UNITED STATES
SECURITIES AND EXHNAGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT
Pursuant to Section 13 or 15 (d) of
The Securities Exchange act of 1934
Date of Report (Date of Earliest event reported): July 24, 1997
CIRCUIT SYSTEMS, INC.
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Exact name of registrant as specified in its charter
Illinois 0-15047 36-2663010
- ---------------------------- ---------------- -----------------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification Number)
2350 East Lunt Avenue
Elk Grove Village, Illinois 60007
(847) 439-1999
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Registrant's telephone number, including area code
N/A
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(Former name or former address, if changed since last report)
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired.
(1) Audited Special Purpose Financial Statements of Philips
Consumer Electronics Company ("PCEC"), a division of
Philips North America Operation, as of July 28, 1997.
(b) Pro forma financial information.
<PAGE>
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 authorize.
Date October 6, 1997
Circuit Systems, Inc.
(Registrant)
/s/ D.S. Patel
-------------------------
D.S. Patel, President and
Chief Executive Officer
<PAGE>
(a) Financial Statements of business acquied.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Circuit Systems, Inc.
We have audited the statement of assets acquired of the Printed
Circuit Board Operating Assets of Philips Electronics North
America Corporation as of July 28, 1997 and the related
statement of revenues and direct expenses of the Printed Circuit
Board Operations of Philips Electronics North America
Corporation for the year ended December 31, 1996. These special
purpose financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these special purpose financial statements based on
our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the special purpose financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the special
purpose financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall special purpose
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying statements were prepared for the purpose of
complying with the rules and regulations of the Securities and
Exchange Commission as described in note C and are not intended
to be a complete presentation of the financial position or
results of operations of the Printed Circuit Board Operating
Assets of Philips Electronics North America Corporation.
In our opinion, the statements referred to above present fairly,
in all material respects, the assets acquired of the Printed
Circuit Board Operating Assets of Philips Electronics North
America Corporation as of July 28, 1997 and the revenues and
direct expenses for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Chicago, Illinois
May 15, 1997
<PAGE>
<TABLE>
Printed Circuit Board Operating Assets of Philips Electronics
North America Corporation
STATEMENT OF ASSETS ACQUIRED
July 28, 1997
<S> <C>
Inventories .........................................$ 650,000
Property, Plant and Equipment
Building and building improvements................. 3,845,000
Machinery and equipment............................ 5,500,000
Land............................................... 155,000
----------
9,500,000
----------
Total assets acquired ..........................$ 10,150,000
==========
</TABLE>
The accompanying notes are an integral part of this statement.
Printed Circuit Board Operating Assets of Philips Electronics
North America Corporation
STATEMENTS OF REVENUES AND DIRECT EXPENSES
<TABLE>
Quarter ended Quarter ended
Year ended March 31, 1997 March 31, 1996
December 31, 1996 (Unaudited) (Unaudited)
<S> <C> <C> <C>
Net sales
Philips divisions....... $18,382,072 $3,378,875 $3,923,449
Other................... 2,198,000 300,000 440,000
---------- --------- ---------
20,580,072 3,678,875 4,363,449
Cost of goods sold ....... 18,956,307 3,819,907 4,390,157
---------- --------- ---------
Gross profit (loss).. $ 1,623,765 $ (141,032) $ (26,708)
========== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Printed Circuit Board Operating Assets of Philips Electronics
North America Corporation
NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS
July 28, 1997
NOTE A - BUSINESS ORGANIZATION
The printed circuit board operating assets of Philips
Electronics North America Corporation ("Philips") consists of a
stand alone facility which manufactures and sells printed
circuit boards in high volumes to various Philips consumer
electronics' divisions and certain independent manufacturers.
NOTE B - ACQUISITION OF CERTAIN ASSETS OF PHILIPS ELECTRONICS
NORTH AMERICA CORPORATION
Effective July 28, 1997, Circuit Systems, Inc. (the "Company")
through its wholly-owned affiliates, Circuit Systems of
Tennessee, L.P. (CST, L.P.) and Circuit Systems of Tennessee,
Inc. (the general partner of CST, L.P.), acquired certain assets
relating to the printed circuit board operations of Philips.
The assets consisted of inventory and fixed assets. The total
purchase price, including direct costs of acquisition,
approximated $10,150,000.
In addition, Circuit Systems, Inc., entered into a Printed
Circuit Board Purchase Agreement with Philips which requires
Philips to purchase its printed circuit boards for certain
manufacturing facilities from the Company for a minimum of two
years at prices stipulated in the contract.
NOTE C - BASIS OF PRESENTATION
The accompanying special purpose financial statements have been
prepared to comply with requirements of Regulation S-X of the
Securities and Exchange Commission relating to the filing of
audited financial information for the acquisition of a business
meeting the significant subsidiary definition of Rule 1-02(w) of
Regulation S-X.
The Statement of Assets Acquired presents the identifiable
operating assets acquired by the Company as of the effective
date of the acquisition.
The Statements of Revenues and Direct Expenses include the net
sales and cost of goods sold for the printed circuit board
operations and excludes any other products of Philips. It is
impracticable to determine selling, general and administrative
expenses for sales to customers other than the Philips'
divisions. Such expenses are not material for sales to Philips'
divisions. Interest and income tax expense have not been
allocated to the printed circuit board operations as it is not
the general practice of Philips to do so. Statements of Cash
Flows are not presented as such information is not determinable.
<PAGE>
Printed Circuit Board Operating Assets of Philips Electronics
North America Corporation
NOTES TO SPECIAL PURPOSE FINANCIAL STATEMENTS - CONTINUED
July 28, 1997
NOTE D - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue
Revenue is recognized upon shipment. Net sales to Philips divisions
included in the accompanying Statements of Revenues and Direct
Expenses reflect transfer pricing policies within Philips. These pricing
policies are consistent with the pricing agreed upon in the Printed
Circuit Board Purchase Agreement.
Inventories
Inventories are valued at the lower of cost or market. Cost was
determined at the replacement cost at the date of acquisition.
<PAGE>
Property, Plant and Equipment
Property, plant and equipment are carried at estimated fair
value which was estimated by references to appraisals and other
information.
(b) Pro forma financial information.
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET AND STATEMENT OF OPERATIONS
The following unaudited pro forma condensed combined balance
sheet and statements of operations reflect the effect of the
acquisition of substantially all of the identifiable operating
assets of the Printed Circuit Board Operating Assets of Philips
Electronics North America Corporation ("Philips").
Effective July 28, 1997, Circuit Systems, Inc. (the "Company"),
through a recently formed limited partnership and its general
partner, acquired the inventory and property, plant and
equipment of Philips for a purchase price of $10,150,000
including direct costs of acquisition.
This pro forma information has been prepared utilizing
historical financial statements of the Company and Philips. The
unaudited pro forma condensed combined statements of operations
gives effect to the acquisition as if the transaction was
consummated as of beginning of period reported, utilizing the
results of operations for the twelve months ended April 30, 1997
and the quarter ended July 31, 1997 for the Company and the twelve
months ended March 31, 1997 and the quarter ended June 30, 1997
for Philips. The information for Philips is the latest available
information. This information should be read in conjunction with
the historical financial statements and notes thereto. The pro
forma financial data have been included as required by the rules
and regulations of the Securities and Exchange Commission and
are provided for comparative purposes only. The pro forma
financial data do not purport to be indicative of the results
which actually would have been obtained if the acquisition had
occurred on the date indicated or of those results which may be
obtained in the future.
<PAGE>
Circuit Systems, Inc. and Printed Circuit Board Operating Assets of
Philips Electronics North America Corporation
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
April 30, July 28,
1997 1997
Circuit Pro Forma Pro Forma
ASSETS Systems, Philips adjustments combined
Inc.
--------- ------- ----------- --------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents ........$ 294,204 $ - $ - $ 294,204
Accounts receivable .............. 6,561,782 - - 6,561,782
Inventories ...................... 6,636,821 670,000 - 7,306,821
Prepaid expenses ................. 215,674 - - 215,674
Deferred income taxes ............ 363,000 - - 363,000
--------- -------- --------- ----------
Total current assets ........... 14,071,481 670,000 - 14,741,481
INVESTMENT IN AFFILIATE........... 2,841,193 - - 2,841,193
PROPERTY, PLANT AND EQUIPMENT
At cost .......................... 46,216,098 9,480,000 - 55,696,098
less accumulated depreciation .... 18,442,154 - - 18,442,154
---------- --------- ------- ---------- - -
27,773,944 9,480,000 - 37,253,944
OTHER ASSETS...................... 1,071,481 - - 1,071,481
---------- --------- ------- ----------
Total assets ...................$45,758,099 $10,150,000 $ - $55,908,099
========== ========== ====== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of
long-term obligations............ 4,662,289 - 1,561,966 A 6,224,255
Accounts payable ................. 4,095,791 - 150,000 A 4,245,791
Accrued liabilities & income taxes 1,578,714 - - 1,578,714
---------- ------ --------- ----------
Total current liabilities .....10,336,794 - 1,711,966 12,048,760
LONG-TERM OBLIGATIONS............10,640,363 - 8,438,034 A 19,078,397
DEFERRED INCOME TAXES............ 1,848,000 - - 1,848,000
MINORITY INTEREST................ 471,246 - - 471,246
SHAREHOLDERS' EQUITY
Common stock ..................... 2,882,322 - - 2,882,322
Retained earnings ................19,596,240 - - 19,596,240
Cumulative foreign currency
translation adjustment.......... (16,866) - - (16,866)
---------- ------ -------- ----------
22,461,696 - - 22,461,696
---------- ------ ---------- ----------
$45,758,099 - $10,150,000 $55,908,099
========== ====== ========= ==========
</TABLE>
<PAGE>
Circuit Systems, Inc. and Printed Circuit Board Operating Assets of
Philips Electronics North America Corporation
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
Year Year ended
ended March 31,
April 30, 1997
1997
Circuit Pro Forma Pro Forma
Systems, Philips adjustments combined
Inc.
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Net sales................... $63,414,341 $19,895,498 $ - $83,309,839
Cost of goods sold.......... 55,077,512 18,386,057 (698,000)B 72,765,569
---------- ---------- ------- ----------
Gross profit ..... 8,336,829 1,509,441 698,000 10,544,270
Sales and marketing expenses 3,168,551 - - 3,168,551
Administrative expenses..... 2,384,205 - - 2,384,205
--------- --------- ------- ---------
5,552,756 - - 5,552,756
--------- --------- ------- ---------
Operating profit..... 2,784,073 1,509,441 698,000 4,991,514
Other deductions (income)
Interest expense .......... 1,612,854 - 758,000 C 2,370,854
Interest income ........... (14,031) - - (14,031)
Equity in earnings of
unconsolidated affiliate.. (636,260) - - (636,260)
Realized gain on sale of
common stock of affiliate (1,092,215) - - (1,092,215)
Rental income ............. (338,620) - - (338,620)
Sundry .................... (83,605) - - (83,605)
--------- --------- ------- ---------
(551,877) - 758,000 206,123
--------- --------- -------- ---------
Earnings before income taxes 3,335,950 1,509,441 (60,000) 4,785,391
Income taxes........ 1,217,000 - 529,000 D 1,746,000
--------- --------- -------- ---------
NET EARNINGS ............... $ 2,118,950 $1,509,441 $(589,000) $3,039,391
========= ========= ======== =========
Per share data
Net earnings ............ $ .40 $ .57
========= =========
Weighted average number of
common shares outstanding 5,338,240 5,338,240
========= =========
</TABLE>
<PAGE>
Circuit Systems, Inc. and Printed Circuit Board Operating Assets of
Philips Electronics North America Corporation
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
<TABLE>
Quarter Quarter
ended ended
July 31, June 30,
1997 1997
Circuit Pro Forma Pro Forma
Systems, Philips adjustments combined
Inc.
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Net sales................... $12,922,618 $3,343,013 $ - $16,265,631
Cost of goods sold.......... 12,283,558 3,611,182 (134,000)B 15,760,740
---------- ---------- -------- ----------
Gross profit ..... 639,060 (268,169) 134,000 504,891
Sales and marketing expenses 640,089 - - 640,089
Administrative expenses..... 588,355 - - 588,355
---------- ---------- -------- ----------
1,228,444 - - 1,228,444
---------- ---------- -------- ----------
Operating profit..... (589,384) (269,169) 134,000 (723,553)
Other deductions (income)
Interest expense .......... 354,993 - 201,000 C 555,993
Interest income ........... - - - -
Equity in earnings of
unconsolidated affiliate.. (32,528) - - (32,528)
Realized gain on sale of
common stock of affiliate. - - - -
Rental income ............. (90,860) - - (90,860)
Sundry .................... (46,703) - - (46,703)
---------- ---------- -------- ----------
184,902 - 201,000 385,902
---------- ---------- -------- ----------
Loss before income taxes... (774,286) (268,169) (67,000) (1,109,455)
Income taxes........ (272,000) - (118,000)D (390,000)
--------- --------- -------- ---------
NET LOSS.................... $ (502,286) $(268,169) $ 51,000 $ (719,455)
========= ========= ======== =========
Per share data
Net loss................. $ (.10) $ (.14)
========= =========
Weighted average number of
common shares outstanding 5,097,843 5,097,843
========= =========
</TABLE>
<PAGE>
Circuit Systems, Inc. and Printed Circuit Board Operating Assets of
Philips Electronics North America Corporation
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET AND STATEMENTS OF OPERATIONS
The unaudited pro forma condensed combined balance sheet and
statements of operations reflect the effect of the acquisition
of the identifiable operating assets of the Printed Circuit
Board Operations of Philips Electronics North America
Corporation ("Philips"). The assets acquired and operations
constitute an insignificant portion of the assets and operations
of Philips. The unaudited pro forma condensed combined
statements of operations gives effect to the acquisition as if
the transactions were consummated at the beginning of the
periods presented. The statements of operations for Philips
reflect only gross profit information for the year ended March
31, 1997 and the quarter ended June 30, 1997. It is
impracticable to determine selling, general and administrative
expenses for sales to customers other than the Philips'
divisions. Such expenses are not material for sales to other
Philips' divisions. Interest and income taxes have not been
allocated to the printed circuit board operations as it is not
the general practice of Philips to do so.
Additionally, the Philips balance sheet presented as of July 28,
1997 reflects the allocated purchase price. Balance sheet
information prior to purchase price allocation is not available.
The pro forma condensed combined financial statements do not
purport to be indicative of the results which could actually
have been obtained if the acquisition had been consummated on
the dates indicated or which may be obtained in the future.
The pro forma condensed combined financial statements reflect
the following pro forma adjustments.
(A)Direct costs of acquisition and debt incurred by the Company
to finance the purchase.
(B)Reduction of depreciation expense due to new basis of
acquired fixed assets.
(C)To record interest expense on additional debt incurred in
acquisition.
(D)The tax effect of pro forma adjustments and Philips' gross
profit using the applicable effective tax rates.
<PAGE>
