<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Commission
Date of Report (Date of earliest event reported): March 20, 1998
Hadco Corporation
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Massachusetts 0-12102 04-2393279
- ---------------------------- ------------------------ ----------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer Identification No.)
of Incorporation
</TABLE>
12A Manor Parkway, Salem, New Hampshire,
03079
----------------------------------------
(Address of principal executive offices)
(603) 898-8000
----------------------------------------
Registrant's telephone number, including
area code
<PAGE> 2
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
Report of Independent Auditors
Consolidated Balance Sheets at July 31, 1996 and 1997 and
January 31, 1998 (unaudited)
Consolidated Statements of Income for the Years Ended July 31,
1995, 1996 and 1997 and for the six-months ended February 2, 1997
(unaudited) and January 31, 1998 (unaudited)
Consolidated Statements of Cash Flow for the Years Ended July
31, 1995, 1996 and 1997 and for the six-months ended
February 2, 1997 (unaudited) and January 31, 1998 (unaudited)
Consolidated Statements of Shareholders' Equity for the Years
Ended July 31, 1995, 1996 and 1997 and for the six-months
ended January 31, 1998 (unaudited)
Notes to Consolidated Financial Statements
(b) PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Pro Forma Condensed Consolidated Balance Sheet as of January
31, 1998
2. Pro Forma Condensed Consolidated Statement of Operations for
the Year Ended October 25, 1997
3. Pro Forma Consolidated Statement of Operations for
the Three-months Ended January 31, 1998
4. Note to Pro Forma Condensed Consolidated Financial
Statements
<PAGE> 3
CONTINENTAL CIRCUITS CORP.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Auditors......................................... F-1
Consolidated Balance Sheets at July 31, 1996 and 1997 and
January 31, 1998 (unaudited)........................................... F-2
Consolidated Statements of Income for the Years Ended July 31, 1995,
1996 and 1997 and for the six-months ended February 2, 1997
(unaudited) and January 31, 1998 (unaudited)........................... F-3
Consolidated Statements of Cash Flow for the Years Ended July 31,
1995, 1996 and 1997 and for the six-months ended February 2,
1997 (unaudited) and January 31, 1998 (unaudited)...................... F-4
Consolidated Statements of Shareholders' Equity for the Years Ended
July 31, 1995, 1996 and 1997 and for the six-months ended
January 31, 1998 (unaudited)........................................... F-5
Notes to Consolidated Financial Statements ............................ F-6
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Continental Circuits Corp.
We have audited the accompanying consolidated balance sheets of Continental
Circuits Corp. and subsidiaries as of July 31, 1996 and 1997, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended July 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Continental
Circuits Corp. and subsidiaries at July 31, 1996 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended July 31, 1997 in conformity with generally accepted accounting
principles.
/S/ ERNST & YOUNG LLP
Phoenix, Arizona
August 22, 1997
F-1
<PAGE> 5
CONTINENTAL CIRCUITS CORP.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JULY 31, JULY 31, JANUARY 31,
1996 1997 1998
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 3,851 $ 85 $ 180
Accounts receivable, less allowance of $167 in 1996
and $152 in 1997...................................... 15,114 21,431 20,150
Inventories.............................................. 4,796 8,805 13,081
Refundable income taxes.................................. 240 420 420
Deferred income taxes.................................... 714 125 125
Prepaid expenses and other............................... 259 946 1,109
------- ------- --------
Total current assets.................................. 24,974 31,812 35,065
Property, plant, and equipment:
Land..................................................... 2,899 3,586 3,586
Buildings and improvements............................... 18,353 24,677 30,733
Machinery and equipment.................................. 53,065 69,123 80,333
------- ------- --------
74,317 97,386 114,652
Accumulated Depreciation................................. 40,200 46,422 50,774
------- ------- --------
34,117 50,964 63,878
Other assets............................................... 495 83 3,340
------- ------- --------
Total assets............................................. $59,586 $82,859 $102,283
======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... $ 7,193 $14,665 $ 15,774
Accrued vacation expense................................. 720 688 497
Other accrued expenses................................... 1,332 2,443 1,965
Current portion of long-term debt........................ 1,000 -- --
------- ------- --------
Total current liabilities............................. 10,245 17,796 18,236
Long-term debt, less current portion..................... 3,333 10,312 29,375
Deferred income taxes.................................... 1,976 2,507 2,507
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value -- Authorized shares
1,000,000................................................ -- -- --
Issued and outstanding shares none
Common stock, $.01 par value -- Authorized shares
20,000,000
Issued and outstanding shares -- 7,194,000 in 1996,
7,252,000 in 1997, and 7,292,000 1998............... 72 73 73
Additional paid-in capital............................... 10,077 10,266 10,511
Retained earnings........................................ 33,883 41,905 41,581
------- ------- --------
Total shareholders' equity............................... 44,032 52,244 52,165
------- ------- --------
Total liabilities and shareholders' equity............ $59,586 $82,859 $102,283
======= ======= ========
</TABLE>
See accompanying notes
F-2
<PAGE> 6
CONTINENTAL CIRCUITS CORP.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE INFORMATION)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JULY 31, JULY 31, JULY 31, FEBRUARY 2, JANUARY 31,
1995 1996 1997 1997 1998
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales................................ $95,372 $108,362 $120,752 $56,685 $69,650
Cost of products sold.................... 76,174 89,502 98,698 47,052 58,763
------- -------- -------- ------- -------
Gross profit............................. 19,198 18,860 22,054 9,633 10,887
Selling, general and administrative
expense................................ 7,381 7,991 8,487 3,839 4,616
In-process research and development...... -- -- -- -- 4,300
------- -------- -------- ------- -------
11,817 10,869 13,567 5,794 1,971
Other expense:
Interest................................. 878 470 354 123 734
Other.................................... 25 123 365 325 15
------- -------- -------- ------- -------
Income before income taxes............... 10,914 10,276 12,848 5,346 1,222
Income taxes............................. 4,260 3,993 4,826 2,096 1,546
------- -------- -------- ------- -------
Net income (loss)........................ $ 6,654 $ 6,283 $ 8,022 $ 3,250 $ (324)
======= ======== ======== ======= =======
Net income (loss) per share
Basic.................................... $ 0.93 $ 0.88 $ 1.11 $ 0.45 $ (0.04)
======= ======== ======== ======= =======
Diluted.................................. $ 0.90 $ 0.85 $ 1.08 $ 0.44 $ (0.04)
======= ======== ======== ======= =======
Number of shares used in computing
Basic.................................... 7,120 7,152 7,213 7,206 7,267
======= ======== ======== ======= =======
Diluted.................................. 7,409 7,430 7,432 7,428 7,267
======= ======== ======== ======= =======
</TABLE>
See accompanying notes
F-3
<PAGE> 7
CONTINENTAL CIRCUITS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JULY 31, JULY 31, JULY 31, FEBRUARY 2, JANUARY 31,
1995 1996 1997 1997 1998
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................ $ 6,654 $ 6,283 $ 8,022 $ 3,250 $ (324)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation........................... 5,612 6,572 6,292 2,838 4,351
In process research and development
writeoff............................ -- -- -- -- 4,300
Loss on sale of property, plant, and
equipment........................... 70 139 6 -- --
Deferred income taxes.................. 101 (418) 1,120 -- --
Provision (recovery) for doubtful
accounts............................ 24 424 (15) (133) 16
Changes in operating assets and
liabilities:
Accounts receivable.................... (1,327) (1,040) (6,302) (2,971) 2,136
Inventories............................ (1,129) 320 (4,009) (1,919) (3,881)
Refundable income taxes................ -- (240) (180) -- --
Prepaid expenses and other............. (417) 365 (687) 154 (163)
Other assets........................... 77 (801) 412 291 (1,870)
Accounts payable....................... 1,135 (1,513) 7,472 3,748 535
Accrued expenses....................... 418 (158) 1,079 (72) (1,061)
Income taxes........................... 164 (386) -- 692 --
-------- ------- -------- ------- --------
Net cash provided by operating
activities............................. 11,382 9,547 13,210 5,878 4,039
INVESTING ACTIVITIES
Purchases of property, plant, and
equipment.............................. (11,676) (8,682) (20,562) (7,589) (16,361)
Proceeds from disposal of property,
plant, and equipment................... 31 102 17 -- --
Acquisition of Flexible Circuits
Technology............................. -- -- -- -- (6,891)
Acquisition of a division of Radian
International LLC...................... -- -- (2,600) -- --
-------- ------- -------- ------- --------
Net cash used in investing activities.... (11,645) (8,580) (23,145) (7,589) (23,252)
FINANCING ACTIVITIES
Borrowings under line of credit
agreement.............................. -- -- 9,312 1,000 19,063
Principal payments on long-term debt..... (11,143) (4,167) (4,333) (500) --
Borrowings under long-term debt.......... -- 5,000 1,000 -- --
Proceeds from issuance of common stock,
net of issuance cost................... 9,504 13 190 135 245
Payments to repurchase common stock...... (57) -- -- -- --
-------- ------- -------- ------- --------
Net cash provided by (used in) financing
activities............................. (1,696) 846 6,169 635 19,308
-------- ------- -------- ------- --------
Net increase (decrease) in cash and cash
equivalents............................ (1,959) 1,813 (3,766) (1,076) 95
Cash and cash equivalents at beginning
of period.............................. 3,997 2,038 3,851 3,851 85
-------- ------- -------- ------- --------
Cash and cash equivalents at end of
period................................. $ 2,038 $ 3,851 $ 85 $ 2,775 $ 180
======== ======= ======== ======= ========
</TABLE>
See accompanying notes
F-4
<PAGE> 8
CONTINENTAL CIRCUITS CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
--------------- ADDITIONAL RETAINED
SHARES AMOUNT PAID-IN-CAPITAL EARNINGS TOTAL
------ ------ ---------------- -------- -------
<S> <C> <C> <C> <C> <C>
BALANCE AT JULY 31, 1994........................ 6,133 $61 $ 581 $20,993 $21,635
Cash proceeds from issuance of common stock, net
of share issuance costs....................... 1,000 10 9,396 -- 9,406
Shares issued in connection with options
exercised..................................... 10 -- 98 -- 98
Shares repurchased and canceled................. (13) -- (10) (47) (57)
Net income...................................... -- -- -- 6,654 6,654
----- --- ------- ------- -------
BALANCE AT JULY 31, 1995........................ 7,130 71 10,065 27,600 37,736
Shares issued in connection with options
exercised..................................... 64 1 199 -- 200
Share issuance costs............................ -- -- (187) -- (187)
Net income...................................... -- -- -- 6,283 6,283
----- --- ------- ------- -------
BALANCE AT JULY 31, 1996........................ 7,194 72 10,077 33,883 44,032
Shares issued in connection with options
exercised and for employee stock purchase
plan.......................................... 58 1 189 -- 190
Net income...................................... -- -- -- 8,022 8,022
----- --- ------- ------- -------
BALANCE AT JULY 31, 1997........................ 7,252 73 10,266 41,905 52,244
Shares issued in connection with options
exercised and for employee stock purchase plan
(unaudited)................................... 40 -- 245 -- 245
Net loss (unaudited)............................ -- -- -- (324) (324)
----- --- ------- ------- -------
BALANCE AT JANUARY 31, 1998 (UNAUDITED)......... 7,292 $73 $10,511 $41,581 $52,165
===== === ======= ======= =======
</TABLE>
See accompanying notes
F-5
<PAGE> 9
CONTINENTAL CIRCUITS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1997
(THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998
IS UNAUDITED)
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company is in one line of business as a manufacturer of complex
multilayer, surface mount circuit boards used in sophisticated electronic
equipment in the computer, communications, instrumentation and industrial
controls industries. The Company sells its products primarily to leading
original equipment manufacturers and to contract assemblers in the United States
and abroad.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries, which are wholly owned. Significant intercompany accounts
and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of checking accounts and funds invested
in overnight repurchase agreements and is stated at cost, which approximates
market value. The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are carried at the lower of cost or market using the first-in,
first-out (FIFO) method.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. Depreciation is computed
using the double declining balance and the straight-line methods based on the
estimated useful lives of the related assets ranging from three to forty years.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values of financial instruments. Cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities are carried at
amounts that reasonably approximate their fair values. The carrying amounts of
the Company's borrowings under its line of credit arrangement approximates its
fair value based on the variable nature of its interest rates.
REVENUE RECOGNITION
Sales are recorded at the time individual items are shipped.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense for the
years ended July 31, 1995, 1996, and 1997 and for the six months ended January
31, 1998 were $55,000, $54,000, $47,000 and $64,000, respectively.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes".
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" ("SFAS No. 128"), adopted by the Company in the second
quarter of fiscal year 1998. SFAS No. 128 replaced the previously reported
primary or fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants, and convertible securities.
Diluted earnings per share is very similar to the previously reported primary
earnings per share. All earnings per share amounts for all periods have been
presented, and where necessary, restated to conform to the SFAS No. 128
requirements. The impact of SFAS No. 128 on the calculation of fully diluted
earnings per share for each of the periods presented was not material.
SUPPLEMENTAL EARNINGS PER SHARE
Supplemental earnings per share, assuming the proceeds from the issuance of
922,000 common shares at the public offering of $10.50, net of issuance costs,
were used to repay $9.0 million of the Company's indebtedness as of August 1,
1994, would have reduced diluted earnings per share from $0.90 to $0.85 in 1995.
F-6
<PAGE> 10
CONTINENTAL CIRCUITS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JULY 31, 1997
(THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998
IS UNAUDITED)
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants to employees in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees," (APB 25)
and, accordingly, recognizes no compensation expense for the stock option
grants.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INTERIM FINANCIAL INFORMATION
The consolidated financial statements for the six months ended February 2,
1997 and January 31, 1998 are unaudited but include all adjustments (consisting
only of normal recurring adjustments) that the Company considers necessary for a
fair presentation of financial position and results of operations. Operating
results for the six months ended January 31, 1998 are not necessarily indicative
of the results that may be expected for any future periods.
2. ACQUISITIONS
In April 1997, the Company acquired the assets and assumed certain
liabilities of a division of Radian International LLC (Radian) for $2,600,000.
The acquisition was accounted for as a purchase, and accordingly, the results of
its operations have been included in the consolidated results of operations
since the transaction date. The purchase price has been allocated to the assets
and liabilities acquired based on fair values at acquisition. The results of
operations of Radian were not significant in relation to the Company for periods
prior to the acquisition.
On November 17, 1997, the Company acquired substantially all of the assets
of Flexible Circuits Technology, dba Dynaflex Technology, for approximately $6.9
million in cash. The purchase price has been allocated to the assets acquired
and included an allocation of $4.3 million to in process research and
development. The results of the acquired business were not significant in
relation to the Company for periods prior to the acquisition.
F-7
<PAGE> 11
CONTINENTAL CIRCUITS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JULY 31, 1997
(THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998
IS UNAUDITED)
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JULY 31, JULY 31, JANUARY 31,
1996 1997 1998
-------- -------- -----------
<S> <C> <C> <C>
Raw material.................................. $ 649 $2,117 $ 2,943
Work-in-process............................... 2,487 4,878 8,344
Finished Goods................................ 1,660 1,810 1,794
------ ------ -------
$4,796 $8,805 $13,081
====== ====== =======
</TABLE>
4. LONG-TERM DEBT
On July 25, 1997, the Company entered into a $45,000,000 long-term line of
credit agreement with a bank. Up to $25,000,000 of the line of credit agreement
can be converted into a long-term note payable. At July 31, 1997 there were no
amounts converted to a long-term note. The line of credit bears interest at
LIBOR plus a fixed rate factor, as defined, and/or the prime rate, payable
monthly, and the interest rate can be converted by the Company to a fixed rate
when the Company draws above $2,000,000. The line of credit expires on October
31, 2000 and provides for maximum borrowings of the lessor of $45,000,000 less
any converted long-term note payable amounts. At July 31, 1997, amounts
available under the line of credit were approximately $34,700,000. The weighted
average interest rate under the line of credit was 8.5 percent in 1997. The
above long-term debt agreements are collateralized by substantially all
available assets of the Company.
The line of credit agreement contains covenants which place various
restrictions on financial ratios, transactions with related parties, and
prohibits the payment of dividends. In addition, the line of credit agreement
contains an event of default provision whereby all outstanding amounts would be
due and payable should there be a change in ownership control.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JULY 31, JULY 31, JANUARY 31,
1996 1997 1998
-------- -------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
$45,000,000 long-term line of credit agreement with a bank,
interest payable monthly at LIBOR plus a fixed rate
factor, as defined, and/or the prime rate, maturing
October 31, 2000.......................................... $ -- $ 9,312 $28,375
$1,000,000 long-term adjustable rate industrial development
revenue bond, interest payable monthly at a variable rate
until September 1, 2011 when all outstanding interest and
principal is due and payable; secured by $1,000,000
irrevocable letter of credit; bond is subject to certain
optional and mandatory redemption, as defined............. -- 1,000 1,000
$5,000,000 long-term note payable to a bank, paid in full
during 1997............................................... 4,333 -- --
------ ------- -------
4,333 10,312 29,375
Less current portion 1,000 -- --
------ ------- -------
$3,333 $10,312 $29,375
====== ======= =======
</TABLE>
Maturities of long-term debt for the five years succeeding July 31, 1997
are as follows: July 31, 1998 $0, 1999 $0, 2000 $0, 2001 $9,312,000, 2002 $0,
and thereafter $1,000,000. Interest payments approximated interest expense
during the years ended July 31, 1995, 1996, 1997 and for the six months ended
January 31, 1997 and 1998.
F-8
<PAGE> 12
CONTINENTAL CIRCUITS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JULY 31, 1997
(THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998
IS UNAUDITED)
5. STOCK OPTIONS
The Company has elected to follow APB 25 and related Interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
Accounting for Stock-Based Compensation (Statement 123), requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation is recognized.
During 1987, the Company's stockholders adopted a stock option plan (the
1987 Plan) that provides for the granting of options to employees (including
officers) and non-employee directors at fair value at the date of the grant. The
1987 Plan provides for the issuance of options at fair value to purchase a
maximum of 750,000 shares of common stock. All options under the 1987 Plan are
exercisable cumulatively, beginning on the third anniversary of the date of
grant. Generally, after three years from the date of grant, the optionee may
purchase 40 percent of the shares granted; an additional 20 percent after four
years; an additional 20 percent after five years; and the final 20 percent after
six years. However, with respect to 200,000 options granted on August 25, 1994,
the options become exercisable at the rate of 15 percent a year. All options
expire between seven and ten years after the date of grant. The options granted
under the 1987 Plan become fully exercisable if the Company is dissolved,
liquidated, merged, consolidated, or undergoes a change in control as defined in
the Plan document.
During 1996, the Company's stockholders adopted a second stock option plan
(the 1996 Plan) that provides for the granting of options to employees
(including officers) and non-employee directors at fair value at the date of the
grant. The 1996 plan provides for the issuance of options at fair value at the
date of the grant. The 1996 plan provides for the issuance of options at fair
value to purchase a maximum of 1,000,000 shares of common stock. All options
under the 1996 plan are exercisable cumulatively, beginning on the first
anniversary of the date of grant. Generally, after one year from the date of
grant, the optionee may purchase 20 percent of the shares granted; an additional
20 after two years; an additional 20 percent after three years; an additional 20
percent after four years; and the final 20 percent after five years. All options
expire ten years after the date of grant. The options granted under the 1996
Plan become fully exercisable if the Company is dissolved, liquidated, merged,
consolidated, or undergoes a change in control as defined in the Plan document.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1997 and 1996: risk-free interest rate of 5.5 percent, dividend
yield of zero percent, volatility factor of the expected market price of the
Company's common stock of .46, and a weighted-average expected life of the
option of 6.26 years and seven years, respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
F-9
<PAGE> 13
CONTINENTAL CIRCUITS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JULY 31, 1997
(THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998
IS UNAUDITED)
Because Statement No. 123 is applicable to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
approximately 2003. For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the option's vesting period.
The Company's pro forma information follows (in thousands except for earnings
per share information):
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1996 1997
-------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net income, as reported................................... $6,283 $8,022
Pro forma compensation expense for options................ 74 142
------ ------
Pro forma net income...................................... $6,209 $7,880
====== ======
Diluted earnings per share, as reported................... $ 0.85 $ 1.08
Diluted earnings per share, pro forma..................... $ 0.84 $ 1.06
</TABLE>
Information regarding stock options outstanding under the Plans are as
follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
------- ----------------
<S> <C> <C>
Outstanding at July 31, 1994........................ 186,000 $ 3.11
Granted........................................... 225,000 3.27
Exercised......................................... (9,600) 6.72
Forfeited (canceled).............................. (25,000) 3.10
------- ------
Outstanding at July 31, 1995........................ 376,400 3.11
Granted........................................... 110,000 15.00
Exercised......................................... (64,040) 3.12
Forfeited (canceled).............................. (24,000) 12.50
------- ------
Outstanding at July 31, 1996........................ 398,360 5.69
Granted........................................... 432,000 14.03
Exercised......................................... (40,960) 2.50
Forfeited (canceled).............................. (26,750) 12.85
------- ------
Outstanding at July 31, 1997........................ 762,650 $10.48
======= ======
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISEABLE
- -------------------------------------------------- -----------------------------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$2.50 -- $ 3.25 258,900 6.83 years...... $ 3.14 15,100 $2.50
$ 4.00 5,000 7.29 years...... $ 4.00 -- --
$10.63 -- $15.00 368,750 9.24 years...... $12.85 -- --
$18.00 130,000 9.99 years...... $18.00 -- --
</TABLE>
Exercise prices for options outstanding at July 31, 1997, range from $2.50
to $18.00. The weighted-average fair value of options granted during 1997 and
1996 was $7.43 and $8.36, respectively.
F-10
<PAGE> 14
CONTINENTAL CIRCUITS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JULY 31, 1997
(THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998
IS UNAUDITED)
6. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
JULY 31
----------------
1996 1997
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation.................. $1,970 $2,499
Receivables adjustments..................... -- 493
Other, net.................................. 52 52
------ ------
Total deferred tax liabilities.............. 2,022 3,044
------ ------
Deferred tax assets:
Receivables allowances...................... 227 61
Inventory allowances........................ 116 136
Accrued vacation............................ 227 220
Accrued expenses............................ 80 87
Unicap and other............................ 110 158
------ ------
Total deferred tax assets................... 760 662
------ ------
Net deferred taxes.......................... $1,262 $2,382
====== ======
</TABLE>
Significant components of the federal and state income tax expense are:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
--------------------------
1995 1996 1997
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal..................................... $3,287 $3,486 $3,053
State....................................... 872 925 653
------ ------ ------
Total current............................ 4,159 4,411 3,706
Deferred:
Federal..................................... 84 (347) 929
State....................................... 17 (71) 191
------ ------ ------
Total deferred........................... 101 (418) 1,120
------ ------ ------
$4,260 $3,993 $4,826
====== ====== ======
</TABLE>
Total income tax payments, net of any refunds received, during the years
ended July 31, 1995, 1996 and 1997, were approximately $3,962,000, $5,037,000
and $3,997,000, respectively.
A reconciliation of the Company's effective income tax rate to the federal
statutory rate follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JULY 31 JANUARY 31
-------------------- ------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Federal statutory rate................. 34% 34% 34% 34% 34%
State tax net of federal benefit....... 7 7 7 7 5
In process research and development
write-offs........................... -- -- -- -- 136
Tax credits............................ -- -- -- -- (48)
Other.................................. (2) (2) (3) (2) --
---- ---- ---- ---- ----
39% 39% 38% 39% 127%
==== ==== ==== ==== ====
</TABLE>
F-11
<PAGE> 15
CONTINENTAL CIRCUITS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JULY 31, 1997
(THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998
IS UNAUDITED)
The effective income tax rate for the six months ended January 31, 1998
includes a year to date adjustment to reflect one time and ongoing tax credits
available to the Company, which reduced its estimated income tax rate for the
year ending July 31, 1998 to approximately 28% based on estimated earnings for
the year.
7. SIGNIFICANT CUSTOMERS AND EXPORT SALES
The percentages of total sales to significant customers were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
--------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Customer A............................................... 0% 5% 15%
Customer B............................................... 15 11 7
Customer C............................................... 15 21 20
</TABLE>
The amount of total export sales by geographic area was as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31
---------------------------
1995 1996 1997
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Canada.............................................. $ 3,500 $ 3,800 $ 2,700
Singapore........................................... 10,800 6,900 5,800
United Kingdom and others........................... 10,100 9,600 15,600
------- ------- -------
Total export sales.................................. $24,400 $20,300 $24,100
======= ======= =======
</TABLE>
The Company performs ongoing credit risk evaluations of its customers'
financial conditions and generally does not require collateral. The Company's
significant customers are major, well-known businesses in the electronic
equipment industry. Credit losses have been provided for in the financial
statements and have been within management's expectations.
8. COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment and buildings under noncancelable
operating leases that expire in various years through 2004. Total rental expense
for all operating leases was approximately $122,000, $357,000 and $397,000,
during the years ended July 31, 1995, 1996 and 1997, respectively. Future
minimum payments under noncancelable operating leases with initial terms of one
year or more consisted of the following at July 31, 1997:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998........................................................ $ 672,115
1999........................................................ 636,480
2000........................................................ 636,480
2001........................................................ 636,480
2002........................................................ 636,480
Thereafter.................................................. 1,092,624
----------
$4,310,659
==========
</TABLE>
The Company is a party to certain litigation in the normal course of
business. Management does not anticipate any material adverse impact from the
resolution of such matters.
9. BENEFIT PLANS
The Company has a 401(k) Retirement Plan (Plan) covering all employees who
reside in the United States, have completed six months of service, and have
attained age 21. Under the terms of the Plan, employees may contribute up to 15
percent of their annual compensation, subject to Internal Revenue Service
limitations. The Company matched 25 percent of employee contributions up to 6
percent of the employee's
F-12
<PAGE> 16
CONTINENTAL CIRCUITS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
JULY 31, 1997
(THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998
IS UNAUDITED)
annual compensation. Additional contributions to the Plan can be made at the
discretion of the Board of Directors. Company contributions to the Plan during
the years ended July 31, 1995, 1996, and 1997, were approximately $164,000,
$198,000 and $212,000, respectively.
During 1996, the Company adopted the Continental Circuits Corp. Employee
Stock Purchase Plan. All employees who are regularly scheduled to work at least
20 hours per week and have completed at least six (6) months of continuous
service with the Company are eligible to participate in the plan. Eligible
employees are entitled to purchase shares of common stock through payroll
deductions of up to 10 percent of their compensation. The price paid for the
common stock is equal to 85 percent of the fair market value of the Company's
common stock on the last business day of the quarterly investment period. At the
Company's option, common stock can either be purchased on the open market or
through new shares issued. Total shares reserved for issuance are 200,000, with
17,937 purchased through July 31, 1997 at a market price ranging from $10.75 to
$13.88 per share.
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the quarterly results of operations for the years ended July
31, 1996 and 1997 follows:
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1997:
Net sales......................................... $27,123 $29,562 $31,862 $32,205
Gross margin...................................... $ 4,463 $ 5,170 $ 6,148 $ 6,273
Net income........................................ $ 1,433 $ 1,817 $ 2,379 $ 2,393
Earnings per share................................ $ .19 $ .24 $ .32 $ .32
Weighted average common and equivalent shares
outstanding..................................... 7,424 7,432 7,457 7,497
</TABLE>
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1996:
Net sales......................................... $28,508 $28,860 $26,464 $24,530
Gross margin...................................... $ 5,733 $ 6,215 $ 4,406 $ 2,506
Net income........................................ $ 2,248 $ 2,305 $ 1,380 $ 350
Earnings per share................................ $ .30 $ .31 $ .19 $ .05
Weighted average common and equivalent shares
outstanding..................................... 7,430 7,431 7,413 7,420
</TABLE>
The 1997 quarterly results for net earnings per share, when totaled, do not
equal the net earnings per share for the year ended July 31, 1997 due to
rounding.
11. SUBSEQUENT EVENTS
On February 9, 1998, the Company announced that it had completed the
purchase of substantially all of the assets of a wholly owned subsidiary of CCIR
of California Corp., named PCA Design, PCA Design has annual sales of
approximately $2.0 million.
On February 11, 1998, the Company, through one of its recently acquired
businesses, obtained $6.0 million in tax-exempt revenue bonds.
On March 20, 1998, Hadco Corporation acquired all of the outstanding
capital stock of the Company for approximately $188 million (including costs).
F-13
<PAGE> 17
HADCO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In January 1997, Hadco Corporation (the "Company") acquired all of the
outstanding capital stock of Zycon Corporation ("Zycon") for approximately $212
million (including acquisition costs). The acquisition of Zycon (the "Zycon
Acquisition") was accounted for as a purchase. A significant portion of the
purchase price was identified in an appraisal as intangible assets, including
approximately $78 million of acquired in-process research and development.
In March 1998, the Company acquired all of the outstanding capital stock of
Continental Circuits Corp. ("Continental") for approximately $188 million
(including acquisition costs)(the "Continental Acquisition"). The acquisition
of Continental has been accounted for as a purchase. A significant portion of
the purchase price was identified in an appraisal as intangible assets,
including approximately $63 million of acquired in-process research and
development. Collectively, the Zycon Acquisition and Continental Acquisition
are referred to as the "Acquisitions."
The Pro Forma Condensed Consolidated Statement of Operations for the year
ended October 25, 1997 assumes the Acquisitions had occurred on October 27, 1996
and includes the actual results of operations of Hadco for its fiscal year ended
October 25, 1997 (including Zycon's actual results of operations from January
10, 1997 through October 25, 1997), Zycon's actual results of operations for the
three months ended December 31, 1996 and Continental's actual results of
operations for its fiscal year ended July 31, 1997. The Pro Forma Condensed
Consolidated Statement of Operations for the three months ended January 31, 1998
assumes the Continental Acquisition had occurred on October 25, 1997 and
reflects Hadco's actual results of operations for the three months ended January
31, 1998 and Continental's actual results of operations for the three months
ended November 1, 1997. The Pro Forma Condensed Consolidated Balance Sheet as of
January 31, 1998 gives effect to the Continental Acquisition as if it had
occurred on January 31, 1998 and reflects Hadco's and Continental's balance
sheets both as of January 31, 1998, the most recent historical balance sheets
for both companies.
The Pro Forma Condensed Consolidated Statements of Operations do not
include the effect of any non-recurring write-offs directly attributable to the
Acquisitions and are not necessarily indicative of the actual results that would
have been achieved had the Acquisitions occurred at the beginning of the
respective periods, nor do they purport to indicate the results of future
operations of the Company. The accompanying Pro Forma Condensed Consolidated
Financial Statements should be read in conjunction with the Company's and
Continental's historical financial statements and related notes thereto.
F-14
<PAGE> 18
HADCO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(1)
FOR THE YEAR ENDED OCTOBER 25, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------------------------------------- COMBINED
HADCO ZYCON CONTINENTAL ZYCON CONTINENTAL AS ADJUSTED
YEAR ENDED QUARTER ENDED YEAR ENDED PRO FORMA PRO FORMA FOR THE
OCTOBER 25, 1997 DECEMBER 31, 1996 JULY 31, 1997 ADJUSTMENTS ADJUSTMENTS ACQUISITIONS
---------------- ----------------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net sales............. $648,705 $ 61,011 $120,752 $ -- $ -- $830,468
Cost of sales......... 507,313 52,650 98,698 -- 1,035(2) 659,696
-------- -------- -------- -------- -------- --------
Gross profit.......... 141,392 8,361 22,054 -- (1,035) 170,772
Operating expenses.... 64,586 4,753 8,487 1,188(3) 5,703(4) 84,717
Write-off of acquired
in-process research
and development...... 78,000 -- -- (78,000)(5) -- --
-------- -------- -------- -------- -------- --------
Income (loss) from
operations........... (1,194) 3,608 13,567 76,812 (6,738) 86,055
Other expense......... -- (6,019) (365) 6,019(6) -- (365)
Interest and other
income............... 3,296 167 -- (496)(7) -- 2,967
Interest expense...... (10,923) (1,033) (354) (2,703)(8) (12,531)(9) (27,544)
-------- -------- -------- -------- -------- --------
Income (loss) before
provision for income
taxes................ (8,821) (3,277) 12,848 79,632 (19,269) 61,113
Provision for income
taxes................ 27,672 1,247 4,826 (1,953)(10) (6,889)(10) 24,903
-------- -------- -------- -------- -------- --------
Net income (loss)..... $(36,493) $ (4,524) $ 8,022 $ 81,585 $(12,380) $ 36,210
======== ======== ======== ======== ======== ========
Net income (loss) per
share
Basic................ $ (3.18) $ 3.16
Diluted.............. $ (3.18) $ 3.03
Weighted average
shares outstanding
Basic................ 11,458 11,458
Diluted.............. 11,458 11,942
</TABLE>
- ---------------
(1) For purposes of the Pro Forma Condensed Consolidated Statement of
Operations, acquired in-process research and development of approximately
$63 million related to the Continental Acquisition was assumed to have been
written off prior to the period presented herein, so that the Pro Forma
Condensed Consolidated Statement of Operations includes only recurring
costs.
(2) Gives effect to conforming Continental's accounting policy of capitalizing
certain inventory and spare parts costs to Hadco's policy of expensing
these inventory and spare parts costs.
(3) Gives effect to amortization for three months of acquired intangible assets
totaling $106.4 million recognized in the Zycon Acquisition over lives
ranging from 12 to 30 years.
(4) Gives effect to the amortization of intangible assets totaling $97.3
million recognized in the Continental Acquisition over lives ranging from
12 to 20 years.
(5) Gives effect to the elimination of a non-recurring write-off of acquired
in-process research and development related to the Zycon Acquisition.
(6) Gives effect to the elimination of non-recurring acquisition costs incurred
by Zycon in connection with the Zycon Acquisition.
(7) Gives effect to a reduction in interest income as a result of utilizing
cash for the Zycon Acquisition.
(8) Gives effect to interest expense related to $212 million of net additional
bank debt to finance the Zycon Acquisition at an assumed 7.5% weighted
average interest rate.
(9) Gives effect to the interest expense related to the $187.9 million of bank
debt to finance the Continental Acquisition at an assumed 7% weighted
average interest rate.
(10) Gives effect to an adjustment in the tax provision as a result of the
combination and pro forma adjustments.
F-15
<PAGE> 19
HADCO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(1)
FOR THE THREE MONTHS ENDED JANUARY 31, 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------
HADCO CONTINENTAL
QUARTER ENDED QUARTER ENDED PRO FORMA PRO FORMA
JANUARY 31, 1998 NOVEMBER 1, 1997 ADJUSTMENTS COMBINED
---------------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales............. $198,276 $ 34,306 $ -- $232,582
Cost of sales......... 159,208 28,384 1,433(2) 189,025
-------- -------- -------- --------
Gross profit.......... 39,068 5,922 (1,433) 43,557
Operating expenses.... 17,784 2,064 1,426(3) 21,274
-------- -------- -------- --------
Income from
operations.......... 21,284 3,858 (2,859) 22,283
Interest and other
income.............. 533 -- -- 533
Interest expense...... (2,099) (134) (3,133)(4) (5,366)
-------- -------- -------- --------
Income before
provision for income
taxes............... 19,718 3,724 (5,992) 17,450
Provision for income
taxes............... 7,591 1,410 (2,064)(5) 6,937
-------- -------- -------- --------
Net Income............ $ 12,127 $ 2,314 $ (3,928) $ 10,513
======== ======== ======== ========
Net Income per share
Basic............... $ 0.93 $ 0.80
Diluted............. $ 0.90 $ 0.78
Weighted Average
Shares Outstanding
Basic............... 13,096 13,096
Diluted............. 13,505 13,505
</TABLE>
- ---------------
(1) For purposes of the Pro Forma Condensed Consolidated Statement of
Operations, acquired in-process research and development of approximately
$63 million related to the Continental Acquisition was assumed to have been
written off prior to the period presented herein, so that the Pro Forma
Condensed Consolidated Statement of Operations includes only recurring
costs.
(2) Gives effect to conforming Continental's accounting policy of capitalizing
certain inventory and spare parts costs to Hadco's policy of expensing these
inventory and spare parts costs.
(3) Gives effect to the amortization of acquired intangible assets totalling
$97.3 million recognized in the Continental Acquisition over lives ranging
from 12 to 20 years.
(4) Gives effect to interest expense related to $187.9 million in bank debt to
finance the Continental Acquisition at an assumed 7% interest rate.
(5) Gives effect to an adjustment in the tax provision as a result of the
combination and pro forma adjustments.
F-16
<PAGE> 20
HADCO CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JANUARY 31, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-----------------------------------
HADCO CONTINENTAL
AS OF AS OF PRO FORMA PRO FORMA
JANUARY 31, 1998 JANUARY 31, 1998 ADJUSTMENTS COMBINED
---------------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS:
Cash, cash equivalents
and short-term
investments.......... $ 11,395 $ 180 $ -- $ 11,575
Accounts receivable,
net.................. 99,912 20,150 -- 120,062
Inventories............ 54,016 13,081 (3,089)(1) 64,008
Other current assets... 15,214 1,654 -- 16,868
-------- -------- --------- --------
Total current assets... 180,537 35,065 (3,089) 212,513
Property, plant and
equipment, net....... 239,819 63,878 -- 303,697
Other assets........... 7,601 1,620 -- 9,221
Acquired intangible
assets, net.......... 97,870 1,720 95,555(2) 195,145
-------- -------- --------- --------
Total assets........... $525,827 $102,283 $ 92,466 $720,576
======== ======== ========= ========
LIABILITIES:
Current portion of
long-term debt....... $ 4,793 $ -- $ -- $ 4,793
Accounts payable and
accrued expenses..... 109,227 18,236 4,418(3) 131,881
-------- -------- --------- --------
Total current
liabilities.......... 114,020 18,236 4,418 136,674
Long-term debt, net of
current portion...... 118,769 29,375 187,876(4) 336,020
Deferred tax
liability............ 31,185 2,507 18,476(5) 52,168
Other long-term
liabilities.......... 9,192 -- 9,192
-------- -------- --------- --------
Total liabilities...... 273,166 50,118 210,770 534,054
-------- -------- --------- --------
STOCKHOLDERS'
INVESTMENT:
Common stock........... $ 656 $ 73 $ (73)(6) $ 656
Paid-in capital........ 168,843 10,511 (10,511)(6) 168,843
Deferred
compensation......... (93) -- -- (93)
Retained earnings...... 83,255 41,581 (107,720)(6)(7) 17,116
-------- -------- --------- --------
Total stockholders'
investment........... 252,661 52,165 (118,304) 186,522
-------- -------- --------- --------
Total liabilities and
stockholders'
investment........... $525,827 $102,283 $ 92,466 $720,576
======== ======== ========= ========
</TABLE>
Note: Allocation of Purchase Price
The following outlines the allocations of purchase price for the acquisition of
Continental Circuits Corp.
<TABLE>
<CAPTION>
<S> <C>
Purchased in-process R&D (1) $ 63,050
Developed technology 22,190
Customer relationships 18,000
Assembled workforce 6,000
Goodwill 51,084
--------
160,324
Net book value of assets acquired 46,028
--------
206,352
Less: Deferred Taxes (18,476)
--------
187,876
========
</TABLE>
- ---------------
(1) Gives effect to conforming Continental's accounting policy of capitalizing
certain inventory and spare parts costs to Hadco's policy of expensing these
inventory and spare parts costs.
(2) Gives effect to acquired intangible assets related to the Continental
Acquisition.
(3) Gives effect to acquisition costs incurred in connection with the
Continental Acquisition.
(4) Gives effect to borrowings under the Credit Facility to finance the
Continental Acquisition.
(5) Gives effect to deferred income taxes related to the Continental
Acquisition.
(6) Gives effect to the elimination of Continental's equity as a result of the
Continental Acquisition.
(7) Gives effect to the write-off of $63 million of acquired in-process research
and development related to the Continental Acquisition.
F-17
<PAGE> 21
(c) EXHIBITS
23.1 Consent of Independent Public Accountants - Arthur Andersen LLP, Boston
23.2 Consent of Independent Auditors - Ernst & Young LLP, Phoenix
<PAGE> 22
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 hereunto duly authorized.
HADCO CORPORATION
Dated: May 1, 1998 By: /s/ Timothy P. Losik
------------------------
Timothy P. Losik
Chief Financial Officer
<PAGE> 23
EXHIBIT INDEX
Exhibit Exhibit Description
- ------- -------------------
23.1 Consent of Independent Public Accountants - Arthur Andersen, LLP
Boston
23.2 Consent of Independent Public Accountants - Ernst & Young LLP,
Phoenix
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 8-K/A into Hadco Corporation's previously
filed Registration Statements on Form S-8, File No. 33-2915, File No. 33-12555,
File No. 33-24975, File No. 33-24976, File No. 33-40616, File No. 33-48288,
File No. 333-11485 and File No. 333-47589.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 30, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to incorporation by reference in the registration statements
(Nos. 33-2915, 33- 12555, 33-24975, 33-24976, 33-40616, 33-48288, 333-11485 and
333-47589) on Form S-8 of Hadco Corporation of our report dated August 22,
1997, with respect to the consolidated financial statements of Continental
Circuits Corp. and subsidiaries as of July 31, 1997 and for each of the years
in the three-year period ended July 31, 1997, included in the May 1, 1998
Current Report on Form 8-K/A of Hadco Corporation.
/s/ Ernst & Young LLP
Phoenix, Arizona
May 1, 1998
