<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington , D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended May 27, 1995
COMMISSION FILE NUMBER 0-7558
ADVANCE CIRCUITS, INC.
A Minnesota Corporation
I. R. S. Identification Number 41-0917530
5929 Baker Road, Suite 470
Minnetonka, Minnesota 55345
Telephone No. (612) 988-8700
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 twelve (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_____________________
7,564,895 Shares of Common Stock (Par value $.10 per Share) outstanding on June
10, 1995.
This report totals 8 pages
No Exhibit Index 1
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ADVANCE CIRCUITS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
May 27 August 27
ASSETS 1995 1994
-------------- -------------
<C> <S> <S>
CURRENT ASSETS:
Cash $ 5,513,674 $ 8,694,590
Receivables 22,711,560 20,487,407
Prepaid expenses 1,319,498 1,100,892
------------- -------------
Inventories:
Materials 3,585,421 2,971,848
Printed circuit boards in process 6,320,469 4,800,951
------------- -------------
Total inventories 9,905,890 7,772,799
------------- -------------
Total current assets 39,450,622 38,055,688
------------- -------------
PROPERTY AND EQUIPMENT:
Land and building 2,723,540 2,658,041
Equipment 67,420,595 52,263,219
Leasehold improvements 6,004,348 5,205,104
Accumulated depreciation and amortization (42,214,700) (32,967,848)
------------- -------------
Net property and equipment 33,933,783 27,158,516
------------- -------------
GOODWILL 5,278,898 784,828
OTHER ASSETS 2,923,973 3,665,917
-------------------------------------------------
$ 81,587,276 $ 69,664,949
-------------------------------------------------
-------------------------------------------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 211,957 $ 31,913
Note payable -- 2,000,000
Accounts payable 15,857,638 12,687,854
Accrued wages 2,514,342 2,240,730
Accrued expenses 781,426 784,709
Income taxes payable 438,535 551,228
-------------------------------------------------
Total current liabilities 19,803,898 18,296,434
-------------------------------------------------
DEFERRED INCOME TAXES 2,093,000 2,093,000
LONG-TERM DEBT, less current maturities 25,492 50,990
------------- -------------
SHAREHOLDERS' INVESTMENT:
Common stock, $.10 par, 10,000,000 shares
authorized, 7,564,895 and 7,319,895 shares issued 756,489 731,990
Paid-in surplus 12,995,673 10,044,051
Retained Earnings 47,248,547 40,022,759
Deferred compensation (1,335,823) (1,574,275)
-------------------------------------------------
Total shareholders' investment 59,664,886 49,224,525
-------------------------------------------------
$ 81,587,276 $ 69,664,949
-------------------------------------------------
-------------------------------------------------
</TABLE>
2
<PAGE>
ADVANCE CIRCUITS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
FOR THE 3 MONTHS ENDED FOR THE 9 MONTHS ENDED
------------------------------ ------------------------------
May 27 May 28 May 27 May 28
1995 1994 1995 1994
--------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES $ 45,685,703 $ 38,608,512 $127,838,809 $106,386,979
COST OF SALES 39,174,581 32,874,177 108,276,296 89,991,219
------------- ------------- ------------ ------------
GROSS PROFIT 6,511,122 5,734,335 19,562,513 16,395,760
------------- ------------- ------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES 1,391,552 1,005,123 4,110,740 3,010,156
MARKETING EXPENSES 1,432,432 1,261,066 4,219,977 3,540,915
------------- ------------- ------------ ------------
3,687,138 3,468,146 11,231,796 9,844,689
INTEREST AND OTHER INCOME (110,442) (137,498) (260,297) (483,199)
INTEREST EXPENSE 24,197 8,555 54,305 37,902
------------- ------------- ------------ ------------
3,773,383 3,597,089 11,437,788 10,289,986
INCOME TAXES 1,376,000 1,333,000 4,212,000 3,798,000
------------- ------------- ------------ ------------
NET INCOME $ 2,397,383 $ 2,264,089 $ 7,225,788 $ 6,491,986
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 7,540,000 7,175,000 7,387,000 7,173,000
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
NET INCOME PER SHARE $ 0.32 $ 0.32 0.98 $ 0.91
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
DIVIDENDS PER COMMON SHARE NONE NONE NONE NONE
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
3
<PAGE>
ADVANCE CIRCUITS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE 9 MONTHS ENDED
--------------- ------------
May 27 May 28
1995 1994
--------------- ------------
<S> <C> <C>
Cash Flows Provided By (Used For):
Operating Activities:
Net income $ 7,225,786 $ 6,491,955
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,209,677 5,756,407
Change in current assets and
current liabilities. (3,938,084) (1,876,029)
------------- ------------
Net cash provided by operating activities 10,497,379 10,372,333
------------- ------------
Investing Activities:
Change in other assets 26,014 190
License agreement (750,000) ---
Note Receivable --- (1,500,000)
Capital expenditures, net (11,303,364) (8,166,754)
------------- ------------
Net cash used in investing activities (12,027,350) (9,666,564)
------------- ------------
Financing Activities:
Forfeiture of restricted common stock (33,726) ---
Principal payments on long-term debt (1,545,049) (116,793)
Proceeds from issuance of common stock --- 17,500
Cash deficit from acquisition of AAI (72,170) ---
------------- ------------
Net cash used in financing activities (1,650,945) (99,293)
------------- ------------
Net change in cash (3,180,916) 606,476
Cash:
Beginning of period 8,694,590 7,096,806
------------- ------------
End of period $ 5,513,674 $ 7,703,282
------------- ------------
Supplemental Disclosures of Cash Used For
Interest $ 133,150 $ 43,187
Income taxes 4,321,919 4,360,393
------------- ------------
------------- ------------
Schedule of non cash financing activities:
Common stock issued for acquisition of AAI $ 2,970,000 $ -
Retirement of note receivable in acquisition of AAI 1,500,000 -
------------- ------------
------------- ------------
</TABLE>
4
<PAGE>
ADVANCE CIRCUITS, INC.
Notes to Condensed Consolidated Financial Statements
May 27,1995
NOTE 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and therefore do
not include all information and disclosures necessary for a fair presentation of
results of operations, financial position and changes in cash flows in
conformity with generally accepted accounting principles. The condensed
statements of income for the nine month periods ended May 27, 1995 and May 28,
1994 reflect, in the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary for a fair presentation of the results
of operations for these periods.
NOTE 2 - Acquisition of Acsist Associates, Inc.
On December 2, 1994, the company acquired Acsist Associates, Inc. (AAI) a
manufacturer of complex multilayer circuit boards and multi-chip modules for
240,000 common shares. The transaction was accounted for by the purchase method
of accounting. The cost of the acquisition exceeded the basis in its assets by
$4,671,245, which amount is being amortized over a period of 15 years. The
operations of AAI have been included in the financial statements from the date
of acquisition. Proforma results of operations as if the acquisition had
occurred at the beginning of the period for each of the fiscal years are as
follows:
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
May 27, 1995 May 28, 1994
------------ ------------
<S> <C> <C>
Sales $ 130,396 $ 115,692
Net income before extraordinary item 6,186 5,978
Net income 6,186 6,451
Per Share
Net income before extraordinary item $ .84 $ .80
Net income .84 .87
</TABLE>
5
<PAGE>
NOTE 3 - Net Income Per Share
Net income per common share is computed by dividing net income by the
weighted average number of common shares and common share equivalents
outstanding.
NOTE 4 - Restricted Stock Plan
The Company has a restricted stock plan under which 500,000 shares of
common stock are reserved for issuance. During the first nine months of fiscal
1995, 25,000 shares were granted in accordance with the plan and 20,000 shares
were forfeited. . As of May 27, 1995, the Board of Directors has granted 331,000
shares without charge to certain key employees. Shares granted pursuant to the
plan vest seven years after the grant date. However, if the Company earns $1.50
per share for three consecutive years, up to 50 percent of the shares will vest.
The shares are subject to forfeiture if the employee leaves the Company.
NOTE 5 - Incentive Stock Option Plan
During the first nine months of fiscal 1995, no common shares were issued
upon exercise of options granted in accordance with the Company's incentive
stock option plan. No options were granted during the period and no shares were
forfeited. As of May 27, 1995, there were options outstanding to purchase 56,000
shares at $8.38 per share.
In connection with the acquisition of AAI, existing options and warrants
for AAI shares were converted into options to acquire 5,018 shares at $16.64 per
share and 20,936 shares at $24.96 per share of the Company's common shares. The
options expire in various amounts to 1999.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Sales for the three-month period ended May 27, 1995 were $45,686,000, an
increase of $7,077,000 (18%) from sales of $38,609,000 for the third quarter of
fiscal 1994. Sales for the nine-month period ended May 27, 1995 totaled
$127,839,000 an increase of $21,452,000 (20%) from sales of 106,387,000 for the
comparable period in fiscal 1994.
Sales for the quarter and for the first nine months of the fiscal year
represent records for the Company and are the result of utilization of
increased capacity from the addition of new capital equipment and the inclusion
of Acsist Associates, Inc. (AAI) in the consolidated results from its
acquisition on December 2, 1994. At the same time, the electronics industry
continues in a period of sustained growth.. The May 27, 1995 sales backlog
totaled $90,042,000 compared to $68,309,000 at February 25, 1995 and $64,461,000
at May 28, 1994.
Gross margin for the third quarter in fiscal 1995 was 14.3% compared to
15.7% in the prior quarter and 14.9% for the comparable period in fiscal 1994.
The decrease in margins for the quarter compared to the prior quarter is the
result of a significant decrease in margins at AAI due to decreased volume and
yield problems from the introduction of new products. Margins are down from the
same period in 1994 as a result of an increase in sales from both AAI and Targ-
It-Tronics which are at much lower gross margin than the circuit board sales.
The pressure on margins during the quarter and during the nine month period from
pricing pressure has greatly diminished due to the robust electronic
environment.
Operating expenses for the quarter and nine month periods ended May 27,
1995 increased $558,000 (25%) and $1,780,000 (27%) from the corresponding
periods in fiscal 1994. The increases in dollar amount were due to a higher
level of operations and the inclusion of AAI, but remained a relatively
consistent percentage of sales compared to the corresponding periods in the
prior year. The increase in marketing expenses was due to additions to the sales
force which resulted in the higher level of sales and in the sales order
backlog. Interest income decreased due to lower cash balances which was
partially offset by an improvement in interest rates.
The Company's income tax provision has been computed at 37 percent which is
the expected effective rate for the fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $7,000,000 line of credit with its bank, none of which
has been drawn as of May 27, 1995. The credit line has an interest rate equal to
the bank's base rate and is secured by accounts receivable. The Company believes
that the current cash balances, cash flow generated from operations and
available borrowing capacity under the line of credit, will be sufficient to
fund operations and capital requirements for 1995.
7
<PAGE>
PART II OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) During the three month period ended May 27, 1995, no reports on 8-K
were filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADVANCE CIRCUITS, INC. (the "Registrant")
Date: June 20, 1995 By /s/ Robert W. Heller
--------------------
Robert W. Heller
President & CEO
Date: June 20, 1995 By /s/ Thomas I. Mueller
---------------------
Thomas I. Mueller
Executive Vice President & CFO
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
ADVANCE CIRCUITS, INC. MAY 27, 1995 BALANCE SHEET AND INCOME STATEMENT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-26-1995
<PERIOD-START> MAY-27-1995
<PERIOD-END> MAY-27-1995
<CASH> 5,513,674
<SECURITIES> 0
<RECEIVABLES> 22,711,560
<ALLOWANCES> 0
<INVENTORY> 9,905,890
<CURRENT-ASSETS> 39,450,622
<PP&E> 76,148,483
<DEPRECIATION> 42,214,700
<TOTAL-ASSETS> 81,587,276
<CURRENT-LIABILITIES> 19,803,898
<BONDS> 0
<COMMON> 756,489
0
0
<OTHER-SE> 58,908,397
<TOTAL-LIABILITY-AND-EQUITY> 81,587,276
<SALES> 127,838,809
<TOTAL-REVENUES> 127,838,809
<CGS> 108,276,296
<TOTAL-COSTS> 8,330,717
<OTHER-EXPENSES> 260,297
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,305
<INCOME-PRETAX> 11,437,788
<INCOME-TAX> 4,212,000
<INCOME-CONTINUING> 7,225,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,225,788
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
