<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 JULY 2, 1995
OR
[ ] 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 0-17743
-------
COMPTRONIX CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 63-0860282
(STATE OR JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
COMPTRONIX CORPORATION
THREE MARYLAND FARMS
SUITE 140 37027
NASHVILLE, TENNESSEE
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE): (615) 377-3330
--------------------------------------
N/A
--------------------------------------------------------------------------------
(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 _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS 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, 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 practical date.
13,263,410 as of August 15, 1995
--------------------------------------------------
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM I. CONDENSED FINANCIAL STATEMENTS
COMPTRONIX CORPORATION
BALANCE SHEETS
ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
July 2, December 31,
1995 1994
------- ------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ - $ 397
Accounts receivable, net 11,851 13,683
Inventories 15,269 16,119
Other current assets 411 570
------- -------
Total Current Assets 27,531 30,769
Property, Plant and Equipment
(Less accumulated depreciation and
amortization of $24,794 at July 2,
1995 and $23,508 at December 31,
1994) 16,150 17,719
Other Assets 1,356 1,988
------- -------
Total Assets $45,037 $50,476
======= =======
</TABLE>
See notes to financial statements.
2
<PAGE> 3
COMPTRONIX CORPORATION
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
July 2, December 31,
1995 1994
----------- ------------
(unaudited)
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 1,885 $ 2,517
Accounts payable 5,792 7,474
Accrued payroll and related expenses 1,112 1,034
Other payables and accruals 3,378 2,562
-------- --------
Total current liabilities 12,167 13,587
Convertible Subordinated Debentures 29,230 34,500
Long-term debt, excluding current maturities 14,039 16,380
Stockholders' Equity:
Redeemable convertible preferred stock Series A-6%, no
par value per share; authorized 5,000,000 shares;
issued and outstanding, 1,844,791 shares plus $268
dividend accretion at July 2, 1995 and 1,274,787
shares plus $203 dividend accretion at December 31, 18,716 12,951
1994
Common stock, par value $.01 per share; authorized
50,000,000 shares; issued 13,263,360 shares at July
2, 1995 and 11,153,194 at December 31, 1994 133 111
Additional paid-in capital 29,715 29,873
Accumulated deficit (58,963) (56,926)
-------- --------
Total Stockholders' Equity/(Deficiency) (10,399) (13,991)
-------- --------
Total Liabilities and Stockholders' Equity $ 45,037 $ 50,476
======== ========
</TABLE>
See notes to financial statements.
3
<PAGE> 4
COMPTRONIX CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------
July 2, July 3,
1995 1994
------- -------
(in thousands except per share)
<S> <C> <C>
Sales $22,737 $33,181
Cost of Sales 21,475 34,970
------- -------
Gross profit/(loss) 1,262 (1,789)
Marketing, general and administrative expense 1,798 2,002
Interest expense - net 938 1,150
Estimated loss on sale of excess capacity - 3,500
Other expense 125 335
------- -------
2,861 6,987
------- -------
Net loss (1,599) (8,776)
Accrued dividend in kind on preferred stock 277 189
------- -------
Net loss applicable to common stock $(1,876) $(8,965)
======= =======
Net loss per common share $ (0.14) $ (0.81)
======= =======
Weighted average common shares 13,263 11,044
======= =======
</TABLE>
See notes to financial statements.
4
<PAGE> 5
COMPTRONIX CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
July 2, July 3,
1995 1994
-------- --------
(in thousands except per share)
<S> <C> <C>
Sales $ 50,240 $ 63,737
Cost of Sales 46,750 64,486
-------- --------
Gross profit/(loss) 3,490 (749)
Marketing, general and administrative expense 3,153 3,865
Interest expense - net 1,931 2,233
Estimated loss on sale of excess capacity -- 3,500
Other (income)/expense (69) 82
-------- --------
5,015 9,680
-------- --------
Net loss (1,525) (10,429)
Accrued dividend in kind on preferred stock 512 375
-------- --------
Net loss applicable to common stock $ (2,037) $(10,804)
======== ========
Net loss per common share $ (0.16) $ (0.98)
======== ========
Weighted average common shares 12,975 11,029
======== ========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
COMPTRONIX CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
----------------------
July 2, July 3,
1995 1994
------- --------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,525) $(10,429)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Estimated loss on sale of excess capacity -- 3,500
Depreciation and amortization 2,702 3,312
Allowance for doubtful accounts (618) 212
Decrease in accounts receivable - trade 2,450 1,182
Decrease in inventories 850 4,037
(Increase)/decrease in prepaid exp.and other assets 334 (314)
Increase/(decrease) in accounts payable (1,682) 5,605
Increase in accrued payroll and related expenses 62 66
Increase/(decrease) in other payables and accruals 816 (4)
------- --------
Net cash provided by operating activities 3,389 7,167
------- --------
Cash flows from investing activities:
Capital expenditures, net (813) (459)
------- --------
Net cash used in investing activities (813) (459)
------- --------
Cash flows from financing activities:
Payment of settlement and restructuring costs -- (1,497)
Net payments on revolving line of credit (1,561) (4,021)
Principal payments on other long term debt (1,412) (1,265)
Proceeds from issuance of common stock -- 35
------- --------
Net cash used in financing activities (2,973) (6,748)
------- --------
Net decrease in cash (397) (40)
Cash, beginning of period 397 897
------- --------
Cash, end of period $ 0 $ 857
======= ========
</TABLE>
See notes to financial statements.
6
<PAGE> 7
NOTES TO CONDENSED FINANCIAL STATEMENTS
July 2, 1995
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with instructions to Form 10-Q and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The statements (and all other information in
this report) have not been audited by independent accountants, but in the
opinion of the Company, contain all adjustments necessary for a fair
presentation of the results for the period. The results of operations for the
six month period ended July 2, 1995 are not necessarily indicative of the
results of operations for the year ending December 31, 1995.
NOTE 2 - LONG TERM DEBT
In November 1993, the Company retired its existing revolving line of credit and
equipment loan with a new credit facility with CIT Group/Business Credit, Inc.
The new credit facility consists of a $34.0 million three (3) year revolving
line of credit secured by accounts receivable and inventory and a $6.0 million
five-year term loan secured by equipment. The borrowings under the revolving
line of credit are limited to 85% of the Company's eligible accounts receivable
and 50% of the Company's eligible inventory (a total availability of $12.8
million at July 2, 1995 and $14.3 million at December 31, 1994 and total
borrowings of $10.2 million and $11.8 million, respectively). The credit
facility has various financial covenants which limit the Company's ability to
incur additional indebtedness, purchase and dispose of equipment and declare or
pay cash dividends. The Company is also required to maintain certain financial
covenants. As of July 2, 1995, the Company failed to meet the covenants in its
credit agreement with The CIT Group. CIT has granted the Company a waiver for
all covenant violations resulting from the Company's second quarter
performance.
Based on the Company's second quarter performance, management currently
believes the Company will not meet the covenants previously contained in the
credit agreement for the remainder of 1995. The CIT Group and the Company have
negotiated and implemented revised covenants as follows:
EBITDA:
The Company shall have EBITDA for the applicable periods below of not less
than:
<TABLE>
<CAPTION>
Fiscal Period EBITDA
<S> <C>
For the nine (9) months ended September 30, 1995 $ 5,000,000
For the twelve months (12) ended December 31, 1995 $ 7,500,000
For each twelve (12) months ending on each fiscal
quarter thereafter $10,000,000
</TABLE>
7
<PAGE> 8
Working Capital:
The Company shall have on the last day of the applicable fiscal quarters below
working capital of not less than:
<TABLE>
<CAPTION>
Fiscal Quarter Working Capital
<S> <C>
For the quarter ending September 30, 1995 $4,500,000
For the quarter ending December 31, 1995 $5,500,000
For each quarter after the quarter ending December 31, 1995 $7,000,000
</TABLE>
Interest Coverage Ratio:
The Company shall have on the last day of the applicable fiscal periods below
an Interest Coverage Ratio of not less than:
<TABLE>
<CAPTION>
Fiscal Period Ratio
<S> <C>
For the nine (9) months ending September 30, 1995 .40 to 1
For the twelve (12) months ending December 31, 1995 .65 to 1
For the twelve (12) months ending on each fiscal quarter
thereafter 1.50 to 1
</TABLE>
Fixed Charge Coverage Ratio:
<TABLE>
<CAPTION>
Fiscal Periods Ratio
<S> <C>
For the nine (9) months ending September 30, 1995 .45 to 1
For the twelve (12) months ending December 31, 1995 1.00 to 1
For the twelve (12) months ending on each fiscal quarter
thereafter 1.50 to 1
</TABLE>
Based on the Company's current business plan and the consolidation of the
Colorado Springs and Guntersville facilities resulting in reduced overhead
expenses and the Company's current business plan, management currently believes
the Company will meet the revised covenants. If it does not comply with these
covenants, the Company will be required to seek a waiver or amendment to the
CIT Credit Agreement in order to continue borrowing under such agreement and to
avoid potential acceleration of the indebtedness outstanding.
The Company believes that cash generated from operations and with borrowings
under its credit facility described above should be sufficient for the Company
to meet its obligations during 1995, including debt service and trade creditor
obligations. Based on its current assessment of the level of its business, the
Company does not anticipate that it will be required to make significant
capital expenditures in the next twelve to eighteen months.
On January 25, 1995, the Company completed a private negotiated exchange of
$5.3 million of debentures for shares of the Company's common and Series A
preferred stock. This exchange provided the exchanging debenture holders an
aggregate of 2.1 million shares of common stock and .5 million shares of Series
A preferred stock. The Company had no material gain or loss on the transaction.
8
<PAGE> 9
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
GENERAL
Comptronix Corporation provides manufacturing services to original equipment
manufacturers ("OEMs"), including producers of computers, computer peripherals,
industrial instruments, communications equipment, medical devices and test
equipment. The Company operates two plants in Guntersville, Alabama.
Operating results are generally affected by a number of factors, including the
relative mix of high volume/lower margin business and lower volume/higher
margin business, price competition, raw material costs, labor efficiencies, the
degree of automation that can be used in the assembly process and the
efficiencies achieved by the Company in managing inventories and fixed assets.
The financial information and the discussion below should be read in
conjunction with the unaudited financial statements and notes thereto included
in this Form 10-Q. This discussion will also address certain factors which are
anticipated to effect the Company's 1995 results and financial condition.
RESULTS OF OPERATIONS
Quarter Ended July 2, 1995 and July 3, 1994
The following table sets forth for the period indicated, the percentage of
sales of certain items in the Statement of Operations.
<TABLE>
<CAPTION>
Quarter Ended
------------------
July 2, July 3,
1995 1994
------- -------
(%) (%)
<S> <C> <C>
Sales 100.0 100.0
Cost of Sales 94.4 105.4
----- -----
Gross profit/(loss) 5.6 (5.4)
Marketing, general and administrative expense 7.9 6.0
Interest expense - net 4.1 3.5
Loss on sale of excess capacity -- 10.5
Other expense .6 1.0
----- -----
Net loss (7.0) (26.4)
</TABLE>
With the disposition of the San Jose operations effective July 3, 1994, the
second quarter of 1995 Company sales and expenses do not include any effects of
the San Jose operations. For the 1994 first quarter, San Jose sales and
expenses are included in their respective categories.
Total Company sales for the second quarter of 1995 were $22.7 million, a
decrease of 12.5% as compared to the second quarter 1994 sales of $25.9
million, excluding $7.2 million for the San Jose division. The decrease in
sales is primarily attritibutable to inefficiencies and lost production days
with the transition of the Company's Colorado Springs division to the
Guntersville facilities. These temporary capacity constraints affected the
Company's ability to meet customer delivery schedules in June and reduced
second quarter revenues by several million dollars. Additionally, to a lesser
degree, the Company's revenues were impacted by component market conditions
that affected the avialability of components needed for certain programs and by
certain customers' decisions to push production out to the later part of the
year.
Gross profit for the second quarter of 1995 was $1.3 million, 5.6% of sales, as
compared to a gross loss of $1.2 million, 4.4% of sales, for the second quarter
of 1994, excluding $.6 million gross loss for the San Jose division. The second
quarter improvement in gross profit is primarily from a more profitable mix of
9
<PAGE> 10
business, as well as an increase in consigned business which produces higher
gross profit margins. During the latter part of 1994, the Company began to
implement additional steps to improve gross margins, including adding new
customers with better operating margins and reductions in overhead and direct
costs. Additional measures were also taken to improve labor and material
efficiencies.
Marketing, general and administrative expense was $1.8 million, 7.9% of sales,
for the second quarter of 1995, as compared to $2.0 million, 6.0% of sales, for
the second quarter 1994. The overall decrease is attributable to the
disposition of the San Jose division which accounted for approximately $.3
million in the second quarter of 1994.
Interest expense decreased to $.9 million for the second quarter of 1995 from
$1.2 million for the second quarter of 1994. The decrease in interest expense
over the 1994 second quarter is the result of decreased borrowings for lower
levels of inventory and receivables.
Other expense was $.1 million for the second quarter of 1995 as compared to $.3
for the second quarter of 1994. Other expense for 1995 and 1994 includes
amortization expense of deferred financing costs.
The Company's net loss was $1.9 million for the second quarter of 1995 as
compared to a net loss of $9.0 million for the second quarter of 1994. Net loss
per share was $0.14 (based upon a weighted average of 13,263,000 shares
outstanding) in the second quarter of 1995, compared to net loss per share
$0.81 (based upon a weighted average of 11,044,000 shares outstanding) in the
second quarter of 1994.
Six Months Ended July 2, 1995 and July 3, 1994
The following table sets forth for the period indicated, the percentage of
sales of certain items in the Statement of Operations.
<TABLE>
<CAPTION>
Six Months Ended
-------------------
July 2, July 3,
1995 1994
-------- -------
(%) (%)
<S> <C> <C>
Sales 100.0 100.0
Cost of Sales 93.1 101.2
----- -----
Gross profit/(loss) 6.9 (1.2)
Marketing, general and administrative expense 6.2 6.1
Interest expense - net 3.8 3.5
Loss on sale of excess capacity -- 5.5
Other (income)/expense (.1) .1
----- -----
Net loss (3.0) (16.4)
</TABLE>
With the disposition of the San Jose operations effective July 3, 1994, the
first half of 1995 Company sales and expenses do not include any effects of the
San Jose operations. For the 1994 first half, San Jose sales and expenses are
included in their respective categories.
Total Company sales for the first half of 1995 were $50.2 million, an increase
of 6.5% as compared to the first half 1994 sales of $47.2 million, excluding
$16.6 million for the San Jose division. The increase in sales predominantly
relates to new customers and increased sales for existing customers in the
telecommunications and consumer electronics industry.
Gross profit for the first half of 1995 was $3.5 million, 6.9% of sales, as
compared to a gross loss of $.1 million, .3% of sales, for the first half of
1994, excluding $.6 million gross loss for the San Jose division. The first
half improvement in gross profit is primarily from a more profitable mix of
business, as well as an increase in consigned business which produces higher
gross profit margins. During the latter part of 1994,
10
<PAGE> 11
the Company began to implement additional steps to improve gross margins,
including adding new customers with better operating margins and reductions in
overhead and direct costs. Additional measures were also taken to improve labor
and material efficiencies.
Marketing, general and administrative expense was $3.2 million, 6.2% of sales,
for the first half of 1995, as compared to $3.9 million, 6.1% of sales, for the
first half 1994. The overall decrease is attributable to the disposition of the
San Jose division which accounted for approximately $.7 million in the second
quarter of 1994.
Interest expense decreased to $1.9 million for the first half quarter of 1995
from $2.2 million for the first half of 1994. The decrease in interest expense
over the 1994 first half is the result of decreased borrowings for lower levels
of inventory and receivables.
Other income was $.1 million for the first half of 1995 as compared to other
expense of $.1 for the first half of 1994. Other income for 1995 includes
amortization expense of deferred financing costs which was more than offset by
the reversal of reserves relating to previous non-cash charges reserving for
bad debts that were subsequently collected. Other expense for 1994 includes
amortization expense of deferred financing costs.
The Company's net loss was $2.0 million for the first half of 1995 as compared
to a net loss of $10.8 million for the first half of 1994. Net loss per share
was $0.16 (based upon a weighted average of 12,975,000 shares outstanding) in
the first half of 1995, compared to net loss per share $0.98 (based upon a
weighted average of 11,029,000 shares outstanding) in the first half of 1994.
CERTAIN CURRENTLY IDENTIFIABLE FACTORS ANTICIPATED TO AFFECT REMAINING 1995
RESULTS
Based upon the Company's current assessment of its business, there are several
currently identifiable factors which are likely to affect the remainder of 1995
operating results. In addition, factors which are likely to affect the
Company's liquidity and uses of funds during the remainder of 1995 are
discussed below under "Liquidity and Capital Resources".
As described above, the Company has experienced a decrease in sales as compared
to the second quarter of 1994 which is mainly attributable to greater than
expected delays and inefficiencies in the transfer of the Colorado Springs
operations to the two facilities in Guntersville, Alabama. Customers
representing over 90% of the first two quarter revenues of the Company's
Colorado Springs division have transferred their programs to Guntersville. The
transfer of production is complete and the Company is in production in
Guntersville for the former Colorado Springs customers. The Company currently
believes that it will maintain or slightly improve targeted margins as compared
to the second quarter of 1995. This belief is based upon the Company's backlog
of orders on July 2, 1995, which totaled approximately $66 million compared to
$56 million at the end of 1994. The Company believes that it has been able to
maintain the quality of its products and, other than is impacted by the
Colorado Springs transition, meet its customer schedules. The Company has
experienced some component shortages or higher than projected costs from time
to time related to the components market generally.
The Company has also identified certain factors which are likely to effect cost
of sales during the remainder of 1995. As described above, the Company has
significantly reduced overhead costs with the combination of the Colorado
Springs and Guntersville facilities and will continue to improve and reduce the
overhead component of costs of sales during 1995. The Company believes that its
operating expense control and reorganization of its material purchasing and
control functions will have a positive impact on costs of sales. In the first
half of 1995, the Company experienced favorable purchase prices for materials
in comparison to amounts charged by suppliers from previous periods during
1994. In addition, the Company has made additional overhead reductions and
reorganized the Company's management team.
11
<PAGE> 12
In the event that the revenue base proves too large for the Guntersville
facility or in order to accommodate future growth, the Company intends to
consider the possibility of leasing or acquiring another facility in a location
where a lower level of costs makes it attractive to operate an additional
facility.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its capital expenditures through the
issuance of debt and equity securities and borrowings under its bank equipment
line of credit. The Company has financed the growth in its inventory and
accounts receivable through bank borrowings and through payment terms provided
by suppliers. During 1994 and the first half of 1995, the Company made
significant progress in reducing its accounts receivable and inventory balances
to more acceptable levels, and used the excess working capital to reduce debt.
The Company reduced total long-term indebtedness (other than convertible debt)
from $21.8 million at July 3, 1994 to $14.0 million at July 2, 1995. Management
of the Company recognizes the strategic importance of generating greater
working capital from operations and is focusing on improving inventory turns,
reducing work in process cycle times and improving asset utilization to measure
the Company's future success in this area.
The Company's net cash flows provided by operating activities were $3.4 million
and $7.2 million in the first six months of 1995 and 1994, respectively.
Principally, the 1995 amount reflects lower levels of accounts payable
outstanding as compared to the first half of 1994.
The Company's net cash flows used in investing activities were $.8 million and
$.5 million in the first half of 1995 and 1994, respectively. These uses
principally relate to additions of machinery and equipment during the first
half of 1995.
The Company's net cash flows used in financing activities were $3.0 million and
$6.7 million in the first half of 1995 and 1994, respectively. These uses are
principally related to payments on bank debt and settlement and restructuring
costs.
In November 1993, the Company completed the refinancing of its existing credit
facilities. As part of the refinancing, the Company obtained a $40.0 million
credit facility from the CIT Group/Business Credit, Inc. (CIT). The agreement
with CIT provides for a $34.0 million three (3) year revolving credit facility
and a $6.0 million five (5) year term loan. Amounts which may be borrowed under
the revolving credit facility are subject to a borrowing base test of 85% of
the Company's eligible accounts receivable and 50% of the Company's eligible
inventory. At July 2, 1995, the Company had borrowed $10.2 million under the
revolving credit facility on a total availability of $12.8 million as of July
2, 1995. The agreement also contains various financing covenants which limit
the Company's ability to incur additional indebtedness, purchase and dispose of
equipment and declare or pay cash dividends. The Company also is required to
maintain certain financial covenants. As of July 2, 1995, the Company failed to
meet the covenants in its credit agreement with The CIT Group. CIT has granted
the Company a waiver for all covenant violations resulting from the Company's
second quarter performance.
Based on the Company's second quarter performance, management currently
believes the Company will not meet the covenants previously contained in the
credit agreement for the remainder of 1995. The CIT Group and the Company have
negotiated and implemented revised covenants as follows:
12
<PAGE> 13
EBITDA:
The Company shall have EBITDA for the applicable periods below of not less
than:
<TABLE>
<CAPTION>
Fiscal Period EBITDA
<S> <C>
For the nine (9) months ended September 30, 1995 $ 5,000,000
For the twelve months (12) ended December 31, 1995 $ 7,500,000
For each twelve (12) months ending on each fiscal
quarter thereafter $10,000,000
</TABLE>
Working Capital:
The Company shall have on the last day of the applicable fiscal quarters below
working capital of not less than:
<TABLE>
<CAPTION>
Fiscal Quarter Working Capital
<S> <C>
For the quarter ending September 30, 1995 $ 4,500,000
For the quarter ending December 31, 1995 $ 5,500,000
For each quarter after the quarter ending December 31, 1995 $ 7,000,000
</TABLE>
Interest Coverage Ratio:
The Company shall have on the last day of the applicable fiscal periods below
an Interest Coverage Ratio of not less than:
<TABLE>
<CAPTION>
Fiscal Period Ratio
<S> <C>
For the nine (9) months ending September 30, 1995 .40 to 1
For the twelve (12) months ending December 31, 1995 .65 to 1
For the twelve (12) months ending on each fiscal quarter
thereafter 1.50 to 1
</TABLE>
Fixed Charge Coverage Ratio:
<TABLE>
<CAPTION>
Fiscal Periods Ratio
<S> <C>
For the nine (9) months ending September 30, 1995 .45 to 1
For the twelve (12) months ending December 31, 1995 1.00 to 1
For the twelve (12) months ending on each fiscal quarter
thereafter 1.50 to 1
</TABLE>
Based on the Company's current business plan and the consolidation of the
Colorado Springs and Guntersville facilities resulting in reduced overhead
expenses and the Company's current business plan, management currently believes
the Company will meet the revised covenants. If it does not comply with these
covenants, the Company will be required to seek a waiver or amendment from the
CIT Credit Agreement in order to continue borrowing under such agreement and to
avoid potential acceleration of the indebtedness outstanding.
The Company believes that cash generated from operations and with borrowings
under its credit facility described above should be sufficient for the Company
to meet its obligations during 1995, including debt settlement and trade
creditor obligations. Based on its current assessment of the level of its
business, the
13
<PAGE> 14
Company does not anticipate that it will be required to make significant
capital expenditures in the next twelve to eighteen months.
On January 25, 1995, the Company completed a private negotiated exchange of
$5.3 million of debentures for shares of the Company's common and Series A
preferred stock. This exchange provided the exchanging debenture holders an
aggregate of 2.1 million shares of common stock and .5 million shares of Series
A preferred stock. The Company had no material gain or loss on the transaction.
The Company believes that cash generated from operations and with borrowings
under its credit facility described above will be sufficient for the Company to
meet its obligations during 1995, including debt principal payments and trade
creditor obligations. Based on its current assessment of the level of its
business, the Company does not anticipate that it will be required to make
significant capital expenditures in the next twelve to eighteen months.
EBITDA
The Company's earnings before interest, income taxes, depreciation and
amortization ("EBITDA") was $3.1 million income and $1.4 million loss for the
first half of 1995 and 1994, respectively. The Company presents EBITDA as a
supplement to the discussion of the Company's operating income and cash flow
from operations analysis because the Company believes that certain parties find
it to be a useful tool for measuring the Company's performance and ability to
service debt. EBITDA is not a substitute for GAAP operating and cash flow data.
Management, however, believes that EBITDA does supplement this information for
several reasons. First, EBITDA supplements data regarding the Company's cash
flow because EBITDA is the principal performance covenant in the CIT Credit
Agreement. In addition, the Company also has made significant investments in
capital equipment, primarily through borrowings. Therefore, the Company is
incurring a significant amount of depreciation on this equipment reflected in
its results of operations. As a result, the Company believes that information
with respect to EBITDA should be read in conjunction with the discussion of
results of operations and the discussion of liquidity and capital resources.
14
<PAGE> 15
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Description
10 Agreements between the CIT Group
and Comptronix Corporation
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
None.
15
<PAGE> 16
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.
COMPTRONIX CORPORATION
(Registrant)
Date: August 16, 1995
By: /s/ E. Townes Duncan
E. Townes Duncan
Chairman of the Board
By: /s/ Joseph G. Andersen
Joseph G. Andersen
Chief Financial Officer
16
<PAGE> 1
Exhibit 10
Agreements between the CIT Group and Comptronix Corporation
WAIVER LETTER
July 19, 1995
Comptronix Corporation
1800 Comptronix Drive
Guntersville, AL 35976
Gentlemen:
We refer to the Financing Agreement between us dated November 22, 1993 as
amended (the "Financing Agreement"). Capitalized terms used herein and defined
in the Financing Agreement shall have the same meanings as specified therein
unless otherwise specifically defined herein.
You have advised us that you are in violation of the financial covenants set
forth in Section 7, Paragraphs 9 (EBITDA), 12 (Working Capital), 13 (Interest
Coverage Ratio) and 16 (Fixed Charge Coverage Ratio) of the Financing Agreement
for the fiscal period ending June 30, 1995.
This letter is to confirm our agreement that, solely with respect to said
fiscal period the foregoing violations and/or breaches of the Financing
Agreement shall not be deemed to be Defaults and/or Events of Default under the
Financing Agreement. On and after the date hereof you shall be in compliance
with all of the terms and provisions of the Financing Agreement (including,
without limitation, the financial covenants referred to above).
In consideration of (i) our execution of this Waiver Letter you agree to pay us
an Accommodation Fee of $7,500.00 and (ii) the preparation of this agreement by
our in-house legal department you agree to pay to us a Documentation Fee of
$195.00. Such fees shall be due and payable in full on the date hereof and may,
at our option, be charged to your Revolving Loan Account on the due date
thereof.
Except to the extent set forth herein, no other waiver of, or change in any of
the terms, provisions or conditions of the Financing Agreement is intended or
implied. This agreement shall not constitute a waiver of any other existing
Defaults or Events of Default under the Financing Agreement (whether or not we
have knowledge thereof), and shall not constitute a waiver of any future
Defaults or Events of Default whatsoever.
17
<PAGE> 2
If the foregoing is in accordance with your understanding of our agreement,
kindly so indicate by signing and returning the enclosed copy of this letter.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By: /s/ M.H. Hampton
---------------------------
Title: Assistant Vice President
Read and Agreed to:
COMPTRONIX CORPORATION
By: /s/ J.G. Andersen
---------------------------
Title: Chief Financial Officer
18
<PAGE> 3
AMENDMENT LETTER
August 15, 1995
Comptronix Corporation
Three Maryland Farms
Suite 140
Brentwood, TN 37027
Gentlemen:
We refer to the Financing Agreement between us dated November 22, 1993 and all
other documents and agreements executed in connection therewith, all as amended
(collectively the "Agreement"). Capitalized terms used herein and defined in
the Agreement shall have the same meanings as set forth therein unless
otherwise specifically defined herein.
Effective immediately, it is hereby mutually agreed that the Agreement shall
be, and hereby is, amended as follows:
(1) the EBITDA covenant contained in Paragraph 9 of Section 7 of the
Agreement shall be, and hereby is, amended by deleting the entries for
the periods ending "September 30, 1995" and "December 31, 1995 and
thereafter" and inserting the following in lieu of thereof:
<TABLE>
<CAPTION>
FISCAL PERIOD EBITDA
------------- ------
<S> <C>
"For the nine (9) months ending
September 30, 1995 $ 5,000,000.00
For the twelve (12) months ending
December 31, 1995 $ 7,500,000.00
For each twelve (12) months ending
on each fiscal quarter thereafter $10,000,000.00"
</TABLE>
(2) The Working Capital covenant contained in Paragraph 12 of Section 7 of
the Agreement shall be, and hereby is, amended by deleting the entries
for the periods ending "September 30, 1995" and "December 31, 1995 and
thereafter" and inserting the following in lieu thereof:
<TABLE>
<CAPTION>
FISCAL QUARTER WORKING CAPITAL
-------------- ---------------
<S> <C>
"For the quarter ending
September 30, 1995 $4,500,000.00
For after the quarter ending
December 31, 1995 $5,500,000.00
For each fiscal quarter thereafter $7,000,000.00"
</TABLE>
(3) The Interest Coverage Ratio covenant contained in Paragraph 13 of
Section 7 of the Agreement shall be, and hereby is amended by deleting
the entries for the periods ending
19
<PAGE> 4
"September 30, 1995 and "December 31, 1995" and thereafter and
inserting the following in lieu thereof:
<TABLE>
<CAPTION>
FISCAL PERIOD RATIO
------------- -----
<S> <C>
"For the nine (9) months
ending September 30, 1995 .40 to 1
For the twelve (12) months
ending December 31, 1995 .65 to 1
For the (12) months ending on each
fiscal quarter thereafter 1.50 to 1."
</TABLE>
(4) The Fixed Charge Coverage Ratio covenant contained in Paragraph 16 of
Section 7 of the Agreement shall be, and hereby is, amended by
deleting the entries for the periods ending "September 30, 1995" and
"December 31, 1995 and thereafter" and inserting the following in lieu
thereof:
<TABLE>
<CAPTION>
FISCAL PERIODS RATIO
-------------- -----
<S> <C>
"For the nine (9) months ending
September 30, 1995 .45 to 1
For the twelve (12) months ending
December 31, 1995 1.00 to 1
For the twelve (12) months ending
on each fiscal quarter thereafter 1.50 to 1."
</TABLE>
In consideration of (i) our execution of this agreement you agree to pay us an
Accommodation fee of $5,000.00 and (ii) the preparation of this agreement by our
in-house legal department you agree to pay to us a Documentation Fee of
$195.00. Such fees shall be due and payable in full upon execution of this
agreement and may, at our option, be charged to your Revolving Loan account on
the due date thereof.
Except to the extent set forth herein, no other waiver of, or change in any of
the terms, provisions or conditions of the Agreement is intended or implied.
If the foregoing is in accordance with your understanding of our agreement,
kindly so indicate by signing and returning the enclosed copy of this letter.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC.
By: /s/ M.H. Hampton
---------------------------
Title: Assistant Vice President
Read and Agreed to:
COMPTRONIX CORPORATION
By: /s/ Joseph G. Andersen
---------------------------
Title: Chief Financial Officer
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF COMPTRONIX CORPORATION FOR THE SIX MONTHS ENDED JULY
2, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUL-02-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 11,984
<ALLOWANCES> 133
<INVENTORY> 15,269
<CURRENT-ASSETS> 27,531
<PP&E> 40,944
<DEPRECIATION> 24,794
<TOTAL-ASSETS> 45,037
<CURRENT-LIABILITIES> 12,167
<BONDS> 29,230
<COMMON> 133
18,716
0
<OTHER-SE> (29,248)
<TOTAL-LIABILITY-AND-EQUITY> 45,037
<SALES> 50,240
<TOTAL-REVENUES> 50,240
<CGS> 46,750
<TOTAL-COSTS> 49,903
<OTHER-EXPENSES> (69)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,931
<INCOME-PRETAX> (1,525)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,525)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,037)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
