<PAGE> 1
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 Quarterly Period Ended April 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-25554
CONTINENTAL CIRCUITS CORP.
(Exact name of registrant as specified in its charter)
Delaware 86-0267198
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3502 East Roeser Road, Phoenix, Arizona 85040
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 268-3461
No Change
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
The number of shares outstanding of each of the issuer's classes of common
stock was 7,175,125 shares common stock, par value $.01, as of June 1, 1996.
<PAGE> 2
FORM 10-Q
CONTINENTAL CIRCUITS CORP.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONTINENTAL CIRCUITS CORP.
CONDENSED STATEMENT OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 26,464 $ 24,297 $ 83,832 $ 69,817
Cost of products sold 22,058 19,165 67,478 55,876
-------- -------- -------- --------
Gross profit 4,406 5,132 16,354 13,941
Selling, general and
administrative expenses 2,002 1,852 6,099 5,379
-------- -------- -------- --------
Income from operations 2,404 3,280 10,255 8,562
Other (income) expense:
Interest expense 153 192 446 796
Other (29) 2 (4) (18)
-------- -------- -------- --------
Income before income taxes 2,280 3,086 9,813 7,784
Income taxes 900 1,220 3,880 3,053
-------- -------- -------- --------
Net income $ 1,380 $ 1,866 $ 5,933 $ 4,731
======== ======== ======== ========
Net income per share $ 0.19 $ 0.27 $ 0.80 $ 0.72
======== ======== ======== ========
Number of shares used in computing
net income per share 7,413 6,924 7,428 6,586
======== ======== ======== ========
</TABLE>
See notes to condensed financial statements.
1
<PAGE> 3
FORM 10-Q
CONTINENTAL CIRCUITS CORP.
CONDENSED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
April 30, July 31,
1996 1995
---- ----
<S> <C> <C>
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 2,767 $ 2,038
Accounts receivable, less allowance of $143 at
July 31, 1995 and $461 at April 30, 1996 15,122 14,098
Inventories 5,666 5,116
Prepaid expenses, income taxes and other 1,449 624
Deferred income taxes 264 264
------- -------
Total current assets 25,268 22,140
Property, plant, and equipment:
Land 2,899 2,764
Buildings and improvements 18,269 15,396
Machinery & equipment 53,636 50,031
------- -------
74,804 68,191
Accumulated depreciation 39,725 35,943
------- -------
35,079 32,248
Other assets 30 94
------- -------
Total assets $60,377 $54,482
======= =======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 7,623 $ 8,706
Accrued expenses 2,418 2,210
Income taxes 0 386
Current portion of long-term debt 1,000 2,143
------- -------
Total current liabilities 11,041 13,445
Long-term debt, less current portion 3,583 1,357
Deferred income taxes 1,944 1,944
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value:
Authorized shares -- 1,000,000
Issued and outstanding shares -- none
Common stock, $.01 par value:
Authorized shares -- 20,000,000
Issued and outstanding shares --
7,129,625 in 1995, and 7,171,325
at April 30, 1996 72 71
Additional paid-in capital 10,204 10,065
Retained earnings 33,533 27,600
------- -------
Total shareholders' equity 43,809 37,736
------- -------
Total liabilities and shareholders' equity $60,377 $54,482
======= =======
</TABLE>
See notes to condensed financial statements.
2
<PAGE> 4
FORM 10-Q
CONTINENTAL CIRCUITS CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
April 30,
----------------------
1996 1995
---- ----
<S> <C> <C>
Operating activities
Net income $ 5,933 $ 4,731
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,782 3,804
Provision for doubtful accounts 318 18
Changes in operating assets and liabilities:
Accounts receivable (1,342) 309
Inventories (550) (481)
Prepaid expenses, income taxes and other (825) (274)
Other assets 64 24
Accounts payable (1,083) 484
Accrued expenses 208 (112)
Income taxes payable (386) 294
-----------------------
Net cash provided by operating activities 6,119 8,797
Investing activities
Purchases of property, plant, and equipment (6,613) (7,429)
Financing activities
Principal payments on long-term debt (774) (10,607)
Borrowings under long-term debt and line of credit 1,857 --
Proceeds from issuance of common stock, net
of issuance costs 140 9,417
-----------------------
Net cash provided (used) by financing activities 1,223 (1,190)
-----------------------
Net increase in cash and cash equivalents 729 178
Cash and cash equivalents at beginning of period 2,038 3,997
-----------------------
Cash and cash equivalents at end of period $ 2,767 $ 4,175
=======================
</TABLE>
See notes to condensed financial statements
3
<PAGE> 5
FORM 10-Q
CONTINENTAL CIRCUITS CORP.
Notes to Condensed Financial Statements
(Unaudited)
April 30, 1996
Note 1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the nine-month period ended April 30, 1996 are
not necessarily indicative of the results that may be expected for the year
ended July 31, 1996.
Note 2. Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
April 30, July 31,
1996 1995
--------- --------
(In thousands)
<S> <C> <C>
Raw material $ 739 $ 754
Work in process 3,094 3,201
Finished goods 1,833 1,161
------- -------
$ 5,666 $ 5,116
======= =======
</TABLE>
4
<PAGE> 6
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
Except for historical information contained herein, the information in
this document contains forward-looking comments which are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
These comments involve risks and uncertainties that could cause the Company's
actual performance to differ materially from expectations. Factors which could
cause or contribute to such differences include, but are not limited to, the
general economic and business conditions affecting the volatile electronics
industry, accuracy of customer forecasts and communications with the Company,
competitive pressures from other independent and captive circuit board
manufacturers, the Company's manufacturing efficiency and the "Risk Factors" set
forth in the Company's preliminary prospectus dated September 8, 1995. The
forward-looking comments should be considered in light of these risks and
uncertainties.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations primarily through
cash generated from operations, although such funds have been supplemented by
borrowings under a line of credit and term notes as needed. The Company's
principal uses of cash historically have been to pay operating expenses, make
capital expenditures and service debt.
Cash generated from operations totaled $6.1 million and $8.8 million
for the nine months ended April 30, 1996 and 1995 respectively. Major cash uses
include accounts receivable - $1.3 million (see comments below), accounts
payable - $1.1 million, and prepaid expenses, income taxes and other - $800,000.
During the nine months ended April 30, 1996, the Company reduced outstanding
payables and began taking advantage of available vendor payment incentives, and
increased estimated tax payments consistent with income growth. Capital
expenditures totaled $6.6 million and $7.4 million for the nine months ended
April 30, 1996 and 1995 respectively. Capital expenditures made in the nine
months ended April 30, 1995 resulted from routine replacements and execution of
the fiscal 1995 capacity expansion plan. These purchases were financed through
cash generated from operations. The expenditures in the nine months ended April
30, 1996 completed the fiscal 1995 planned capacity expansion and maintained the
fiscal 1996 capital operating requirements. This expansion was also funded with
cash from operations and through the Company's credit facility.
The Company believes that funds generated from operations and borrowing
availability under the existing line of credit agreement will be sufficient
through fiscal 1996. At April 30, 1996 all $10 million of the line of credit was
available.
Accounts receivable growth from $14.1 million on July 31, 1995 to $15.1
million on April 30, 1996 was due to a 3.6% increase in sales from the quarter
ended July 31, 1995 to the quarter ended April 30, 1996 and a one day increase
in days sales outstanding driven by a single customer that represents less than
1.5% of net sales.
Inventory growth of 10.8% from $5.1 million on July 31, 1995 to $5.7
million on April 30, 1996 occurred in finished goods. Finished goods increased
as customers reduced requirements consistent with their inventory reduction and
product transition plans. Customer communications with the Company indicate a
short term correction before normal shipment levels resume. Based on these
inputs and an expanded customer base, the Company expects the order rate to
increase in the second half of calendar 1996.
5
<PAGE> 7
FORM 10-Q
Consistent with a growth and broadened capability strategy, the Company
has entered into negotiations to acquire an additional building for enhanced
manufacturing capability. The Company anticipates that funds for the building
will be provided from cash generated from operations.
RESULTS OF OPERATIONS
Comparison of Three Months ended April 30, 1996 and 1995
Net sales increased 8.9% to $26.5 million for the three months ended
April 30, 1996 from $24.3 million for the three months ended April 30, 1995.
This increase was the result of a 3% unit volume growth, with a continuing mix
shift toward higher layer count, more complex products and the higher selling
prices for these products. Overall, price per layer dropped approximately 2%
from period to period. The Company's principal customers are manufacturers and
contract manufacturers of electronic devices that are subject to rapid
technological change, product obsolescence and economic cycles.
Gross profit as a percent of net sales decreased to 16.6% for the
three months ended April 30, 1996 from 21.1% for the three months ended April
30, 1995. This decrease resulted from additional costs of increased scrap and
increased manufacturing capability established to support a higher sales level
than occurred in the three months ending April 30, 1996.
Selling, general and administrative expenses increased 8.1% to $2.0
million for the three months ended April 30, 1996 from $1.9 million for the
three months ended April 30, 1995. This increase was primarily the result of
reserves for doubtful accounts associated with a single customer.
Income from operations decreased 26.7% to $2.4 million, or 9.1% of net
sales, for the three months ended April 30, 1996 from $3.3 million, or 13.5% of
net sales for the three months ended April 30, 1995 as a result of the above
factors.
Interest expense decreased 20.3% to $153,000 for the three months
ended April 30, 1996 from $192,000 for the three months ended April 30, 1995.
The decrease was a result of lower average debt levels for February through
April 1996. The net proceeds to the Company from the March 1995 sale of
1,000,000 shares of Common Stock was used to reduce debt during April 1995.
Income taxes decreased 26.2% to $900,000 for the three months ended
April 30, 1996 from $1.2 million for the three months ended April 30, 1995. The
decrease was a result of the decrease in income before taxes.
Comparison of Nine Months ended April 30, 1996 and 1995
Net sales increased 20.1% to $83.8 million for the nine months ended
April 30, 1996 from $69.8 million for the nine months ended April 30, 1995. The
majority of this increase was the result of the Company's marketing efforts and
favorable industry trends and unit volume increases during the first two
quarters of the period. The Company's product mix shifted toward more complex
circuit boards and the higher selling prices for these products. For the nine
months ended April 30, 1996 versus the same period in 1995, sales increased
18.2% due to increased volume/mix, and 1.9% as a result of increased selling
prices.
Gross profit as a percent of net sales dropped to 19.5% for the nine
months ended April 30, 1996 from 20.0% for the nine months ended April 30,
1995. This decrease was due primarily to higher scrap and manufacturing
capability established to support a higher sales volume.
6
<PAGE> 8
FORM 10-Q
Selling, general and administrative expenses increased 13.4% to $6.1
million for the nine months ended April 30, 1996 from $5.4 million for
the nine months ended April 30, 1995. This increase was the result of
increased selling and distribution expenses and reserves for doubtful accounts
associated with a single customer.
Income from operations increased 19.8% to $10.3 million, or 12.2% of
net sales, for the nine months ended April 30, 1996 from $8.6 million, or 12.3%
of net sales for the nine months ended April 30, 1995 as a result of the above
factors.
Interest expense decreased 44.0% to $446,000 for the nine months ended
April 30, 1996 from $796,000 for the nine months ended April 30, 1995. The
decrease was a result of lower debt levels for August 1995 through April 1996.
The net proceeds to the Company from the March 1995 sale of 1,000,000 shares of
Common Stock was used to reduce debt.
Income taxes increased 27.1% to $3.9 million for the nine months ended
April 30, 1996 from $3.1 million for the nine months ended April 30, 1995. The
increase was a result of an increase in income before taxes, and an effective
tax rate adjustment to 39.5% from 39.2%.
7
<PAGE> 9
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index following the signature page, which is incorporated
herein by this reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the quarter ended April 30, 1996.
8
<PAGE> 10
FORM 10-Q
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 thereunto duly authorized.
CONTINENTAL CIRCUITS CORP.
(Registrant)
Date: June 13, 1996 By: /s/ Frederick G. McNamee, III
-----------------------------
Frederick G. McNamee, III
Chairman of the Board, President
and Chief Executive Officer
Date: June 13, 1996 By: /s/ Steven J. Walters
---------------------
Steven J. Walters
Controller - (Interim Chief
Accounting Officer)
9
<PAGE> 11
FORM 10-Q
EXHIBIT INDEX
TO
CONTINENTAL CIRCUITS CORP.
FORM 10-Q
QUARTERLY REPORT FOR THE QUARTER ENDED APRIL 30, 1996
(Commission File 0-25554)
<TABLE>
<CAPTION>
Exhibit Description
- - ------- -----------
<S> <C>
3.1 Certificate of Incorporation of Registrant, as amended (1)
3.2 Bylaws of Registrant, as amended (1)
11 Statement re: computation of net income per share
27 Financial Data Schedule
</TABLE>
- - ----------------------
(1) Incorporated by reference to identically numbered exhibit in
Registrant's registration statement on Form S-1 (SEC File No.
33-88368), as amended, initially filed on January 9, 1995.
10
<PAGE> 1
FORM 10-Q
CONTINENTAL CIRCUITS CORPORATION
STATEMENT RE: COMPUTATION OF NET INCOME PER SHARE
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
----------------- ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares outstanding 7,413 6,924 7,428 6,586
Net Income $1,380 $1,866 $5,933 $4,731
Net income per share $ 0.19 $ 0.27 $ 0.80 $ 0.72
</TABLE>
(1) Common stock equivalents, which were dilutive, were included in the
computation of weighted average number of shares outstanding.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED APRIL 30, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> APR-30-1996
<CASH> 2,767
<SECURITIES> 0
<RECEIVABLES> 15,583
<ALLOWANCES> 461
<INVENTORY> 5,666
<CURRENT-ASSETS> 25,268
<PP&E> 74,804
<DEPRECIATION> 39,725
<TOTAL-ASSETS> 60,377
<CURRENT-LIABILITIES> 11,041
<BONDS> 3,583
0
0
<COMMON> 72
<OTHER-SE> 43,737
<TOTAL-LIABILITY-AND-EQUITY> 60,377
<SALES> 83,832
<TOTAL-REVENUES> 83,832
<CGS> 67,478
<TOTAL-COSTS> 67,478
<OTHER-EXPENSES> 6,099
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 446
<INCOME-PRETAX> 9,813
<INCOME-TAX> 3,880
<INCOME-CONTINUING> 5,933
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,933
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
