UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10 - Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934.
For the period ended October 31, 1996.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to .
---- ----
Commission file number 0-15407
Circuit Systems, Inc.
--------------------------------------------------
(Exact name of registrant as specified in charter)
Illinois 36-2663010
- ------------------------------------ ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2350 East Lunt Avenue, Elk Grove Village, Illinois 60007
- --------------------------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
(847) 439 - 1999
- --------------------------------- -----------------------------------
(Registrant's telephone number, (Former name, former address and
including area code) and former fiscal year, if changed
since last report)
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 .
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes No .
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date: November 30, 1996 5,321,973.
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
1. Financial Statements
Consolidated Condensed Balance Sheets .................. 3
Consolidated Condensed Statements of Earnings ............ 4
Consolidated Condensed Statement of Cash Flows ........... 5
Notes to Consolidated Condensed Financial Statements ..... 6
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .............................. 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............... 9
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
4/30/96 10/31/96
------------ ------------
[S] [C] [C]
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS ................ $ 243,269 $ 302,955
ACCOUNTS RECEIVABLE, LESS
ALLOWANCE OF ($475,000 AND $600,000) ... 8,119,134 10,326,803
INVENTORIES
RAW MATERIALS .......................... 3,909,818 2,630,415
WORK IN PROCESS ........................ 2,094,047 3,464,475
FINISHED GOODS ......................... 1,596,777 1,679,917
---------- ----------
7,600,642 7,774,807
DEFERRED INCOME TAXES .................... 408,000 408,000
PREPAID EXPENSES ......................... 193,137 158,042
---------- ----------
TOTAL CURRENT ASSETS .............. 16,564,182 18,970,607
INVESTMENT IN AFFILIATE .................. 2,587,609 2,981,267
PROPERTY, PLANT, AND EQUIPMENT - AT COST
BUILDING AND IMPROVEMENTS ................ 8,397,345 8,712,725
MACHINERY AND EQUIPMENT ................... 29,971,227 31,664,727
AUTOMOTIVE EQUIPMENT .................... 64,789 64,789
---------- ----------
8,433,361 40,442,241
LESS ACCUMULATED DEPRECIATION ........ 15,894,629 17,754,629
---------- ----------
22,538,732 22,687,612
LAND ..................................... 2,351,703 2,351,703
---------- ----------
24,890,435 25,039,315
OTHER ASSETS
DEPOSITS AND SUNDRY ...................... 1,774,028 1,741,826
---------- ----------
$45,816,254 $48,733,015
========== ==========
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
[S] [C] [C]
CURRENT LIABILITIES
CURRENT MATURITIES OF L/T OBLIGATIONS .... $ 3,523,979 $ 3,655,318
ACCOUNTS PAYABLE ......................... 3,659,482 5,485,813
ACCRUED LIABILITIES ...................... 1,012,121 1,695,976
INCOME TAXES PAYABLE ..................... 322,432 192,471
---------- ----------
TOTAL CURRENT LIABILITIES 8,518,014 11,029,578
LONG - TERM OBLIGATIONS ................... 14,535,823 14,349,114
DEFERRED INCOME TAXES ..................... 1,560,000 1,608,000
SHAREHOLDERS' EQUITY
COMMON STOCK ............................. 3,002,599 3,002,599
RETAINED EARNINGS ........................ 18,199,818 18,743,724
---------- ----------
21,202,417 21,746,323
---------- ----------
$45,816,254 $48,733,015
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
10/31/95 10/31/96 10/31/95 10/31/96
----------- ----------- ----------- -----------
[S] [C] [C] [C] [C]
NET SALES ............... $18,000,901 $18,399,817 $34,983,161 $32,735,227
COST OF GOODS SOLD ...... 14,909,373 16,326,328 28,974,015 28,704,849
---------- ---------- ---------- ----------
GROSS PROFIT .......... 3,091,528 2,073,489 6,009,146 4,030,378
SALES & MARKETING EXPENSES 705,520 864,119 1,488,233 1,553,793
ADMINISTRATIVE EXPENSES 498,520 656,692 1,009,946 1,407,533
---------- ---------- ---------- ----------
1,204,040 1,520,811 2,498,179 2,961,326
---------- ---------- ---------- ----------
OPERATING INCOME ...... 1,887,488 552,678 3,510,967 1,069,052
OTHER (INCOME) DEDUCTIONS
INTEREST EXPENSE ...... 353,039 391,863 708,363 760,508
GAIN ON SALE OF EQUIPMENT --- --- (18,600) ---
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATE (100,823) (261,810) (186,859) (393,658)
RENTAL INCOME ......... (167,299) (78,600) (334,599) (156,600)
SUNDRY ................ (6,143) (17,919) (17,124) (24,104)
---------- ---------- ---------- ----------
78,774 33,534 151,181 186,146
---------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 1,808,714 519,144 3,359,786 882,906
INCOME TAXES ............ 705,000 199,400 1,310,000 339,000
---------- ---------- ---------- ----------
NET EARNINGS .......... $ 1,103,714 $ 319,744 $ 2,049,786 $ 543,906
========== ========== ========== ==========
PER SHARE DATA
- ---------------------------
NET EARNINGS PER SHARE $0.20 $0.06 $0.38 $0.10
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING ...... 5,331,296 5,357,977 5,328,450 5,371,141
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
10/31/95 10/31/96
----------- -----------
[S] [C] [C]
CASH FLOWS FROM OPERATING ACTIVITIES:
NET EARNINGS ................................ $ 2,049,786 $ 543,906
ADJUSTMENTS TO RECONCILE NET EARNINGS TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION .............................. 1,704,000 1,860,000
GAIN ON SALE OF PROPERTY & EQUIPMENT ...... (18,600) ---
DEFERRED INCOME TAXES ..................... 235,000 48,000
EQUITY IN EARNINGS OF UNCONSOLIDATED
AFFILIATE ............................. (186,859) (393,658)
CHANGES IN ASSETS AND LIABILITIES
ACCOUNTS RECEIVABLE ....................... (781,167) (2,207,669)
INVENTORIES ............................... (3,204,481) (174,165)
PREPAID EXPENSES .......................... 84,001 35,095
OTHER ASSETS .............................. (145,008) 32,202
ACCOUNTS PAYABLE & ACCRUED LIABILITIES .... 902,286 2,380,225
--------- ---------
TOTAL ADJUSTMENTS ...................... (1,410,828) 1,580,030
---------- ---------
NET CASH PROVIDED BY OPERATIONS ........ 638,958 2,123,936
CASH FLOWS FROM INVESTING ACTIVITIES
CAPITAL EXPENDITURES ...................... (1,664,419) (2,008,880)
PROCEEDS FROM SALE OF PROPERTY & EQUIPMENT . 18,600 ---
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES .. (1,645,819) (2,008,880)
CASH FLOWS FROM FINANCING ACTIVITIES
NET BORROWINGS UNDER LINE OF CREDIT ....... (848,597) 264,335
PROCEEDS FROM LONG - TERM OBLIGATIONS ..... 3,431,744 1,500,000
PAYMENTS ON LONG - TERM OBLIGATIONS ....... (1,497,967) (1,819,705)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES ............... 1,085,180 (55,370)
--------- ---------
INCREASE IN CASH ............................ 78,319 59,686
CASH AT THE BEGINNING OF THE PERIOD ......... 127,865 243,269
--------- ---------
CASH AT THE END OF THE PERIOD ............... $ 206,184 $ 302,955
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
INTEREST ................................. $ 697,164 $ 722,472
INCOME TAXES ............................. 677,739 465,000
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
CAPITAL LEASES FOR NEW EQUIPMENT ......... $ 662,119 $ ---
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. These interim Consolidated Condensed Financial Statements should be read
in conjunction with the Consolidated Financial Statements & notes included
in the Company's April 30, 1996 Annual Report and Form 10-K.
2. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial information reflects all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of
the statements contained herein.
3. These consolidated statements are presented in accordance with the
requirements of Form 10-Q and consequently may not include all disclosures
normally required by generally accepted accounting principles normally made
in the Company's Annual Report and Form 10-K.
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The net sales for the quarter ended October 31, 1996 were $18,400,000,
increasing by 2.2% from $18,001,000 for the same quarter last year. The
increase in sales is primarily due to a general increase in business activity
within the existing customer base. Net sales to two individual unaffiliated
customers accounted for approximately 46% and SigmaTron International, Inc.
("SigmaTron") accounted for 13%. Three customers accounted for 59% of net
sales for the quarter ended October 31, 1996, compared to the same period
last year in which four customers including SigmaTron accounted for
approximately 45% of net sales. The gross profit for the quarter was
$2,073,000 or 11.3% of net sales, compared to $3,092,000 or 17.2% of net sales
for the same quarter last year. The lower gross profit is attributed to a
change in product mix & very competitive pricing, which increased expenses as
a percentage of sales. In addition, repairs and maintenance costs have
increased as the Company realigns its current facilities and relocates a
portion of its manufacturing facility to the 2400 Lunt Avenue location.
The net sales for six months ended October 31, 1996 were $32,735,000,
decreasing by 6.4% from $34,983,000 for the same period last year. Net sales
to two individual unaffiliated customers accounted for approximately 44%,
SigmaTron accounted for 11% for a total of 55% of net sales for three customers
for the six months ended October 31, 1996, compared to same period last year,
in which four customers including SigmaTron accounted for approximately 41% of
net sales. The sales decrease is attributed to the first quarter slowdown
within the industry. The gross profit for the six months ended
October 31, 1996, was $4,030,000 or 12.3% of net sales, compared to $6,009,000
or 17.2% of net sales for the same period in the prior year. The gross profit
was affected by the same factors as noted above and by the lower sales volume.
Sales and marketing and administrative expenses for the three and six
months ended October 31, 1996, were $1,521,000 or 8.3% of net sales and
$2,961,000 or 9.0% of net sales, respectively, compared to $1,204,000 or 6.7%
of net sales and $2,498,000 or 7.1% of net sales, respectively, for the same
periods last year. The increase in the expenses as a percentage of net sales
is due to increases in salaries, legal costs, professional services,
commissions (higher commissionable sales base) and for bad debt expense.
Other deductions-net for the three and six months ended October 31, 1996,
were $34,000 and $186,000, respectively, compared to $79,000 and $151,000,
respectively, for the same periods in the prior year. Interest expense
increased to $392,000 and $761,000, respectively, in 1996, compared to
$353,000 and $708,000, respectively, for the same periods last year. The
increase is due to increased borrowings. Rental income declined to $79,000 and
$157,000, for the three and six months ended October 31, 1996, compared to
$167,000 and $335,000, respectively for the same periods last year. The
decrease is due to the non-rental of the 2400 and 2450 E. Lunt locations.
The equity in the net earnings of the unconsolidated affiliate, SigmaTron,
increased to $262,000 and $394,000, for the three and six months ended
October 31, 1996, compared to $101,000 and $187,000, respectively, for the
same periods last year. This increase is due to SigmaTron's sales growth and
related net earnings for the current year.
The effective income tax rate for the six months ended October 31, 1996 is
38.4%, compared to 39.0% for the same period in prior year.
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The net earnings and earnings per share for the three and six months ended
October 31, 1996, were $320,000 or $.06 and $544,000 or $.10, respectively,
compared to $1,104,000 or $.20 and $2,050,000 or $.38, respectively, for the
same periods in the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial requirements were met through cash generated from
operations and increased borrowings.
For the six months ended October 31, 1996, the increase in accounts
receivable of $2,208,000, capital expenditures of $2,009,000, payments on
long-term obligations of $1,820,000, and the increase in inventories of
$174,000 were funded by operating income, increase in accounts payable and
accrued liabilities of $2,380,000, proceeds from long-term obligations of
$1,500,000, and net borrowings on the line of credit of $264,000.
The Company has purchase commitments as of October 31, 1996 of approximately
$2,600,000 for future deliveries of machinery and equipment, $100,000 for
building improvements at the 2400 E. Lunt Ave. location and $180,000 for
a 8,300 square foot addition to the Landmeier location which will be leased
to SigmaTron. The Company intends to finance such purchases through
collateralized borrowings, installment loans and existing cash flow.
The Company's backlog at October 31, 1996 is approximately $14,136,000
compared to $15,004,000 at October 31, 1995. Backlog represents orders
scheduled to be shipped with in approximately six months, but most of which
is shipped in four months or less. The reliability of backlog as an indicator
of future sales varies substantially with the make-up of customer orders and
the Company's scheduled production and delivery dates.
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
PART 2 - OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
Exhibit 11 - Calculation of Primary and
Fully Diluted Per Share Earnings
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended
October 31, 1996.
<PAGE>
Exhibit 11
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED SIX MONTHS ENDED
PRIMARY EPS 10/31/95 10/31/96 10/31/95 10/31/96
---------- --------- ---------- ---------
[S] [C] [C] [C] [C]
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD ............. 5,321,973 5,321,973 5,321,973 5,321,973
NET ADDITIONAL SHARES ASSUMING
DILUTIVE STOCK OPTIONS EXERCISED
AND PROCEEDS USED TO PURCHASE
TREASURY SHARES AT AVERAGE FAIR
MARKET VALUE .................. 9,323 36,004 6,477 49,168
--------- --------- --------- ---------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON EQUIVALENT
SHARES OUTSTANDING ............ 5,331,296 5,357,977 5,328,450 5,371,141
========= ========= ========= =========
NET EARNINGS ................. $1,103,714 $319,744 $2,049,786 $543,906
========= ========= ========= =========
PRIMARY EARNINGS PER SHARE .... $0.20 $0.06 $0.38 $0.10
FULLY DILUTED EPS
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
DURING THE PERIOD ............. 5,321,973 5,321,973 5,321,973 5,321,973
NET ADDITIONAL SHARES ASSUMING
DILUTIVE STOCK OPTIONS EXERCISED
AND PROCEEDS USED TO PURCHASE
TREASURY SHARES AT FAIR MARKET
VALUE (OR AVERAGE FAIR MARKET
VALUE IF HIGHER) .............. 24,437 36,004 24,437 49,168
--------- --------- --------- ---------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES AND COMMON
EQUIVALENT SHARES OUTSTANDING .. 5,346,410 5,357,977 5,346,410 5,371,141
========= ========= ========= =========
NET EARNINGS .................. $1,103,714 $319,744 $2,049,786 $543,906
========= ========= ========= =========
FULLY DILUTED EARNINGS PER SHARE $0.20 $0.06 $0.38 $0.10
========= ========= ========= =========
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
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, registrant's principal financial officer, thereunto
duly authorized.
Circuit Systems, Inc.
(registrant)
/s/ Dilip S. Vyas
----------------------------
Dilip S. Vyas
(Principal Financial Officer)
December 10, 1996
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
ARTICLE 5 OF REGULATION S-X
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1996
<CASH> 302,955
<SECURITIES> 0
<RECEIVABLES> 10,926,803
<ALLOWANCES> 600,000
<INVENTORY> 7,774,807
<CURRENT-ASSETS> 18,970,607
<PP&E> 42,793,944
<DEPRECIATION> 17,754,629
<TOTAL-ASSETS> 48,733,015
<CURRENT-LIABILITIES> 11,029,578
<BONDS> 14,349,114
0
0
<COMMON> 3,002,599
<OTHER-SE> 18,743,724
<TOTAL-LIABILITY-AND-EQUITY> 48,733,015
<SALES> 32,735,227
<TOTAL-REVENUES> 32,735,227
<CGS> 28,704,849
<TOTAL-COSTS> 28,704,849
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 125,000
<INTEREST-EXPENSE> 760,508
<INCOME-PRETAX> 882,906
<INCOME-TAX> 339,000
<INCOME-CONTINUING> 543,906
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 543,906
<EPS-PRIMARY> .1
<EPS-DILUTED> .1
</TABLE>
