<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 February 2, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-25554
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CONTINENTAL CIRCUITS CORP.
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(Exact name of registrant as specified in its charter)
Delaware 86-0267198
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3502 East Roeser Road, Phoenix, Arizona 85040
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 268-3461
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No Change
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(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
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The number of shares outstanding of each of the issuer's classes of common
stock was 7,220,274 shares common stock, par value $.01, as of March 3, 1997.
<PAGE> 2
CONTINENTAL CIRCUITS CORP.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONTINENTAL CIRCUITS CORP.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
February 2, January 31, February 2, January 31,
----------- ------------ ------------ ------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $29,562 $28,860 $56,685 $57,368
Cost of products sold 24,392 22,645 47,052 45,420
------- ------- ------- -------
Gross profit 5,170 6,215 9,633 11,948
Selling, general and administrative
expenses 1,809 2,184 3,839 4,097
------- ------- ------- -------
Income from operations 3,361 4,031 5,794 7,851
Other (income) expense:
Interest expense 59 183 123 293
Other 321 38 325 25
------- ------- ------- -------
Income before income taxes 2,981 3,810 5,346 7,533
Income taxes 1,164 1,505 2,096 2,980
------- ------- ------- -------
Net income $ 1,817 $ 2,305 $ 3,250 $ 4,553
======= ======= ======= =======
Net income per share $ 0.24 $ 0.31 $ 0.44 $ 0.61
======= ======= ======= =======
Number of shares used in computing
net income per share 7,432 7,431 7,428 7,432
======= ======= ======= =======
</TABLE>
See notes to condensed financial statements.
<PAGE> 3
CONTINENTAL CIRCUITS CORP.
CONDENSED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
February 2, July 31,
1997 1996
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Assets (Unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 2,775 $ 3,851
Accounts receivable, less allowance of $34 at
February 2, 1997 and $167 at July 31, 1996 18,218 15,114
Inventories 6,715 4,796
Prepaid expenses, income taxes and other 345 499
Deferred income taxes 714 714
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Total current assets 28,767 24,974
Property, plant, and equipment: 81,906 74,317
Accumulated depreciation 43,038 40,200
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38,868 34,117
Other assets 69 495
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Total assets $67,704 $59,586
======= =======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $10,941 $ 7,193
Accrued expenses and taxes 2,672 2,052
Current portion of long-term debt 1,000 1,000
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Total current liabilities 14,613 10,245
Long-term debt, less current portion 3,833 3,333
Deferred income taxes 1,976 1,976
Shareholders' equity:
Preferred stock, $.01 par value:
Authorized shares -- 1,000,000
Issued and outstanding shares -- none
Common stock 72 72
Additional paid-in capital 10,212 10,077
Retained earnings 36,998 33,883
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Total shareholders' equity 47,282 44,032
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Total liabilities and shareholders' equity $67,704 $59,586
======= =======
</TABLE>
See notes to condensed financial statements.
<PAGE> 4
CONTINENTAL CIRCUITS CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
February 2, January 31,
-----------------------
1997 1996
---- ----
Operating activities
<S> <C> <C>
Net income $ 3,250 $ 4,553
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 2,838 3,017
Provision for doubtful accounts (credit) (133) 162
Changes in operating assets and liabilities:
Accounts receivable (2,971) (2,686)
Inventories (1,919) (721)
Prepaid expenses, income taxes and other 154 98
Other assets 291 62
Accounts payable 3,748 540
Accrued expenses (72) (374)
Income taxes payable 692 (256)
--------------------
Net cash provided by operating activities 5,878 4,395
Investing activities
Purchases of property, plant, and equipment (7,589) (5,793)
Financing activities
Principal payments on long-term debt (500) (536)
Borrowings under long-term debt and line of credit 1,000 1,869
Proceeds from issuance of common stock, net
of issuance costs 135 35
--------------------
Net cash provided (used) by financing activities 635 1,368
--------------------
Net increase in cash and cash equivalents (1,076) (30)
Cash and cash equivalents at beginning of period 3,851 2,038
--------------------
Cash and cash equivalents at end of period $ 2,775 $ 2,008
====================
</TABLE>
See notes to condensed financial statements
<PAGE> 5
CONTINENTAL CIRCUITS CORP.
Notes to Condensed Financial Statements
(Unaudited)
February 2, 1997
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 six month period ended February 2, 1997
are not necessarily indicative of the results that may be expected for the year
ended July 31, 1997.
Note 2. Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
February 2, July 31,
1997 1996
---- ----
(In thousands)
<S> <C> <C>
Raw material $ 498 $ 649
Work in process 4,148 2,487
Finished goods 2,069 1,660
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$ 6,715 $ 4,796
======== ========
</TABLE>
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparison of Three Months ended February 2, 1997 and January 31, 1996
Net sales increased 2.4% to $29.6 million for the three months ended
February 2, 1997 from $28.9 million for the three months ended January 31, 1996.
The combination of the effects of production levels, pricing per layer, and a
continuing mix shift toward higher layer count, more complex products resulted
in the increase. The Company's principal customers are OEM 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 17.5% for the three
months ended February 2, 1997 from 21.5% for the three months ended January 31,
1996. Gross profit was negatively impacted by the cancellation of a high margin
customer program during the quarter. Additionally, the decrease was a result of
the lower productivity per employee and training costs for newly hired
employees. The Company hired new employees during the quarter to support
business growth in the base business and innerlayer and quick-turn expansion.
Selling, general and administrative expenses decreased 17.2% to $1.8
million for the three months ended February 2, 1997 from $2.2 million for the
three months ended January 31, 1996. This decrease was primarily the result of
reduced discretionary spending.
Income from operations decreased 16.6% to $3.4 million, or 11.4% of net
sales, for the three months ended February 2, 1997 from $4.0 million, or 14.0%
of net sales, for the three months ended January 31, 1996 as a result of the
above factors.
Net interest expense decreased 67.8% to $59,000 for the three months ended
February 2, 1997 from $183,000 for the three months ended January 31, 1996. This
decrease was a result of higher interest earned during the three months ended
February 2, 1997 due to a larger average cash balance than during the three
months ended January 31, 1996, and $1.0 million of long-term debt financed at a
favorable interest rate.
Income before income taxes was unfavorably impacted by an other expense
increase of $300,000 as a result of a one-time charge of legal and other
professional costs associated with the abandoned acquisition of Sigma Circuits,
Inc.
Income taxes decreased 22.7% to $1.2 million for the three months ended
February 2, 1997 from $1.5 million for the three months ended January 31, 1996
as a result of lower income before taxes. The effective tax rate was
approximately 39% for both periods.
Comparison of Six Months ended February 2, 1997 and January 31, 1996
Net sales were flat at $56.7 million for the six months ended February 2,
1997 versus $57.4 million for the six months ended January 31, 1996.
Gross profit as a percent of net sales decreased to 17.0% for the six
months ended February 2, 1997 from 20.8% for the six months ended January 31,
1996. Gross profit was negatively impacted during the 1997 period by the
cancellation of a high margin customer program and lower productivity and
training costs associated with direct labor increases to support business
growth.
<PAGE> 7
Selling, general and administrative expenses decreased 6.3% to $3.8
million for the six months ended February 2, 1997 from $4.1 million for the six
months ended January 31, 1996. The decrease was the result of lower
discretionary spending.
Income from operations decreased 26.2% to $5.8 million for the six months
ended February 2, 1997 from $7.9 million for the six months ended January 31,
1996 as a result of the above factors.
Net interest expense decreased 58.0% to $123,000 for the six months ended
February 2, 1997 from $293,000 for the six months ended January 31, 1996. This
decrease was a result of higher interest earned during the six months ended
February 2, 1997 due to a larger average cash balance than during the six months
ended January 31, 1996, and $1.0 million of long-term debt financed at a
favorable interest rate.
Other expense increased $300,000 as a result of the one-time charge of
legal and other professional costs associated with the abandoned acquisition of
Sigma Circuits, Inc.
Income taxes decreased 29.7% to $2.1 million for the six months ended
February 2, 1997 compared to $3.0 million for the six months ended January 31,
1996 as a result of lower income before taxes. The effective tax rate was
approximately 39% for both periods.
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 have been to pay operating expenses, make capital
expenditures and service debt.
Cash generated from operations totaled $5.9 million and $4.4 million for
the six months ended February 2, 1997 and January 31, 1996 respectively. Major
cash uses include inventory growth of $1.9 million and accounts receivable of
$3.0 million for the six months ended February 2, 1997 and accounts receivable
growth of $2.7 million for the six months ended January 31, 1996. The 1997
inventory increase was primarily in work in process to support the sales growth
over the period. Accounts receivable growth for both six month periods was a
result of strengthening end of quarter sales.
Capital expenditures totaled $7.6 million and $5.8 million for the six
months ended February 2, 1997 and January 31, 1996 respectively. Capital
expenditures for the six months ended February 2, 1997 were for routine
replacements and the purchase of two buildings adjacent to the current Phoenix
operations for a total of $2.8 million. Capital expenditures for the six months
ended January 31, 1996 were for routine replacements. All purchases were
financed through cash generated from operations.
The Company believes that funds generated from operations and borrowing
availability under the existing line of credit agreement will be sufficient for
routine equipment replacement through fiscal 1997. The Company is evaluating the
need to increase its credit facilities to finance its growth strategy over 1997
and 1998. The Company believes it will be successful in negotiating the
increased credit facilities.
FORWARD-LOOKING STATEMENTS
The statements contained in this document regarding management's
anticipation of sufficiency of funds and negotiation of credit facilities
constitute "forward-looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Management's anticipation is based
upon assumptions regarding the market in which the Company operates, the cost
and amount of equipment required for replacements and growth, and the
availability and qualification for credit. Any of these assumptions could prove
inaccurate, and therefore there can be no assurance that the forward-looking
information will prove to be accurate.
<PAGE> 8
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.
<PAGE> 9
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: March 18, 1997 By: /s/ Frederick G. McNamee, III
-----------------------------
Frederick G. McNamee, III
Chairman of the Board, President
and Chief Executive Officer
Date: March 18, 1997 By: /s/ Joseph G. Andersen
-----------------------------
Joseph G. Andersen
Vice-President of Finance, Chief Financial
Officer, Secretary and Treasurer
<PAGE> 10
EXHIBIT INDEX
TO
CONTINENTAL CIRCUITS CORP.
FORM 10-Q
QUARTERLY REPORT FOR THE QUARTER ENDED FEBRUARY 2, 1997
(Commission File 0-25554)
Exhibit Description
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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
- ----------------------
(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.
<PAGE> 1
CONTINENTAL CIRCUITS CORPORATION
STATEMENT RE: COMPUTATION OF NET INCOME PER SHARE
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six Months Ended
February 2, January 31, February 2, January 31,
-----------------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average shares outstanding (1) 7,432 7,431 7,428 7,432
Net Income $ 1,817 $ 2,305 $ 3,250 $ 4,553
Net income per share $ 0.24 $ 0.31 $ 0.44 $ 0.61
</TABLE>
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(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 FEBRUARY 2, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10 Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> FEB-02-1997
<CASH> 2,506
<SECURITIES> 269
<RECEIVABLES> 18,252
<ALLOWANCES> 34
<INVENTORY> 6,715
<CURRENT-ASSETS> 28,767
<PP&E> 81,906
<DEPRECIATION> 43,038
<TOTAL-ASSETS> 67,704
<CURRENT-LIABILITIES> 14,613
<BONDS> 3,833
0
0
<COMMON> 72
<OTHER-SE> 47,210
<TOTAL-LIABILITY-AND-EQUITY> 67,704
<SALES> 56,685
<TOTAL-REVENUES> 56,685
<CGS> 47,052
<TOTAL-COSTS> 47,052
<OTHER-EXPENSES> 3,839
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123
<INCOME-PRETAX> 5,346
<INCOME-TAX> 2,096
<INCOME-CONTINUING> 3,250
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,250
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
