<PAGE>
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 March 31, 2000.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-33438
PRECISION PARTNERS, INC.
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Delaware 75-2783285
-------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5605 N. MacArthur Boulevard
Suite 760
Irving, Texas 75038
(Address of principal executive offices)
(972) 580-1550
Indicate by check mark whether 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 NO X
--- ---
The number of shares outstanding of the Registrant's Common Stock, $.01 par
value, was 100 as of April 30, 2000.
<PAGE>
PRECISION PARTNERS, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
March 31, 2000 (Unaudited) and December 31, 1999 3
Unaudited Consolidated Statements of Operations
for the Three Months Ended March 31, 2000 and 1999 4
Unaudited Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 2000 and 1999 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosure of Market Risk 21
Part II: Other Information
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Securities Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signature 23
Exhibit 27 Financial Data Schedule
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
Precision Partners, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -----------
(Unaudited)
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ -- $ 313
Trade accounts receivable, less allowance for doubtful accounts
of $260,838 at March 31, 2000 and December 31, 1999 26,404 23,613
Inventories 21,847 18,404
Current deferred income taxes 1,303 1,303
Other current assets 2,681 1,916
----------- ----------
Total current assets 52,235 45,549
Property, plant and equipment, at cost, net 69,778 71,057
Goodwill, net 76,592 77,429
Non-compete agreement 883 933
Advance deposits for equipment leases 4,400 3,532
Other assets 5,865 7,891
----------- ----------
Total assets $ 209,753 $ 206,391
=========== ==========
Liabilities and stockholders' equity
Current liabilities:
Short-term borrowings $ 11,900 $ 11,200
Accounts payable 12,312 7,703
Accrued expenses 9,683 11,406
Income taxes payable 907 1,014
Deferred revenue 4,979 4,700
Current installments of long term debt 2,577 2,611
Other current liabilities 3,182 3,071
----------- ----------
Total current liabilities 45,540 41,705
Long term debt, less current portion 120,785 120,737
Non-current deferred taxes 7,817 7,817
Stockholders' equity:
Common stock, $.01 par value; 100 shares authorized, issued and
outstanding -- --
Additional paid-in capital 42,050 42,042
Accumulated deficit (6,439) (5,910)
----------- ----------
Total stockholders' equity 35,611 36,132
----------- ----------
Total liabilities and stockholders' equity $ 209,753 $ 206,391
=========== ==========
</TABLE>
See accompanying notes
3
<PAGE>
Precision Partners, Inc.
Unaudited Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------
2000 1999
---------- --------
(in thousands)
<S> <C> <C>
Net sales $ 44,887 $ 12,008
Cost of sales 33,768 8,572
---------- ---------
Gross profit 11,119 3,436
Selling, general and administrative expenses 7,534 2,659
---------- ---------
Operating income 3,585 777
Other income (expense):
Investment income 12 15
Interest expense (4,092) (1,428)
Loss on sale of property and equipment (10) --
Other 30 49
---------- ---------
Loss before income taxes (475) (587)
Provision for income taxes 54 43
---------- ---------
Net loss $ (529) $ (630)
========== =========
</TABLE>
See accompanying notes
4
<PAGE>
Precision Partners, Inc.
Unaudited Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
2000 1999
--------- ---------
(in thousands)
<S> <C> <C>
Operating activities
Net loss $ (529) $ (630)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 2,941 656
Amortization 1,230 1,020
Loss on sale of fixed assets 10 --
Changes in operating assets and liabilities, net of
acquisitions:
Trade accounts receivable (2,791) 492
Inventories (3,443) (1,061)
Other current assets (765) (175)
Advance deposit for equipment leases (868) --
Other long term assets 1,976 --
Accounts payable 4,609 2,515
Accrued expenses (1,723) 395
Income taxes payable (107) (309)
Deferred revenue 279 --
Other current liabilities 111 4
--------- ---------
Net cash provided by operating activities 930 2,907
Investing activities
Proceeds from sale of property, plant and equipment 37 --
Purchase of property, plant and equipment (1,641) (2,772)
Acquisition of subsidiaries, net of cash (185) (100,089)
--------- ---------
Net cash used in investing activities (1,789) (102,861)
Financing activities
Proceeds from revolving line of credit 700 --
Repayment of long-term debt (54) (23,000)
Proceeds from long-term debt -- 123,000
Contribution of capital 8 10,000
Payment of debt issue costs (108) (4,932)
--------- ---------
Net cash provided by financing activities 546 105,068
--------- ---------
Net (decrease) increase in cash and cash equivalents (313) 5,114
Cash and cash equivalents, beginning of period 313 963
--------- ---------
Cash and cash equivalents, end of period $ -- $ 6,077
========= =========
Supplementary information for the statement of cash flows:
Interest payments $ 7,094 $ 410
Income tax payments $ 36 $ 272
Non-cash investing and financing activities - purchase of
computer hardware under financing agreements $ 68 $ --
</TABLE>
See accompanying notes
5
<PAGE>
Notes to the Unaudited Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Description of Business and Basis of Presentation
Precision Partners, L.L.C. (LLC) was incorporated on September 9, 1998 for
the purpose of acquiring and operating companies in the business of
manufacturing and supplying complex precision metal parts, toolings and
assemblies for original equipment manufacturers ("OEMS").
On September 30, 1998, investors contributed approximately $32 million of
capital to LLC which was then contributed by LLC to two wholly-owned
subsidiaries, Mid State Acquisition Corp. and Galaxy Acquisition Corp.,
established to acquire on September 30, 1998 all of the outstanding capital
stock of Mid State Machine Products ("Mid State") and Galaxy Industries
Corporation ("Galaxy") (the "1998 Acquisitions"). The purchase price on this
date including transaction expenses was approximately $54,483,000 and was
financed by the proceeds of the contributed capital and borrowings under the
Company's credit facility. This purchase price does not include fees and
expenses of approximately $242,000 related to the transactions that were billed
subsequent to the date of purchase. The purchase price was allocated to the
estimated fair value of the assets acquired and liabilities assumed in
accordance with the purchase method of accounting as follows:
Current assets $12,472,000
Property, plant and equipment 15,131,000
Goodwill 35,036,000
Other assets 1,007,000
Current liabilities (5,553,000)
Deferred taxes, non-current (3,610,000)
In February 1999, Precision Partners, Inc. ("Precision" or "Company") was
formed as a wholly-owned subsidiary of Precision Partners Holdings, Inc.
(Holdings) which is a wholly-owned subsidiary of LLC. On March 19, 1999 as part
of a reorganization, LLC contributed through Holdings to Precision its
investments and related equity in Galaxy, Mid State and Precision Partners
Management Corporation ("Management Corporation"), which comprised substantially
all of the equity of LLC. Simultaneous with this reorganization, Precision
issued $100,000,000 of 12% Senior Subordinated Notes (the "Notes") in order to
purchase all of the issued and outstanding capital stock of Certified
Fabricators, Inc. and its sister company Calbrit Design, Inc. (together,
"Certified") and to purchase substantially all of the assets and assume certain
liabilities of General Automation, Inc. ("General Automation") and Nationwide
Precision Products Corp. ("Nationwide"). Also, on September 1, 1999, Precision
purchased all of the issued and outstanding capital stock of Gillette Machine &
Tool, Inc. ("Gillette") using existing cash and borrowings under Precision's
credit facility. The acquisitions of Certified, General Automation, Nationwide,
and Gillette are referred to collectively as the "1999 Acquisitions." Subsequent
to this reorganization, capital totaling approximately $42 million had been
contributed to LLC by investors; this capital has been contributed through
Holdings to Precision.
The 1999 Acquisitions were financed through the net proceeds of the
issuance of the Notes, together with borrowings under our credit facilities, an
equity contribution of approximately $10,000,000 and available cash. The total
price at date of purchase, including transaction expenses, was approximately
$116,388,000. This purchase price does not include fees and expenses of
approximately $185,000 related to the transactions that were billed subsequent
to the dates of purchase. The purchase price was allocated to estimated fair
value of the assets acquired and liabilities assumed in accordance with the
purchase method of accounting as follows:
Current assets $27,848,000
Property, plant and equipment 54,658,000
Goodwill 45,641,000
Other assets 309,000
Current liabilities (6,466,000)
Deferred taxes, non-current (5,602,000)
6
<PAGE>
The excess of the purchase price over the net fair value of the assets
acquired was allocated to goodwill, which is being amortized over 20 years.
Prior to the 1998 Acquisitions, LLC had substantially no operations and
prior to the 1999 Acquisitions, Precision had substantially no operations. For
financial statement presentation purposes, the reorganization is being accounted
for as if it had occurred on September 9, 1998 in a manner similar to a pooling
of interests. Therefore, the 1999 operations are shown for Precision and consist
of the operations of Mid State and Galaxy for the quarter ended March 31, 1999,
and LLC from January 1, 1999 through March 19, 1999. The March 19, 1999
Acquisitions for accounting purposes are assumed to have occurred on March 31
and are not included in first quarter 1999 results. All significant intercompany
balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three-month period ended March 31, 2000
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2000.
Certain prior period amounts have been reclassified to conform to the
current period's presentation.
2. Inventories and Costs and Estimated Earnings on Uncompleted Contracts
Inventories consist of the following at:
March 31, December 31,
2000 1999
----------- --------------
(in thousands)
Raw materials $ 4,965 $ 2,575
Work in process 13,469 13,978
Finished goods 3,530 2,365
----------- -----------
21,964 18,918
Less reserves for obsolescence 117 514
----------- -----------
$ 21,847 $ 18,404
=========== ===========
Information regarding contract costs, estimating earnings and progress
billings consisted of the following at:
<TABLE>
<CAPTION>
March 31,
2000
-------------
(in thousands)
<S> <C>
Costs incurred on uncompleted contracts $ 9,417
Estimated earnings 619
-----------
10,036
Less net progress billings 7,827
-----------
Costs and estimated earnings on uncompleted contracts included in
work in progress inventory $ 2,209
===========
</TABLE>
7
<PAGE>
There were no significant billings in excess of net costs and estimated
earnings on uncompleted contracts.
3. Debt
Precision maintains a line of credit of $25.0 million, which matures on
March 31, 2005, under which it can borrow funds or secure letters of credit at
prevailing market rates. As of March 31, 2000, we had outstanding draws on the
line of credit totaling $11.9 million (8.54% at March 31, 2000). The revolving
line of credit is secured by substantially all accounts receivable and
inventory. Advances under the line are available to us based upon 85% of
outstanding eligible accounts receivable and 50% of eligible inventories.
Associated with the line of credit is a commitment fee of 0.5% per annum payable
in arrears on the last day of each quarter. The fee is calculated from the
closing date, March 19, 1999, to the date the revolving commitments have been
terminated, computed at the commitment fee rate on the actual daily amount of
available revolving commitment of such lending during the period. As of March
31, 2000, the Company had approximately $13.1 million of available borrowing
capacity under the revolving credit facility.
Long-term debt consists of the following at:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- -------------
(In thousands)
<S> <C> <C>
Precision Partners, Inc. 12% Senior Subordinated Notes due 2009, interest paid
semiannually on March 15 and September 15 commencing on September 15, 1999. $100,000 $100,000
Note payable to a bank, due in quarterly principal installments plus interest at
a variable rate (8.6875% as of March 31, 2000), maturing March 31, 2005.
Quarterly principal installments of $805,000 begin on June 30, 2000,
increasing to $920,000 on June 30, 2001, $1,150,000 on June 30, 2002,
$1,380,000 on June 30, 2003, and $1,495,000 on June 30,2004, secured by all
assets of Precision Partners and its subsidiaries 23,000 23,000
Financial software financing agreement due in twelve quarterly installments of
$32,471, including interest at 7.8% 238 265
Director and Officer insurance premium financing agreement, due in six quarterly
installments of $28,997, including interest at 7.15% 56 83
Computer hardware financing agreement due in thirty six monthly installments of
$2,214, including interest at 10.8% 68 --
----------- ------------
123,362 123,348
Less current portion 2,577 2,611
----------- ------------
$120,785 $ 120,737
=========== ============
</TABLE>
Pursuant to the terms entered into in conjunction with the March 19, 1999
issuance of the Notes, the interest payable on the Notes increased from 12.00%
to 12.50% on September 16, 1999, from 12.50% to 12.75% on December 16, 1999, and
from 12.75% to 13.00% on March 16, 2000. This increase in the interest rate is a
contractual obligation which has arisen because the Notes were not registered
with the SEC within 180 days of their initial issuance. The exchange offer
registration statement was filed and became effective on May 5, 2000 and the
exchange offer is currently open. We anticipate the exchange offer to close in
June at which time the additional interest charges will terminate.
The company has unamortized deferred costs of $5.1 million related to the
Notes and the $23.0 million term loan and credit facility. The costs are being
amortized over the life of the related Notes, term loan and credit facility.
8
<PAGE>
Under the terms of the note payable to the bank, the Company is required
to maintain certain leverage, interest coverage, and fixed charge coverage
ratios on a consolidated basis. The company was in compliance with all of the
restrictive covenants at March 31, 2000.
The indenture governing the Notes contains covenants that limit our and
some of our subsidiaries' ability to incur additional debt, pay dividends on or
redeem or repurchase capital stock, enter into transactions with affiliates and
transfer or sell assets, among other things.
4. Litigation
Precision or its subsidiaries are defendants from time to time in lawsuits
and disputes arising in the normal course of business. Management believes that
the ultimate outcome of those matters will not have a materially adverse effect
on the consolidated financial position, results of operations or cash flows.
5. Income Taxes
The first quarter of 2000 and 1999 tax provisions are impacted by
permanent differences between pre-tax loss for financial reporting purposes
and taxable income resulting primarily from non-deductible goodwill generated by
the stock acquisitions.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
We are a leading contract mechanical manufacturing services supplier of
complex precision metal parts, tooling and assemblies for original equipment
manufacturers. Our broad manufacturing capabilities and highly engineered
processes allow us to meet the critical specifications of our customers across a
wide range of industries. We have earned "Preferred or "Qualified" supplier
status with most of our customers and are predominately the sole-source supplier
to our customers of the parts we manufacture.
Precision Partners, L.L.C. was formed in September 1998 and we were formed
in February 1999 for the sole purpose of consummating acquisitions in the
business of manufacturing and supplying complex precision metal parts, tooling
and assembles for original equipment manufacturers. On September 30, 1998,
Precision Partners, L.L.C. acquired all of the outstanding capital stock of Mid
State and Galaxy. In March 1999, we underwent a corporate reorganization under
which we acquired all of the issued and outstanding capital stock of Mid State
and Galaxy. At the same time, we also purchased all of the issued and
outstanding capital stock of Certified and Calbrit and we purchased
substantially all of the assets and assumed some liabilities of General
Automation and Nationwide. The aggregate purchase price including fees and
expenses for the March acquisitions was approximately $102.0 million and was
financed through the net proceeds from the sale of the outstanding notes,
borrowings under our credit facilities, an equity contribution and available
cash. In July 1999, we merged Calbrit into Certified and in September 1999 we
acquired Gillette. The purchase price for the Gillette acquisition was
approximately $14.4 million and was financed using existing cash and borrowings
under our revolving credit facility.
Prior to the acquisitions of Mid State and Galaxy, Precision Partners,
L.L.C. had substantially no operations and, prior to the consummation of the
reorganization and the acquisitions of Certified, Calbrit, Nationwide and
General Automation, we had substantially no operations. For financial statement
presentation purposes, and for purposes of the following discussion, the
reorganization is accounted for as if it occurred on September 9, 1998 and we
are treated as having commenced operations at that time. See Note 1 to our
consolidated financial statements.
9
<PAGE>
For this reason, the following management's discussion and analysis relates to
the results of operations for the three months ended March 31, 1999 of:
. a consolidation of our company for the period from February 9, 1999
(inception) through March 31, 1999 and Precision Partners, L.L.C. from
January 1, 1999 to March 19, 1999. The acquisitions of Certified,
Nationwide, and General were treated as if the acquisitions took place on
March 31, 1999, therefore, the operations of these companies for the
period from the date of acquisition are not included in the 1999 results
of operations for the quarter ended March 31, 1999. The amounts
are not considered material.
The Historical Results of Operations discusses the results of operations
of Precision and its subsidiaries for the three months ended March 31, 2000 and
1999.
HISTORICAL RESULTS OF OPERATIONS
First Quarter 2000 Compared to First Quarter 1999
- -------------------------------------------------
Net Sales
Net sales increased 273.8% to $44.9 million in the first quarter of 2000
compared to $12.0 million in the same period 1999. The increase is primarily due
to the acquisitions of Certified, General, Nationwide, and Gillette in 1999, but
also includes significant growth in power generation sales, as well as increases
in heavy construction equipment sales.
Gross Profit
Gross profit increased 223.6% to $11.1 million in the first quarter of
2000 compared to $3.4 million in the same period 1999. The increase is primarily
due to the acquisitions of Certified, General, Nationwide, and Gillette in 1999,
as well as volume increases in power generation, offset by operational
difficulties at Galaxy. Gross margin decreased by 3.8% to 24.8% in the first
quarter of 2000 from 28.6% in the comparable period in 1999. This decrease is
largely due to a change in product mix, ramp up costs associated with additional
power generation volume, and Galaxy operational difficulties.
Selling, General and Administrative Expenses
Selling, general, and administrative expenses increased 183.3% to $7.5
million in the first quarter of 2000 compared to $2.7 million in the same period
1999. The increase is primarily due to the acquisition of Certified, General,
Nationwide, and Gillette in 1999, and additional costs related to sales volume
increases.
Operating Income
As a result of the foregoing, operating income increased to $3.6 million
in the first quarter of 2000 from $0.8 million in the same period in 1999.
Income Tax Expense
The first quarter of 2000 and 1999 tax provisions are impacted by
permanent differences between pre-tax loss for financial reporting purposes and
taxable income resulting primarily from non-deductible goodwill generated by the
stock acquisitions.
10
<PAGE>
Net Loss
Net loss was ($0.5 million) in the first quarter of 2000, a decrease of
16.0% compared to ($0.6 million) in the same period of 1999 due to the
aforementioned reasons and interest expense attributed to $123.0 million of long
term debt incurred to fund the Mid State, Galaxy, Certified, General,
Nationwide, and Gillette acquisitions.
Depreciation and Amortization
Depreciation and amortization increased 269.5% to $4.0 million in the
first quarter of 2000 compared to $1.1 million in the same period of 1999. The
increase is primarily due to depreciation and goodwill amortization from the
acquisitions of Certified, General, Nationwide, and Gillette in 1999, including
additional depreciation on the step-up in basis of property, plant, and
equipment of these acquisitions.
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma consolidated statement of operations for the
three month period ended March 31, 1999 includes the operations of Mid State and
Galaxy for the period and gives effect to the 1999 Acquisitions as if the
transactions had occurred on January 1, 1999. For purposes of the unaudited pro
forma consolidated statements of operations, the historical financial
information of General and Nationwide has been adjusted to eliminate the
effect of certain assets not acquired and certain liabilities not assumed in the
acquisition by our company, in each case in accordance with the terms of the
purchase agreement relating to such acquisition. The unaudited pro forma
consolidated financial statements should be read in conjunction with the
unaudited historical consolidated financial statements of Precision Partners,
including the notes thereto, included elsewhere in this report.
Management believes that the adjustments necessary to fairly present
this pro forma consolidated financial information have been made based on
available information and in the opinion of management are reasonable and are
described in the accompanying notes. The pro forma consolidated financial
information should not be considered indicative of actual results that would
have been achieved had the transactions been consummated on the respective dates
indicated and do not purport to indicate results of operations as of any future
date or for any future period. We cannot assure you that the assumptions used in
the preparation of the pro forma consolidated financial information will prove
to be correct.
11
<PAGE>
The following table sets forth our unaudited historical consolidated
statement of operations and other information for the three months ended March
31, 2000 and the pro forma statement of operations and other pro forma
information for the three months ended March 31, 1999, both in dollars and
expressed as a percentage of net sales:
Three months ending
March 31,
----------------------
2000 1999
-------- ---------
(In thousands)
Net sales $ 44,887 $ 32,353
Cost of sales (1) 33,768 24,397
-------- --------
Gross profit 11,119 7,956
% of sales 24.8% 24.6%
Selling, general and
administrative expenses (2) 7,534 5,346
-------- --------
Operating income 3,585 2,610
% of sales 8.0% 8.1%
Other income (expense):
Net interest expense (3) (4,080) (4,259)
Other 20 92
-------- --------
Loss before income taxes (475) (1,557)
% of sales (1.1%) (4.8%)
Provision (benefit) for income
taxes (4) 54 (347)
-------- --------
Net loss $ (529) $ (1,210)
======== ========
% of sales (1.2%) (3.7%)
Pro Forma EBITDA: (5)
-----------------
Operating income $ 3,585 $ 2,610
Depreciation 2,941 2,856
Goodwill amortization 1,072 1,025
-------- --------
Total $ 7,598 $ 6,491
% of sales 16.9% 20.1%
12
<PAGE>
Notes to Pro Forma Financial Information
<TABLE>
<CAPTION>
Three months
ended
March 31,
1999
-----------
(In thousands)
<S> <C>
(1) Cost of sales pro forma adjustments:
------------------------------------
Increased depreciation due to fixed asset step up to
fair market value 653
Adjustment for new lease terms of facilities at Nationwide
made as part of the purchase, net of the elimination of
depreciation expense on a building not acquired 156
Adjustment for new lease terms of facilities at General made
as part of the purchase agreement (24)
-----------
765
-----------
(2) SG&A pro forma adjustments:
---------------------------
Goodwill amortization related to the acquisitions 561
Adjustments for termination of executive positions held by
shareholders and related parties as part of the purchase
contract of Gillette whose positions will not be replaced (265)
Reduction in shareholders' compensation, bonus, and benefits as a
result of employment contracts executed in connection with the
transactions (254)
Elimination of acquisition related expenses (128)
-----------
(86)
-----------
</TABLE>
(3) Interest expense related to the $100,000,000 Precision Partners, Inc.
12% Senior Subordinated Notes due 2009, the $23,000,000 term loan
facility, the $25,000,000 revolving credit facility, and debt issue costs
expensed in refinancing.
(4) Adjustment to record the income tax provision (benefit) on pro forma
income before income taxes
(5) Pro forma EBITDA is defined as operating income plus depreciation and
amortization. EBITDA is not a measure of performance under generally
accepted accounting principles. While EBITDA should not be used in
isolation or as a substitute for net income, cash flows from operating
activities or other income or cash flow statement data prepared in
accordance with generally accepted accounting principles or as a measure
of profitability or liquidity, management believes that it may be used by
certain investors as supplemental information to evaluate a company's
financial performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." In addition, the
definition of EBITDA used in this report may not be comparable to the
definition of EBITDA used by other companies.
13
<PAGE>
Pro Forma Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
- -------------------------------------------------------------------------------
Net Sales
Net sales increased 38.7% to $44.9 million for the three months ended
March 31, 2000, compared to $32.4 million for the same period in 1999. During
this period sales at Mid State and Galaxy increased 97.4% to $23.7 million from
$12.0 million in the prior period, mainly due to increased General Electric and
Caterpillar orders. Sales at General and Nationwide for the period ending March
31, 2000 increased 16.0% to $12.4 million from $10.7 million during the
comparable period in 1999 due to increased automotive tooling and component
business. Gillette sales for the period increased 13.0% to $4.4 million from
$3.9 million during the comparable period of 1999 due to increased business
machine volume. Sales at Certified for the three month period ending March 31,
2000 decreased 24.0% to $4.4 million from $5.8 million during the comparable
period in 1999, due to a decrease in defense and space business.
Gross Profit
Gross profit for the period ending March 31, 2000 increased 39.8% to $11.1
million from $8.0 million in the comparable period in 1999 primarily due to
increased power generation sales. Gross margin increased 0.2% during this period
to 24.8% from 24.6% in the comparable period in 1999 as a result of product mix,
and absorption of fixed costs from increased sales volumes.
Selling, General and Administrative Expense
Selling, general and administrative expenses for the period ending March
31, 2000 increased 40.9% to $7.5 million from $5.3 million during the same
period in 1999 due to increased salary expense and additional corporate office
expense required managing the acquisitions. Selling, general and administrative
expenses as a percent of sales for these periods increased to 16.8% in 2000 from
16.5% in 1999.
Operating Income
As a result of the foregoing, operating income increased 37.4% to $3.6
million from $2.6 million during the comparable period in 1999.
Income Tax Expense
Income tax expense (benefit) increased to $0.1 million for the three
months ended March 31, 2000 from ($0.3 million) in the same period in 1999 due
to the increase in taxable income and the impact of permanent differences. The
effective tax rate decreased to 11.3% for the three months ended March 31, 1999
from the tax benefit rate of 22.3% in same period of 1999.
Net Loss
As a result of the foregoing, net loss during the period ending March 31,
2000 decreased 56.3% to ($0.5 million) from ($1.2 million) during the comparable
period in 1999.
Depreciation and Amortization
Depreciation and amortization expense increased $0.1 million in the three
months ended March 31, 2000 from the three months ended March 31, 1999 due to
capital expenditures between these periods.
14
<PAGE>
Backlog
Firm backlog for the period ending March 31, 2000 increased 4.3% to $111.1
million from $107.7 million at December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity are available borrowings under our
revolving credit facility and cash flow from operations. We expect that our
principal uses of liquidity will continue to be working capital, capital
expenditures, debt service requirements and permitted acquisitions.
Our credit facilities consist of a $23.0 million term loan facility and a
$25.0 million revolving credit facility, including a $2.0 million sublimit for
letters of credit, each maturing on March 31, 2005, unless terminated sooner
upon an event of default. As of March 31, 2000, we have total debt of
approximately $135.3 million, consisting of our $23.0 million term loan, the
outstanding aggregate principal amount of the Notes and $11.9 million of
outstanding borrowings under our revolving credit facility. Our ability to
borrow under the revolving credit facility is subject to our compliance with the
financial covenants described below and a borrowing base based on our eligible
accounts receivables and inventory.
The indenture and our credit facilities impose limitations on our ability
to, among other things, incur additional indebtedness (including capital
leases), incur liens, pay dividends or make other restricted payments,
consummate asset sales, enter into transactions with affiliates, issue preferred
stock, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of our assets. In
addition, the credit facilities limit our ability to enter into sale and
leaseback transactions and to make capital expenditures. The credit facilities
also require that we meet and maintain certain financial ratios and tests,
including (i) a minimum interest coverage ratio, EBITDA to interest expense,
(ii) a maximum leverage ratio, total debt to EBITDA, and (iii) a minimum fixed
charge coverage ratio, EBITDA to interest expense plus other fixed charges. Our
ability to comply with these covenants and to meet and maintain these financial
ratios and tests may be affected by events beyond our control, such as those
described under "Risks Associated with Precision Partners, Inc."
As a result of the failure to have an exchange offer registration
statement filed by September 15, 1999, to have it declared effective by
September 16, 1999 and to complete the exchange offer by October 15, 1999, we
are paying additional interest on the outstanding Notes. The amount of
additional interest has ranged from 0.5% per annum for the period from September
15, 1999 through December 14, 1999 to 0.75% per annum for the period December
15, 1999 through March 14, 2000. Beginning March 15, 2000, the amount of
additional interest increased to 1.0% per annum and will continue at that rate
until effectiveness of the registration statement and completion of the exchange
offer. The exchange offer registration statement was filed and became effective
on May 5, 2000, and the exchange offer is currently open. We anticipate the
exchange offer to close in June at which time the additional interest charges
will terminate. The additional interest is expected to be nonrecurring with no
impact on our continuing operations.
We have limited amortization requirements under our credit facilities over
the next two years. Our other debt service requirements over the next two years
consist primarily of interest expense on the Notes. Our short-term cash
requirements for our operations are expected to consist mainly of capital
expenditures to continue to maintain and expand our manufacturing capabilities
and working capital requirements. We currently expect that our capital
expenditures will be approximately $10.6 million in 2000, including maintenance
capital expenditures of approximately $5.0 million. However, our capital
expenditures will be affected by, and may be greater than currently anticipated
depending upon the size and nature of new business opportunities. We also
expect to enter into approximately $35 million of operating leases in 2000
primarily for new equipment related to our recent contracts with Caterpillar and
Dana and increased unit delivery requirements from General Electric.
The aggregate purchase price including fees and expenses for the
acquisitions of Certified, Calbrit, Nationwide and General Automation of $102.0
million does not include potential effects of certain contingent purchase
arrangements. A contingent payment may be payable by our parent, Precision
Partners Holdings Company, in the form of cash or a note payable-in-kind
maturing September 30, 2009, based on one of the companies we acquired in March
1999 achieving specified EBITDA targets in 2000. Payment by Precision Partners
Holding Company of this additional contingent payment, assuming the maximum
amount is earned, would result in an annual increase in our goodwill
amortization of approximately $0.5 million. Additional contingent payments,
which were payable by Precision Partners Holding Company, based on this company
and another company acquired in March 1999
15
<PAGE>
meeting certain EBITDA targets in 1999 were not earned. In addition, a bonus
payment of $3.0 million, based on one of the acquired companies achieving
certain 1999 EBITDA targets, to the former stockholder of this company who is
now an employee of our company was accrued in December 1999 as compensation
expense and was paid in April 2000.
We plan to continue our acquisition strategy and expect to finance future
acquisitions using cash, capital stock, notes and/or assumption of indebtedness.
However, the restrictions imposed on us by our long-term debt instruments may
affect this strategy. In addition, to fully implement our growth strategy and
meet the resulting capital requirements, we may be required to request increases
in amounts available under our credit facilities, issue future debt securities
or raise additional capital through equity financings. There can be no assurance
that any such increase to our credit facilities will be available or, if
available, will be on terms satisfactory to us, or that we will be able to
successfully complete any future debt or equity financings on satisfactory
terms, if at all. As a result, we could be placed at a competitive disadvantage
in pursuing acquisitions.
Based upon current operations and the historical results of our
subsidiaries, we believe that our cash flow from operations, together with
available borrowings under our new revolving credit facility, will be adequate
to meet our anticipated requirements for working capital, capital expenditures,
lease payments, and scheduled interest payments over the next 12 months.
However, there can be no assurance that we will continue to generate cash flow
above current levels or that the acquired companies will repeat their historical
performance. In addition, our ability to pay the notes at maturity will depend
on the availability of refinancing.
FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, such as statements relating to trends
in revenues, gross profit margin expenses, net income and the adequacy of
capital resources, and are therefore prospective. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," "project," and "continue" or similar words.
You should read statements that contain these words carefully because they:
. Discuss our future expectations
. Contain projections of our future results of operations or of our
financial condition
. State other "forward-looking" information
Such forward looking statements are subject to a number of risks,
uncertainties and other factors that could cause actual results to differ
materially from future results expressed or implied by such forward-looking
statements. Potential risks and uncertainties include, but are not limited to,
those risk factors summarized below.
RISKS ASSOCIATED WITH PRECISION PARTNERS, INC.
We are structured as a holding company and we depend on our subsidiaries in
order to service our debt.
We are now, and continue to be, structured as a holding company. Our only
significant asset is the capital stock or other equity interests of our
operating subsidiaries. As a holding company, we conduct all of our business
through our subsidiaries. Consequently, our cash flow and ability to service our
debt obligations, including the exchange notes, are dependent upon the earnings
of our operating subsidiaries and the distribution of those earnings to us, or
upon loans, advances or other payments made by these subsidiaries to us. The
ability of our subsidiaries to pay dividends or make other payments or advances
to us will depend upon their operating results and will be subject to applicable
laws and contractual restrictions contained in the instruments governing their
indebtedness, including our credit facilities and the indenture. Although the
indenture will limit the ability of these subsidiaries to enter into consensual
restrictions on their ability to pay dividends and make other payments to us,
these limitations will be
16
<PAGE>
subject to a number of significant qualifications. There can be no assurance
that the earnings of our operating subsidiaries will be adequate for us to
service our debt obligations, including the exchange notes.
The success of our acquisition strategy depends on the availability of suitable
acquisition candidates, diversion of management time and risk of undisclosed
liabilities.
A significant aspect of our strategy is to continue to pursue select
strategic acquisitions of companies that we believe can benefit from our
operations, management and access to capital and enhance our relationships with
existing customers or augment our manufacturing capabilities. Our ability to
grow by acquisition is dependent upon, and may be limited by, the availability
of suitable acquisition candidates and capital, and the restrictions contained
in the new credit facilities, the indenture governing the Notes and any future
financing arrangements. In addition, growth by acquisition involves risks that
could adversely affect our operating results, including the substantial amount
of management time that may be diverted from operations in order to pursue and
complete such acquisitions, difficulties in managing the additional operations
and personnel of acquired companies and the potential loss of key employees of
acquired companies. There can be no assurance that we will be able to obtain the
capital necessary to pursue our growth strategy or consummate acquisitions on
satisfactory terms, if at all. Possible future acquisitions could result in the
incurrence of additional debt, costs, contingent liabilities and amortization
expenses related to goodwill and other intangible assets, all of which could
materially adversely affect our business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
Although we perform a due diligence investigation of each business that we
acquire, there may be liabilities of the acquired companies, including Mid
State, Galaxy, Certified, General Automation, Nationwide and Gillette, that we
fail or are unable to discover during our due diligence investigation and for
which we, as a successor owner, may be responsible. In connection with
acquisitions, we generally seek to minimize the impact of these liabilities by
obtaining indemnities and warranties from the seller which may be supported by
deferring payment of a portion of the purchase price. However, these indemnities
and warranties, if obtained, may not fully cover the liabilities due to their
limited scope, amount, or duration, the financial limitations of the indemnitor
or warrantor, or other reasons.
Our success depends on our ability to successfully operate our subsidiaries on a
combined basis.
Mid State, Galaxy, Certified, Nationwide, General Automation and Gillette
previously operated independently of one another and there can be no assurance
that we will be able to effectively manage these six operating companies on a
combined basis. In addition, to the extent management time may be diverted to
any one or more of the companies, the other operating companies may be adversely
affected. A failure by us to operate these businesses profitably or to manage
them effectively on a combined basis could have a material adverse effect on our
results of operations and financial condition.
The success of our business strategy to realize a number of cross selling
opportunities could be affected by a number of factors beyond our control.
As part of our business strategy, we intend to capitalize on a number of
cross-selling opportunities we believe exist as a result the complementary
customer bases and manufacturing capabilities of the acquired companies and to
implement certain operating improvements. Our ability to implement and realize
the benefits of this strategy could be affected by a number of factors beyond
our control, such as operating difficulties, increased operating costs,
regulatory developments, general economic conditions, increased competition, or
the inability to obtain adequate financing for our operations on suitable terms.
In addition, after gaining experience with our operations under this strategy,
we may decide to alter or discontinue certain aspects of it. Any failure to
implement aspects of our strategy may adversely affect our results of
operations, financial condition and ability to service debt, including our
ability to make principal and interest payments on the Notes.
17
<PAGE>
Our inability to access additional capital could have a negative impact on our
growth strategy.
Our growth strategy will require additional capital investment. Capital
will be required for, among other purposes, completing acquisitions, managing
acquired companies, acquiring new equipment and maintaining the condition of our
existing equipment. We intend to pay for future acquisitions using cash, capital
stock, debt financings and/or assumption of indebtedness. However, our ability
to make acquisitions and the manner in which they are financed will be limited
by the covenants contained in the indenture governing the Notes and our credit
facilities. To the extent that cash generated internally and cash available
under our credit facilities is not sufficient to fund capital requirements, we
will require additional debt and/or equity financing. There can be no assurance,
however, such financing will be available or, if available, will be available on
terms satisfactory to us. Future debt financings, if available, may result in
increased interest and amortization expense, increased leverage and decreased
income available to fund further acquisitions and expansion, and may limit our
ability to withstand competitive pressures and render us more vulnerable to
economic downturns. If we fail to obtain sufficient additional capital in the
future, we could be forced to curtail our growth strategy by reducing or
delaying capital expenditures and acquisitions, selling assets or restructuring
or refinancing our indebtedness. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
A loss of key employees and highly skilled workers could adversely affect our
business.
Some of our executive officers are key to our management and direction.
Our future success will depend on our ability to retain capable management. To
assist with the integration of the operations of our subsidiaries, we have
retained the services of key personnel of these companies. The success of our
operations may depend, in part, on the successful retention, at least initially,
of these key personnel, as well as our ability to attract and retain additional
talented personnel. Although we believe we will be able to attract and retain
talented personnel and that we could replace key personnel should the need
arise, the inability to attract or retain such personnel could have a material
adverse effect on our business. In addition, because our products and processes
are complex and require a high level of precision, we are generally dependent on
an educated and trained workforce. We would be adversely affected by a shortage
of skilled employees.
Failure to maintain relationships with our larger customers and failure by our
customers to continue to purchase expected quantities due to changes in market
conditions could have an adverse effect on our operations.
Our largest customer, General Electric, accounted for approximately 26.5%
of our 1999 net sales and our top ten customers accounted for approximately 67%
of our 1999 net sales. The termination by General Electric or any one or more of
our other top 10 customers of its relationship with us could have a material
adverse effect upon our business, financial condition and results of operations.
In addition, we have recently been awarded long-term contracts with
Caterpillar and Dana. We currently anticipate that we will need to enter into up
to approximately $35 million of new operating leases in connection with
financing the new equipment necessary to meet the production requirements for
these contracts. To the extent we are unable to purchase, integrate and make
operational this equipment on a cost-effective or timely basis, or to the extent
the costs associated with purchasing, integrating or making operational this
equipment are higher than we currently anticipate, our relationship with these
customers and our business and results of operations could be negatively
impacted.
Our revenues and operating results may be subject to significant fluctuation.
A significant portion of our revenues is derived from new projects and
contracts, the timing of which is subject to a variety of factors beyond our
control, including customer budgets and modifications in customer products. We
cannot predict the degree to which, on a consolidated basis, these trends will
continue. A portion of our operating expenses are relatively fixed. Because we
typically do not enter into long-term contracts or have volume commitments with
our customers, we must anticipate the future volume of orders based upon the
historic purchasing patterns of our customers and upon discussions with our
customers as to their future requirements. Cancellations, reductions or delays
in orders by a customer or group of customers could have a material adverse
effect on our business, financial condition or results of operations.
Additionally, we may periodically incur cost
18
<PAGE>
increases due to hiring and training of new employees in anticipation of future
growth. The size, timing and integration of possible future acquisitions may
also cause substantial fluctuations in operating results from quarter to
quarter. As a result, operating results for any fiscal quarter may not be
indicative of the results that may be achieved for any subsequent fiscal quarter
or for a full fiscal year.
Significant competition for precision part manufacturing outsourced by original
equipment manufacturers may affect our ability to succeed.
We operate in an industry which is highly fragmented and competitive. A
variety of suppliers with different subsets of our manufacturing capabilities
compete to supply the stringent demands of large original equipment
manufacturers. In addition, our customers are continually seeking to consolidate
their business among one or more "Preferred" or "Qualified" suppliers. If any
customer becomes dissatisfied with our prices, quality or timeliness of
delivery, among other things, it could award future business or, in an extreme
case, move existing business to our competitors. We cannot assure you that our
products will continue to compete successfully with the products of our
competitors, including original equipment manufacturers themselves, many of
which are significantly larger and have greater financial and other resources
than we do.
The cyclical nature of the industries we currently serve could have a material
adverse effect on our company.
A majority of our revenues are derived from customers which are in
industries and businesses that are cyclical in nature and subject to changes in
general economic conditions, such as the construction, aerospace and automotive
industries. General economic or industry specific downturns could have a
material adverse effect on our company and our business, results of operations
and financial condition.
Our business could be adversely affected if we are unable to obtain raw
materials and components from our suppliers on favorable terms.
Generally, our major raw materials consist of traditional materials such
as steel, aluminum, iron, copper, magnesium and bronze, as well as exotic and
difficult to machine materials such as titanium, inconel, invar and hastelloy. A
majority of our raw materials are supplied by our customers on consignment. Raw
materials not supplied by our customers are purchased from several suppliers.
Although all of these materials have been available in adequate quantities to
meet our production demands, we can give you no assurance that such materials
will be available in adequate quantities in the future. We do not presently
anticipate any raw material shortages which would significantly affect
production. However, the lead times between the placement of orders for certain
raw materials and actual delivery to us may vary significantly and we may from
time to time be required to order raw materials in quantities and at prices less
than optimal to compensate for the variability of lead times of delivery.
Because we maintain a relatively small inventory of raw materials and component
parts, our business could be adversely affected if we are unable to obtain these
raw materials and components from our suppliers on favorable terms.
Our business could be adversely affected to the extent the U.S. government
terminated or modified a contract with us or one of our customers.
We are generally not a direct party to any contracts with the U.S.
Government. However, a portion of our sales are to customers who use the parts,
assemblies or tooling we supply to them to fill orders under U.S. government
contracts to which they are a party. U.S. government contracts have significant
inherent risks, including:
. the ability of the U.S. government to terminate a contract for
convenience, in which case the other party could be limited to
receiving only costs already incurred or committed;
. modification of U.S. government contracts due to lack of Congressional
funding or changes in such funds; and
. an extensive and complex regulatory structure, which could subject the
other party to contract termination, civil and criminal penalties and
in some cases, suspension or disbarment from future U.S. government
contracts.
19
<PAGE>
To the extent the U.S. government terminates or modifies a contract with
one of our customers, we could be adversely affected if the affected customer
reduced its purchases from us as a result. In addition, in the few instances
where we are a direct party to a U.S. government contract, the inherent risks
described above, as well as risks associated with the competitive bidding
atmosphere under which U.S. government contracts are awarded and unreimbursed
cost overruns in fixed-price contracts, could have a material adverse effect on
our results of operations and financial condition.
Our equipment, facilities and operations are subject to numerous environmental
and other government regulations which may become more stringent in the future
and may result in increased liability and increased capital expenditures.
Our equipment, facilities and operations are subject to increasingly
complex and stringent federal, state and local laws and regulations pertaining
to protection of human health and the environment. These include, among other
things, the discharge of contaminants into the environment and the handling and
disposition of wastes (including industrial, solid and hazardous wastes). In
addition, we are required to obtain and maintain regulatory approvals in the
United States in connection with our operations. Many environmental laws and
regulations provide for substantial fines and criminal sanctions for violations.
It is difficult to predict the future development of such laws and regulations
or their impact on future earnings and operations, but we anticipate that these
laws and regulations will continue to require increased capital expenditures
because environmental standards will become more stringent. We cannot assure you
that material costs or liabilities will not be incurred.
Certain environmental laws provide for strict, joint and several liability
for investigation and remediation of spills and other releases of hazardous
materials. These laws typically impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of any hazardous
materials. Persons who "arrange", as defined under these laws, for the disposal
or treatment of hazardous materials also may be liable for the costs of
investigation, removal or remediation of such materials at the disposal or
treatment site, regardless of whether the affected site is owned or operated by
them. Such liability is strict, and may be joint and several.
Because we own and operate a number of facilities, and because we arrange
for the disposal of hazardous materials at many disposal sites, we may incur
costs for investigation, removal and remediation, as well as capital costs
associated with compliance with environmental laws and regulations. Although
such environmental costs have not been material in the past and are not expected
to be material in the future, changes in environmental laws and regulations or
unexpected investigations and clean-up costs could have a material adverse
effect on our business, financial condition or results of operations.
On the basis of historical financial information, recent operating history
and other factors, we believe that the subsidiary guarantees are being incurred
for proper purposes and in good faith and that each subsidiary guarantor, after
giving effect to its guarantee of the notes, will not be insolvent, will not
have unreasonably small capital for the business in which it is engaged and will
not have incurred debts beyond its ability to pay such debts as they mature.
There can be no assurance, however, as to what standard a court would apply in
making such determinations or that a court would agree with our conclusions in
this regard.
INFLATION
We do not believe that inflation has had a significant impact on our cost
of operations.
YEAR 2000
We did not experience any significant malfunctions or errors in our
operating or business systems when the date changed from 1999 to 2000. Based on
operations since January 1, 2000, we do not expect any significant impact to our
on-going business as a result of the "Year 2000 issue". However, it is possible
that the full impact of the date change, which was of concern due to computer
programs that use two digits instead of four digits to define years, has not
been fully recognized. For example, it is possible that Year 2000 or similar
issues
20
<PAGE>
may occur with billing, payroll, or financial closings at month, quarter, or
year end. We believe that such problems are likely to be minor and correctable.
In addition, we could still be negatively impacted if our customers or suppliers
are adversely affected by the Year 2000 or similar issues. We currently are not
aware of any significant Year 2000 or similar problems that have arisen for our
customers and suppliers.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
Our term loan facility provides for interest to be charged at either the
Eurodollar rate or a base rate determined in accordance with the credit
agreement. Based on our current level of borrowings from our term loan facility,
a 1.0% change in interest rate would result in a $0.2 million annual change in
interest expense. Our revolving line of credit provides for interest to be
charged at either the Eurodollar rate or a base rate determined in accordance
with the credit agreement. Based on our current level of outstanding revolving
line of credit, a 1.0% change in interest rate would result in a $0.1 million
annual change in interest expense. The remainder of our debt is at fixed
interest rates that are not subject to changes in interest rates. We do not own
nor are we obligated for other significant debt or equity securities that would
be affected by fluctuations in market risk.
21
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PART II: OTHER INFORMATION
Item 1: Legal Proceedings
Not applicable.
Item 2: Changes in Securities and Use of Proceeds
Not applicable.
Item 3: Defaults Upon Senior Securities
Not applicable.
Item 4: Submission of Matters to a Vote of Security Holders
(a) through (d) Not applicable.
Item 5: Other Information
Subsequent to the end of the quarter ended March 31,2000, the resignations of
Dr. James Ashton, Chairman and Chief Executive Officer of Precision Partners,
Inc., Mr. Ronald Miller, Chief Financial Officer of Precision Partners, Inc.,
and Mr. Melvin Johnson, Vice-President of Operations of Precision Partners,
Inc., were accepted by the Board of Directors of Precision Partners, Inc. as
tendered. The executives have agreed to continue their leadership roles until a
successor team has been named and a transition strategy has been executed.
Item 6: Exhibits and Reports on Form 8-K
We were not required to file any reports on Form 8-K during the first quarter
due to the status of our Registration Statement.
22
<PAGE>
PRECISION PARTNERS, INC.
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 thereunto duly authorized.
PRECISION PARTNERS, INC.
Dated: May 11, 2000 By: /s/ Ron Miller
-------------------------
Ron Miller
Chief Financial Officer
23
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