<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: January 15, 1997 amending report filed November 15, 1996
(Date of earliest event reported: November 1, 1996)
Commission File Number: 0-21272
SANMINA CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 77-0228183
(State of incorporation or organization) (IRS Employer I.D. No.)
355 East Trimble Road, San Jose, California 95131
(Address of principal executive offices)
(408) 435-8444
(Registrant's telephone number, including area code)
<PAGE> 2
Item 7. Financial Statements and Exhibits
On November 1, 1996, Registrant acquired the Guntersville, Alabama and
Guaymas, Mexico assets and operations (the "Business") of Comptronix
Corporation ("Comptronix") for a cash purchase price of $17.6 million. This
acquisition was originally reported on a report on Form 8-K filed November 15,
1996. This amendment to report on Form 8-K is being filed to provide the
financial statements required with respect to such acquisition by Item 7 of
Form 8-K
(a) Financial Statements and Pro Forma Financial Information
Unaudited Pro forma Condensed Financial Statements of Sanmina
Corporation and Comptronix Corporation at and for the fiscal
year ended September 30, 1996.
Audited Financial Statements of Comptronix Corporation at and
for the year ended December 31, 1995.
Unaudited Financial Statements of Comptronix Corporation at and
for the three and nine months ended September 30, 1996.
-2-
<PAGE> 3
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to report on Form 8-K to be
signed on its behalf by the undersigned hereunto duly authorized.
SANMINA CORPORATION
By: /s/ Randy W. Furr
--------------------------
Randy W. Furr,
President
and Chief Operating Officer
Date: January 15, 1997
-3-
<PAGE> 4
SANMINA CORPORATION AND
COMPTRONIX CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
On November 1, 1996, Sanmina Corporation (the "Company") acquired substantially
all of the assets of Comptronix Corporation ("Comptronix") for cash of
approximately $17.6 million. The transaction will be accounted for as a
purchase. The accompanying unaudited pro forma combined condensed financial
statements should be read in conjunction with the historical financial
statements and related notes thereto for both the Company and Comptronix,
incorporated by reference or included elsewhere herein.
The unaudited pro forma combined condensed balance sheet has been prepared as if
the acquisition was consummated on September 30, 1996, and combines the
Company's balance sheet as of September 30, 1996, with Comptronix's balance
sheet as of September 30, 1996. The unaudited pro forma combined condensed
statement of operations for the year ended September 30, 1996, has been prepared
as of the acquisition was consummated as of the beginning of the fiscal year and
combines the Company's statement of operations for the year ended September 30,
1996 with Comptronix's statement of operations for the year ended September 30,
1996.
This method of combining historical financial statements for the preparation of
the pro forma combined condensed financial statements is for presentation
purposes only. Actual statements of operations of the companies will be combined
from the closing date of the acquisition with no retroactive restatements.
Additionally, the unaudited pro forma combined condensed financial statements
are provided for illustrative purposes only and are not necessarily indicative
of the combined financial position or combined results of operations that would
have been reported had the acquisition occurred on the dates indicated, nor do
they represent a forecast of the combined financial position or results of
operations for any future period.
4
<PAGE> 5
SANMINA CORPORATION AND
COMPTRONIX CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
SANMINA COMPTRONIX ADJUSTMENTS COMBINED
---------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 29,568 $ 910 $ (18,864) (a,d) $ 11,614
Short-term investments 85,374 - 85,374
Accounts receivable 30,421 6,156 (616) (b) 35,961
Inventories 32,109 6,642 (1,328) (c) 37,423
Prepaid expenses and other current assets 7,851 1,977 (1,977) (d) 7,851
---------------------------- --------
Total current assets 185,323 15,685 178,223
Property and equipment, net 34,868 7,100 41,968
Deposits and other 10,350 3 (3) (d) 10,350
---------------------------- --------
$ 230,541 $ 22,788 $230,541
============================ ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 24,401 $ 627 (627) (e) $ 24,401
Accrued liabilities and other 15,613 690 (690) (e) 15,613
Current portion of long-term debt - 12,575 (12,575) (e) -
---------------------------- --------
Total current liabilities 40,014 13,892 40,014
Convertible subordinated notes 86,250 - 86,250
Long-term liabilities 592 - 592
Liabilities not assumed - 41,842 (41,842) (e) -
---------------------------- --------
Total liabilities 126,856 55,734 126,856
---------------------------- --------
Stockholders' equity (deficit):
Common stock 169 133 (133) (f) 169
Preferred stock - 20,014 (20,014) (f) -
Additional paid-in capital 61,520 29,794 (29,794) (f) 61,520
Unrealized gain on investments 19 - 19
Retained earnings (deficit) 41,977 (82,887) 82,887 (f) 41,977
---------------------------- --------
Total stockholders' equity (deficit) 103,685 (32,946) 103,685
---------------------------- --------
$ 230,541 $ 22,788 $230,541
============================ ========
</TABLE>
See accompanying notes.
5
<PAGE> 6
SANMINA CORPORATION AND
COMPTRONIX CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
SANMINA COMPTRONIX ADJUSTMENTS COMBINED
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 265,076 $ 75,403 $ 340,479
Cost of sales 201,531 76,494 278,025
---------------------------- ---------
Gross profit (loss) 63,545 (1,091) 62,454
---------------------------- ---------
Operating expenses:
Selling, general and administrative 16,593 5,962 22,555
Amortization 1,723 - 1,723
---------------------------- ---------
Total operating expenses 18,316 5,962 24,278
---------------------------- ---------
Income (loss) from operations 45,229 (7,053) 38,176
Interest income (expense), net 83 (3,555) (718) (g) (4,190)
Estimated loss on sale of assets - (9,855) (9,855)
Other expense - (1,630) (1,630)
---------------------------- ---------
Income (loss) from operations before income taxes 45,312 (22,093) 22,501
Provision for income taxes 17,217 - (8,667) (h) 8,550
---------------------------- ---------
Net income ( loss) $ 28,095 $ (22,093) $ 13,951
============================ =========
Net income (loss) per share:
Primary $ 1.60 $ 0.80
Fully diluted $ 1.50 $ 0.82
Shares used in calculating per share amounts:
Primary 17,531 17,531
Fully diluted 20,812 20,812
</TABLE>
See accompanying notes.
6
<PAGE> 7
SANMINA CORPORATION AND
COMPTRONIX CORPORATION
NOTES TO PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma combined condensed financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, the Company believes
that the disclosures are adequate to make the information presented not
misleading. These pro forma combined financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Company's annual report for the year ended September 30, 1996.
NOTE 2. PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the accompanying pro forma
combined condensed balance sheet and statement of operations as described below:
(a) Entry to record cash used for the acquisition assuming the
acquisition had occurred as of September 30, 1996.
(b) Entry to reflect purchase of Comptronix receivables at 90% of
book value (which approximates fair market value).
(c) Entry to reflect purchase of Comptronix inventory at 80% of
book value (which approximates fair market value).
(d) Entry to eliminate assets not acquired by the Company as part
of the acquisition.
(e) Entry to eliminate liabilities not assumed by the Company as
part of the acquisition.
(f) Entry to eliminate Comptronix stockholders' equity as a result
of the acquisition.
(g) Entry to adjust interest expense for cash used in the
acquisition had the acquisition occurred as of the beginning
of the fiscal year.
(h) Entry to adjust the provision for income taxes for the impact
of Comptronix's loss.
7
<PAGE> 8
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
COMPTRONIX CORPORATION:
We have audited the accompanying balance sheets of Comptronix Corporation (a
Delaware Corporation) as of December 31, 1995 and 1994 and the related
statements of operations, stockholders' equity/(deficit) and cash flows for
each of the years in the three-year period ended December 31, 1995. These
financial statements and the schedule referred to below are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Comptronix Corporation as of
December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed further in Note 14, subsequent to February 14, 1996, the date of
our original report, due to the Company's second quarter 1996 performance, the
Company did not meet the required EBITDA, as defined, covenant for the six
months ended June 30, 1996 in its credit facility with The CIT Group/Business
Credit, Inc. ("CIT"). In addition, because of the reduced level of sales,
the Company's borrowings exceeded the availability computed in accordance with
the lending formula. 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. On
November 1, 1996, the Company consummated the sale of substantially all of its
assets to Sanmina Corporation, pursuant to an Asset Purchase Agreement. The
accompanying financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities as a result of the events described above.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Nashville, Tennessee
February 14, 1996 (except for Note 14, to which the date is November 1, 1996)
8
<PAGE> 9
COMPTRONIX CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
-----------------------
(in thousands)
<S> <C> <C>
Current Assets:
Cash $ 225 $ 397
Accounts receivable - trade, net of allowances of
$165 and $751 for 1995 and 1994, respectively 13,042 13,683
Inventories 18,165 16,119
Prepaid expenses and other assets 822 570
-----------------------
Total current assets 32,254 30,769
-----------------------
Property, plant and equipment, including assets under
capital leases:
Land 295 295
Buildings and improvements 7,366 7,395
Construction in progress 177 168
Machinery and equipment 32,818 33,369
-----------------------
40,656 41,227
Less accumulated depreciation and amortization (26,344) (23,508)
-----------------------
14,312 17,719
-----------------------
Deferred financing costs and other, net 1,145 1,988
-----------------------
Total assets $ 47,711 $ 50,476
=======================
</TABLE>
(continued)
9
<PAGE> 10
COMPTRONIX CORPORATION
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
<TABLE>
<CAPTION>
December 31,
-----------------------
1995 1994
-----------------------
(in thousands)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 1,559 $2,517
Accounts payable 8,158 7,474
Accrued payroll and related expenses 876 1,034
Accrued interest 845 947
Other payables and accruals 2,425 1,615
-----------------------
Total current liabilities 13,863 13,587
Long-term debt, excluding current maturities 17,098 16,380
Subordinated convertible debentures 29,230 34,500
Commitments and contingencies
Stockholders' equity/(deficit):
Redeemable convertible preferred stock Series A-6%
dividend - no par value per share; authorized
5,000,000 shares, issued and outstanding 1,899,319
shares in 1995 plus $286 dividend accretion,
1,274,787 shares in 1994 plus $203 dividend
accretion (stated at liquidation preference value
of $10.00 per share) 19,279 12,951
Common stock - par value $.01 per share; authorized
50,000,000 shares, issued and outstanding 13,298,410
and 11,153,194 shares in 1995 and 1994, respectively 133 111
Unearned compensation - restricted stock (390) (375)
Additional paid-in capital 30,139 30,248
Accumulated deficit (61,641) (56,926)
-----------------------
Total stockholders' deficit (12,480) (13,991)
-----------------------
Total liabilities and stockholders' equity/(deficit) $ 47,711 $50,476
=======================
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 11
COMPTRONIX CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------
1995 1994 1993
---------------------------------------------------
(in thousands, except per share data)
<S> <C> <C> <C>
Sales $92,211 $119,998 $184,137
Cost of sales 85,954 117,894 181,010
---------------------------------------------------
Gross profit 6,257 2,104 3,127
---------------------------------------------------
Marketing, general and
administrative expenses 5,847 6,555 7,227
Interest expense 3,870 4,588 5,417
Interest income (15) (107) (1,048)
Loss on sale of San Jose division - 5,535 -
Settlement with Exicom - - 1,837
Other expense 194 97 935
---------------------------------------------------
9,896 16,668 14,368
---------------------------------------------------
Net loss (3,639) (14,564) (11,241)
Dividend in kind on preferred stock 1,076 760 162
---------------------------------------------------
Net loss applicable to common shares $(4,715) $(15,324) $(11,403)
===================================================
Net loss per common share $ (.36) $ (1.38) $ (1.04)
===================================================
</TABLE>
See accompanying notes to financial statements
11
<PAGE> 12
COMPTRONIX CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY/(DEFICIT)
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
Redeemable
Redeemable Convertible Unearned
Convertible Preferred Compensation Additional
Preferred Stock Issued and Common Restricted Paid-In Accumulated
Stock To be Issued Outstanding Stock Stock Capital Deficit Total
---------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,1992 $ 10,500 $ - $109 $ - $29,019 $(30,199) $ 9,429
Issuance of common stock to lenders - - 1 - 399 - 400
Options exercised - - - - 126 - 126
Issuance of Series A preferred stock (10,500) 12,275 - - - - 1,775
Series A preferred stock dividend - 162 - - - (162) -
Net loss - - - - (11,241) (11,241)
---------------------------------------------------------------------------------------------
Balance, December 31, 1993 - 12,437 110 - 29,544 (41,602) 489
Issuance of common stock - - - - 34 - 34
Series A preferred stock dividend - 760 - - - (760) -
Conversion of Series A preferred
stock to common stock - (246) - - 246 - -
Issuance of restricted common stock - - 1 - 424 - 425
Unamortized restricted common stock - - - (375) - - (375)
Net loss - - - - - (14,564) (14,564)
---------------------------------------------------------------------------------------------
Balance, December 31, 1994 - 12,951 111 (375) 30,248 (56,926) (13,991)
Issuance of preferred stock and common
stock in exchange for debentures - 5,270 21 - (196) - 5,095
Series A Preferred Stock Dividend - 1,076 - - - (1,076) -
Conversion of Series A Preferred
Stock Dividend - (18) - - 18 - -
Issuance of restricted common stock - - 1 (66) 65 - -
Unamortized restricted common stock - - - 51 4 - 55
Net Loss - - - - - (3,639) (3,639)
---------------------------------------------------------------------------------------------
Balance, December 31, 1995 $ - $19,279 $133 $(390) $30,139 $(61,641) $(12,480)
=============================================================================================
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 13
COMPTRONIX CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
1995 1994 1993
--------------------------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(3,639) $(14,564) $(11,241)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss on sale of San Jose division - 5,535 -
Non-cash expenses settled with
preferred stock - - 1,775
Depreciation and amortization 4,971 5,660 8,918
Bad debt provision (586) 171 238
Provision for inventory reserves and
asset retirements - - 7,244
Decrease in accounts receivable - trade 1,227 4,636 13,467
Decrease in income tax refund receivable - 229 6,731
(Increase) decrease in inventories (2,046) 5,748 15,442
(Increase) decrease in prepaid expenses
and other assets (252) 492 (835)
Increase (decrease) in accounts payable 684 1,442 (22,725)
Decrease in accrued payroll and
related expenses (158) (128) (1,259)
Increase (decrease) in other payables
and accruals 708 (2,281) 14
------- -------- --------
Net cash provided by operating activities 909 6,940 17,769
------- -------- --------
Cash flows from investing activities:
Capital expenditures, net (841) (433) (1,085)
Proceeds from sale of San Jose division - 6,400 -
------- -------- --------
Net cash provided by (used in)
investing activities (841) 5,967 (1,085)
------- -------- --------
</TABLE>
(Continued)
13
<PAGE> 14
COMPTRONIX CORPORATION
STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1995 1994 1993
------------------------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from financing activities:
Payment of settlement and restructuring costs - - (3,932)
Payment of loan costs - - (601)
Net payments on revolving line of credit - - (19,973)
Net proceeds (payments) on new revolving line
of credit 2,337 (9,262) 21,006
Proceeds from issuance of other long-term debt - - 9,200
Principal payments on other long-term debt (2,577) (4,179) (21,661)
Proceeds from issuance of common stock - 34 126
------- -------- --------
Net cash used in financing activities (240) (13,407) (15,835)
------- -------- --------
Net increase (decrease) in cash (172) (500) 849
Cash at beginning of period 397 897 48
------- -------- --------
Cash at end of period $ 225 $ 397 $ 897
======= ======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for:
Interest $ 3,972 $ 4,728 $ 5,281
Noncash investing and financing activities:
Common stock issued for financing costs - - 400
Issuance of Series A preferred stock 1,076 760 -
Issuance of restricted common stock 66 425 -
Issuance of preferred stock and common stock
in exchange for debentures 5,270 - -
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 15
COMPTRONIX CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company (a Delaware corporation) is engaged in the contract manufacturing
and testing of products and assemblies for use in the computer, communications,
medical, instrumentation, consumer and peripherals industries throughout the
United States. The Company currently has two operating facilities in
Guntersville, Alabama and a facility in Empalme, Sonora, Mexico.
Results of Operations
The Company has incurred operating losses for the last seven years. The
Company has had to seek, from time to time, waivers of certain of the covenants
contained in the credit agreement with CIT to continue borrowing under such
agreement and to avoid potential acceleration of the indebtedness outstanding.
Management has implemented plans and strategies intended to increase sales,
gross margins, and to further control costs while improving operating
efficiencies. Further, the Company has taken steps to diversify its customer
base to reduce, to some extent, the vulnerability it experienced as a result of
decreased shipments to the personal computer and medical capital equipment
industries. It has been the Company's experience that a substantial portion of
its revenues comes from its customer base on a recurring basis, but that new
business is an important source of revenue to counteract conditions applicable
to that recurring base of revenue. The Company has reduced its fixed costs and
reorganized its manufacturing overhead personnel into business teams to improve
productivity while still enabling the Company to provide quality manufacturing
services to its customers.
Revenue Recognition
Revenue from product sales to customers is recognized when the units are
shipped.
Inventories
Inventories include material, labor and overhead and are stated at the lower of
cost or market using the first-in, first-out (FIFO) method. Recoverable costs
incurred in connection with the start-up of new projects, which are not in
excess of estimated realizable values, are deferred and amortized over the life
of the contract.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is computed
by the straight-line method over five to seven years for machinery and
equipment and 19 years for buildings and improvements, including leasehold
improvements. Depreciation includes the amortization of assets under capital
leases.
Expenditures for repairs and maintenance are charged against income as
incurred. The Company removes the costs and related allowances from the
accounts for properties sold or retired, and any resulting gains or losses are
included in other income (expense).
15
<PAGE> 16
Deferred Financing Costs
Deferred financing costs are amortized on a straight-line basis over the terms
of the related loans.
Accrued Liability for Employee Insurance Claims
The Company is self-insured for medical claims and certain workmen's
compensation claims. The estimated liability for incurred claims is based
primarily on historical payment experience on an individual claim basis and an
estimate for unreported claims. Predetermined loss limits have been insured to
limit the Company's per occurrence liability.
Income Taxes
The Company has adopted SFAS No. 109 for the financial reporting of income
taxes. The statement generally requires the Company to record deferred income
taxes for the differences between book and tax bases in its assets and
liabilities.
Concentration of Credit Risks
The Company's credit risks relate primarily to accounts receivable. Accounts
receivable consist primarily of amounts due from original equipment
manufacturers for units shipped. The Company's customers are located
throughout the United States. The Company performs credit evaluations of its
customers and maintains allowances for doubtful accounts on these accounts
receivable. See Note 12 for information regarding major customers.
Losses Per Share
Losses per common share are computed on the basis of the weighted average
number of common shares outstanding. Common stock equivalents are not included
in each period as inclusion of their effect would be antidilutive. Fully
diluted earnings per share, which considers common stock equivalents and
convertible subordinated debentures, is not presented as it is antidilutive for
each year.
Weighted average shares used in the computation of losses per share for the
years ended December 31, 1995, 1994, and 1993 were 13,135,000, 11,081,000 and
10,966,000, respectively.
Use of Estimates
The preparation of financial statements in conformity with general accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and estimated fair values of financial instruments were as
follows as of December 31, 1995:
<TABLE>
<CAPTION>
Carrying Amount Fair Value
--------------- ----------
<S> <C> <C>
Long-term debt $18,657 $18,657
Subordinated convertible debentures $29,230 $15,200
</TABLE>
16
<PAGE> 17
The carrying amount of long-term debt is assumed to approximate fair value as
substantially all of it bears interest at a floating rate. The fair value of
the subordinated convertible debentures was determined by obtaining quotes from
dealers.
NOTE 3 INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1995 1994
------------------
(in thousands)
<S> <C> <C>
Raw materials $13,589 $11,601
Work in process and finished goods 6,030 5,608
Reserve for excess and obsolete material (1,454) (1,090)
------------------
$18,165 $16,119
==================
</TABLE>
The Company has incurred certain start-up costs that are assignable to units
not yet produced. The aggregate amount incurred, which is included in
work-in-process, is approximately $200,000 and $300,000 as of December 31, 1995
and 1994, respectively.
17
<PAGE> 18
NOTE 4 NOTES PAYABLE AND LONG-TERM DEBT
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1995 1994
----------------------------
(in thousands)
<S> <C> <C>
Industrial Development Revenue bonds, 10 year
amortization at rates ranging from 7.5% to 8.7%,
secured by buildings and equipment, principal and
interest payments are due quarterly $ 640 $ 960
Revolving line of credit at prime plus 1 1/2% 14,080 11,747
Equipment term loan at prime plus 1 3/4% due in
20 quarterly installments beginning June 1, 1994,
secured by equipment 2,500 3,700
Senior Notes at 10%, due in quarterly payments of
principal and interest, final maturity in 1995,
secured by certain equipment - 990
Bank Loan at prime plus 2% due in 24 monthly
installments, beginning November 1, 1995, with a
lump sum payment on November 1, 1997, secured by
real property 1,437 1,500
------- -------
Total long-term debt 18,657 18,897
Current maturities (1,559) (2,517)
------- -------
Total long-term debt, excluding current maturities $17,098 $16,380
======= =======
</TABLE>
Maturities of long-term debt, in thousands, are as follows:
<TABLE>
<S> <C>
1996 $ 1,559
1997 16,998
1998 100
-------
Total $18,657
=======
</TABLE>
The prime rate was 9.0% and 8.5% at December 31, 1995, and 1994, respectively.
The Company does not currently have any interest rate cap or swap agreements in
place.
In November 1993, the Company obtained a new credit facility with The CIT
Group/Business Credit, Inc. The new credit facility consists of a $34.0
million revolving line of credit secured by accounts receivable and inventory
maturing in November 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 $15.2 million at December 31, 1995). CIT
has also provided a $.3 million letter of credit for a certain vendor which
reduces the Company's line of credit. Following the sale of the Company's San
Jose division in October of 1994, the Company made
18
<PAGE> 19
additional payments of $4,561,000 on the revolver, and $1,400,000 on the term
loan. The agreement also contains various financing covenants which limit the
Company's ability to incur additional indebtness, purchase and dispose of
equipment and declare or pay cash dividends. In March of 1996, the Company
amended the credit agreement with CIT based upon the Company's 1996 business
plan. The amended loan agreement added new covenants for earnings before
interest, income taxes, depreciation and amortization (EBITDA) and a fixed
charge coverage ratio 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 three (3) months ending March 31, 1996 $ 500,000
For the six (6) months ending June 30, 1996 $2,000,000
For the nine (9) months ending September 30, 1996 $4,000,000
</TABLE>
Fixed Charge Coverage Ratio:
The Company shall have at all times during the applicable fiscal periods below,
a Fixed Charge Coverage Ratio of not less than:
<TABLE>
<CAPTION>
Fiscal Periods Ratio
- -------------- -----
<S> <C>
For the twelve (12) months ending December 31, 1996 1.0 to 1
For the twelve (12) months ending March 31, 1997
and for the twelve (12) months ending on each
fiscal quarter thereafter 1.25 to 1
</TABLE>
Based on its current plan for 1996, the Company believes it will comply with
such covenants. If it does not comply with those covenants, the Company will
be required to seek a waiver of noncompliance or amendment to the agreement in
order to continue borrowing under such agreement and to avoid potential
acceleration of the indebtedness.
The Company also has a term loan for $3.0 million which is secured by real
property. The loan balance was reduced to $1.5 million in December 1993 after
the payment to the lenders of $1.5 million of the income tax refund proceeds.
The Company believes that cash generated from operations together with proceeds
of the new CIT credit facility described above should be sufficient for the
Company to meet its obligations during 1996, including debt settlement and
trade creditor obligations.
In connection with the financing agreements, The CIT Group/Business Credit,
Inc. was granted a warrant to purchase 100,000 shares of the Company's common
stock at a price of $4.50 per share, expiring November 1998. No value has been
assigned to the warrant as the exercise price was equivalent to the market
price of the warrant on the grant date.
In addition, as part of its credit agreement restructuring costs in March 1993,
the Company issued an aggregate of 50,000 shares of common stock to its former
bank lenders and 50,000 shares of common stock to its term lenders. The term
lenders also were granted a warrant to purchase 50,000 shares at $4.00 per
share
19
<PAGE> 20
exercisable for five years. The value of the shares of approximately $400,000
is being amortized over the life of the credit agreements. The portion
associated with the retired bank debt has been fully amortized. The senior
lenders were granted an additional 50,000 warrants following the sale of the
San Jose division. The warrants were issued at $1.50 per share and expire
October 12, 1999.
The Company's two buildings and the majority of its machinery and equipment in
Guntersville are leased by the Company under two industrial revenue bond
financings. The 1987 bonds are held by a third-party and reflected as debt
outstanding above. The Company has the option to purchase the facility under
this lease for $18,000 in 1997. The other bond issue was induced in 1991 and
completed in 1993, and the bonds were purchased by the Company and pledged to
its bank lenders. The respective investment in the bonds and the related lease
obligations together with the related interest income and expense have been
netted in the accompanying financial statements. The facility leased under
this bond issue can be purchased in 2008 for nominal consideration. Nominal
additional payments are required at maturity for the equipment under capital
lease.
The Company is contingently liable under a letter of credit in the amount of
approximately $1,007,600 issued by one of its bank lenders as additional
collateral for an Industrial Development Revenue Bond.
NOTE 5 PREFERRED STOCK
On May 12, 1989, the Company's stockholders approved a class of 5,000,000
shares of Preferred Stock which may be issued in one or more series with such
rights, preferences, privileges and restrictions as the Board of Directors may
determine.
On December 17, 1993, the Company issued 1,050,000 shares of Series A
redeemable convertible preferred stock, without par value, in settlement of the
class action lawsuit and 175,000 shares pursuant to the settlement with Exicom
Technologies. The stock is subject to mandatory redemption on April 1, 2003,
or annual redemption at the option of the holder beginning April 1, 1998 at a
price equal to $10.00 per share. The redemption may be either in cash or, in
the sole discretion of the Company, in shares of common stock at the current
market price on the date such shares are redeemed. The stock is convertible at
$8.00 per share and carries a dividend rate of 6% payable in kind at the
Company's election. In 1995, the Company recorded dividends of $1.1 million of
which $286,000 had not been issued at December 31, 1995.
NOTE 6 CONVERTIBLE SUBORDINATED DEBENTURES
On March 17, 1992, the Company sold $34,500,000 of 6 3/4% convertible
subordinated debentures. The debentures mature on March 1, 2002 and pay
interest semi-annually at March 1 and September 1. The debentures are
convertible at the option of the holder at any time prior to maturity, unless
previously redeemed, into common shares at a conversion price of $11.625
(reduced from $17.75 per share as a result of the shareholder litigation
settlement). The Company may redeem the debentures on or after April 1, 1998
at par plus premiums declining to par at April 1, 2001. The debentures are
subordinate to all existing and future senior indebtedness, as defined in the
indenture. The indenture contains certain covenants and other terms for events
of default. At December 31, 1995, the Company was in compliance with such
covenants.
On January 25, 1995, the company completed a privately negotiated exchange of
$5,270,000 of debentures for shares of the Company's common and Series A
preferred stock. This exchange provided the exchanging debenture holders an
aggregate of 2,108,000 shares of common stock and 527,000 shares of Series A
preferred stock.
20
<PAGE> 21
NOTE 7 STOCK OPTION PLAN
The Company's 1985 Employee Incentive Stock Option Plan and 1989 Employee Stock
Incentive Plan provide for the granting of options to purchase shares of the
Company's common stock at not less than fair market value on the date of grant.
The stock options issued under the plans are subject to certain terms,
conditions and restrictions. The awards which may be granted include stock
options, stock appreciation rights (SARs) and/or other stock based awards. The
plans also provide that if there is a change in control or a potential change
in control, SARs and limited SARs outstanding for at least six months, and any
stock options which are not then exercisable will become fully exercisable and
vested. The Company also has granted non-qualified options to certain
Directors under the Company's Outside Directors Stock Option Program to
purchase shares of common stock at the fair market value on the date of grant.
Option activity is summarized as follows:
<TABLE>
<CAPTION>
Options Granted
------------------------------------------------------------------
$1.19 $2.25 $5.00 $10.00 $15.00
to $2.24 to $4.99 to $9.99 to $14.99 to $22.99
per share per share per share per share per share Total
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1992 - 175,188 225,488 303,813 179,350 883,839
Granted - 55,600 797,803 7,000 1,000 861,403
Canceled or expired - (33,263) (189,238) (299,813) (180,350) (702,664)
Exercised - (40,162) - - - (40,162)
------------------------------------------------------------------
Balances, December 31, 1993 - 157,363 834,053 11,000 - 1,002,416
Granted 290,700 181,004 138,250 - - 609,954
Canceled or expired (11,500) (57,025) (158,855) - - (227,380)
Exercised - (9,750) - - - (9,750)
------------------------------------------------------------------
Balances, December 31, 1994 279,200 271,592 813,448 11,000 - 1,375,240
Granted 866,764 136,600 - - - 1,003,364
Canceled or expired (179,359) (206,307) (730,703) (11,000) - (1,127,369)
Exercised - - - - - -
------------------------------------------------------------------
Balances, December 31, 1995 966,605 201,885 82,745 - - 1,251,235
==================================================================
</TABLE>
In January 1994, the Board of Directors approved a restatement of prior
amendments to the plans together with a new amendment to the 1989 Incentive
Stock Option Plan to authorize an aggregate of 910,000 additional shares of
common stock.
In November 1993, the Company granted a restricted stock award of 100,000 of
common stock shares to its Chief Executive Officer under the 1989 Plan. These
shares vest ratably over a ten year period beginning November 30, 1993 provided
that his employment continues with the Company or become fully vested if there
is a change in control event, as defined in his employment agreement. In May
1995, the Company granted to certain executive officers of the Company an
aggregate of 20,000 shares of Common Stock pursuant to restricted stock awards
under the 1989 Plan. These shares contain restrictions on transfer which lapse
in annual 20% increments, with accelerated vesting upon a change of control.
Compensation expense
21
<PAGE> 22
will be recognized over the vesting period for the restricted shares. Upon
termination of employment, any shares which are still restricted shall revert
to the Company.
NOTE 8 SALE OF THE SAN JOSE DIVISION
On October 17, 1994, the Company completed the sale of its San Jose facility to
Sanmina Corporation for a purchase price of approximately $6.4 million in cash
and the assumption of approximately $1.6 million in liabilities. The San Jose
disposition resulted in a year to date loss of $5.1 million which includes a
loss from operations from July 3, 1994 of $423,000. In addition, the Company
identified certain assets to be held for sale. These assets were written down
to net realizable value which resulted in a $400,000 loss.
NOTE 9 INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of December 31, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Current Deferred Tax Assets
Inventory and inventory reserves $ 1,120,207 $ 763,039
Asset allowances and liabilities not yet tax deductible 118,038 425,875
Less valuation allowance (1,238,245) (1,188,914)
------------ ------------
Net current deferred tax assets $ - $ -
============ ============
Non-Current Deferred Tax Assets
Net operating loss carry forwards $ 23,140,623 $ 23,299,254
Less valuation allowance (21,889,447) (21,902,459)
------------ ------------
Total non-current deferred tax assets 1,251,176 1,396,795
------------ ------------
Non-Current Deferred Tax Liabilities
Tax in excess of book depreciation and amortization (1,251,176) (1,396,795)
------------ ------------
Total non-current deferred tax liabilities (1,251,176) (1,396,795)
------------ ------------
Net non-current deferred tax liabilities $ - $ -
============ ============
</TABLE>
No income tax expense has been recorded as of December 31, 1995, 1994 and 1993
due to the losses from operations. A valuation allowance has been recorded
equal to the remaining deferred tax assets after considering deferred tax
assets that can be realized through offsets to existing taxable temporary
differences. The tax operating loss carry forwards begin expiring in 2004.
NOTE 10 COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities under operating leases and has other
operating leases for automobiles and office equipment. The future minimum
lease payments under the facilities and automobile leases are as follows (in
thousands):
<TABLE>
<S> <C>
1996 $110
1997 84
1998 66
1999 22
</TABLE>
22
<PAGE> 23
The minimum payments for the office equipment is not material. The Company's
rental expense related to operating leases was approximately $1,242,000 in
1995, $1,764,000 in 1994 and $1,968,000 in 1993.
The Company has an employment agreement with its chief executive officer which
includes a non-compete agreement and provides for severance compensation for
one year if terminated for any reason without cause.
The Company's Bylaws provide for indemnification of its officers and directors
to the extent permitted by Delaware law. Additionally at December 31, 1995,
the Company has a directors and officers liability insurance policy which
provides up to $5.0 million of coverage.
The Company is involved in various legal actions arising in the normal course
of business. After taking into consideration legal counsel's evaluation of
such actions, management is of the opinion that the outcomes will not have a
significant effect on the Company's financial position or results of
operations.
NOTE 11 ACCOUNTING PRONOUNCEMENTS
In 1995, the Financial Accounting Standards Board ("FASB") issued Statements of
Financial Accounting Standards Number 121 ("SFAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
Adoption of SFAS 121 is required for fiscal years beginning after December 15,
1995. The Company plans to adopt SFAS 121 in the first quarter of 1996 and
does not expect adoption to have a material effect on the Company's financial
position.
In October 1995, the FASB issued Statement No. 123 ("SFAS 123") "Accounting for
Stock-Based Compensation". This statement requires new disclosures in the
notes to the financial statements about stock-based compensation plans based on
the fair value of equity instruments granted. Companies also may base the
recognition of compensation cost for instruments issued under stock-based
compensation plans on these fair values. The Company anticipates adopting SFAS
123 in 1996, but currently does not plan to change its method of accounting for
these plans.
NOTE 12 MAJOR CUSTOMERS
The Company provides contract manufacturing services to producers of electronic
equipment in the computer, communication, medical, instrumentation, consumer
and peripherals industries. Accordingly, the ultimate collectibility of a
substantial portion of the Company's receivables are susceptible to changes in
the market conditions in these industries.
Significant concentrations of sales and accounts receivable are summarized
below:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------------------------
1995 1994 1993
-------------------------------------------------------------------------
Accounts Accounts Accounts
Sales Receivable Sales Receivable Sales Receivable
-------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Customer A $ 8,482 $1,046 $13,050 $1,173 $19,510 $1,275
Customer B 14,260 3,074 12,434 4,060 - -
Customer C 7,172 30 7,047 1,653 - -
Customer D 11,305 696 - - - -
Customer E 122 - 11,314 113 18,765 893
</TABLE>
23
<PAGE> 24
The Company generally does not require collateral or other security from its
customers and would incur an accounting loss equal to the carrying value of the
accounts receivable if its customers failed to perform according to the terms
of the credit arrangement.
NOTE 13 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth certain unaudited quarterly information with
respect to the Company's results of operations for the years 1995 and 1994.
<TABLE>
<CAPTION>
1995 Quarters
----------------------------------------------
1st 2nd 3rd 4th
----------------------------------------------
<S> <C> <C> <C> <C>
Sales $27,503 $22,737 $19,282 $22,689
Gross Profit 2,230 1,262 1,699 1,066
Net Income (Loss) 73 (1,599) (532) (1,581)
Preferred Stock Dividends 234 277 293 272
Net Loss Applicable to Common Shares (161) (1,876) (825) (1,853)
Loss Per Common Share (0.01) (0.14) (0.06) (0.14)
1994 Quarters
----------------------------------------------
1st 2nd 3rd 4th
----------------------------------------------
Sales $30,556 $33,181 $25,612 $30,649
Gross Profit (Loss) 1,040 (1,789) 876 1,977
Net Loss (1,653) (a) (8,776) (a) (3,867) (268)
Preferred Stock Dividends 186 189 190 195
Net Loss Applicable to Common Shares (1,839) (8,965) (4,057) (463)
Loss Per Common Share (0.17) (0.81) (0.36) (0.04)
</TABLE>
(a) Includes loss on sale of San Jose division of $3,500 in the second
quarter and $2,000 in the third quarter.
Note 14 Events Subsequent to Balance Sheet Date
Because of the Company's second quarter 1996 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 lending formula. 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 U.S. Bankruptcy Court.
On November 1, 1996, the Company consummated the 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. The accompanying financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities as a result of the events described above. The Company recorded a
special charge of $9.8 million in the third quarter of 1996 to reduce the
carrying value of the related assets to realizable values from the sale or
other disposal.
24
<PAGE> 25
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.
25
<PAGE> 26
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.
26
<PAGE> 27
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.
27
<PAGE> 28
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.
28
<PAGE> 29
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.
29
<PAGE> 30
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
30
<PAGE> 31
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.
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of Comptronix Corporation:
As independent public accountants, we hereby consent to the use of our report
dated February 14, 1996 (except for Note 14, to which the date is November 1,
1996) for each of the years in the three year period ended December 31, 1995,
in Sanmina Corporation's Form 8-K dated January 15, 1997.
ARTHUR ANDERSEN LLP
Nashville, Tennessee,
January 13, 1997
