<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 SEPTEMBER 29, 1996
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 Identification No.)
incorporation or organization)
COMPTRONIX CORPORATION 37027
5123 VIRGINIA WAY (Zip Code)
UNIT C22
NASHVILLE, TENNESSEE
(Address of principal executive offices)
(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, 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 practical date.
13,902,447 as of November 12, 1996
- -------------------------------------------------------------------------------
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM I. CONDENSED FINANCIAL STATEMENTS
COMPTRONIX CORPORATION
DEBTOR-IN-POSSESSION
BALANCE SHEETS
ASSETS
(in thousands)
<TABLE>
<CAPTION>
September 29, December 31,
1996 1995
------------- ------------
(unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 910 $ 225
Accounts receivable, net 6,156 13,042
Inventories 6,642 18,165
Other current assets 1,977 822
------- -------
Total Current Assets 15,685 32,254
Property, Plant and Equipment
(Less accumulated depreciation and
amortization of $27,712 at
September 29, 1996 and $26,344 at
December 31, 1995) 7,100 14,312
Other Assets 3 1,145
------- -------
Total Assets $22,788 $47,711
======= =======
</TABLE>
See notes to financial statements.
2
<PAGE> 3
COMPTRONIX CORPORATION
DEBTOR-IN-POSSESSION
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
September 29, December 31,
1996 1995
------------- ------------
(unaudited)
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ -- $ 1,559
Secured debt 12,575 --
Accounts payable 627 8,158
Accrued payroll and related expenses 406 876
Other payables and accruals 284 3,270
-------- --------
Total current liabilities 13,892 13,863
Convertible Subordinated Debentures -- 29,230
Long-term debt, excluding current maturities -- 17,098
Liabilities Subject to Compromise 41,842 --
Stockholders' Deficit:
Redeemable convertible preferred stock
Series A-6%, no par value per share;
authorized 5,000,000 shares; issued and
outstanding, 1,899,319 shares plus
$1,021 dividend accretion at September
29, 1996 and 1,899,319 shares plus
$286 dividend accretion at December
31, 1995 20,014 19,279
Common stock, par value $.01 per share;
authorized 50,000,000 shares; issued
13,298,410 shares at September 29,
1996 and 13,298,410 at December 31,
1995 133 133
Additional paid-in capital 29,794 29,749
Accumulated deficit (82,887) (61,641)
-------- --------
Total Stockholders' Deficit (32,946) (12,480)
-------- --------
Total Liabilities and Stockholders' Deficit $ 22,788 $ 47,711
======== ========
</TABLE>
See notes to financial statements.
3
<PAGE> 4
COMPTRONIX CORPORATION
DEBTOR-IN-POSSESSION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Quarters Ended
----------------------------
September 29, October 1,
1996 1995
------------- ----------
(in thousands except per share)
<S> <C> <C>
Sales $ 11,450 $ 19,282
Cost of Sales 13,810 17,583
-------- --------
Gross profit/(loss) (2,360) 1,699
Marketing, general and administrative expense 1,577 1,316
Interest expense -- net 588 923
Special charge 9,855 --
Other (income)/expense 1,109 (8)
-------- --------
13,129 2,231
-------- --------
Net loss (15,489) (532)
Accrued dividend in kind on preferred stock 149 293
-------- --------
Net loss applicable to common stock $(15,638) $ (825)
======== ========
Net loss per common share $ (1.18) $ (0.06)
======== ========
Weighted average common shares 13,298 13,293
======== ========
</TABLE>
See notes to financial statements.
4
<PAGE> 5
COMPTRONIX CORPORATION
DEBTOR-IN-POSSESSION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
September 29, October 1,
1996 1995
------------- ----------
(in thousands except per share)
<S> <C> <C>
Sales $ 52,715 $ 69,523
Cost of Sales 54,872 64,332
-------- --------
Gross profit/(loss) (2,157) 5,191
Marketing, general and administrative expense 4,584 4,469
Interest expense -- net 2,555 2,855
Special charge 9,855 --
Other (income)/expense 1,360 (76)
-------- --------
18,354 7,248
-------- --------
Net loss (20,511) (2,057)
Accrued dividend in kind on preferred stock $ 735 $ 804
-------- --------
Net loss applicable to common stock $(21,246) $ (2,861)
======== ========
Net loss per common share $ (1.60) $ (0.22)
======== ========
Weighted average common shares 13,298 13,080
======== ========
</TABLE>
See notes to financial statements.
5
<PAGE> 6
COMPTRONIX CORPORATION
DEBTOR-IN-POSSESSION
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
September 29, October 1,
1996 1995
------------- ----------
(in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net loss $(20,511) $ (2,057)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Special charge 9,855 --
Depreciation and amortization 4,009 3,907
Allowance for doubtful accounts (45) (597)
Decrease in accounts receivable - trade 6,247 3,300
Decrease in inventories 8,363 (3,915)
(Increase)/decrease in prepaid exp. and other
assets (1,155) 227
Increase in accounts payable 2,946 1,132
Decrease in accrued payroll and related
expenses (289) (54)
Increase/(decrease) in other payables and
accruals (1,035) 405
-------- --------
Net cash provided by operating activities 8,385 2,348
-------- --------
Cash flows from investing activities:
Capital expenditures, net (1,618) (950)
-------- --------
Net cash used in investing activities (1,618) (950)
-------- --------
Cash flows from financing activities:
Net payments on revolving line of credit (5,042) 351
Principal payments on other long term debt (1,040) (2,130)
-------- --------
Net cash used in financing activities (6,082) (1,779)
-------- --------
Net decrease in cash 685 (381)
Cash, beginning of period 225 397
-------- --------
Cash, end of period $ 910 $ 16
======== ========
</TABLE>
See notes to financial statements.
6
<PAGE> 7
COMPTRONIX CORPORATION - SEE NOTE 3
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 29, 1996
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
nine month period ended September 29, 1996 are not necessarily indicative of
the results of operations for the year ending December 31, 1996.
NOTE 2 - SECURED DEBT
In November 1993, the Company obtained a credit facility with CIT
Group/Business Credit, Inc. ("CIT"). The credit facility, as amended, consists
of a $34.0 million revolving line of credit secured by accounts receivable and
inventory maturing in 1998 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 $7.9 million at September 29, 1996 and
$15.2 million at December 31, 1995 and total borrowings of $9.0 million and
$14.1 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 also is required to maintain certain financial covenants. As of June
30, 1996, the Company failed to meet the EBITDA covenant in its credit
agreement with CIT. In November 1993, the Company's bank lenders agreed to
retain a four (4) year term loan of $3.0 million secured by one of the
Company's manufacturing facilities in Guntersville, Alabama. At September 29,
1996 the amounts outstanding under the term loan were $1.9 million. Because the
Company did not receive a waiver for the covenant violations, it has presented
CIT and bank borrowings as current indebtedness.
NOTE 3 - CHAPTER 11 PROCEEDING
Because of the Company's second quarter performance, the Company did not meet
the required EBITDA covenant for the six months ended June 30, 1996 in its
credit facility with CIT. In addition, because of the reduced level of sales,
the Company's borrowings exceeded the availability computed in accordance with
the formula described above. After discussions, the Company and CIT were unable
to reach an agreement on terms for continued lending and a waiver of covenants
in the credit agreement for the Company's second quarter performance.
Therefore, on August 8, 1996, the Company filed a Voluntary Petition for
Reorganization Under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court (the "Chapter 11 Proceedings").
In general, commencement of the Chapter 11 Proceeding constituted an event of
default under the Company's lending agreements. However, under Chapter 11,
actions to collect claims against the Company in existence prior to the filing
of the petition for relief under the federal bankruptcy laws are stayed while
the Company continues business operations as debtor-in-possession. Additional
claims may arise subsequent to the filing date resulting from rejection of
executory contracts, including leases, and
7
<PAGE> 8
from the determination by the court (or agreed to by parties in interest) of
allowed claims for contingencies and other disputed amounts. Actions relative
to claims secured against the Company's assets ("secured claims") also are
stayed by the bankruptcy filing, although the holders of such claims have the
right to move the court for relief from stay. Secured claims are secured
primarily by liens on the Company's accounts receivable, inventory and
property, plant and equipment. Substantially all unsecured liabilities of the
Company as of the petition date are subject to compromise under a plan of
reorganization which has not yet been completed. In the Chapter 11 Proceeding,
claims of unsecured creditors are entitled to be paid in full prior to the
equity holders of the Company receiving any value under a plan of
reorganization. Because of the levels of the Company's unsecured claims and
indebtedness, holders of unsecured debt and claims will receive substantially
less than the full amount of their claims and equity holders will not,
therefore, be entitled to any value in a plan of reorganization. To finance the
Company's operations during the initial phase of the Chapter 11 Proceeding, the
Company and CIT entered into an agreed order pursuant to which the Company was
permitted to use its cash from operations to fund its business.
NOTE 4 - LIABILITIES SUBJECT TO COMPROMISE
Payment or other disposition of the secured and unsecured liabilities of the
Company existing as of the petition date is deferred until a plan of
reorganization has been approved by the Company's creditors and confirmed by
the Bankruptcy Court.
As of September 29, 1996, the Company's books and records reflected unsecured
liabilities subject to compromise as follows:
<TABLE>
<S> <C>
Convertible Subordinated Debentures 29,230
Accrued Interest on Convertible Subordinated Debentures 865
Pre-petition Accounts Payable Trade 10,480
Other Liabilities 1,267
------
41,842
======
</TABLE>
NOTE 5 - SUBSEQUENT EVENT - SALE OF SUBSTANTIALLY ALL ASSETS
On November 1, 1996, the Company consummated the previously reported sale of
substantially all of its assets to Sanmina Corporation ("Sanmina"), pursuant to
an Asset Purchase Agreement. The proceeds from the sale and cash on hand
totaled $19.4 million. Approximately $14.3 million of such amounts was used to
repay the secured creditors of the Company, and the balance (after payment of
expenses) will be used to pay the claims of unsecured creditors, including
holders of the Company's convertible subordinated debentures, at the rate of
approximately ten cents to twelve cents on the dollar, upon consummation of a
plan in the Company's bankruptcy case. The Company recorded a special charge of
$9.8 million in the third quarter to reduce the carrying value of the related
assets to realizable values from the sale or other disposal.
The consideration for the sale of assets was determined through arm's-length
negotiations between the parties, and the sale was approved by the U.S.
Bankruptcy Court.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GENERAL
Comptronix Corporation (the "Company") provided manufacturing services to
original equipment manufacturers in the electronics industry, including
producers of computers, computer peripherals, industrial instruments,
communications equipment, medical devices and test equipment. The Company
operated facilities in Guntersville, Alabama and in Empalme, Sonora, Mexico.
On August 8, 1996, the Company filed a petition for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the
Middle District of Tennessee, Case Number 396-06840 (the "Chapter 11
Proceeding"). On November 1, 1996, the Company consummated the previously
reported sale of substantially all of its assets to Sanmina, pursuant to an
Asset Purchase Agreement. The proceeds from the sale and cash on hand totaled
$19.4 million. Approximately $14.3 million of such amounts was used to repay
the secured creditors of the Company, and the balance (after payment of
expenses) will be used to pay the claims of unsecured creditors, including
holders of the Company's convertible subordinated debentures, at the rate of
approximately ten cents to twelve cents on the dollar, upon consummation of a
plan in the Company's bankruptcy case. The consideration for the sale of assets
was determined through arm's-length negotiations between the parties, and the
sale was approved by the U.S. Bankruptcy Court.
The Company has incurred operating losses during the last seven years.
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 the inventories and fixed
assets.
RESULTS OF OPERATIONS
Quarter Ended September 29, 1996 and October 1, 1995
The following table sets forth for the period indicated, the percentage of
sales of certain items in the Statement of Operations.
9
<PAGE> 10
<TABLE>
<CAPTION>
Quarter Ended
--------------------------
September 29, October 1,
1996 1995
------------- ----------
(%) (%)
<S> <C> <C>
Sales 100.0 100.0
Cost of Sales 120.6 91.2
----- -----
Gross profit/(loss) (20.6) 8.8
Marketing, general and administrative expense 13.8 6.8
Interest expense -- net 5.1 4.8
Special charge 86.1 --
Other expense 9.7 --
----- -----
Net loss (135.3) (2.8)
</TABLE>
Sales for the third quarter of 1996 were $11.4 million, a decrease of 40.9% as
compared to third quarter 1995 sales of $19.3 million. The decrease in sales
predominantly relates to significant reductions in several customers'
production schedules, customers disengaging and the Company's inability in
bankruptcy to obtain credit terms with vendors which resulted in missing
customer delivery dates.
Gross loss for the third quarter of 1996 was $2.4 million as compared to a
gross profit of $1.7 million for the third quarter of 1995. Gross profit
declined due to the decrease in sales and production schedules by several large
customers. The effect of the reduction in sales was exacerbated because the
Company was not able to reduce labor costs as quickly as its customers reduced
their production schedules. In addition, material cost was negatively affected
by additional charges relating to cash on delivery orders required by vendors
after the bankruptcy filing. In addition, the Company incurred significant
costs related to excess or unallocated inventory during the 1996 period.
Marketing, general and administrative expenses increased to $1.6 million for
the third quarter of 1996 as compared to $1.3 million for the third quarter of
1995. Marketing, general and administrative expenses increased to 13.8% of
sales for the third quarter of 1996 as compared to 6.8% of sales for the third
quarter of 1995 reflecting the lower sales base in the third quarter of 1996.
The dollar increase relates to additional recruiting cost and employment costs
on account of the bankruptcy.
Interest expense was at $588,000, 5.1% of sales, for the third quarter of 1996
as compared to $923,000, 4.8% of sales, for the third quarter of 1995. The
dollar decrease in interest expense relates to the convertible debentures not
accruing interest after the bankruptcy filing date.
The Company recorded a special charge of $9.8 million in the third quarter to
reduce the carrying value of the related assets to realizable values from the
sale or other disposal.
Other expense was $1.1 million for the third quarter of 1996 as compared to
other income of $8,000 for the third quarter of 1995. Deferred financing costs
of $972,000 were written off in the third quarter of 1996.
10
<PAGE> 11
The Company's net loss was $15.6 million for the third quarter of 1996 as
compared to a net loss of $.8 million for the third quarter of 1995. Net loss
per common share was $1.18 (based upon a weighted average of 13,298,000 shares
outstanding) in the third quarter of 1996 compared to net loss per common share
$0.06 (based upon a weighted average of 13,293,000 shares outstanding) in the
third quarter of 1995.
Nine Months Ended September 29, 1996 and October 1, 1995
The following table sets forth for the period indicated, the percentage of
sales of certain items in the Statement of Operations.
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
September 29, October 1,
1996 1995
------------- ----------
(%) (%)
<S> <C> <C>
Sales 100.0 100.0
Cost of Sales 104.1 92.5
----- -----
Gross profit/(loss) (4.1) 7.5
Marketing, general and administrative expense 8.7 6.4
Interest expense -- net 4.8 4.1
Special charge 18.7 --
Other (income)/expense 2.6 (.1)
----- -----
Net loss (38.9) (2.9)
</TABLE>
Sales for the first nine months of 1996 were $52.7 million, a decrease of 24.2%
as compared to first nine months of 1995 sales of $69.5 million. The decrease
in sales predominantly relates to significant reductions in several customers'
production schedules, customers disengaging and the Company's inability in
bankruptcy to obtain credit terms with vendors which resulted in missing
customer delivery dates.
Gross loss for the first nine months of 1996 was $2.2 million, (4.1)% of sales,
as compared to a gross profit of $5.2 million, 7.5% of sales, for the first
nine months of 1995. Gross profit declined due to the decrease in sales and
production schedules by several large customers. The effect of the reduction in
sales was exacerbated because the Company was not able to reduce labor costs as
quickly as its customers reduced their production schedules. In addition,
material cost was negatively affected by additional charges relating to cash on
delivery orders required by vendors after the bankruptcy filing.
Marketing, general and administrative expenses increased to $4.6 million for
the first nine months of 1996 as compared to $4.5 million for the first nine
months of 1995. Marketing, general and administrative expenses increased to
8.7% of sales for the first nine months of 1996 as compared to 6.4 % of sales
for the first nine months of 1995 reflecting the lower sales base in the first
nine months of 1996.
Interest expense was at $2.6 million, 4.8% of sales, for the first nine months
of 1996 as compared to $2.9 million, 4.1% of sales, for the first nine months
of 1995. The dollar decrease in interest expense relates to the convertible
debentures not accruing interest after the bankruptcy filing date.
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<PAGE> 12
The Company recorded a special charge of $9.8 million in the third quarter to
reduce the carrying value of the related assets to realizable values from the
sale or other disposal.
Other expense was $1.4 million for the first nine months of 1996 as compared to
other income of $76,000 for the first nine months of 1995. Other expense for
1996 includes the write off of deferred financing costs of $972,000. 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.
The Company's net loss was $21.2 million for the first nine months of 1996 as
compared to $2.9 million for the first nine months of 1995. Net loss per common
share was $1.60 (based upon a weighted average of 13,298,000 shares
outstanding) in the first nine months of 1996, compared to net loss per common
share $0.22 (based upon a weighted average of 13,080,000 shares outstanding) in
the first nine months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash flows provided by operating activities were $8.4 million
and $2.3 million in the first nine months of 1996 and 1995, respectively.
Principally, the 1996 amount reflects lower levels of accounts receivable and
inventory, and increased levels of accounts payable, as compared to the first
nine months of 1995.
The Company's net cash flows used in investing activities were $1.6 million and
$1.0 million in the first nine months of 1996 and 1995, respectively. These
uses are principally related to additions of machinery and equipment.
The Company's net cash flows used in financing activities were $6.1 million for
the first nine months of 1996 and principally related to payments of debt. The
net cash flows used by financing activities were $1.8 million in the first nine
months of 1995 and principally relates to payments of debt.
In November 1993, the Company's bank lenders agreed to retain a four (4) year
term loan of $3.0 million secured by one of the Company's manufacturing
facilities in Guntersville, Alabama. At September 29, 1996 the amounts
outstanding under the term loan were $1.9 million.
In November 1993, the Company obtained a new credit facility with CIT. The
credit facility, as amended, consists of a $34.0 million revolving line of
credit secured by accounts receivable and inventory maturing in November 1998
and $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 $7.9 million at September 29, 1996 and $15.2 million at
December 31, 1995 and total borrowings of $9.0 million and $14.1 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.
Because of the decline in sales discussed above, the Company did not meet the
required EBITDA covenant for the six months ended June 30, 1996. In addition,
because of the reduced level of sales, the Company's borrowings exceeded the
availability computed in accordance with the formula described above. After
12
<PAGE> 13
discussions, the Company and CIT were unable to reach an agreement on terms for
continued lending and a waiver of covenants in the credit agreement for the
Company's second quarter performance. Therefore, on August 8, 1996, the Company
filed the Chapter 11 Proceeding.
In general, commencement of the Chapter 11 Proceeding constituted an event of
default under the Company's lending agreements. However, under Chapter 11,
actions to collect claims against the Company in existence prior to the filing
of the petition for relief under the federal bankruptcy laws are stayed while
the Company continues business operations as debtor-in-possession. Additional
claims may arise subsequent to the filing date resulting from rejection of
executory contracts, including leases, and from the determination by the court
(or agreed to by parties in interest) of allowed claims for contingencies and
other disputed amounts. Actions relative to claims secured against the
Company's assets ("secured claims") also are stayed by the bankruptcy filing,
although the holders of such claims have the right to move the court for relief
from stay. Secured claims are secured primarily by liens on the Company's
accounts receivable, inventory and property, plant and equipment. Substantially
all unsecured liabilities of the Company as of the petition date are subject to
compromise under a plan of reorganization which has not yet been completed;
when completed. In the Chapter 11 Proceeding, claims of unsecured creditors are
entitled to be paid in full prior to the equity holders of the Company
receiving any value under a plan of reorganization. Because of the levels of
the Company's unsecured claims and indebtedness, holders of unsecured debt and
claims will receive substantially less than the full amount of their claims and
equity holders will not, therefore, be entitled to any value in a plan of
reorganization. To finance the Company's operations during the initial phase of
the Chapter 11 Proceeding, the Company and CIT entered into an agreed order
pursuant to which the Company was permitted to use its cash from operations to
fund its business.
On November 1, 1996, the Company consummated the previously reported sale of
substantially all of its assets to Sanmina, pursuant to an Asset Purchase
Agreement. The proceeds from the sale and cash on hand totaled $19.4 million.
Approximately $14.3 million of such amounts was used to repay the secured
creditors of the Company, and the balance (after payment of expenses) will be
used to pay the claims of unsecured creditors, including holders of the
Company's convertible subordinated debentures, at the rate of approximately ten
cents to twelve cents on the dollar, upon consummation of a plan in the
Company's bankruptcy case. The consideration for the sale of assets was
determined through arm's-length negotiations between the parties, and the sale
was approved by the U.S. Bankruptcy Court.
EBITDA
The Company's earnings before interest, income taxes, depreciation and
amortization ("EBITDA") was a loss of $3.1 million and income of $4.7 million
for the first nine months of 1996 and 1995, 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 EBTIDA 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.
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<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 8, 1996, the Company filed a petition for reorganization
under Chapter 11 of the U.S. Bankruptcy Code, in the U.S. Bankruptcy Court for
the Middle District of Tennessee, Case Number 396-06840.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
(a) As discussed above, the Company failed to meet the covenants in
its credit agreement with CIT and was unable to reach agreement with CIT for
continued lending and a waiver of covenants pursuant to such credit agreement
for the Company's second quarter performance. Such failure and the commencement
of the Company's Chapter 11 Proceeding constituted events of default under the
Company's credit agreements. See Note 3 to Unaudited Financial Statements.
(b) The Company did not declare or pay the regular semi-annual
dividend on the Company's Series A Convertible Preferred Stock (the "Preferred
Stock"), the scheduled payment dates for which were April 1, 1996 and October
1, 1996. However, the dividend of $0.30 per share, which may be paid in cash or
in additional shares of Preferred Stock shall accumulate.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The Company filed the following Current Reports on Form 8-K
during the quarter ended September 29, 1996:
Form 8-K dated August 9, 1996, to report the filing by the
Company of the Chapter 11 Proceeding pursuant to Item 3 of
Form 8-K.
Form 8-K dated September 20, 1996, to report the definitive
Asset Purchase Agreement, by and between the Company and
Sanmina Corporation pursuant to Item 5 of Form 8-K.
The Company also filed a Form 8-K dated November 1, 1996, to
report the closing of the sale of substantially all of its
assets to Sanmina Corporation pursuant to Item 2 of Form
8-K.
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities and 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: November 12, 1996 By: /s/ E. Townes Duncan
--------------------------
E. Townes Duncan
Chairman of the Board
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF COMPTRONIX CORPORATION FOR THE NINE MONTHS ENDED
SEPTEMBER 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-29-1996
<CASH> 910
<SECURITIES> 0
<RECEIVABLES> 6,276
<ALLOWANCES> 120
<INVENTORY> 6,642
<CURRENT-ASSETS> 15,685
<PP&E> 34,812
<DEPRECIATION> 27,712
<TOTAL-ASSETS> 22,788
<CURRENT-LIABILITIES> 26,504
<BONDS> 29,230
0
20,014
<COMMON> 133
<OTHER-SE> (53,093)
<TOTAL-LIABILITY-AND-EQUITY> 22,788
<SALES> 52,715
<TOTAL-REVENUES> 52,715
<CGS> 54,872
<TOTAL-COSTS> 59,456
<OTHER-EXPENSES> 11,215
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,555
<INCOME-PRETAX> (20,511)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,511)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,246)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
