Total expenses 5,095,941 3,900,132
------------ ------------
INCOME FROM OPERATIONS 2,796,423 771,526
OTHER EXPENSE - Net 857,620 205,650
============ ============
INCOME BEFORE INCOME TAXES 1,938,803 565,876
PROVISION (CREDIT) FOR STATE INCOME TAXES 22,142 (3,199)
------------ ------------
NET INCOME $ 1,916,661 $ 569,075
============ ============
See notes to financial statements.
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
TREND CIRCUITS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock Additional Total
---------------------------- Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
<S> <C> <C> <C> <C> <C>
BALANCE, January 1, 1994 7,044 $ 70,440 $ 468,905 $ 975,310 $ 1,514,655
Net income 569,075 569,075
---------- --------- --------- ------------- -------------
BALANCE, December 31, 1994 7,044 70,440 468,905 1,544,385 2,083,730
Sale of common stock 570 5,700 106,800 112,500
Net income 1,916,661 1,916,661
Stockholder distributions (2,249,000) (2,249,000)
---------- --------- --------- ------------- -------------
BALANCE, December 31, 1995 7,614 $ 76,140 $ 575,705 $ 1,212,046 $ 1,863,891
========== ========= ========= ============= =============
</TABLE>
See notes to financial statements.
-6-
<PAGE>
<TABLE>
<CAPTION>
TREND CIRCUITS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
- ----------------------------------------------------------------------------------------------------
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,916,661 $ 569,075
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 772,328 752,720
Loss on disposal of equipment 678,147 18,699
Deferred income taxes (25,456) (16,725)
Change in operating assets and liabilities:
Accounts receivable (1,235,291) (597,035)
Inventories (111,259) (37,524)
Prepaid expenses 14,697 33,101
Other assets (32,847) (9,213)
Accounts payable 198,847 16,776
Accrued expenses 444,563 115,953
Income taxes payable 21,596 11,907
------------- -------------
Net cash provided by operating activities 2,641,986 857,734
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in notes receivable 323 (59,273)
Purchase of property and equipment (1,244,033) (369,848)
Proceeds from sale of assets 54 1,250
------------- -------------
Net cash used by investing activities (1,243,656) (427,871)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payment of line of credit (200,000) (535,000)
Repayment of long-term obligations (915,876) (1,138,554)
Proceeds from long-term obligations 1,850,000 1,178,000
Distributions to stockholders (2,249,000) -
Proceeds from sale of stock 112,500 -
------------- -------------
Net cash used by financing activities (1,402,376) (495,554)
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,046) (65,691)
CASH AND CASH EQUIVALENTS:
Beginning of year 43,798 109,489
------------- -------------
End of year $ 39,752 $ 43,798
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Income taxes paid $ 29,360 $ 530
------------- -------------
Interest paid $ 287,769 $ 236,081
------------- -------------
NONCASH ACTIVITIES:
Noncash activities consist of new equipment of $1,282,040 and $501,736
acquired through additional financing during the years ended December 31,
1995 and 1994, respectively.
</TABLE>
See notes to financial statements.
-7-
<PAGE>
TREND CIRCUITS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995 AND 1994
- -------------------------------------------------------------------------------
1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Business - Trend Circuits, Inc. (the Company) manufacturers and sells
prototype electronic printed circuit boards to customers in the electronics
industry. Virtually all of the Company's sales are on credit. The Company's
headquarters are located in Fremont, California.
Estimates and Assumptions - In accordance with generally accepted
accounting principles, the Company's management prepares the financial
statements utilizing certain estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents - Cash and cash equivalents include all highly
liquid investments with original maturities of three months or less.
Concentration of Credit Risk - Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of
trade accounts receivable. The risk is limited due to the fact that the
Company's trade accounts receivable are derived from sales in various
geographic areas to numerous companies varying in size within the
electronic interconnect industry. Additionally, the Company performs
ongoing credit evaluations of its customers' financial condition and
generally does not require collateral, such as letters of credit or
security agreements. Credit losses have consistently been within
management's expectations.
Inventories - Inventories are stated at the lower of cost, using the
first-in, first-out (FIFO) method, or market.
Property and Equipment - Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization
are computed over the Company's estimated useful lives using the
straight-line method as follows:
Furniture and fixtures 10 years
Machinery and equipment 10 years
Computer equipment 7 years
Automobiles 6 years
Leasehold improvements:
Nonbuilding Shorter of lease term or 10 years
Building Shorter of lease term or 20 years
Fair Value of Financial Instruments - Financial instruments consist of
notes payable. The carrying amount of the Company's notes payable
approximates fair market value based on similar rates available to the
Company.
Revenue Recognition - Sales are recognized at the time of product shipment.
Income Taxes - Income taxes are accounted for in accordance with Statement
of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes" which requires an asset and liability approach for financial
accounting and reporting of income taxes.
-8-
<PAGE>
2. INVENTORIES
Inventories at December 31 consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Raw materials $ 369,647 $ 273,433
Work in process 198,188 173,512
Finished goods 58,462 68,093
-------------- --------------
$ 626,297 $ 515,038
============== ==============
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31 consist of:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Machinery and equipment $ 4,614,686 $ 4,457,540
Computers 904,432 736,751
Furniture and fixtures 260,545 215,431
Automobiles 19,903 31,393
Leasehold improvements 2,081,421 1,481,639
Construction in process 335,575 22,951
Tooling 116,205 134,332
------------- -------------
8,332,767 7,080,037
Accumulated depreciation and amortization (4,289,588) (4,112,402)
------------- -------------
$ 4,043,179 $ 2,967,635
============= =============
</TABLE>
4. NOTES RECEIVABLE - RELATED PARTIES
The Company has notes receivable from certain officers who are also
stockholders of the Company. The balance of the principal and accrued
interest on these notes were $183,935 and $2,768, respectively, at December
31, 1995 and $183,935 and $3,091, respectively, at December 31, 1994.
Principal and accrued interest on these notes become due in 1998 and 1999
(see the fifth paragraph of Note 11). The interest rate is 6% per annum for
all notes.
5. FINANCING ARRANGEMENTS
The Company has a line of credit agreement with a bank, which may be
terminated by either party with a 30-day notice to the other party. The
agreement provides for borrowings of up to the lesser of $3,000,000 or 80%
of eligible trade accounts receivable and 80% of inventory balances.
Borrowings bear interest at the bank's prime lending rate (8.5% at December
31, 1995) plus 1.25%. The line of credit is collateralized by receivables,
inventory, equipment and deposits. The agreement requires, among other
things, that the Company satisfy certain financial covenants for
maintaining minimum levels of profit, working capital and tangible net
worth. The Company was not in compliance with certain of these covenants at
December 31, 1995 and, therefore, the bank has the right to demand payment
at any time of all amounts outstanding on the line of credit.
-9-
<PAGE>
6. LONG-TERM OBLIGATIONS
Long-term obligations consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Notes payable to bank $ 2,393,337 $ 831,300
Notes payable to other financing companies 501,612 532,936
Capital lease obligations (see Note 8) 1,290,166 604,715
------------ -----------
4,185,115 1,968,952
Current portion (3,277,214) (522,623)
------------- -----------
Long-term portion $ 907,901 $ 1,446,328
============ ===========
</TABLE>
The Company has entered into certain financing arrangements including
equipment term notes and capital lease obligations with various lenders
with terms expiring through 1999. These arrangements bear interest ranging
from 8.67% to 23%. Principal and interest or lease payments are due
quarterly or monthly. Each financing arrangement is collateralized by the
applicable underlying equipment purchased by the Company. Certain of these
financing arrangements require, among other things, that the Company
satisfy certain financial covenants for maintaining minimum levels of
profit, working capital and tangible net worth. At December 31, 1995, the
Company was not in compliance with these covenants. As a result, all notes
payable have been classified as a current obligation in the amount of
$2,894,949.
7. PROFIT-SHARING PLAN
The Company has a qualified profit-sharing plan with a 401(k) deferred
compensation provision for all eligible employees of the Company. The
Company contributed for 1995, on the 401(k) portion of the plan, 25% of
amounts contributed by employees not to exceed 4% of each eligible
employee's wages, and a discretionary profit-sharing contribution as
determined by the Company's Board of Directors. The Company contributions
charged to operations for the plan amounted to $45,710 for 1995. No
contribution was made for 1994.
8. INCOME TAXES
The Company has elected S corporation status for federal income tax
purposes. Accordingly, the stockholders are responsible for reporting their
pro rata share of the Company's federal taxable income or loss on their
individual tax returns.
The Company's state income tax provision credit consists of:
1995 1994
Current $ 47,598 $ 13,526
Deferred (25,456) (16,725)
---------- ----------
$ 22,142 $ (3,199)
========= =========
Deferred tax assets at December 31, 1995 and 1994 primarily result from
accruals and reserves not yet recognized for tax return purposes and
accumulated Manufacturer's Investment Credit of $44,512 available to offset
California taxes. This credit will expire in 2005.
-10-
<PAGE>
9. LEASES
Equipment with a cost and accumulated amortization of $1,371,187 and
$696,291 at December 31, 1995 and $1,418,943 and $995,784 at December 31,
1994 has been leased under capital leases. In addition, the Company rents
office and warehouse facilities under operating lease agreements which
expire through 1999.
Future minimum annual capital and operating lease payments at December 31,
1995 are as follows:
<TABLE>
<CAPTION>
Fiscal Year Operating Leases Capital Leases
<S> <C> <C>
1996 $ 640,588 $ 463,288
1997 583,574 400,765
1998 587,696 242,252
1999 317,731 202,708
2000 -- 140,147
---------- ---------
Total minimum lease payments $2,129,589 1,449,160
Amount representing interest ========== (158,994)
-----------
Present value of minimum lease payments 1,290,166
Current portion (382,265)
Long-term portion $ 907,901
==========
</TABLE>
Rent expense for office and warehouse facilities and equipment rentals was
approximately $724,757 and $692,995 for the years ended December 31, 1995
and 1994, respectively.
10. MAJOR CUSTOMER
The Company had one customer representing 14% of the total sales for the
fiscal year ended December 31, 1995. During the fiscal year ended December
31, 1994, there were no customers representing over 10% of sales.
11. SUBSEQUENT EVENTS
On March 31, 1996, the Company's controlling stockholder and CEO retired
from the Company and simultaneously sold all of his common stock to the
Company and its officers in exchange for $2,229,695 in nonrecourse notes of
which $1,752,340 is payable by the Company and $477,355 is payable by the
officers. The notes bear interest at 10% per annum and are payable over
four years (interest only for the first year and one-twelfth of the
principal plus accrued interest each quarter thereafter). In the event of a
change in control as a result of a merger, liquidation, etc., the notes
become immediately due and payable. Of the 5,096 shares sold, the Company
reacquired and retired 4,005 shares. Additionally, the Company agreed with
its officers to pay the principal and interest on the notes issued by the
officers as the amounts become due in the form of a bonus totaling
approximately $950,000 which includes an amount for the related estimated
income taxes payable by the officers. Consequently, this obligation is to
be recorded by the Company in 1996, with the related deferred compensation
recorded as a reduction to stockholders' equity.
Also on March 31, 1996, as part of the above agreement, the Company and the
former CEO entered into agreements for the former CEO to (1) provide
consulting services until December 31, 1997 for $288,000 payable over seven
quarters, (2) receive bonuses totaling $580,137 for past services, (3) not
compete with the Company for a period of four years for $200,000 payable in
installments through 1999 and (4) receive health and life insurance paid
for by the Company. Pursuant to these agreements,
-11-
<PAGE>
in the event of a change in control as a result of a merger, liquidation,
etc., the amounts specified in (1) through (3) above under these agreements
become immediately due and payable.
The following condensed pro forma financial information reflects the above
transactions had these agreements been entered into on December 31, 1995:
<TABLE>
<CAPTION>
As Reported Pro Forma
<S> <C> <C>
As of December 31, 1995
Total current assets $4,101,901 $ 4,101,901
Total assets 8,461,943 8,661,943
Total liabilities 6,598,052 10,080,529
Total stockholders' equity (deficit) 1,863,891 (1,418,586)
Year ended December 31, 1995:
Operating expenses $5,095,941 $5,676,078
Net income 1,916,661 1,336,524
</TABLE>
On July 24, 1996, the Company committed to purchase approximately seven
acres of land in Fremont, California for a purchase price of $2,700,000
from an individual (the "Seller") and made a nonrefundable deposit of
$250,000. The closing date for the land purchase is expected to be in
September 1996. The purchase is contingent upon the Company being acquired
by Praegitzer Industries (see below). In the event the company is not
acquired by Praegitzer Industries, the Company is obligated to purchase a
25,000 square foot building to be constructed by the Seller.
On August 15, 1996, the Company's stockholders agreed to issue a cash bonus
to certain officers of approximately $190,231. The bonus is contingent upon
the sale of the Company to Praegitzer Industries (see below) and will be
used by the officers to pay off the amount of notes receivables due from
such officers (see Note 4) along with the estimated income taxes related to
the bonus.
On August 16, 1996, the Company and its stockholders entered into an
agreement to sell their ownership interest in the Company to Praegitzer
Industries, an entity also in the printed circuit board industry. The sale
is subject to the satisfaction of certain closing conditions and is
expected to close on August 26, 1996. The estimated sales price is one
million shares of Praegitzer Industries stock and $5 million in cash. Upon
the closing, all amounts to be paid to the former CEO as discussed above
become immediately payable.
-12-
<PAGE>
<TABLE>
<CAPTION>
TREND CIRCUITS, INC.
BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------
(Unaudited)
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 0 $ 39,752
Accounts receivable, less allowance for doubtful
accounts of $45,000 3,838,400 3,300,167
Inventories 853,460 626,297
Prepaid expenses 293,621 135,685
------------- ------------
Total current assets 4,985,481 4,101,901
PROPERTY AND EQUIPMENT - Net 4,984,974 4,043,179
NOTES RECEIVABLE - Related parties 138,703 186,703
OTHER ASSETS 286,757 76,104
DEFERRED INCOME TAXES 0 54,056
------------- ------------
TOTAL $ 10,395,915 $ 8,461,943
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 550,000 $ 400,000
Current portion of long-term obligations 4,490,308 3,277,214
Bank Overdraft 158,471 0
Accounts payable 1,123,172 927,968
Accrued employee costs 977,643 676,981
Accrued commissions 269,635 200,001
Other accrued expenses 179,703 145,304
Income taxes payable 55,934 32,298
------------- ------------
Total current liabilities 7,804,866 5,659,766
LONG-TERM OBLIGATIONS 1,481,028 907,901
DEFERRED INCOME TAXES 0 30,385
STOCKHOLDERS' EQUITY:
Common stock, $10 par value; 10,000 shares authorized;
3,609 and 7,614 shares outstanding in 1996 and 1995, 36,090 76,140
respectively
Additional paid-in capital 337,368 575,705
Retained earnings 736,563 1,212,046
------------- ------------
Total stockholders' equity 1,073,931 1,863,891
------------- ------------
TOTAL $ 10,395,915 $ 8,461,943
============= ============
</TABLE>
See notes to financial statements.
-13-
<PAGE>
<TABLE>
<CAPTION>
TREND CIRCUITS, INC.
STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
- -------------------------------------------------------------------------------
(Unaudited)
1996 1995
<S> <C> <C>
NET SALES $ 14,917,579 $ 9,689,037
COST OF GOODS SOLD 9,092,799 6,330,935
------------ ------------
Gross profit 5,824,780 3,358,102
------------ ------------
EXPENSES:
Sales and marketing 1,683,159 1,326,233
General and administrative 2,322,096 1,016,834
Total expenses 4,005,255 2,343,067
------------ ------------
INCOME FROM OPERATIONS 1,819,525 1,015,036
OTHER EXPENSE - Net 235,032 117,292
============ ============
INCOME BEFORE INCOME TAXES 1,584,493 897,744
PROVISION (CREDIT) FOR STATE INCOME TAXES 586,021 50,150
------------ ------------
NET INCOME $ 998,471 $ 847,594
============ ============
See notes to financial statements.
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
TREND CIRCUITS, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
- ------------------------------------------------------------------------------------------------
(Unaudited)
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 998,471 $ 847,594
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 416,156 370,906
Loss on disposal of equipment 3,714
Deferred income taxes 23,671
Change in operating assets and liabilities:
Accounts receivable (538,233) (264,133)
Inventories (227,163) (298,482)
Prepaid expenses (157,936) (44,817)
Other assets (210,653) (341,275)
Accounts payable 195,204 227,276
Accrued expenses 404,695 (231,283)
Income taxes payable 23,636 32,186
------------ -----------
Net cash provided by operating activities 931,562 297,972
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (increase) in notes receivable 48,000 0
Purchase of property and equipment (1,361,665) (376,764)
------------ -----------
Net cash used by investing activities (1,313,665) (376,764)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payment of line of credit 158,471 0
Net borrowings of line of credit 150,000 15,000
Repayment of long-term obligations (1,195,715) (322,442)
Proceeds from long-term obligations 1,229,595 500,000
Distributions to stockholders 0 (115,000)
------------ -----------
Net cash used by financing activities 342,351 77,558
------------ -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (39,752) (1,234)
CASH AND CASH EQUIVALENTS:
Beginning of year 39,752 43,798
------------ -----------
End of year $ 0 $ 42,563
------------ -----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Income taxes paid $ 61,782 $ 50,150
------------ -----------
Interest paid $ 255,953 $ 132,109
------------ -----------
NONCASH ACTIVITIES:
During the six months ended June 30, 1996, the Company reacquired and
retired 4,005 shares of common stock in exchange for $1,752,340 in
nonrecourse notes payable.
</TABLE>
See notes to financial statements.
-15-
<PAGE>
PRAEGITZER INDUSTRIES, INC.
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
(Unaudited)
Effective August 26, 1996, Praegitzer Industries, Inc. ("Praegitzer") acquired
Trend Circuits, Inc. ("Trend"), a printed circuit board manufacturer with
production facilities in Fremont, California. The acquisition was accomplished
by a merger of Trend with and into Praegitzer. The acquisition of Trend has been
accounted for using the purchase method of accounting. The purchase price
consisted of $5.0 million in cash and 1,000,000 shares of Praegitzer common
stock. The unaudited pro forma combined statements of operations reflect the
following: (i) adjustment for the purchase accounting and estimated fair market
value allocation of the assets acquired and the obligations assumed and (ii)
provision for income taxes as if the combined operations had been taxed as a C
corporation for all periods presented. The unaudited pro forma balance sheet was
prepared as if the transaction had occurred on June 30, 1996, and the proforma
statement of operations for the fiscal year ended June 30, 1996 was prepared as
if the transaction had occurred on July 1, 1995.
In the opinion of management of Praegitzer, all adjustments necessary to present
fairly such pro forma financial statements have been made. However, a one-time,
nonrecurring charge of $8.0 million related to a portion of the purchase price
allocated to in-process technology that was expensed at the closing of the
transaction has not been included in the pro forma financial statements. These
unaudited pro forma financial statements are not necessarily indicative of what
actual results would have been had the transaction occurred at the beginning of
the respective period nor do they purport to indicate the results of future
operations of Praegitzer.
(1) Depreciation expense associated with the property and equipment of $1.1
million, the amount by which the fair market value of the assets acquired
exceeded the book value of the assets as reflected on the balance sheet of
Trend, on a straight-line basis over five years.
(2) Amortization associated with the goodwill of $9.0 million, the amount by
which the total consideration for the acquisition exceeded the fair market value
of assets acquired less the one-time, nonrecurring charge of $8.0 million, over
eight years on a straight-line basis.
(3) Income tax expense at the pro forma effective tax rates of Praegitzer for
effects of the adjustments set forth in notes (1) through (2).
(4) Gives effect to 1,000,000 shares valued at $10.65 per share issued by
Praegitzer in connection with the acquisition of Trend.
(5) Amount by which the fair market value of the assets or liabilities differed
from historical cost basis of assets or liabilities as reflected on the balance
sheet of Trend.
(6) Goodwill of $9.0 million less the amortization over eight years on a
straight-line basis.
(7) Elimination of amounts of common stock and retained earnings of Trend
Circuits, Inc.
-16-
<PAGE>
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1996
Pro Forma
Praegitzer Trend Adjustments Pro Forma
Industries Circuits, June 30, June 30,
Inc. Inc. 1996 1996
<S> <C> <C> <C> <C>
Revenue $ 95,101,170 $ 27,690,613 $ - $122,791,783
Cost of goods sold 72,941,213 17,331,572 214,295(1) 90,487,080
------------ ------------ ---------- ------------
Gross profit 22,159,957 10,359,042 (214,295) 32,304,704
General and administrative expense 8,895,548 6,758,129 1,125,000(2) 13,847,826
------------ ------------ ---------- ------------
EARNINGS (LOSS) FROM
OPERATIONS 13,264,409 3,600,912 (1,339,295) 15,526,026
Interest expense 1,798,914 975,361 - 2,774,275
Other income 301,642 - - 301,642
------------ ------------ ---------- ------------
INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES 11,767,137 2,625,551 (1,339,295) 13,053,393
PRO FORMA PROVISION FOR
INCOME TAXES 4,472,000 558,013 (509,000)(3) 4,521,013
------------ ------------ ---------- ------------
PRO FORMA INCOME FROM
CONTINUING OPERATIONS $ 7,295,137 $ 2,067,538 $ (830,295) $ 8,532,390
------------ ------------ ---------- ------------
PRO FORMA INCOME PER SHARE
FROM CONTINUING OPERATIONS $ 0.80 $ 0.84
------------ ------------
PRO FORMA WEIGHTED AVERAGE
SHARES OUTSTANDING 9,110,233 10,110,233
------------ ------------
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
PRAEGITZER INDUSTRIES, INC.
PRO FORMA BALANCE SHEET
YEAR ENDED JUNE 30, 1996
(Unaudited)
Praegitzer Trend Pro Forma
Industries Circuits, Pro Forma June 30,
Inc. Inc. Adjustments 1996
<S> <C> <C> <C> <C>
ASSETS
Cash $ 38,687 $ - $ - $ 38,687
Receivables 13,073,861 3,838,400 (234,077)(5) 16,678,184
Inventories 6,211,755 853,460 106,909 (5) 7,172,124
Prepaid expenses 206,129 293,621 (143,626)(5) 356,124
Current deferred taxes 394,000 - - 394,000
------------ ------------ ------------ ------------
Total current assets 19,924,432 4,985,481 (270,794) 24,639,119
Property, plant, and equipment, net 24,795,705 4,984,974 1,071,475 (5) 30,852,154
Restricted cash 305,956 - - 305,956
Other assets 7,809,968 425,460 (285,339)(5)
9,257,597 (6) 17,207,686
------------ ------------ ------------ ------------
TOTAL ASSETS $ 52,836,061 $ 10,395,915 $ 9,772,939 $ 73,004,915
============ ============ ============ ============
LIABILITIES AND EQUITY
Bank overdraft $ 530,817 $ 158,471 $ - $ 689,288
Taxes payable 943,000 55,934 - 998,934
Accounts payable 5,157,913 1,123,172 250,000 (5) 6,531,085
Accrued payroll and related benefits 1,623,439 977,643 (17,040)(5) 2,584,042
Other current liabilities 55,045 449,338 - 504,383
Current portion of long term obligations 870,874 5,040,308 - 5,911,182
------------ ------------ ------------ ------------
Total current liabilities 9,181,088 7,804,866 232,960 17,218,914
------------ ------------ ------------ ------------
Long term obligations 7,694,590 1,481,028 - 9,175,618
Deferred tax liability 896,000 - - 896,000
Contingencies and commitments 423,450 - - 423,450
Common stock 29,932,049 373,458 10,650,000 (4) 40,582,049
(373,458)(7)
Retained earnings 4,708,884 736,563 (736,563) 4,708,884
------------ ------------ ------------ ------------
Total shareholders' equity 34,640,933 1,110,021 9,539,979 45,290,933
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND EQUITY $ 52,836,061 $ 10,395,915 $ 9,772,939 $ 73,004,915
============ ============ ============ ============
</TABLE>
-18-
<PAGE>
Signature
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.
September 12, 1997
PRAEGITZER INDUSTRIES, INC.
By /s/ MATTHEW J. BERGERON
--------------------------------------
Matthew J. Bergeron
Chief Operating Officer, Executive
Vice President and Director
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