<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: JULY 3, 1999
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: 333-32207
HCC INDUSTRIES INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 95-2691666
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4232 TEMPLE CITY BLVD., ROSEMEAD, CALIFORNIA 91770
--------------------------------------------------
(Address of principal executive offices)
(626) 443-8933
--------------
(Registrant's telephone number, including area code)
-------------------
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 ( )
Registrant's Common Stock, outstanding at August 17, 1999 was 135,495 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
HCC INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
JULY 3, APRIL 3,
1999 1999
--------- ---------
<S> <C> <C>
CURRENT ASSETS: (UNAUDITED)
Cash and cash equivalents $ 14,914 $ 17,395
Trade accounts receivable, less allowance for
doubtful accounts of $55 at July 3, 1999
and $40 at March 28, 1998 8,699 9,834
Inventories 4,168 4,370
Prepaid and deferred income taxes 734 293
Other current assets 699 468
--------- ---------
Total current assets 29,214 32,360
PROPERTY, PLANT AND EQUIPMENT, NET 19,713 19,153
OTHER ASSETS:
Intangible assets 5,280 5,352
Deferred financing costs 3,013 3,108
Deferred income taxes 4,275 4,275
Restricted cash 6,199 6,120
--------- ---------
TOTAL ASSETS $ 67,694 $ 70,368
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,122 $ 1,125
Accounts payable 2,889 2,449
Accrued liabilities 4,038 6,707
--------- ---------
Total current liabilities 8,049 10,281
LONG TERM LIABILITIES:
Long-term debt, net of current portion 102,305 102,043
Other long-term liabilities 9,402 9,416
--------- ---------
119,756 121,740
--------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock; $.10 par value; authorized 550,000
shares, issued and outstanding 135,495 shares 14 14
Additional paid-in capital 200 200
Accumulated deficit (52,276) (51,586)
--------- ---------
TOTAL STOCKHOLDERS' DEFICIT (52,062) (51,372)
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 67,694 $ 70,368
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE>
HCC INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
July 3, June 27,
1999 1998
---------- ---------
<S> <C> <C>
NET SALES $ 12,218 $ 18,246
Cost of goods sold 9,146 10,933
---------- ---------
GROSS PROFIT 3,072 7,313
Selling, general and administrative expenses 1,569 2,088
---------- ---------
EARNINGS FROM OPERATIONS 1,503 5,225
---------- ---------
OTHER INCOME (EXPENSE):
Interest and other income 192 177
Interest expense (2,827) (2,722)
---------- ---------
Total other expense, net (2,635) (2,545)
Earnings (loss) before taxes (1,132) 2,680
Taxes (benefit) on earnings (loss) (442) 1,049
----------- ---------
NET EARNINGS (LOSS) $ (690) $ 1,631
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
HCC INDUSTRIES INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three Months Ended
----------------------------------
July 3, June 27,
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ (690) $ 1,631
Reconciliation of net earnings (loss) to net cash
provided by operating activities:
Depreciation 484 395
Amortization 167 168
Deferred income taxes (441) ---
Changes in operating assets and liabilities:
Decrease in trade accounts receivable, net 1,135 308
Decrease (increase) in inventories 202 (128)
(Increase) in other assets (310) (94)
(Decrease) in accrued liabilities (2,683) (2,103)
Increase (decrease) in accounts payable and income
taxes payable 440 (764)
----------- ------------
Net cash used in operating activities (1,696) (587)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (508) (871)
----------- -----------
Net cash used in investing activities (508) (871)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (277) (231)
----------- -----------
Net cash used in financing activities (277) (231)
----------- -----------
Net (decrease) in cash and cash equivalents (2,481) (1,689)
Cash and cash equivalents at beginning of period 17,395 13,441
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,914 $ 11,752
----------- -----------
----------- -----------
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES:
Capital lease obligations and mortgages 536 3,145
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
HCC INDUSTRIES INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
July 3, 1999
1. INTERIM FINANCIAL STATEMENTS:
The accompanying unaudited condensed consolidated financial statements of HCC
Industries Inc. and Subsidiaries (the "Company"), include all adjustments
(consisting of normal recurring entries) which management believes are necessary
for a fair presentation of the financial position and results of operations for
the periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Interim financial
statements are subject to possible adjustments in connection with the annual
audit of the Company's accounts for the full year. The year end condensed
balance sheet data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles. It
is suggested that the accompanying interim financial statements be read in
conjunction with the Company's audited financial statements and footnotes as of
and for the year ended April 3, 1999. Operating results for the three month
period ended July 3, 1999 are not necessarily indicative of the operating
results for the full fiscal year.
2. INVENTORIES:
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
July 3, April 3,
1999 1999
-------- --------
<S> <C> <C>
Raw materials and component parts $ 2,023 $ 2,279
Work in process 2,145 2,091
-------- --------
$ 4,168 $ 4,370
-------- --------
-------- --------
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
July 3, April 3,
1999 1999
-------- --------
<S> <C> <C>
Land $ 4,017 $ 4,017
Buildings and improvements 8,699 8,699
Furniture, fixtures and equipment 16,322 15,278
-------- ---------
29,038 27,994
Less accumulated depreciation (9,325) (8,841)
-------- ---------
$ 19,713 $ 19,153
-------- ---------
-------- ---------
</TABLE>
5
<PAGE>
HCC INDUSTRIES INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
July 3, 1999
4. LONG-TERM DEBT:
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
July 3, April 3,
1999 1999
---------- ---------
<S> <C> <C>
10 3/4% Senior Subordinated Notes - interest payable
semi-annually; due May 15, 2007 $ 90,000 $ 90,000
Subordinated Notes due Selling Shareholders -
12% interest payable semi-annually; due March 28, 2001 2,500 2,500
Subordinated Bonus Notes - 10% interest payable semi-annually;
$3,000,000 due March 28, 2001 and
$1,085,000 due April 3, 2002 4,085 4,085
Term loans on land, building and improvements -
8% interest payable monthly; due may 2008 2,762 2,762
Other 4,080 3,821
---------- ---------
103,427 103,168
Less current portion 1,122 1,125
---------- ---------
$ 102,305 $ 102,043
---------- ---------
---------- ---------
</TABLE>
5. CAPITAL STOCK:
The Company is authorized to issue an aggregate of 550,000 shares of common
stock. These shares may be issued in four different classes (A, B, C or D
shares) which differ only in voting rights per share. At July 3, 1999, the
135,495 outstanding shares of common stock were designated as follows:
<TABLE>
<CAPTION>
Shares Voting Rights
Class Outstanding Amount Per Share
----- ----------- ---------- -------------
<S> <C> <C> <C>
A 103,193 $ 11,000 1
B 27,506 3,000 1
C 4,316 --- None
D 480 --- 10
-------- ----------
135,495 $ 14,000
-------- ----------
-------- ----------
</TABLE>
The remaining 414,505 shares of authorized but unissued common stock are
undesignated as to class.
6. COMMITMENTS AND CONTINGENCIES:
ENVIRONMENTAL
As an ongoing facet of the Company's business, it is required to maintain
compliance with various environmental regulations. The cost of this compliance
is included in the Company's operating results as incurred. These ongoing costs
include permitting fees and expenses and specialized effluent control systems as
well as monitoring and site assessment costs required by various governmental
agencies. In the opinion of management, the maintenance of this compliance will
not have a significant effect on the financial position or results of operations
of the Company.
6
<PAGE>
HCC INDUSTRIES INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
July 3, 1999
6. COMMITMENTS AND CONTINGENCIES, Continued:
In August 1994, the U.S. Environmental Protection Agency ("EPA") identified
the Company as a potentially responsible party ("PRP") in the El Monte
Operable Unit ("EMOU") of the San Gabriel Valley Superfund Sites. In early
1995, the Company and the EPA executed an Administrative Consent Order which
requires the Company and other PRP's to perform a Remedial Investigation and
Feasibility Study ("RI/FS") for the EMOU. In addition, the Company's facility
in Avon, Massachusetts is subject to Massachusetts "Chapter 21E", the State's
hazardous site clean-up program. Uncertainty as to (a) the extent to which
the Company caused, if at all, the conditions being investigated, (b) the
extent of environmental contamination and risks, (c) the applicability of
changing and complex environmental laws (d) the number and financial
viability of other PRP's, (e) the stage of the investigation and/or
remediation, (f) the unpredictability of investigation and/or remediation
costs (including as to when they will be incurred), (g) applicable clean-up
standards, (h) the remediation (if any) that will ultimately be required, and
(i) available technology make it difficult to assess the likelihood and scope
of further investigation or remediation activities or to estimate the future
costs of such activities if undertaken. In addition, liability under CERCLA
is joint and several, and any potential inability of other PRPs to pay their
pro rata share of the environmental remediation costs may result in the
Company being required to bear costs in excess of its pro rata share.
In fiscal 1997, the Company with the help of independent consultants,
determined a range of estimated costs of $9,000,000 to $11,000,000 associated
with the various claims and assertions it faces. The time frame over which
the Company expects to incur such costs varies with each site, ranging up to
20 years as of March 28, 1998. These estimates are based partly on progress
made in determining the magnitude of such costs, experience gained from sites
on which remediation is ongoing or has been completed, and the timing and
extent of remedial actions required by the applicable governmental
authorities. As a result, the Company accrued $10,000,000 in fiscal 1997 for
existing estimated environmental remediation and other related costs which
the Company believes to be the best estimate of the liability. As of July 3,
1999, the accrual for estimated environmental costs was $9,402,000.
Claims for recovery of costs already incurred and future costs have been
asserted against various insurance companies. The Company has neither
recorded any asset nor reduced any liability in anticipation of recovery with
respect to such claims made.
The Company believes its reserves are adequate, but as the scope of its
obligations becomes more clearly defined, this reserve may be modified and
related charges against earnings may be made.
Pursuant to the Recapitalization Agreement, the Selling Group has agreed to
indemnify the Company with respect to the after-tax costs of contingent
environmental and other liabilities, subject to a cap for all indemnified
liabilities of $30 million. Pursuant to the Recapitalization Agreement, a
$6.0 million interest bearing escrow account was established by the selling
stockholders (the "Deferred Amount") to secure indemnity claims of the
Company and others, including with respect to environmental liabilities. Any
environmental costs, net of tax benefit, are expected to be funded from the
escrow account. Actual expenditures for environmental remediation were
$14,000 for the quarter ended July 3, 1999 and $203,000 for the fiscal year
ended April 3 1999.
7
<PAGE>
HCC INDUSTRIES INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
July 3, 1999
6. COMMITMENTS AND CONTINGENCIES, Continued:
Other
On March 3, 1998, Walter Neubauer, formerly the largest shareholder of the
Company and presently one of the largest shareholders of Special Devices,
Inc., the Company's largest customer, filed a lawsuit in California Superior
Court against the Company and certain other stockholders alleging (i) breach
of fiduciary duty, (ii) fraud, (iii) negligent misrepresentation, (iv)
negligence, (v) violations of corporations code and (vi) breach of contract.
The allegations primarily relate to the Company's exercise of a 1995 option
to acquire Mr. Neubauer's stock in August 1996. Mr. Neubauer is seeking
damages of $40.0 million. Based upon the Company's analysis of the current
facts, it is management's belief that the Company should ultimately prevail
in this matter, although there can be no assurance in this regard at this
time.
On May 7, 1998, the Company filed a lawsuit against Mr. Neubauer in
California Superior Court alleging (i) breach of contract, (ii) intentional
interference with business relations and (iii) interference with prospective
business advantage. All allegations relate to violations of the
noncompetition agreement executed by Mr. Neubauer in August 1996. The Company
is seeking damages of $50.0 million.
In addition to the above, the Company is involved in other claims and
litigation arising in the normal course of business. Based on the advice of
counsel and in the opinion of management, the ultimate resolution of these
matters will not have a significant effect on the financial position or the
results of operations of the Company.
8
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (IN MILLIONS)
<TABLE>
<CAPTION>
For The Three Months Ended
---------------------------------
July 3, June 27,
1999 Percent 1998 Percent
------ ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $12.2 100.0% $18.2 100.0%
Gross profit 3.1 25.4% 7.3 40.1%
Selling, general and administrative
expenses 1.6 13.1% 2.1 11.5%
Earnings from operations 1.5 12.3% 5.2 28.6%
Other income/expense (2.6) -21.3% (2.5) -13.7%
Net earnings (loss) $(0.7) -5.7% $1.6 8.8%
</TABLE>
COMPARISON OF THE THREE MONTHS ENDED JULY 3, 1999 ("2000 QUARTER") TO THE THREE
MONTHS ENDED JUNE 27, 1998 ("1999 QUARTER")
NET SALES
The Company's net sales decreased by approximately 33.0% or $6.0
million to $12.2 million for the 2000 Quarter compared to sales of $18.2 million
for the 1999 Quarter. The significant decrease was due to decreasing demand in
all product lines. Sales to existing aerospace, industrial process control, and
petrochemical customers decreased significantly in the 2000 Quarter. Net
non-automotive shipments decreased by approximately 33% in the 2000 Quarter
compared to the 1999 Quarter. Based on current order volume, the Company expects
significant weakness in the aerospace, industrial process control and
petrochemical markets to continue in the next quarter.
On the automotive side, unit shipments of airbag initiator products
decreased significantly due to customer delays on existing programs. The
Company's airbag initiator shipments to its largest customer, Special
Devices, Inc. ("SDI") decreased 24% for the 2000 Quarter compared to the 1999
Quarter. This decreased volume was magnified by a price reduction effected
under a new supply agreement with SDI. The new agreement with SDI was
effective March 18, 1999 and expires on December 31, 2002. Overall, revenue
from all automotive shipments decreased approximately 33% in the 2000 Quarter
compared to the 1999 Quarter. Based on current order volume, the Company
expects significant weakness in the automotive market to continue in the next
quarter.
GROSS PROFIT
Gross profit decreased by approximately 57.5% or $4.2 million, to $3.1
million for the 2000 Quarter compared to $7.3 for the 1999 Quarter. Gross margin
decreased to 25.4% for the 2000 Quarter from 40.1% for the 1999 Quarter.
The decrease in gross profit is attributable to the decreased sales
volume. The decrease in gross margin was primarily attributable to the
significant decrease in revenue and the corresponding impact of fixed overhead
costs leveraged against lower revenue. Additionally, gross margin was impacted
by price concessions on automotive products that have exceeded the Company's
ability to reduce its production costs. The ongoing decreases in sales will
continue to impact gross profitability and gross margin.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative ("S,G&A") expenses decreased by
approximately 23.8% or $0.5 million to $1.6 million for the 2000 Quarter
compared to $2.1 million for the 1999 Quarter. S,G&A expenses as a percent to
sales increased to 13.1% in the 2000 Quarter from 11.5% for the 1999 Quarter.
Selling expenses decreased approximately 17% in the 2000 Quarter
compared to the 1999 Quarter. This decrease was attributable to lower selling
commissions recorded against approximately $6.0 million fewer sales.
Additionally, G&A expenses overall were lower in the 2000 Quarter as the 1999
Quarter included approximately $0.6 million of contingent compensation expenses
for the period. There was no such contingent compensation expense in the 2000
Quarter. The increased percentage of S,G&A expenses to sales reflects the
decreased leverage on the fixed portion of those expenses.
EARNINGS FROM OPERATIONS
Operating earnings decreased $3.7 million to $1.5 million for the 2000
Quarter compared to $5.2 million for the 1999 Quarter. Operating margins
decreased to 12.3% in the 2000 Quarter from 28.6% for the 1999 Quarter.
The decrease in operating earnings and margin was attributable to the
same factors (as discussed above) that contributed to the decrease in gross
profit, gross margin and S,G&A expenses as a percent to sales.
OTHER EXPENSE, NET
Other expense, net (which is predominantly net interest expense) was
relatively flat at $2.6 million in the 2000 Quarter and $2.5 million in the 1999
Quarter. The Company has $103.4 million of indebtedness as of July 3, 1999
compared to $103.2 million at June 27, 1998.
NET EARNINGS
Net earnings decreased by approximately $2.3 million to a net loss of
$0.7 million for the 2000 Quarter from $1.6 million in the 1999 Quarter.
The decrease in net earnings was primarily attributable to the decrease
in earnings from operations in the 2000 Quarter.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $1.7 million for the 2000
Quarter compared to $0.6 million for the 1999 Quarter. The increase of $1.1
million of cash consumed was primarily attributable to a reduction in earnings
from operations.
Net cash used in investing activities was $0.5 million for the 2000
Quarter compared to $0.9 million for the 1999 Quarter.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
As of July 3, 1999, the Company's outstanding indebtedness is $103.4
million, consisting of $90.0 million principal amount of the senior subordinated
notes, $2.5 million of subordinated notes due Selling Shareholders pursuant to
the Contingent Note Agreement, $4.1 million of subordinated bonus notes pursuant
to the Contingent Bonus Plan, $2.7 million of mortgage debt and $4.1 million of
other borrowings. The Company has a Revolving Credit Facility up to $20.0
million and is collateralized by accounts receivable and inventories. At July 3,
1999 no amounts were outstanding and $16.4 million was available under the
Revolving Credit Facility. Borrowings under the Revolving Credit Facility may be
used for general and other corporate purposes.
The Company believes that cash flow from operations and the
availability of borrowings under the Revolving Credit Facility will provide
adequate funds for ongoing operations, planned capital expenditures and debt
service during the term of such facility. To the extent certain performance
thresholds with respect to the Contingent Notes and Contingent Bonuses are met,
and such obligations become vested, the Company believes that cash flow from
operations and availability of borrowings will be sufficient to fund such
obligations.
Capital expenditures for fiscal 2000 are expected to focus on vertical
integration with investments in equipment to expand manufacturing capacity in
machining, glass production, sealing and plating, as well as automation
equipment to lower production costs on the high volume production lines.
Expected capital expenditures for fiscal 2000 are approximately $2.5 million and
will be financed through working capital and the Revolving Credit Facility.
YEAR 2000 ISSUE
The Year 2000 readiness issue, which is common to most businesses,
arises from the inability of information systems, and other time and date
sensitive products and systems to properly recognize and process date-sensitive
information or system failures. Assessments of the potential cost and effects of
Year 2000 issues vary significantly among businesses, and it is extremely
difficult to predict the actual impact. Recognizing this uncertainty, management
is continuing to actively analyze, assess and plan for various Year 2000 issues
across its business. The products manufactured by the Company do not have issues
related to Year 2000 functionality.
The Year 2000 issue has an impact on both information technology ("IT")
systems and non-IT systems, such as manufacturing systems and physical
facilities including, but not limited to, security systems and utilities.
Although management believes that a majority of the Company's IT systems are
Year 2000 ready, such systems continue to be tested for Year 2000 readiness. The
Company is replacing or upgrading those systems that are identified as non-Year
2000 compliant. Certain IT systems previously identified as non-Year 2000
compliant are being upgraded or replaced which should be complete by September
30, 1999. Non-IT system issues are more difficult to identify and resolve. The
Company is actively identifying non-IT Year 2000 issues concerning its physical
facility locations. As non-IT areas are identified, management formulates the
necessary actions to ensure minimal disruption to its business processes.
Although management believes that its efforts will be successful and the costs
will be insignificant to its consolidated financial position and results of
operations, management also recognizes that any failure or delay could cause a
potential negative impact.
Independent of the Company's efforts to prepare for Year 2000
readiness, the Company has purchased and is implementing a new management
information system. This new system is Year 2000 compliant and is scheduled to
be fully operational by September 30, 1999.
The Year 2000 readiness of its customers varies. The Company is not
investigating whether or not its customers are evaluating and/or preparing their
own systems. These efforts by customers to address Year 2000 issues may affect
the demand for certain products and services; however, the impact to the revenue
or any change in revenue patterns is highly uncertain.
11
<PAGE>
The Company has also initiated efforts to assess the Year 2000
readiness of its key suppliers and business partners. The Company's direction of
this effort is to ensure the adequacy of resources and supplies to minimize any
potential business interruptions. While the Company continues to believe the
Year 2000 issue described above will not materially affect its consolidated
financial position or results of operations, it remains uncertain as to what
extent, if any, the Company may be impacted.
This filing contains statements that are "forward looking statements",
and includes, among other things, discussions of the Company's business strategy
and expectations concerning market position, future operations, margins,
profitability, liquidity and capital resources. Although the Company believes
that the expectations reflected in such forward looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. All phases of the operations of the Company are subject to a
number of uncertainties, risks and other influences, including general economic
conditions, regulatory changes and competition, many of which are outside the
control of the Company, any one of which, or a combination of which, could
materially affect the results of the Company's operations and whether the
forward looking statements made by the Company ultimately prove to be accurate.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on
long-term debt obligations that impact the fair value of these obligations.
At July 3, 1999 the carryng value of our fixed-rate long-term debt
approximated its fair value.
12
<PAGE>
PART II - OTHER INFORMATION
Items 1 through 5 are omitted as they are not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: 12 - Computation of ratio of earnings to fixed
charges
(b) Reports on Form 8-K - Not applicable
SIGNATURES
HCC INDUSTRIES INC.
DATED: AUGUST 17, 1999 s/s ANDREW GOLDFARB
--------------- ---------------
President and Chief Executive Officer
DATED: AUGUST 17, 1999 s/s CHRISTOPHER H. BATEMAN
--------------- ----------------------
Vice President and Chief Financial Officer
13
<PAGE>
EXHIBIT 12
HCC INDUSTRIES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
For The Three Months Ended
--------------------------------
July 3, June 27,
1999 1998
----------- ----------
<S> <C> <C>
Earnings:
Earnings (loss) before taxes $ (1,132) $ 2,680
Add: Fixed Charges* 2,827 2,722
----------- ----------
$ 1,695 $ 5,402
----------- ----------
----------- ----------
* Fixed Charges:
Interest expense $ 2,827 $ 2,722
----------- ---------
$ 2,827 $ 2,722
----------- ----------
----------- ----------
Ratio of Earnings to Fixed Charges --(1) 2.0
----------- ----------
----------- ----------
</TABLE>
(1) There was a deficiency of earnings to fixed charges for the three months
ended July 3, 1999 of $1,132.
* The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, "earnings" consist of earnings before
taxes and extraordinary item plus fixed charges and "fixed charges" consist
of interest expense and amortization of debt issuance costs.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-01-2000
<PERIOD-START> APR-04-1999
<PERIOD-END> JUL-03-1999
<CASH> 14,914
<SECURITIES> 0
<RECEIVABLES> 8,754
<ALLOWANCES> (55)
<INVENTORY> 4,168
<CURRENT-ASSETS> 29,214
<PP&E> 29,038
<DEPRECIATION> (9,325)
<TOTAL-ASSETS> 67,694
<CURRENT-LIABILITIES> 8,049
<BONDS> 102,305
0
0
<COMMON> 14
<OTHER-SE> (52,076)
<TOTAL-LIABILITY-AND-EQUITY> 67,694
<SALES> 12,218
<TOTAL-REVENUES> 12,218
<CGS> 9,146
<TOTAL-COSTS> 9,146
<OTHER-EXPENSES> 1,569
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 2,827
<INCOME-PRETAX> (1,132)
<INCOME-TAX> (442)
<INCOME-CONTINUING> (690)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (690)
<EPS-BASIC> (5.092)
<EPS-DILUTED> (5.092)
</TABLE>
