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 January 31, 2000.
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.)
2400 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) 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: February 29, 2000: 4,591,653
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition And Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market
Risks 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
<PAGE>
<TABLE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
1/31/00 4/30/99
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 390,461 $ 1,463,336
ACCOUNTS RECEIVABLE, LESS
ALLOWANCE OF $175,000 13,161,953 13,048,378
INVENTORIES
RAW MATERIALS 3,450,365 4,007,914
WORK IN PROCESS 3,386,147 2,451,106
FINISHED GOODS 4,072,114 3,073,442
---------- ----------
10,908,626 9,532,462
REFUNDABLE INCOME TAXES 181,000 579,000
DEFERRED INCOME TAXES 309,000 309,000
PREPAID EXPENSES 354,835 103,707
---------- ----------
TOTAL CURRENT ASSETS 25,305,875 25,035,883
INVESTMENT IN AFFILIATE 3,469,709 3,211,083
PROPERTY, PLANT AND EQUIPMENT - AT COST
BUILDING AND IMPROVEMENTS 16,412,501 15,206,521
MACHINERY AND EQUIPMENT 59,336,738 53,454,625
AUTOMOTIVE EQUIPMENT 226,922 226,922
---------- ----------
75,976,161 68,888,068
LESS ACCUMULATED DEPRECIATION 33,315,119 28,082,923
---------- ----------
42,661,042 40,805,145
---------- ----------
LAND 3,040,453 3,040,453
---------- ----------
45,701,495 43,845,598
OTHER ASSETS
GOODWILL, NET 12,717,845 6,487,447
DEPOSITS AND SUNDRY 2,034,206 1,335,757
---------- ----------
TOTAL OTHER ASSETS 14,752,051 7,823,204
---------- ----------
TOTAL ASSETS $89,229,130 $79,915,768
========== ==========
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
CURRENT MATURITIES OF L/T OBLIGATIONS $ 8,032,990 $ 7,854,208
ACCOUNTS PAYABLE 18,199,228 9,252,421
ACCRUED LIABILITIES 3,617,197 2,461,738
---------- ----------
TOTAL CURRENT LIABILITIES 29,849,415 19,568,367
LONG-TERM OBLIGATIONS 37,409,667 38,136,619
SUBORDINATED DEBT 6,409,034 3,375,985
DEFERRED INCOME TAXES 885,300 2,556,000
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
COMMON STOCK 3,672,415 2,191,168
RETAINED EARNINGS 11,003,299 14,087,629
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 14,675,714 16,278,797
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $89,229,130 $79,915,768
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
</TABLE>
<PAGE>
<TABLE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENED NINE MONTHS ENDED
1/31/00 1/31/99 1/31/00 1/31/99
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $23,031,379 $20,708,764 $71,310,968 $68,364,060
COST OF GOODS SOLD 21,181,227 18,744,032 65,981,338 59,266,286
---------- ---------- ---------- ----------
GROSS PROFIT 1,850,152 1,964,732 5,329,630 9,097,774
SALES AND MARKETING EXPENSES 1,047,661 898,339 3,287,229 2,536,271
ADMINISTRATIVE ESPENSES 1,609,931 930,672 4,133,477 2,584,761
RESTRUCTURING CHARGE - - - 1,520,000
---------- ---------- ---------- ----------
2,657,592 1,829,011 7,420,706 6,641,032
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) (807,440) 135,721 (2,091,076) 2,456,742
OTHER (INCOME) DEDUCTIONS
INTEREST EXPENSE 1,155,024 931,312 3,238,467 2,371,216
INTEREST RECEIVED - (37,895) - (39,733)
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATE (92,306) (41,425) (258,626) (116,422)
RENTAL INCOME (111,424) (94,347) (306,542) (298,867)
MINORITY INTEREST IN
LOSS OF SUBSIDIARY - - - (31,782)
SUNDRY (1,993) (160,303) (29,545) (153,725)
---------- ---------- ---------- ----------
949,301 597,342 2,643,754 1,730,687
---------- ---------- ---------- ----------
EARNINGS (LOSS) BEFORE
INCOME TAXES (1,756,741) (461,621) (4,734,830) 726,055
INCOME TAX EXPENSE (BENEFIT) (612,100) (142,000) (1,650,500) 305,000
---------- ---------- ---------- ----------
NET EARNINGS (LOSS) $(1,144,641) $ (319,621) $(3,084,330) $ 421,055
========== ========== ========== ==========
PER SHARE DATA:
NET EARNINGS (LOSS)
PER COMMON SHARE - BASIC $ (.25) $ (0.08) $ (.72) $ .10
====== ====== ====== ======
NET EARNINGS (LOSS)
PER COMMON SHARE - DILUTED $ (.25) $(0.08) $ (.72) $ .10
====== ====== ====== ======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
</TABLE>
<PAGE>
<TABLE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
NINE MONTHS ENDED
1/31/00 1/31/99
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET EARNINGS (LOSS) $ (3,084,330) $ 421,055
ADJUSTMENTS TO RECONCILE NET EARNINGS
(LOSS) TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 5,700,781 4,225,715
DEFERRED INCOME TAXES (1,670,700) 175,000
MINORITY INTEREST IN LOSS OF
SUBSIDIARY - (31,782)
EQUITY IN EARNINGS OF
UNCONSOLIDATED AFFILIATE (258,626) (116,422)
CHANGES IN ASSETS AND LIABILITIES, NET
OF EFFECTS FROM ACQUISITIONS AND
DIVESTITURE:
ACCOUNTS RECEIVABLE 1,316,303 1,220,094
INVENTORIES (1,376,164) (101,811)
PREPAID EXPENSES (251,128) 467,759
OTHER ASSETS (697,166) 522,276
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 9,441,035 (2,989,836)
----------- ----------
TOTAL ADJUSTMENT 12,204,335 3,370,993
----------- ----------
NET CASH PROVIDED BY OPERATIONS 9,120,005 3,792,048
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (6,895,452) (7,626,307)
BUSINESS ACQUISITIONS, NET OF CASH
ACQUIRED (1,719,000) (2,751,955)
----------- ----------
NET CASH USED IN INVESTING
ACTIVITIES (8,614,452) (10,378,262)
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
NET BORROWINGS UNDER LINE OF CREDIT 2,000,000 5,016,903
REPURCHASE OF COMMON STOCK (5,640) (1,357,789)
PROCEEDS FROM LONG-TERM OBLIGATIONS 2,007,093 11,123,521
PAYMENTS ON LONG-TERM OBLIGATIONS (5,579,881) (8,859,264)
----------- ----------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (1,578,428) 5,923,371
EFFECT OF FOREIGN EXCHANGE RATE CHANGES - 7,326
----------- ----------
DECREASE IN CASH (1,072,875) (655,517)
CASH AT THE BEGINNING OF THE PERIOD 1,463,336 1,531,526
----------- ----------
CASH AT THE END OF THE PERIOD $ 390,461 $ 876,009
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
CASH PAID (RECEIVED) DURING THE PERIOD FOR:
INTEREST $ 3,157,616 $ 2,277,594
INCOME TAXES (206,781) 183,124
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
SUBORDINATED DEBT AND COMMON STOCK
TO SELLERS IN CONJUNCTION WITH
BUSINESS ACQUISITIONS $ 4,231,000 $ 4,000,000
ISSUANCE OF COMMON STOCK IN
SATISFACTION OF LONG-TERM
OBLIGATION AND ACCRUED INTEREST 961,887 -
DIVERSTITURE OF NET INVESTMENT IN
CIRCUIT SYSTEMS (INDIA) LIMITED
AND CIRCUIT SIGMA INDIA LIMITED
IN SATISFACTION OF CERTAIN ACCRUED
LIABILITIES AND REPURCHASE OF
COMMON STOCK - 1,270,049
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
</TABLE>
<PAGE>
CIRCUIT SYSTEMS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. These interim Condensed Consolidated Financial Statements
should be read in conjunction with the Consolidated Financial
Statements and notes included in the Company's April 30, 1999
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 condensed 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.
4. The following table illustrates a reconciliation of the basic
and diluted earnings per share calculations.
<TABLE>
Three Months Ended Nine Months Ended
1/31/99 1/31/99
------- -------
<S> <C> <C> <C> <C>
Net Earnings (Loss) $(319,621) $ 421,055
======== =========
Shares Per Share Shares Per Share
Amount Amount
--------- --------- --------- ---------
Basic Earnings (Loss) 4,060,874 $ (0.08) 4,303,799 $ 0.10
per Share
Effect of Dilutive Securities:
Stock Options N/A N/A - -
--------- --------- --------- ---------
Diluted Earnings (Loss)
per Share 4,060,874 $ (0.08) 4,303,799 $ 0.10
========= ========= ========= =========
Three Months Ended Nine Months Ended
1/31/00 1/31/00
------- -------
Net Loss $(1,144,641) $(3,084,330)
========== =========
Shares Per Share Shares Per Share
Amount Amount
--------- --------- --------- ---------
Basic Loss per Share 4,591,816 $ (.25) 4,273,509 $ (.72)
Effect of Dilutive
Securities:
Stock Options N/A N/A N/A N/A
--------- --------- --------- ---------
Diluted Loss per Share 4,591,816 $ (.25) 4,273,509 $ (.72)
========= ========= ========= =========
</TABLE>
<PAGE>
5. The provisions of Statement of Financial Accounting Standards
No. 130 "Reporting Comprehensive Income" requires that an entity
report, by major components and as a single total, the change in its
net assets during the period from non-shareholder resources. Total
comprehensive income (loss) for the three months and nine months
ended January 31, 2000 was $(1,144,641) and $(3,084,330),
respectively, and for the three months and nine months ended January
31, 1999 was $(319,621) and $502,041, respectively.
6. On September 10, 1999, the Company acquired all of the
outstanding shares of stock of Infovision, Inc. ("Infovision").
Infovision specializes in two markets: 1) the rendering of
consulting services and currently has approximately 58 full-time
consultants, and 2) the development and licensing of a certain
software product, which is being finalized for general release,
which documents a company's ISO procedures, with internet/intranet
capabilities. The purchase price of $3,750,000 (plus acquisition
costs) consists of cash of $1,440,000, subordinated term notes of
$1,785,000 with installment terms ranging from two to five years and
$525,000 of the Company's common stock. The cash portion of the
purchase price was funded by a $1,000,000 increase in the Company's
installment note to its commercial lender and the remainder from its
line of credit. The Company's president/CEO and his wife owned 14%
of the Infovision common stock and affiliates of the president/CEO
owned 36%.
The acquisition was accounted for under the purchase method. The
purchase price, including direct costs of acquisition, was allocated
to the assets acquired and liabilities assumed based upon their
estimated fair values. Results of operations for Infovision is
included with those of the Company since September 10, 1999. The
excess of the purchase price over the net assets acquired, which is
approximately $4,517,000, is being amortized to operations over 15
years.
The fair value of assets acquired, net of liabilities assumed or
created is as follows:
Current assets $ (1,033,000)
Furniture and equipment (100,000)
Purchase price in excess of net
assets acquired (4,517,000)
Liabilities assumed and seller
subordinated debt 3,685,000
------------
Cash paid and Company common
stock issued $ (1,965,000)
============
As of the date of acquisition, in conjunction with the purchase
agreement, approximately $962,000 of a pre-existing note payable and
accrued interest due to the Company's President/CEO was converted
into 460,000 shares of Company stock.
The prior operating results of Infovision were maintained on a
cash basis and it is therefore impracticable to provide interim
proforma results of operations from the beginning of the Company's
fiscal year on a combined basis.
<PAGE>
7. On January 24, 2000, with an effective date of January 1, 2000,
Infovision acquired certain assets, contracts and intangibles of
Project Control Solutions, Inc. ("PCS") for a total purchase price
of $2,200,000 (plus acquistion costs), which was funded by $279,000
cash at closing and a subordinated term note in the amount of
$1,921,000. PCS has a wide range of consulting skillsets including
project management, client/server and web development. The company
is also authorized to resell, train and implement Allaire software
(Cold Fusion and Spectra) products.
The acquisition was accounted for under the purchase method.
The purchase price, including direct costs of acquisition, has been
allocated to the assets acquired based upon their estimated fair
values. Results of operations for PCS is included with those of the
Company since January 1, 2000. The excess of the purchase price
over the net assets acquired of approximately $2,175,000, is being
amortized to operations over 15 years.
The fair value of assets acquired, net of liabilities assumed
or created is as follows:
Furniture, equipment and software $ (100,000)
Purchase price in excess of
net assets acquired (2,175,000)
Liabilities for costs of acquisition and
seller subordinated debt 1,996,000
-------------
Cash paid $ (279,000)
=============
The prior operating results of PCS were maintained on a cash
basis and it is therefore impracticable to provide interim proforma
results of operations from the beginning of the company's fiscal
year on a combined basis.
8. At January 31, 2000, the Company was in violation of several of
its financial covenants contained in its line of credit agreement.
In conjunction with the cash infusion and operational changes
described in Note 9, the Company's senior lender agreed to waive
these covenant violations through January 2000 and amended its
credit agreement and various covenants to bring the Company in
compliance.
9. On February 15, 2000, the Company received a cash infusion of
approximately $3,175,000 in the form of subordinated convertible
notes from three sources: an affiliate of the Company's President
and CEO, Tribhovan ("Tom") Patel, a board member, and an unrelated
investor. General terms of the notes are: interest payments (at
12% per annum) during the first two years of the agreement and fully
amortizing monthly principal and interest payments over the next
three years of the note. The notes are convertible into common
shares of Company stock during the first two years at the lower of
$1.00 per share or the average of the closing price of the stock for
the ten days preceding the conversion. In conjunction with the
issuance of the subordinated convertible notes, the Company expects
to record a charge against earnings and corresponding increase
in common stock in the fourth quarter of fiscal year 2000 of
approximately $1,575,000. In connection with this cash infusion,
Tom Patel joined the Company as Executive Vice President and Chief
Operating Officer.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements that
involve risks and uncertainties, including Year 2000 matters. The
Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed
herein, as well as those discussed in the Company's Annual Report
on Form 10-K for the year ended April 30, 1999. Reliance on these
forward-looking statements reflect management's analysis only as of
the date hereof. The Company undertakes no obligation to publicly
release the results of any revision to these forward-looking
statements, which may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated
events. Although the Company believes the expectations expressed
in such forward-looking statements are based on reasonable
assumptions within the bounds of its knowledge of its business, a
number of factors could cause actual results to differ materially
from those expressed in any forward-looking statements, whether
oral or written, made by or on behalf of the Company. Many of
these factors have previously been identified in filings or
statements made by or on behalf of the Company. The Company does
not intend to update these forward-looking statements.
Reference to "IL" hereinafter refers to the Company's Illinois
operations only; reference to "CST" refers to Circuit Systems of
Tennessee; reference to "CSIL" refers to Circuit Systems (India)
Limited; reference to "SVPC" refers to SVPC Circuit Systems, Inc.;
reference to "Infovision" refers to Infovision, Inc., including,
from the date of acquisition, Project Control Solutions, Inc.,
("PCS"). The results of operations for Infovision are included with
those of the Company since September 10, 1999. The results of
operations for PCS are included with those of the Company since
January 1, 2000.
Net sales for the quarter ended January 31, 2000, were
$23,031,000, increasing by 11% when compared to $20,709,000 for the
same quarter last year. The net sales of IL, CST, SVPC and
Infovision for fiscal 2000 were $14,549,000, $3,603,000, $3,272,000
and $1,607,000, respectively, as compared to $15,108,000,
$3,226,000, $2,375,000 and $0, respectively, for fiscal 1999. The
net increase in sales is comprised of an increase in CST sales of
$377,000 and additional revenues resulting from the inclusion of
SVPC and Infovision in fiscal 2000 which was offset by a decrease
in IL sales of $559,000 compared to the prior year. Net sales to
five customers accounted for approximately $12,802,000 or 56% of
net sales for the quarter ended January 31, 2000, compared to four
customers representing approximately $11,753,000 or 57% of net
sales for the same quarter last year.
Gross profit for the quarter was $1,850,000 or 8.7% of net
sales, compared to $1,965,000 or 9.5% of net sales for the same
quarter last year. The gross profit (loss) of IL, CST, SVPC and
Infovision for fiscal 2000 were $1,567,000, $(158,000), $61,000 and
$380,000, respectively, as compared to $1,665,000, $(160,000),
$460,000 and $0 for IL, CST SVPC and Infovision, respectively, for
fiscal 1999.
<PAGE>
The net sales for the nine months ended January 31, 2000 were
$71,311,000, increasing by 4.3% from $68,634,000 for the same
period last year. The net sales of IL, CST, SVPC and Infovision
for fiscal 2000 were $46,796,000, $12,178,000, $9,866,000 and
$2,471,000, respectively, as compared to $49,514,000, $15,863,000,
$2,375,000 and $0, respectively, for fiscal 1999. The fiscal 1999
sales also included revenues of $612,000 from CSIL, which was
divested as of July 27, 1998. The decrease in IL and CST sales is
due primarily to pricing decreases and lower demand from the
current customer base. Net sales to five individual customers
accounted for approximately 55% in the current year compared to the
same period last year in which four customers accounted for approxi-
mately 61% of net sales. The gross profit for the nine months ended
January 31, 2000 was $5,330,000 or 7.5% of net sales, compared to
$9,098,000 or 13.3% of net sales for the same period in the prior
year. The gross margin has been impacted by a reduction in volume,
continued pricing pressure and an overall increase in occupancy
costs with the addition of a new facility in IL which began limited
production in the second quarter of fiscal year 2000. Overall
margins have and will continue to be impacted as a result of
continued pricing pressures driven by Far East competitors.
Additionally, the gross margin at SVPC has been impacted by
increasing overhead costs, including costs related to outsourcing
certain core operations. It is anticipated that recent equipment
acquisitions will reduce the need for the Company's current
outsourcing requirements. Realignment of certain manufacturing
processes within existing facilities and the installation of
machinery and building improvements in the new manufacturing
facility in IL continued during the third quarter and will continue
into the fourth quarter of fiscal 2000.
Sales and marketing, and administrative expenses for the three
and nine months ended January 31, 2000, were $2,658,000 or 11.5% of
net sales and $7,421,000 or 10.4 % of net sales, respectively,
compared to $1,829,000 or 8.8% of net sales and $5,121,000 or 7.5%
of net sales, respectively, for the same periods last year. The
increase in operating expenses is due primarily to the acquisition
of SVPC and Infovision, which have increased these expenses by
$504,000 and $1,990,000 for the three and nine months ended January
31, 2000, respectively.
<PAGE>
Operating expenses for the nine months ended January 31, 1999
also included a restructuring charge of $1,520,000 (which was
recorded in the first quarter of fiscal year 1999) relating to the
reorganization of the Company's management and plant operations.
The majority of the charge relates to severance and other
termination benefits for an executive vice president and five other
managers and supervisors. Excluding the restructuring charge,
income from operations was $3,977,000 or 5.8% of net sales for the
nine months ended January 31, 1999 compared to a loss from
operations of $2,091,000 or 2.9% of net sales for the nine
months ended January 31, 2000. The income (loss) from operations,
excluding the restructuring charge, for the nine months ended
January 31, of IL, CST, SVPC and Infovision for fiscal 1999 was
$1,413,000, $1,118,000, $(11,000) and $0, respectively, as compared
to $598,000, $(1,186,000), $(1,641,000) and $138,000, respectively
for fiscal 2000. The fiscal 1999 income from operations also
included an operating loss for CSIL of $64,000. In response to the
fiscal 2000 operating losses, the Company has initiated an extensive
review of all of its operations with a focus on improving operating
efficiencies and reducing costs.
Other deductions-net for the three and nine months ended
January 31, 2000, were $949,000 and $2,644,000, respectively,
compared to $598,000 and $1,731,000, respectively, for the same
periods in the prior year. Interest expense increased to
$1,155,000 and $3,238,000, respectively, in 2000, compared to
$931,000 and $2,371,000, respectively, for the same periods last
year. The increase is due to the SVPC acquisition in December
1998, the Infovision acquisition in September 1999, the PCS
acquisition in January 2000, increased borrowings under the line of
credit to fund additional working capital needs and an increase in
installment obligations to fund equipment purchases and the new
facility expansion. The equity in the earnings of SigmaTron
increased to $259,000 for the current nine months compared to
$116,000 for the same period last year.
The effective income tax rate for the nine months ended January
31, 2000 is (34.9)%, compared to the rate for the same period last
year of 42.0%. The lower effective income tax rate is due primarily
to the increase in pretax loss for CST in fiscal 2000 for which the
Company receives no state tax benefits, and the inability to
recognize the tax benefits of state net operating losses at SVPC and
foreign net operating losses of CSIL (in fiscal 1999).
The net loss and diluted loss per share for the three months
and nine months ended January 31, 2000, were $1,145,000 or $.25, and
$3,084,000 or $.72, respectively, compared to net earnings (loss)
and diluted earnings (loss) per share for the three and nine month
periods in the prior year of $(320,000) or $(.08) and $421,000 or
$.10, respectively.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations, capital
expenditures, stock repurchases and debt payment requirements
through its line of credit, other collateralized borrowings and
cash generated from operations.
The Company's line of credit agreement (as amended) allows for
maximum borrowings of $16,000,000 and is limited to 85% of eligible
accounts receivable, 50% to 75% of eligible finished goods (not to
exceed $3,000,000), 40% to 50% of eligible raw material inventory
(not to exceed $2,000,000) and 60% of the fair market value of the
Company's investment in SigmaTron (not to exceed $2,000,000). At
January 31, 2000, there was no unused credit available under the
line of credit. The agreement contains certain covenants, which
restrict the amount of dividends the Company could pay, capital
stock redemptions, and capital expenditures. Other financial
covenants pertain to the maintenance of specified debt to tangible
net worth and debt service ratios and minimum EBITDA and tangible
net worth as defined. At January 31, 2000, the Company was in
violation of several of its financial covenants. In conjunction
with the cash infusion and operational changes noted below, the
Company's senior lender agreed to waive these covenant violations
through January 2000, and amended its credit agreement and various
financial covenants to bring the Company into compliance.
On September 10, 1999, the Company acquired all of the
outstanding shares of the stock of Infovision. Infovision
specializes in two markets: 1) the rendering of consulting
services and currently has approximately 58 full-time consultants,
and 2) the development and licensing of a certain software
product, which is being finalized for general release, which
documents a company's ISO procedures, with internet/intranet
capabilities. The purchase price of $3,750,000 (plus acquisition
costs) consisted of cash of $1,440,000, subordinated term notes of
$1,785,000 with installment terms ranging from two to five years
and $525,000 of the Company's common stock. The cash portion of the
purchase price was funded by a $1,000,000 increase in the Company's
installment note to its commercial lender and the remainder from
its line of credit. The Company's president/CEO and his wife owned
14% of the Infovision common stock and affiliates of the
president/CEO owned 36% of the Infovision common stock.
The acquisition was accounted for under the purchase method.
The purchase price, including direct costs of acquisition, was
allocated to the assets acquired and liabilities assumed based upon
their estimated fair values. Results of operations for Infovision
is included with those of the Company since September 10, 1999.
The excess of the purchase price over the net assets acquired,
which is approximately $4,517,000, is being amortized to operations
over 15 years. Subsequent to the acquisition, in conjunction with
the purchase agreement, approximately $962,000 of a note payable
and accrued interest due to the Company's President/CEO was
converted into approximately 460,000 shares of Company stock.
<PAGE>
On January 24, 2000, with an effective date of January 1, 2000,
Infovision acquired certain assets, contracts and intangibles of
PCS for a total purchase price of $2,200,000 (plus acquisition
costs), which was funded by $279,000 cash at closing and a
subordinated term note in the amount of $1,921,000. PCS has a wide
range of consulting skillsets including project management,
client/server and web development. The company is also authorized
to resell, train and implement Allaire software, (Cold Fusion and
Spectra) products.
The acquisition was accounted for under the purchase method.
The purchase price, including direct costs of acquisition, has been
allocated to the assets acquired based upon their estimated fair
values. Results of operations for PCS is included with those
of the Company since January 1, 2000. The excess of the purchase
price over the net assets acquired of approximately $2,175,000, is
being amortized to operations over 15 years.
On February 15, 2000, the Company received a cash infusion of
approximately $3,175,000 in the form of subordinated convertible
notes from three sources: an affiliate of the Company's President
and CEO, Tribhovan ("Tom") Patel, a board member, and an unrelated
investor. General terms of the notes are: interest payments (at
12% per annum) during the first two years of the agreement and fully
amortizing monthly principal and interest payments over the next
three years of the note. The notes are is convertible into common
shares of Company stock during the first two years at the lower of
$1.00 per share or the average of the closing price of the stock for
the ten days preceding the conversion. In connection with this cash
infusion, Tom Patel joined the Company as Executive Vice President
and Chief Operating Officer.
The Company has purchase commitments as of January 31, 2000
of approximately $1,400,000 for future deliveries of machinery and
equipment and building improvements for the Antioch property. The
Company intends to finance such purchases through collateralized
borrowings and existing cash flow. The amount of anticipated
capital expenditures will frequently change based on future changes
in business plans.
The Company's backlog at January 31, 2000 is approximately
$26,520,000, compared to $15,127,000 at January 31, 1999. Backlog
is comprised of orders for which artwork has been received, a
delivery date has been scheduled and the Company reasonably
anticipates it will manufacture and deliver the order. The
majority of the January 31, 2000 backlog is scheduled to be shipped
within approximately 4 months. The reliability of backlog as an
indicator of future sales varies substantially with the make-up of
customer's orders and the Company's scheduled production and
delivery dates. A significant portion of the Company's backlog at
any time may be subject to cancellation or postponement without
penalty.
<PAGE>
YEAR 2000 COMPLIANCE
Prior to December 31, 1999, the Company completed its Year
2000 compliance project as previously discussed in its 1999 Form
10-K.
The Company has completed its internal assessments of
operations, equipment, etc. within each of its plants. The Company
also has completed the implementation of its Enterprise Resource
Planning ("ERP") II systems within the IL and CST operations. In
addition, the Company has implemented a human resource/payroll
software program within its IL operations effective January 1,
2000. SVPC, CST and Infovision currently outsource this function,
but plan to implement the same program in calendar 2000.
The Company did not experience, nor does it anticipate
experiencing any internal or external interruption to its business
activities or incur any impairment to its financial condition or
results of operations as a result of passing into calendar year
2000. Although the Company believes it has completed its Year 2000
project by upgrading its systems, it cannot be assured that
the upgraded systems will be free of defects. If any such risks
materialize, the Company could experience material adverse
consequences to its business, financial conditions and results of
operations.
The Company has expended approximately $850,000 in external
costs related to its Year 2000 project and it anticipates it will
spend an additional $50,000 to complete the implementation and
training of the human resource/payroll software program within its
IL operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
Not Applicable.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(99) a. Generic Form of Convertible Subordinated Term Note
b. Amendment Number Three to Credit Agreement between
registrant and LaSalle Bank National Association
c. Employment Agreement of Tribhovan M. Patel.
(b) Reports on Form 8-K
None.
<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, registrant's principal financial
officer, thereunto duly authorized.
Circuit Systems, Inc.
(registrant)
/s/ James E. Robbs
James E. Robbs
Chief Financial Officer
(Principal Financial Officer)
March 16, 2000
EXHIBIT 99 a
SUBORDINATED TERM NOTE
$___________________
Elk Grove Village, Illinois
February __, 2000
1. FOR VALUE RECEIVED, Circuit Systems, Inc., an Illinois corporation
("Company"), promises to pay to __________________ ("Payee"), on
February __, 2005 (the "Maturity Date"), the principal sum of
______________________________ ($_________) or so much thereof as may
be outstanding on the Maturity Date, together with interest on the
unpaid principal balance from time to time outstanding from the date of
this Note until paid, at the rate of twelve percent (12%) per annum.
Interest shall be computed for the actual number of days elapsed on the
basis of a year consisting of 360 days.
2. Payments. Company will pay: (a) accrued interest in the amount of
________________ Dollars ($__________) on the first day of August 2000;
(b) interest in quarterly installments of________ Dollars ($_______) on
the first day of November 2000 and on the first day of each February,
May, August, and November thereafter through the _____ day of February
2002; and (c) principal and interest in the amount of_________ Dollars
($_________) on the first day of March 2002 and on the first day of
each month thereafter with a final payment of principal and accrued
interest in the amount of_____________________________________ Dollars
($_________)(together with all other obligations due under this Note)
on the Maturity Date, unless sooner paid.
3. Default; Rate of Interest. Failure of Company to pay any sum
within fifteen (15) days of the date such sum becomes due and payable
under this Note, including without limitation, interest or principal or
both, and either as an installment or on the Maturity Date, shall
constitute an event of default ("Default") hereunder. Upon and after
the occurrence of a Default, this Note shall bear interest on the
principal amount outstanding from time to time at a rate (the "Default
Rate") equal to fifteen percent (15%) per annum until paid.
4. Acceleration. If Default occurs in any payment of principal or
interest under this Note, then the entire principal balance of this
Note then outstanding, together with interest accrued thereon, shall
become immediately due and payable without further demand or notice.
5. Prepayment. Company has the right, exercisable in its sole
discretion, to prepay, in whole or in part, any of the obligations
hereunder without penalty or premium, upon ten (10) days' prior notice
to Payee, subject to the conversion rights set forth herein. Upon
surrender of a Note that is paid in part, the Company shall issue to
Payee a new Note equal in principal amount of the unpaid portion of the
Note surrendered.
<PAGE>
6. Conversion into Common Shares. Payee may convert the outstanding
principal amount of this Note, or any portion of the outstanding
principal amount, into fully paid and nonassessable no par value common
shares, of Company ("Common Shares"), on the following terms at any
time after April 1, 2000 and prior to January 31, 2002:
(a) Conversion Rate. As a condition of the borrowing evidenced
hereby, Company hereby grants a conversion right to Payee permitting
the outstanding principal amount of this Note to be repaid, in whole or
in part, through conversion into Common Shares in Company, or its
successor, at a rate equal to $1.00 multiplied by a fraction, the
numerator of which is the principal amount of this Note to be converted
and the denominator is the lower of: (a) $1.00; and (b) the average
closing price for the common shares of Company for the ten (10) trading
days that the Common Shares actually traded preceding the date upon
which any Notice of Conversion (hereinafter defined) is delivered to
the Company ("Conversion Rate"). Common Shares issued upon any
exercise of conversion rights will be unregistered common shares in
Company, or its successor. Payee may exercise conversion rights upon
ten (10) days' prior written notice ("Notice of Conversion") to Company
after April 1, 2000 and at any time prior to January 31, 2002.
(b) Manner of Conversion. To convert this Note, Payee shall
surrender this Note to Company, accompanied by a signed Notice of
Conversion delivered to Company. If less than the full principal
amount of this Note is to be converted, a new Note shall be issued for
the unconverted principal amount. As soon as practicable after the
surrender of this Note, the Company shall issue and deliver: (i) a
certificate for the number of full Common Shares issuable upon
conversion; and (ii) cash as provided in Section 6(d) below for any
fraction of a Common Share which would otherwise be issuable upon
conversion.
(c) Adjustment for Interest. No adjustment or allowance shall
be made for interest on the principal amount of this Note surrendered
for conversion, except that upon conversion interest accrued but unpaid
on the amount surrendered for conversion shall be paid in cash.
(d) Fractional Shares. No fractional Common Shares shall be
issued upon conversion of this Note. In place of a fractional share,
Company shall pay Payee of this Note a dollar amount equal to the
Conversion Rate of the fractional share.
(e) Merger. In case Company shall be consolidated or merged
with another company, or substantially all of its assets shall be sold
to another company in exchange for stock with the view to distributing
such stock to its stockholders, each share of stock into which this
Note is convertible shall be replaced for the purposes hereof by the
securities or property issuable or distributable in respect of one
share of Common stock of Company upon such consolidation, merger or
sale, and adequate provision to that effect shall be made at the time
thereof. Company will provide Payee at least five (5) days' prior
written notice of any event described in this Subsection 6(e).
<PAGE>
(f) Reservation of Common Shares. The Company shall take or has
taken all steps necessary to reserve a number of its authorized but
unissued Common Shares sufficient for issuance upon conversion of this
Note pursuant to this Section 6.
7. Security. This Note is unsecured.
8. Attorneys' Fees and Expenses. If, at any time or times, after a
Default occurs, Payee employs counsel for advice or other
representation or incurs legal and/or other costs and expenses in
connection with any attempt to enforce any rights of Payee against
Company under this Note, then, in such event, the reasonable attorneys'
fees arising from such services and all reasonably incurred expenses,
costs, charges, and other fees of such counsel or of Payee shall be
payable on demand by Company to Payee.
9. No Waiver. Payee's failure, at any time or times hereafter, to
require strict performance by Company of any provision of this Note
shall not constitute a waiver, or affect or diminish any right of Payee
thereafter to demand strict performance by Company under this Note nor
shall any such failure constitute a waiver of or affect any other
default by Company under this Note.
10. Waivers by Company. Presentment, notice of dishonor, and protest
are hereby waived by all makers, sureties, guarantors and endorsers
hereof.
11. Binding Nature. This Note shall be binding upon and inure to the
benefit of the successors and assigns of Company and also the personal
representatives of Payee.
12. Notices. All notices or other communications required or
permitted hereunder shall be in writing and shall be deemed given,
delivered, and received:
(a) when delivered, if delivered personally by a commercial
messenger delivery service with verification of delivery;
(b) two (2) days after mailing, when sent by registered or
certified mail, return receipt requested, and postage prepaid;
(c) one business day after delivery to a private courier service,
when delivered to a private courier service providing documented
overnight service;
(d) on the date of delivery if delivered by facsimile and
electronically confirmed before 5:00 p.m. (Chicago, Illinois time) on
any business day; or
<PAGE>
(e) on the next business day if delivered by facsimile and
electronically confirmed either after 5:00 p.m. (Chicago, Illinois
time) or on a non-business day, in each case addressed as follows:
If to Payee: The last address as recorded
on the books and records of Company
If to Company: Mr. James E. Robbs
Vice President and Chief Financial Officer
Circuit Systems, Inc.
2400 East Lunt Avenue
Elk Grove Village, Illinois 60007
Telephone: 847- 439-1999
Facsimile: 847- 439-2093
With a copy to: Thomas W. Rieck, Esq.
Rieck and Crotty, P.C.
55 West Monroe Street - Suite 3390
Chicago, Illinois 60603
Telephone: 312-726-4646
Facsimile: 312-726-0647
or to such other address or addresses as may hereafter by specified by
notice given by any of the above to the others.
13. Subordination. THIS NOTE IS SUBJECT TO THE TERMS AND CONDITIONS
OF A CERTAIN SUBORDINATION AGREEMENT DATED AS OF EVEN DATE HEREWITH BY
AND BETWEEN COMPANY, PAYEE, AND LASALLE NATIONAL BANK ("SUBORDINATION
AGREEMENT"), THE TERMS AND CONDITIONS OF WHICH ARE INCORPORATED HEREIN
BY THIS REFERENCE THERETO. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS NOTE, NO PAYMENT ON ACCOUNT OF THE OBLIGATIONS
HEREUNDER, WHETHER OF PRINCIPAL, INTEREST OR OTHERWISE, WILL BE MADE,
PAID, RECEIVED OR ACCEPTED, EXCEPT IN ACCORDANCE WITH THE TERMS AND
CONDITIONS OF THE SUBORDINATION AGREEMENT.
14. Securities Law Restrictions. Neither this Note, nor the Common
Shares issuable upon conversion of this Note, have been registered for
sale under the Securities Act of 1933, and neither this Note, nor those
Common Shares, nor any interest in this Note or those Common Shares,
may be sold, offered for sale, pledged or otherwise disposed of without
compliance with applicable securities laws including, without
limitation, an effective registration statement related thereto or
delivery of an opinion of counsel reasonably acceptable to Company that
such registration is not required under the Securities Act of 1933.
<PAGE>
15. Governing Law. This Note shall be enforced in accordance with
the laws of the State of Illinois and shall be construed in accordance
therewith. The parties hereto agree that all actions or proceedings
arising in connection with this Note shall be tried and litigated
exclusively in the State and Federal courts located in the County of
Cook, State of Illinois. The aforementioned choice of venue is
intended by the parties to be mandatory and not permissive in nature,
thereby precluding in the possibility of litigation between the parties
with respect to or arising out of this Note in any jurisdiction other
than that specified in this Section 15. Each party hereby waives any
right it may have to assert the doctrine of forum non conveniens or
similar doctrine or to object to venue with respect to any proceeding
brought in accordance with this Section 15, and stipulates that the
State and Federal courts located in the County of Cook, State of
Illinois shall have in personam jurisdiction and venue over each of
them for the purpose of litigating any dispute, controversy, or
proceeding arising out of or related to this Note. Each party hereby
authorizes and accepts service of process sufficient for personal mail,
return receipt requested, postage prepaid, to its address for the
giving of notices as set forth in this Note. Any final judgment
rendered against a party in any action of proceeding shall be
conclusive as to the subject of such final judgment and may be enforced
in other jurisdictions in any manner provided by law.
Circuit Systems, Inc.
By:
________________________________
James E. Robbs, Vice President and
Chief Financial Officer
<PAGE>
NOTICE OF CONVERSION
The undersigned irrevocably exercises the option to convert
$___________ in aggregate principal amount outstanding and payable
under that Subordinated Term Note dated ________________ ("Note")
issued by Circuit Systems, Inc. ("Company") in favor of the undersigned
into Common Shares in accordance with the terms of the Note and directs
that the Common Shares issuable on conversion be issued and delivered
to the undersigned.
Dated: __________________
_______________________________________
EXHIBIT 99 b
AMENDMENT NUMBER THREE
TO CREDIT AGREEMENT
THIS AMENDMENT NUMBER THREE TO CREDIT AGREEMENT (this
"Amendment") is made as of the 10th day of February, 2000, by and among
CIRCUIT SYSTEMS, INC., an Illinois corporation ("Circuit Systems"),
CIRCUIT SYSTEMS OF TENNESSEE, L.P., a Tennessee limited partnership
("CSTLP") and SVPC CIRCUIT SYSTEMS, INC., a California corporation
("SVPCCSI" and together with Circuit Systems and CSTLP, the
"Borrowers"), and LASALLE BANK NATIONAL ASSOCIATION, f/k/a LaSalle
National Bank ("Bank"), as Agent for the Lenders now or hereafter named
in the Loan Agreement (hereinafter defined).
BACKGROUND
A. Borrowers are obligated and indebted to Bank and the other
Lenders pursuant to the terms of that certain Credit Agreement dated
as of January 6, 1999, as amended and supplemented from time to time
(the "Loan Agreement"), and various instruments, agreements and
documents executed in connection therewith (collectively, the "Loan
Documents"), pursuant to which Lenders have made loans and advances to
the Borrowers.
B. Borrowers have informed Lenders that Borrowers are in
breach of certain provisions of the Loan Agreements, including without
limitation, certain financial covenants set forth in the Loan
Agreements.
C. Borrowers have requested that Bank (a) amend the Loan
Agreement to make additional funds available to Borrowers under the
revolving loan facility, and (b) waive those Events of Default referred
to in Section 1 hereof on the terms and conditions contained herein.
D. Capitalized terms used herein but not defined herein shall
have the same meanings assigned to them in the Loan Documents.
NOW, THEREFORE, in consideration of the premises set forth above
and the mutual promises contained in this Consent, and for other good
and valuable consideration, the receipt and sufficiency of which hereby
are acknowledged, Borrowers and Bank, on behalf of the Lenders, agree
as follows:
1. WAIVER. Effective upon the execution and delivery by
Borrowers of this Amendment to Bank and satisfaction of the conditions
precedent set forth herein, Bank hereby waives any defaults in
existence under Section 6.4 the Loan Agreement. The waiver set forth
in this Section 1 shall be a limited waiver and shall not constitute a
waiver of other violations or any subsequent violations, whether of a
different or like nature, nor shall it constitute a course of conduct
or dealing.
<PAGE>
2. AMENDMENTS TO LOAN AGREEMENT
2.1 The first full paragraph of the definition of "Borrowing
Base" set forth in Section 1.1 of the Loan Agreement is hereby amended
in its entirety to read as follows:
"Borrowing Base:
For the Revolving Credit Loans: The lesser of $16,000,000 or the
sum of (i) 85% of the face amount of Eligible Accounts, (ii) the
lesser of $3,000,000 or the sum of (1) 50% of the value of
Eligible Finished Goods and (2) 75% of the value of Eligible
Finished Goods on Consignment, (iii) the sum of 40% of the value
of SVPCCSI's Raw Materials Inventory and 50% of the value of all
other Borrowers' Raw Materials Inventory, but in no event
greater than $2,000,000, and (iv) 60% of the current market
value of the common stock of SigmaTron held by CSI, as such
market value is quoted on a recognized securities exchange, but
in no event greater than $2,000,000."
2.2 The definition of "Eligible Finished Goods on Consignment"
set forth in Section 1.1 of the Loan Agreement is hereby amended in its
entirety to read as follows:
"Eligible Finished Goods on Consignment" means that portion of
the Borrowers' finished goods Inventory (i) which is held by
Lucent Technologies, Inc., Berg Electronics, Inc., or such other
Account Debtors approved by Agent in writing, (ii) which is
subject to a consignment agreement which is in form and
substance acceptable to Agent, (iii) is located in the United
States, and (iv) in which the Agent holds a perfected first
priority Lien."
2.3 The definition of "Revolving Credit Termination Date" set
forth in Section 1.1 of the Loan Agreement is hereby amended in its
entirety to read as follows:
"Revolving Credit Termination Date means August 1, 2001."
2.4 The definition of "Term Loan Maturity Date" set forth in
Section 1.1 of the Loan Agreement is hereby amended in its entirety to
read as follows:
"Term Loan Maturity Date means August 1, 2001."
2.5 The Loan Agreement is hereby amended to provide that upon
the expiration of any LIBOR-Rate Interest Period with respect to any
Revolving Loan Tranche or Term Loan Tranche in existence on the date of
this Amendment, all such Revolving Loan Tranches and Term Loan Tranches
shall thereafter bear interest at the Base Rate Option and Borrowers
shall not be permitted to elect the LIBOR-Rate Option.
<PAGE>
2.6 Upon the effectiveness of this Amendment, the applicable
Margin for Base Rate Loans and the Pricing Matrix for the Unused
Availability Fee shall be as follows and Annex B to the Loan Agreement
shall be amended accordingly:
"Applicable Margin for the Revolving Credit Loans and Term Loan:
Funded Debt/ Unused Availability
EBITDA Ratio Prime + Fee
------------ ------- -------------------
Greater than or equal to .75% .50%
5.25 to 1.0
Less than 5.25 to 1.0 but .50% .375%
greater than or equal to
4.50 to 1.0
Less than 4.50 to 1.0 but .50% .25%
greater than or equal to
3.50 to 1.0
Funded Debt/ Unused Availability
EBITDA Ratio Prime + Fee
------------ ------- -------------------
Less than 3.50 to 1.0 but .25% .25%
greater than or equal to
2.50 to 1.0
less than 2.50 to 1.0 .0% .125%
2.7 Sections 6.4(a)-(d) of the Loan Agreement are hereby
amended in their entirety to read as follows:
"6.4(a) Minimum EBITDA. Borrowers' consolidated EBITDA shall
not be less than the amounts set forth in the table below for
the indicated fiscal periods of Borrowers' Fiscal Years set
forth below ending as of the last day of such indicated fiscal
period:
Fiscal Period of Borrowers Minimum EBITDA
-------------------------- --------------
Nine months ending 1/31/00 $4,150,000
Ten months ending 2/29/00 $5,000,000
Eleven months ending 3/31/00 $6,000,000
Twelve months ending 4/30/00 $7,100,000
Three months ending 7/31/00 $2,775,000
Six months ending 10/31/00 $6,100,000
Nine months ending 1/31/01 $9,000,000
Twelve months ending 4/30/01 $12,000,000
<PAGE>
"6.4(b) Adjusted Debt Service Ratio. For the indicated fiscal
periods of Borrowers' Fiscal Years set forth below ending as of
the last day of such indicated fiscal periods, Borrowers shall
not permit the ratio of (i) Borrowers' consolidated EBITDA for
such period, less (1) the sum of Borrowers' consolidated Capital
Expenditures for such period, minus increased long term
Indebtedness of Borrowers incurred during such period, and (2)
Borrowers' cash income taxes paid for such period, to (ii)
Borrowers' consolidated Debt Service for such period, measured
as of the last day of such indicated fiscal periods, to be less
than the ratios set forth below for the indicated fiscal
periods:
Fiscal Period Minimum Adjusted Debt
of Borrowers Service Ratio
-------------------------- -----------------------
Nine months ending 1/31/00 - 0.10 to 1.0
Ten months ending 2/29/00 0.30 to 1.0
Eleven months ending 3/31/00 0.35 to 1.0
Twelve months ending 4/30/00 0.40 to 1.0
Three months ending 7/31/00 0.80 to 1.0
Six months ending 10/31/00 0.90 to 1.0
Nine months ending 1/31/01 1.00 to 1.0
Twelve months ending 4/30/01 1.00 to 1.0
"6.4(c) Minimum Tangible Net Worth. Borrowers' Consolidated
Tangible Net Worth shall not be less than the amount set forth below
for the indicated fiscal periods of Borrowers' Fiscal Years set forth
below ending as of the last day of such indicated fiscal periods:
Fiscal Period of Borrowers Minimum Tangible
Net Worth
-------------------------- ----------------
Nine months ending 1/31/00 $6,400,000
Ten months ending 2/29/00 $8,750,000
Eleven months ending 3/31/00 $8,900,000
Twelve months ending 4/30/00 $9,000,000
Three months ending 7/31/00 $9,175,000
Six months ending 10/31/00 $9,600,000
Nine months ending 1/31/01 $9,750,000
Twelve months ending 4/30/01 $10,000,000
<PAGE>
"6.4(d) Maximum Debt to Tangible Net Worth Ratio: Borrowers
shall not permit the ratio of the sum of their consolidated
Indebtedness, less all Indebtedness of Borrowers subordinated to
the Obligations by written agreements acceptable to Agent
("Subordinated Debt") to the sum of Borrowers' consolidated
Tangible Net Worth, plus Subordinated Debt to be more than the
ratios set forth below for the indicated fiscal periods of
Borrowers' Fiscal Years set forth below ending as of the last
day of such indicated fiscal periods:
Maximum Debt to
Fiscal Period Tangible Net Worth
of Borrowers Ratio
-------------------------- ------------
Nine months ending 1/31/00 10.20 to 1.0
Ten months ending 2/29/00 7.75 to 1.0
Eleven months ending 3/31/00 7.75 to 1.0
Twelve months ending 4/30/00 7.75 to 1.0
Three months ending 7/31/00 7.75 to 1.0
Six months ending 10/31/00 7.25 to 1.0
Nine months ending 1/31/01 6.75 to 1.0
Twelve months ending 4/30/01 6.40 to 1.0
2.8 Section 6.1 of the Loan Agreement is hereby amended to add
the following new subsection (vi) thereto:
"(vi) Indebtedness of (1) CSI to Tribhovan M. Patel, Samir
Patel, Sejal Patel and Impex Electronics, Inc., (2) Indebtedness
of SVPCCSI and CSI to H.O.T.L.R.T., Inc., and (3) Indebtedness
of CSI to Tribhovan M. Patel, as assignee of Brijesh H. Shah,
Dahyabhai S. Patel, Kiran Patel, Tribhovan M. Patel, as assignee
of Stan Menezes, P.J. Patel, Hasumati D. Patel, P.J. Patel, as
assignee of Brijesh H. Shah and P.J. Patel as assignee of Stan
Menezes, all of which Indebtedness in (1)-(3) above is
subordinated to the repayment of Borrowers' Obligations to
Lenders, by written agreements on terms acceptable to Agent."
<PAGE>
3. REAFFIRMATIONS OF COLLATERAL DOCUMENTS
(a) Borrowers are parties to each of the following documents:
(i) Security Agreement (Inventory, Equipment, Accounts and
General Intangibles) dated January 6, 1999;
(ii) Mortgage, Assignment of Leases and Rents, Security
Agreement, Fixture Filing and Financing Statement dated as
of January 7, 1999 and filed with the Cook County, Illinois
Recorder on January 13, 1999 as Document No. 99037717 (the
"Elk Grove Village Mortgage"), as heretofore amended;
(iii) Mortgage, Assignment of Leases and Rents, Security
Agreement, Fixture Filing and Financing Statement dated as
of January 7, 1999 and filed with the Lake County, Illinois
Recorder on February 8, 1999 as Document No. 4294762 (the
"Antioch Mortgage"), as heretofore amended; and
(iv) Deed of Trust, Assignment of Leases and Rents,
Security Agreement, Fixture Filing and Financing Statement
dated as of January 7, 1999 and filed with the Santa Clara
County, California Recorder on January 15, 1999 as Document
No. 14600088 (the "Santa Clara Mortgage"), as heretofore
amended.
The documents listed in subsections (i) through (iv), together
with any and all other instruments, documents and agreements granting
to Lender a security interest in all personal property, real property
and fixtures of Borrowers, are collectively referred to as the
"Security Agreements".
(b) Each Borrower hereby expressly reaffirms and assumes all of
its obligations and liabilities as set forth in the Security
Agreements, agrees that the obligations secured thereby shall include
all obligations of such Borrower to Lender under the Loan Agreement, as
amended from time to time, including this Amendment, and agrees to be
bound by and abide by and operate and perform under and pursuant to and
comply fully with all of the terms, conditions, provisions, agreements,
representations, undertakings, warranties, and covenants contained in
the Security Agreements, in so far as such obligations and liabilities
may be modified by this Amendment.
4 REPRESENTATIONS AND WARRANTIES. To induce Bank to enter
into this Amendment, Borrowers represent and warrant to Bank that:
(a) Representations and Warranties. On the date hereof, the
representations and warranties set forth in the Loan Documents are true
and correct with the same effect as though such representations and
warranties had been made on the date hereof, except to the extent such
representations and warranties expressly relate to an earlier date.
(b) Events of Default. On the date hereof, no Event of Default
(other than those being waived hereby) under any of the Loan Documents
has occurred and is continuing.
<PAGE>
(c) No Conflict. The execution and performance by the
Borrowers of this Amendment and the consummation of the transactions
contemplated by the Amendment to Pledge Agreement will not (i) violate
any provision of law, any order of any court or other agency of
government, the Articles of Incorporation or ByLaws of either Circuit
Systems or SVPCCSI or the Partnership Agreement of CSTLP or (ii)
violate any indenture, contract, agreement or other instrument to which
any Borrower is a party, or by which its property is bound, or be in
conflict with, result in a breach of or constitute (with due notice
and/or lapse of time) a default under, any such indenture, contract,
agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of
the property or assets of any Borrower.
5. CONDITIONS PRECEDENT. The effectiveness of this Amendment
and the agreement by Bank to waive the existing Events of Default and
enter into this Amendment is subject to the following conditions
precedent:
(a) Borrowers shall have delivered to the Bank an executed copy
of this Amendment.
(b) Circuit Systems shall have delivered to the Bank an
executed copy of an Amendment to Pledge Agreement in the form of
Exhibit A hereto, together with share certificates evidencing all of
the issued and outstanding shares of common stock of Infovision, Inc.
and an executed assignment separate from certificate in blank.
(c) Circuit Systems and SVPCCSI shall have delivered to Bank a
copy of the resolutions or written consent of their Boards of
Directors, certified to be true and correct by their Secretaries,
authorizing this Amendment.
(d) Circuit Systems shall have delivered to Bank the original
of the subordinated notes, evidencing the subordinated debt due from
Circuit Systems to Sejal Patel, Samir Patel, Impex Electronics, Inc.,
and Tribhovan M. Patel, together with evidence of the receipt of the
proceeds of the subordinated loans by Sejal Patel, Samir Patel, Impex
Electronics, Inc., and Tribhovan M. Patel to Circuit Systems.
(e) Circuit Systems shall have delivered to Bank an executed
copy of a Subordination Agreement, in the form attached hereto as
Exhibit B, from each of Tribhovan M. Patel, Samir Patel, Sejal Patel
and Impex Electronics, Inc.
(f) Borrowers shall have delivered to Bank an Amendment to
Subordination Agreement in the form of Exhibit C attached hereto
executed by H.0.T.L.R.T., Inc. and Circuit Systems.
(g) Borrowers shall have delivered to Bank Amendments to
Subordination Agreements in the form of Exhibit D attached hereto
executed by Circuit Systems, SVPCCSI and each of Tribhovan M. Patel as
assignee of Brijesh H. Shah, Dahyabhai S. Patel, Tribhovan M. Patel as
assignee of Stan Menezes, P.J. Patel, Kiran Patel, P.J. Patel as
assignee of Stan Menezes, P.J. Patel as assignee of Brijesh Patel, and
Hasumati D. Patel.
<PAGE>
(h) Borrowers shall have delivered to Bank an executed
consignment agreement, in form acceptable to Bank, between Borrowers
and Berg Electronics, Inc., together with evidence of the perfection of
Bank's Lien on all Inventory consigned to Berg Electronics, Inc.
(i) Borrowers shall have delivered to Bank a Guaranty executed
by Infovision, Inc. in the form of Exhibit E attached hereto
guarantying the payment of Borrowers' Obligations and an executed
Security Agreement and Financing Statements in the form of Exhibit F
attached hereto granting Bank a Lien on the assets of Infovision, Inc.
as collateral security for Borrowers' obligations.
(j) Borrowers shall have delivered to Bank a Subordination
Agreement in the form of Exhibit G attached hereto executed by Project
Control Solutions, Inc. ("PCS") and Infovision, Inc., whereby PCS
subordinates the repayment of Infovision, Inc.'s obligations to PCS to
the repayment of Infovision, Inc.'s obligations to Bank.
(k) Borrowers shall have delivered to Bank executed Forbearance
Agreements in form acceptable to Bank between CSI and each of PCS,
Kiran Patel, Tribhovan M. Patel, as assignee of Brijesh H. Shah,
Dahyabhai S. Patel, Tribhovan M. Patel, as assignee of Stan Menezes,
P.J. Patel, as assignee of Stan Menezes, P.J. Patel as assignee of
Brijesh Patel, and Hasumati D. Patel.
(l) Circuit Systems of Tennessee, Inc., the corporate general
partner of CSTLP, shall have delivered to Bank evidence of all required
partnership approvals for CSTLP to execute and deliver this Amendment.
(m) Borrowers shall have delivered to Bank a copy of an
executed employment agreement between CSI and Tribhovan M. Patel
providing for Tribhovan M. Patel's employment as Chief Operating
Officer of CSI on terms acceptable to Bank.
7. GENERAL PROVISIONS.
(a) Except as herein amended or modified, the terms and
provisions of the Loan Documents shall remain unchanged and in full
force and effect and are in all other respects ratified and confirmed.
(b) This Amendment shall be construed in accordance with and
governed by the laws of the State of Illinois, and the obligations of
Borrowers under this Amendment are and shall arise absolutely and
unconditionally upon the execution and delivery of this Amendment.
(c) This Amendment. may be executed in any number of
counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument.
(d) Borrowers hereby agree to pay all out-of-pocket expenses
incurred by Bank in connection with the preparation, negotiation and
consummation of this Amendment, and all other documents related
thereto, including without limitation, the fees and expense of Bank's
counsel.
<PAGE>
IN WITNESS WHEREOF, Borrowers and Bank have caused this
Amendment to be duly executed by their duly authorized officers, each
as of the day and year first above written.
CIRCUIT SYSTEMS, INC.
By: __________________________
Title:____________________________
CIRCUIT SYSTEMS OF TENNESSEE, L.P.
By: __________________________
Title:____________________________
SVPC CIRCUIT SYSTEMS, INC.
By: __________________________
Title:____________________________
LASALLE BANK NATIONAL ASSOCIATION
By: __________________________
Title:____________________________
EXHIBIT 99.C
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, dated as of the 11th day of February
2000, is between Circuit Systems, Inc., an Illinois corporation (the
"Company"), and Tribhovan M. Patel ("Patel").
WHEREAS, the Company is experiencing operational difficulties and
desires to retain Patel in an executive capacity for the period and
upon the other terms and conditions herein provided to assist the
Company in its rehabilitative effort; and
WHEREAS, Patel is willing to be employed by the Company pursuant
to the terms and conditions of this Agreement, and understands that one
of his missions as an executive employee will be to reduce the
Company's operating costs and/or increase revenues so as to "cover" the
Compensation and Benefits provided for herein.
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and obligations herein contained, and for other good and
valuable consideration, the receipt, adequacy, and sufficiency of which
are hereby acknowledged, the parties hereto do hereby covenant and
agree as follows:
1. EMPLOYMENT
1.1 Position. The Company hereby confirms Patel's employment as
its Executive Vice President and Chief Operating Officer.
1.2 Duties. Patel's duties will include all those duties
customarily associated with the position of Executive Vice President
and Chief Operating Officer in an emerging growth company, including
those duties that require the performance of policy-making functions
as contemplated by Rule 3b-7 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such duties shall also include
management of all functions and facilities required of and maintained
by the Company and its subsidiaries. Patel agrees to devote
substantially his entire business time and attention to the performance
of his duties hereunder and to serve the Company diligently and to the
best of his abilities. Notwithstanding the foregoing, Patel shall have
the continuing right (a) to make passive investments in the securities
of any publicly-owned corporation, (b) to make any other passive
investments with respect to which he is not obligated or required to,
and does not in fact, devote any substantial managerial efforts that
interfere with the fulfillment of his duties to the Company; and, (c)
subject to the prior written approval of the Company's Board of
Directors (the "Board of Directors"), to serve as a director of or
consultant to other companies and entities.
2. COMPENSATION AND BENEFITS
2.1 Base Annual Salary. The Company shall pay Patel a base
annual salary of $420,000 (the "Base Annual Salary") periodically
throughout the year, commencing the date hereof, in accordance with its
customary payroll practices, as modified from time to time, subject to
all payroll and withholding deductions required by applicable law.
<PAGE>
2.2 Cash Bonuses; Other Incentive Compensation. Subject to the
satisfaction of such criteria and the achievement of such objectives as
the Compensation Committee of the Board of Directors may establish,
Patel may receive additional cash bonuses and other incentive
compensation (including stock options).
2.3 Other Benefits. Patel shall be entitled to other benefits
and perquisites no less favorable than those provided to the Company's
employees generally, as such benefits and perquisites may be modified
from time to time in the Company's discretion. Such benefits shall in
all events include health insurance, a 401(k) plan and paid holidays
annually. Such perquisites shall in all events include three weeks of
vacation annually, disability insurance and group term life insurance.
The Company shall pay Patel compensation in accordance with paragraph
2.1 hereof in the event Patel does not take his full vacation during
any calendar. To assist with the business travel essential to
conducting business in the Metropolitan Chicago area, throughout the
term of this Agreement the Company will provide Patel with a company-
acquired and -maintained automobile. All expenses incidental to the
personal use of the automobile shall be borne by Patel.
2.4 Expense Reimbursement. Patel shall be reimbursed by the
Company for his reasonable out-of-pocket business expenses in
accordance with the Company's established policies applicable to
executive officers generally. The Company shall reimburse Patel for
his temporary living expenses and travel expenses to and from Elk Grove
Village, Illinois until such time as Patel relocates his principal
place of residence near the Company's headquarters in Elk Grove
Village, Illinois. In addition, the Company will reimburse Patel for
all expenses related to legal, tax and financial advice, not to exceed
37,500 in the aggregate over the Term of this Agreement.
2.5 Insurance. The Company will pay an annual premium for a
$5,000,000 life insurance policy to be owned by Patel.
3. TERM
3.1 Term. The term of the Executive's employment hereunder shall
be the period of twelve (12) months commencing as of the date hereof
and expiring on January 31, 2001 (the "Term"). The term of Executive's
employment hereunder shall, in any event, be subject to earlier
termination as provided in paragraph 4 hereof.
4. TERMINATION AND SEVERANCE PAY
4.1 At Will. Patel and the Company acknowledge and agree that
Patel's employment with the Company is "at will" during the term of
this Agreement. Accordingly, either party (and in the case of the
Company, only by the Board of Directors) may terminate Patel's
employment by the Company, with or without cause, in which case Patel
shall have no claim for lost wages, although termination of Patel's
employment shall be subject to the terms and conditions of this
Agreement regarding severance pay, benefits and other obligations.
4.2 Voluntary Resignation. In the event that Patel's employment
with the Company terminates as a result of his voluntary resignation,
Patel shall be entitled to no severance pay or benefits.
<PAGE>
4.3 Involuntary Termination.
(a) Severance Pay. In the event that Patel's employment
with the Company is not extended by the Company upon the expiration of
the Term of this Agreement, Patel shall be entitled to severance pay in
the form of continuation of Base Annual Salary for six (6) months from
the expiration of the Term of this Agreement. In the event that Patel's
employment with the Company is terminated by the Company For Just Cause
(as defined in Section 4.3(c) hereof), Patel shall not be entitled to
severance pay or benefits. In the event that Patel's employment with
the Company is terminated by the Company other than for Just Cause
prior to the expiration of the Term of this Agreement, Patel shall be
entitled to severance pay in the form of continuation of Base Annual
Salary for the remainder of the Term and an additional six (6) months
after the expiration of the Term. Patel shall have no duty to mitigate
such payments by seeking or accepting other employment; accordingly,
such payments shall not be reduced due to receipt of other compensation
from such other employment as he may obtain during the term of his
severance payments.
(b) Additional Benefits. In the event that Patel's
employment with the Company is terminated by the Company other than For
Just Cause, Patel shall be entitled to continue to participate in the
Company's employee benefit programs as and to the extent theretofore
made available to him pursuant to Section 2.4 above. Such benefits
shall be continued at no additional cost to Patel, except to the
extent, if any, that tax laws require the inclusion of the value of
such benefits in his gross income. Such benefits shall continue for
the benefit of Patel for the entire period of his severance pay
continuation as provided in Section 4.3(a) above, in the same manner
and at the same level as in effect immediately prior to Patel's
termination.
(c) For Just Cause. For purposes of this Agreement, the
term "For Just Cause" shall mean any termination of employment of Patel
for one or more of the following reasons: (i) the substantial failure
by Patel to comply with a lawful, written instruction of the Company's
Board of Directors, which instruction is consistent with his duties as
elsewhere provided in this Agreement, which failure continues without
interruption for the 30 days immediately following Patel's receipt of
such instruction; (ii) the substantial and continuing failure of Patel
to render vital service to the Company in execution of his essential
duties, as determined by the Board of Directors in good faith with
reference to Patel's employment agreement then in effect, after giving
written notice to Patel and an opportunity for him to remedy such
failure within 30 days of receiving such notice; (iii) the conviction
of Patel for a felony involving an act of moral turpitude, which
conviction has become final and non-appealable; (iv) recklessness in
the performance of Patel's duties to the Company causing material harm
to the Company; or (v) material dishonesty, material breach of
fiduciary duty or material breach by Patel of any representation,
covenant or other agreement contained in this Agreement.
<PAGE>
(d) Constructive Termination. If Patel without his prior
written consent, is removed by the Board of Directors of the Company
from the position of Executive Vice President and Chief Operating
Officer, or if Patel's duties are restricted or reduced in such a
manner as to result in his position with the Company no longer
including duties requiring the performance of policy making functions
by an executive officer within the meaning of Rule 3b-7 of the Exchange
Act, then, in either such case, the employment of Patel shall be
deemed, in his discretion, involuntarily terminated by the Company
other than For Just Cause, it being understood that Patel must exercise
his discretion under this Section 4.3(d) in writing to the Board of
Directors within sixty days following the latest to occur of any event
constituting involuntary termination pursuant to this Section 4.3(d).
5. NON-DISCLOSURE, NON-SOLICITATION, NON-COMPETE AND NON-
DISPARAGEMENT
5.1 Non-Disclosure. Except as is reasonably necessary in the
performance of his duties hereunder, Patel shall not disclose to any
person or entity or use for his own direct or indirect benefit any
Confidential Information (as defined below) pertaining to the Company
obtained by him in connection with his employment with the Company.
For purposes of this Agreement, the term "Confidential Information"
shall include information with respect to the Company's products,
services, processes, suppliers, customers, customers' account
executives, financial, suppliers and distribution information, price
lists, identity and list of actual and potential customers, trade
secrets, technical information, business plans and strategies;
provided, however, that such information shall not be treated as
Confidential Information to the extent that it has been publicly
disclosed by the Company (other than by Patel through a breach of this
Section 5.1).
5.2 Non-Solicitation. Patel agrees that for a period of three
(3) years after termination of his employment for any reason other than
involuntary termination not for Just Cause, he shall not (a) directly
or indirectly solicit, induce or attempt to solicit or induce any
Company employee to discontinue such employee's employment by the
Company, (b) usurp any opportunity of the Company of which he became
aware during his tenure at the Company, or that was made available to
him on the basis of a mistaken belief that he was still employed by the
Company, or (c) directly or indirectly solicit or induce or attempt to
influence any person or business that is an account, customer or client
of the Company to reduce or cancel the business of any such account,
customer or client with the Company.
5.3 Non-Compete. Patel agrees that, so long as he is employed by
the Company and for a period of three (3) years after termination of
his employment for any reason other than involuntary termination not
For Just Cause, he shall not, without prior written consent of the
Company's Board of Directors, either directly or indirectly (including,
without limitation, through a partnership, joint venture, corporation
or other entity or as a consultant, director or employee), engage in
the business engaged in by the Company as of the date hereof within any
of those geographical areas in which the Company currently conducts
active business operations. The parties hereto agree that the scope
and the nature of such covenant, and the duration and the area within
which such covenant is to be effective, are reasonable in light of all
facts and circumstances.
<PAGE>
5.4 Non-Disparagement. Patel agrees that, so long as he is
employed by the Company and for a period of three years after
termination of his employment for any reason other than involuntary
termination not For Just Cause, he shall not make any public comment
(whether written or oral) concerning or touching upon the Company or
any of its Affiliates, including but not limited to any or all of the
Company's executive officers and directors, which comment would tend to
disparage the personal, financial or business reputation of such other
person or persons, except for such comments as may be required by law
and except for such comments as may be made in litigation, arbitration
or mediation with such person or persons.
6. CERTAIN COVENANTS OF THE COMPANY
6.1 No Waiver. The waiver by either party of a breach of any
provision of this Agreement shall not operate as or be construed as a
waiver of any subsequent breach thereof.
6.2 Assignment. This Agreement may not be assigned by Patel and
may not be assigned by the Company otherwise than by operation of law.
This Agreement shall be binding upon the Company's successors and
assigns.
6.3 Entire Agreement. This Agreement supersedes any and all
prior written or oral agreements between Patel and the Company and
evidences the entire understanding of the parties hereto with respect
to the terms and conditions of Patel's employment with the Company.
6.4 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Illinois without
regard to the choice of law rules of the State of Illinois or any other
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
By: --------------------------------
James E. Robbs, Vice President,
Chief Financial Officer, and Treasurer
--------------------------------
Tribhovan M. Patel
Acknowledged:
--------------------------------
Chairman, Compensation Committee
Circuit Systems, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY OF FINANCIAL
INFORMATION EXTRACTED FROM FORM 10 - Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-END> JAN-31-2000
<CASH> 390,461
<SECURITIES> 0
<RECEIVABLES> 13,336,953
<ALLOWANCES> 175,000
<INVENTORY> 10,908,626
<CURRENT-ASSETS> 25,305,875
<PP&E> 79,016,614
<DEPRECIATION> 33,315,119
<TOTAL-ASSETS> 89,229,130
<CURRENT-LIABILITIES> 29,849,415
<BONDS> 43,818,701
0
0
<COMMON> 3,672,415
<OTHER-SE> 11,003,299
<TOTAL-LIABILITY-AND-EQUITY> 89,229,130
<SALES> 71,310,968
<TOTAL-REVENUES> 71,310,968
<CGS> 65,981,338
<TOTAL-COSTS> 65,981,338
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,238,467
<INCOME-PRETAX> (4,734,830)
<INCOME-TAX> (1,650,500)
<INCOME-CONTINUING> (3,084,330)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,084,330)
<EPS-BASIC> (.72)
<EPS-DILUTED> (.72)
</TABLE>
