<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 1996 or
/ / 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 0-27744
PCD Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2604950
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2 Technology Drive,
Centennial Park,
Peabody, Massachusetts
(Address of principal executive offices)
01960-7977
(Zip Code)
Registrant's telephone number, including area code: 508-532-8800
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
--- ---
Number of shares of common stock, $0.01 par value, outstanding at November 1,
1996: 5,793,033
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PCD Inc.
FORM 10-Q
FOR THE QUARTER ENDED
SEPTEMBER 28, 1996
Statements in this report concerning the future financial condition,
results of operations and business of the Company are "forward-looking"
statements which are inherently uncertain. Actual performance and results are
subject to many risk factors, including the Company's dependence on the
integrated circuit package industry, the Company's dependence on its principal
customers and independent distributors, fluctuations in demand for the Company's
products, patent litigation involving the Company, rapid technological evolution
in the electronics industry, and the like. These factors are set forth in the
Company's Registration Statement on Form S-1 filed with the Securities and
Exchange Commission.
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The Consolidated Balance Sheets (unaudited) at September 28, 1996 and
December 31, 1995, the Consolidated Statements of Income (unaudited) and the
Consolidated Statements of Cash Flows (unaudited) for the three months ended
September 28, 1996 and September 30, 1995 are presented below. The accompanying
notes are an integral part of the condensed consolidated financial statements.
<PAGE> 3
PCD Inc.
CONSOLIDATED BALANCE SHEETS
(Condensed and unaudited)
(In thousands)
<TABLE>
<CAPTION>
9/28/96 12/31/95
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .......................... $18,125 $ 3,958
Accounts receivable - trade, net ................... 4,011 3,564
Inventory .......................................... 2,338 2,867
Prepaid expenses and other current
assets ............................................. 42 399
------- -------
Total current assets ........................... 24,516 10,788
Equipment and improvements .............................. 10,098 8,680
Accumulated depreciation ................................ 4,804 3,749
------- -------
Equipment and improvements, net ................ 5,294 4,931
Other assets ............................................ 229 210
------- -------
Total assets ................................... $30,039 $15,929
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade ............................ $ 352 $ 686
Accrued liabilities ................................ 2,544 2,431
------- -------
Total current liabilities ...................... 2,896 3,117
Stockholders' equity .................................... 27,143 12,812
------- -------
Total liabilities and
stockholders' equity .......................... $30,039 $15,929
======= =======
</TABLE>
The accompanying notes are an integral part
of the condensed, consolidated financial statements.
<PAGE> 4
PCD Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
9/28/96 9/30/95 9/28/96 9/30/95
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales .................................................. $6,222 $6,609 $20,532 $18,891
Cost of sales .............................................. 3,497 3,373 11,350 9,932
------ ------ ------- -------
Gross profit .......................................... 2,725 3,236 9,182 8,959
Operating expenses ......................................... 1,236 1,591 4,012 3,965
------ ------ ------- -------
Income from operations ................................ 1,489 1,645 5,170 4,994
Interest income, net ....................................... 217 22 480 63
------ ------ ------- -------
Income before income
taxes ............................................... 1,706 1,667 5,650 5,057
Provision for income
taxes .................................................... 638 689 2,104 2,085
------ ------ ------- -------
Net income ................................................. $1,068 $ 978 $ 3,546 $ 2,972
====== ====== ======= =======
Net income per share ....................................... $ 0.16 $ 0.18 $ 0.58 $ 0.58
====== ====== ======= =======
Weighted average number of
common and common
equivalent shares
outstanding .............................................. 6,569 5,299 6,150 5,081
====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE> 5
PCD Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Condensed and unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
9/28/96 9/30/95
------- -------
<S> <C> <C>
Cash from operating activities:
Net income ............................ $ 3,546 $ 2,972
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation ........................ 1,055 854
Amortization of deferred compensation 43 49
Tax Benefit from stock options
exercised .......................... 123 --
Changes in operating assets and
liabilities:
Accounts receivable - trade, net .. (448) (1,184)
Inventory ......................... 530 (214)
Prepaid expenses and other current
assets ............................ 357 47
Other assets ...................... (19) (38)
Accounts payable .................. (334) 193
Accrued liabilities ............... 113 700
------- -------
Net cash provided by operating
activities ...................... 4,966 3,379
Cash flows from investing activities:
Purchase of property and equipment .... (1,418) (1,538)
Cash flows from financing activities:
Proceeds from public offering ......... 10,501 --
Exercise of common stock options ...... 118 41
Principal payment under long-term debt
obligations .......................... -- (38)
------- -------
Net cash provided by financing
activities ..................... 10,619 3
------- -------
Net increase in cash ..................... $14,167 $ 1,844
------- -------
Cash and cash equivalents at beginning
of period ............................... $ 3,958 $ 928
------- -------
Cash and cash equivalents at end
of period ............................... $18,125 $ 2,772
======= =======
</TABLE>
The accompanying notes are an integral part
of the condensed, consolidated financial statements.
<PAGE> 6
PCD Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(September 28, 1996 Unaudited)
Note 1. BASIS OF PRESENTATION:
The condensed financial statements for the three months and nine months
ended as of September 28, 1996 and September 30, 1995 are unaudited and reflect
all adjustments, consisting of normal recurring adjustments, which are, in the
opinion of management, necessary for a fair presentation of the results for the
interim periods. This financial data should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 31,
1995 which are included in the prospectus dated March 27, 1996 contained in the
Company's registration statement on Form S-1.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
reported amounts of revenues and expenses during the reporting period and
disclosure of contingent assets, liabilities and accrued litigation at the date
of the financial statements. Actual performance could differ from those
estimates and thereby impact future results of operations and financial
condition.
The results of operations for the three-month and nine-month periods
ended September 28, 1996 are not necessarily indicative of the results expected
for the full year ending December 31, 1996.
Note 2. NET INCOME PER SHARE
Net income per common share is computed using the weighted average
number of shares of common stock outstanding and common equivalent shares
outstanding. Common equivalent shares are included in the per share calculation
where the effect of their inclusion would be dilutive. Pursuant to Securities
and Exchange Commission Staff Accounting Bulletin No. 83, common and common
equivalent shares issued during the twelve month period preceding the date of
the initial filing on February 12, 1996, of the registration statement relating
to the Company's initial public offering have been included in the calculation
using the treasury stock method at the offering price ($11 per share), as if
they were outstanding for all periods prior to January 1, 1996. Fully diluted
net income per common share is not materially different from the reported
primary net income per share.
<PAGE> 7
Note 3. INVENTORY
<TABLE>
<CAPTION>
(In Thousands)
9/28/96 12/31/95
------- --------
<S> <C> <C>
Inventories
Raw materials and
finished subassemblies.............. $1,488 $1,945
Work in process....................... 398 260
Finished goods........................ 452 662
------ ------
Total............................... $2,338 $2,867
====== ======
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996 COMPARED TO THE QUARTER AND
NINE MONTHS ENDED SEPTEMBER 30, 1995
Net sales for the quarter ended September 28, 1996 were $6.2 million, a
decrease of 6% from $6.6 million in the year-earlier period. This decrease was
attributable to the summertime shutdown by a number of our customers as well as
our own scheduled one week vacation plant closing. In the two previous third
quarters, PCD did not experience this seasonality due to the exceptionally high
rate of growth in the semiconductor market. This year, however, the seasonality
was not offset due to weak demand in the semiconductor market.
Net sales for the nine months ended September 28, 1996 were $20.5
million, an increase of 9% from the comparable nine month period in 1995. This
increase was attributable to expanded sales volume in the avionic terminal
blocks and sockets, industrial terminal blocks, and programmable-logic
interconnect sockets product categories.
Net income for the quarter rose 10% to $1.1 million from $1 million in
the third quarter of 1995. Net earnings were $0.16 per share, compared with
$0.18 per share for the same period a year ago. Net income for the nine months
ended September 28, 1996 was $3.5 million, an increase of 19% from the
comparable nine month period in 1995. Net earnings were $0.58 per share,
compared with $0.58 per share for the same period a year ago.
Incoming orders for the quarter ended September 28, 1996 were $6.7
million, down 13% compared to orders of $7.7 million in the year-earlier period
and down 8% over the immediately
<PAGE> 8
preceding quarter. The Company ended the quarter with an order backlog of $7.5
million, compared to $7.0 million at the end of the second quarter 1996.
Gross profit declined from $3.2 million, or 49% of net sales in the
previous corresponding quarter to $2.7 million, or 43.8% of net sales, which
reflects the change to a heavier concentration of avionic and industrial sales
and reduced overhead absorption. The current composition of customer orders and
backlog indicate that this profit margin may only slightly improve in the fourth
quarter. For the nine months ended September 28, 1996, gross profit decreased to
44.7% of net sales, or $9.2 million, from 47.4% of net sales, or $9.0 million
from the year-earlier period. This decrease in the percentage of net sales is
attributable to three factors: a shifting product mix from Burn-in to Avionics
products; the effect of approximately $0.1 million of tooling sales for
application-specific product (these tooling sales generate significantly lower
than the average gross profit); and to a one-time expense for a design change to
a non-standard product in the burn-in socket product category.
Operating expenses for the quarter ended September 28, 1996 were $1.2
million, or 19.9% of net sales, a decrease of $0.4 million, compared to expenses
of $1.6 million or 24.1% of net sales in the year-earlier period. This reduction
is the result of significant professional fees associated with pending patent
litigation in the prior comparable period and cost reductions in response to the
lower volume due to seasonal and product line slowdowns in this quarter. For the
nine months ended September 28, 1996, operating expenses were $4.0 million, or
19.5% of net sales compared with $4.0 million, or 21.0% of net sales in the
year-earlier period.
Other income for the third quarter and nine months increased to $0.2
million and $0.5 million in 1996 from $0.02 million and $0.06 million in 1995,
respectively. Other income consists primarily of interest income which increased
as of result of increased cash balances.
The effective rate for income taxes for the quarter ended September 28,
1996 declined to 37.4% from 41.3% for the year- earlier period. The effective
rate for income taxes was due to the application of the appropriate effective
tax rates for each of the state tax jurisdictions in which the Company operates.
In addition, PCD established a wholly-owned subsidiary which is engaged in
holding PCD securities. The structure of this corporation allows for favorable
tax treatment in the Commonwealth of Massachusetts.
MATERIAL CHANGES IN FINANCIAL CONDITION
As of September 28, 1996, the Company had cash and cash equivalents of
approximately $18.1 million and working capital of approximately $21.6 million
compared to $3.9 million in cash and $7.6 million in working capital as of
December 31, 1995. Cash provided by operating activities totaled $5.0 million
for the
<PAGE> 9
nine month period ended September 28, 1996 compared to $3.4 million in the
comparable year-earlier period.
Capital expenditures were $0.3 million for the third quarter 1996 and
are expected to reach $2.1 million by year end, down slightly from $2.5 million
last year. The Company projects the level of capital expenditures to attain $3.0
million in 1997. The company believes that existing cash and cash equivalents
and funds from operations will satisfy the company's working capital and capital
expenditure needs for at least the next twelve months.
<PAGE> 10
PCD Inc.
PART II
OTHER INFORMATION
Item 1. Legal Proceeding
There has been no material change to the information required to be
furnished by this item since the date of the Company's previous Quarterly Report
on Form 10-Q for the quarter ended June 29, 1996. The information contained in
Part II, Item 1 of such Report is hereby incorporated herein by this reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11.1 Statement re computation of per share earnings.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the period ended
September 28, 1996.
<PAGE> 11
S I G N A T U R E S
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.
PCD INC.
(Registrant)
Dated: , 1996 /s/ John L. Dwight, Jr.
------------------------
John L. Dwight, Jr.
Chairman of the Board, Chief
Executive Officer and
President (Principal Executive
Officer)
Dated: , 1996 /s/ Mary L. Mandarino
------------------------
Mary L. Mandarino
Vice President, Finance and
Administration, Chief
Financial Officer and
Treasurer (Principal Financial
and Accounting Officer)
<PAGE> 12
Exhibit Index
Exhibit
Number Description
11.1 Statement re computation of per share earnings.
27.1 Financial Data Schedule.
<PAGE> 1
Exhibit 11.1
PCD Inc.
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE (1)
<TABLE>
<S> <C>
For the quarter ended September 28, 1996
Common stock outstanding,
beginning of the period................................. 5,723,832
Weighted average common stock issued
during the period....................................... 39,557
Dilutive effect of common stock equivalents................. 805,680
---------
Weighted average number of common and common
equivalent shares outstanding........................... 6,569,069
=========
For the nine-months ended September 28, 1996
Common stock outstanding,
beginning of the period................................. 4,597,032
Weighted average common stock issued
during the period....................................... 764,572
Dilutive effect of common stock equivalents................. 788,619
---------
Weighted average number of common and common
equivalent shares outstanding........................... 6,150,223
=========
For the quarter ended September 30, 1995
Common stock outstanding,
beginning of the period................................. 4,561,032
Cheap stock outstanding during the period (2)............... 70,364
Weighted average common stock issued
during the period....................................... -
Dilutive effect of common stock equivalents................. 668,075
---------
Weighted average number of common and common
equivalent shares outstanding........................... 5,299,471
=========
For the nine-months ended September 30, 1995
Common stock outstanding,
beginning of the period................................. 4,561,032
Cheap stock outstanding during the period (2)............... 70,364
Weighted average common stock issued
during the period....................................... -
Dilutive effect of common stock equivalents................. 422,077
---------
Weighted average number of common and common
equivalent shares outstanding........................... 5,053,473
=========
</TABLE>
(1) All common and common equivalent shares have been restated to reflect a
12-for-1 stock split of the Company's common stock effected in February, 1996.
<PAGE> 2
(2) In accordance with the Securities and Exchange Commission Staff Accounting
Bulletin No. 83, issuances of common stock and common stock equivalents during
the twelve month period preceding the date of the initial filing on February 12,
1996, of the registration statement relating to the Company's initial public
offering have been included in the calculation using the treasury stock method
at the public offering price ($11 per share), as if they were outstanding for
all periods prior to January 1, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-28-1996
<CASH> 18125
<SECURITIES> 0
<RECEIVABLES> 4233
<ALLOWANCES> 222
<INVENTORY> 2338
<CURRENT-ASSETS> 24516
<PP&E> 10098
<DEPRECIATION> 4804
<TOTAL-ASSETS> 30039
<CURRENT-LIABILITIES> 2896
<BONDS> 0
0
0
<COMMON> 58
<OTHER-SE> 27085
<TOTAL-LIABILITY-AND-EQUITY> 30039
<SALES> 20532
<TOTAL-REVENUES> 20532
<CGS> 11350
<TOTAL-COSTS> 11350
<OTHER-EXPENSES> 4012
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 9
<INCOME-PRETAX> 5650
<INCOME-TAX> 2104
<INCOME-CONTINUING> 3546
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3546
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
