<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 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 0-23602
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THE CERPLEX GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0411354
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1382 Bell Avenue, Tustin, CA 92680
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(Address of principal executive offices)
(Zip Code)
(714) 258-5600
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of the Registrant's Common Stock on May 2,
1996 was 13,397,425.
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THE CERPLEX GROUP, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART 1 FINANCIAL INFORMATION
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations . . . . . . . . . . . . 5
Consolidated Statement of Stockholders' Equity . . . . . . . 6
Consolidated Statements of Cash Flows . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . 8
Management's Discussion and Analysis . . . . . . . . . . . . 9
PART II OTHER INFORMATION
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 13
Changes in Securities . . . . . . . . . . . . . . . . . . . . 13
Defaults Upon Senior Securities . . . . . . . . . . . . . . . 13
Submission of Matters to a Vote of Security Holders . . . . . 13
Other Information . . . . . . . . . . . . . . . . . . . . . . 13
Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 21
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
2
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PART I
FINANCIAL INFORMATION
3
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THE CERPLEX GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
-------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,422 $ 3,807
Accounts receivable, net 27,472 30,102
Inventories 28,387 27,789
Net assets of discontinued operations 2,920 2,597
Prepaid expenses and other 2,623 2,267
-------- --------
Total current assets 66,824 66,562
Property, plant and equipment, net 17,441 17,988
Investment in joint venture 8,005 7,723
Goodwill 6,361 6,647
Other long-term assets 2,793 2,973
-------- --------
Total assets $101,424 $101,893
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,898 $ 17,024
Accrued liabilities 11,158 13,622
Short-term borrowings 47,700
Current portion of long-term debt 253 536
Income taxes payable 2,349 2,161
-------- --------
Total current liabilities 82,358 33,343
-------- --------
Long-term debt, less current portion 20,567 68,382
Stockholders' Equity:
Convertible preferred stock, par value $0.001;
5,000,000 shares authorized, none outstanding
Common stock, par value $0.001 par value;
30,000,000 shares authorized; 13,279,610
and 13,127,680 issued and outstanding in
1996 and 1995, respectively 13 13
Additional paid-in capital 47,546 47,528
Notes receivable from stockholders (229) (226)
Unearned compensation (125) (143)
Accumulated deficit (48,599) (47,026)
Cumulative translation adjustment (107) 22
-------- --------
Total stockholders' equity (1,501) 168
-------- --------
Total liabilities and stockholders' equity $101,424 $101,893
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
4
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THE CERPLEX GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------
1996 1995
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<S> <C> <C>
Net sales $40,846 $34,001
Cost of sales 33,915 27,959
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Gross profit 6,931 6,042
Selling, general and administrative expenses 7,057 4,077
------- -------
Operating income (loss) (126) 1,965
Equity in earnings from joint venture 357 515
Interest expense, net 1,511 1,224
------- -------
Income (loss) from continuing operations before taxes (1,280) 1,256
Income taxes 293 467
------- -------
Income (loss) from continuing operations (1,573) 789
Income from discontinued operations, net of income taxes 41
------- -------
Net income (loss) $(1,573) $ 830
======= =======
Income (loss) per share:
Continuing operations $ (.12) .06
Discontinued operations
------- -------
Net income (loss) per share $ (.12) $ .06
======= =======
Weighted average common and common
equivalent shares 13,174 14,428
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
5
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THE CERPLEX GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------- Paid-In Accumulated Stockholders'
Shares Amount Capital Other Deficit Equity
---------- ------ ------- ----- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 13,127,680 $13 $47,528 $(347) $(47,026) $ 168
Stock options and warrants exercised 151,930 18 18
Notes receivable from stockholders (3) (3)
Net loss (1,573) (1,573)
Amortization of unearned compensation 18 18
Translation adjustment (129) (129)
---------- --- ------- ----- -------- -------
Balance at March 31, 1996 13,279,610 $13 $47,546 $(461) $(48,599) $(1,501)
========== === ======= ===== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements
6
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THE CERPLEX GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
-------------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,573) $ 830
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,859 2,291
Amortization of unearned compensation 18 18
Foreign currency transaction (gain) loss 36 (159)
Equity in earnings of joint venture (282) (515)
Decrease (increase) in:
Accounts receivable 2,518 (3,440)
Inventories (818) (3,036)
Prepaid expenses and other (360) (1,327)
Investment in other long-term assets (167) (453)
Net assets of discontinued operations (323)
(Decrease) increase in:
Accounts payable 3,888 1,391
Accrued liabilities (2,452) (159)
Income taxes payable 214 341
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Net cash provided by (used in) operating activities 2,558 (4,218)
------- -------
Cash flows from investing activities:
Purchase of plant and equipment (703) (1,197)
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Net cash used in investing activities (703) (1,197)
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Cash flows from financing activities:
Proceeds from long-term debt, net 3,004
Proceeds from issuance of stock, net 18 5
Decrease in notes receivable from stockholders (3) (4)
Principal payments of long-term debt (243) (281)
------- -------
Net cash provided by (used in) financing activities (228) 2,724
------- -------
Effect of exchange rate changes on cash (12) 167
------- -------
Net increase (decrease) in cash and cash equivalents 1,615 (2,524)
Cash and cash equivalents at beginning of period 3,807 9,442
------- -------
Cash and cash equivalents at end of period $ 5,422 $ 6,918
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 1,538 $ 957
======= =======
Income taxes $ 18 $ 225
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
7
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THE CERPLEX GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial information has been prepared in accordance with
the instructions to Form 10-Q and therefore does not necessarily include all
information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
The Company's fiscal year is the 52 or 53 week period ending on the Sunday
closest to December 31. For purposes of presentation, the Company has
indicated its accounting quarter and year end as March 31 and December 31,
respectively.
In the opinion of management, the financial information for the three-month
periods ended March 31, 1996 and 1995, and at March 31, 1996 reflects all
adjustments (which include only normal, recurring adjustments) necessary for a
fair presentation thereof.
During 1995, the Company discontinued its end-of-life programs, a segment
of the business, through a liquidation of remaining operations. Prior period
financial results have been restated to reflect the discontinuance of this
segment of the Company.
NOTE 2 - INCOME PER SHARE
Net income per share has been computed using the weighted average number of
common shares and dilutive common equivalent shares outstanding during each
period presented. Common equivalent shares consist of stock options and
warrants, which were computed using the treasury stock method.
NOTE 3 - ACQUISITION OF REMAINING INTEREST IN MODCOMP/CERPLEX L.P.
In April 1996, the Company acquired the remaining 51% interest in
Modcomp/Cerplex L.P. for $2.8 million. Assuming the acquisition occurred at
the beginning of 1996, the pro forma results of operations of the Company would
have been as follows:
<TABLE>
<CAPTION>
Pro Forma
---------
<S> <C>
In Thousands
Net sales $50,412
Loss from continuing operations (1,202)
Net loss per share from continuing operations (.09)
</TABLE>
See "Item 5. Other Information (b) Unaudited Pro Forma Combined Financial
Data."
8
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THE CERPLEX GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This report contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such differences include, but are not limited to, those discussed under "Item
5. Other Information (a) Risk Factors."
OVERVIEW
The Company is an independent provider of electronic parts repair and
logistics services worldwide. During the third quarter of 1995, the Board of
Directors approved a Liquidation Plan to discontinue its end-of-life programs,
a segment of the Company, through liquidation of these operations. Net sales
of end-of life programs contributed 26% and 71% of consolidated net sales
during 1994 and 1993, respectively. In its end-of-life programs, the Company
assumed all responsibilities for the support and repair of products which are
no longer manufactured or are being phased out of manufacturing. Generally,
when the Company undertook an end-of-life program, it acquired substantially
all of the unique test equipment, repair equipment and inventories needed to
support the program. Services provided by the Company under end-of-life
programs include repair, provision of spare parts for a defined period of time,
plant return and parts reclamation, engineering and document control,
warehousing, and vendor certification and management. The Company no longer
undertakes these programs. The Company's continuing operations are focused on
depot repair, logistics services, technical help desk, training,
remanufacturing and remarketing, and spare parts services.
The liquidation of end-of-life programs has been accounted for as
discontinued operations and prior period financial statements have been
restated to reflect the discontinuance of this segment of the business.
RESULTS OF OPERATIONS
Results of Continuing Operations
The following table sets forth items from the Company's Consolidated
Statement of Operations as a percentage of net sales.
<TABLE>
<CAPTION>
For the Three Month Period Ended
March 31
1996 1995
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<S> <C> <C>
Net sales 100.0 % 100.0%
Cost of sales 83.0 82.2
----- -----
Gross margin 17.0 17.8
Selling, general and administrative 17.3 12.0
----- -----
Operating income (loss) (.3)% 5.8%
===== =====
</TABLE>
Net sales for the quarter ended March 31, 1996 increased $6.8 million or
20.1% to $40.8 million over the net sales for the corresponding quarter of
1995. The increase in net sales for the first quarter of 1996 compared to the
first quarter of 1995 is primarily attributed to the acquisition of Peripheral
Computer Support, Inc. ("PCS") in May 1995.
Gross profit as a percentage of net sales declined slightly to 17.0% during
the quarter ended March 31, 1996 from 17.8% during the quarter ended March 31,
1995. The gross profit ratio during the quarter
9
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THE CERPLEX GROUP, INC.
ended March 31, 1996 was adversely affected primarily by the performance on
certain contracts that the Company is currently winding down and the impact of
facility consolidations in California.
Selling, general and administrative expenses as a percentage of net sales
increased to 17.3% during the quarter ended March 31, 1996 from 12.0% during
the quarter ended March 31, 1995. The increase in selling, general and
administrative expenses as a percentage of net sales is primarily due to
increased corporate overhead related to the Company's expanded senior
management staff and increased selling, general and administrative expenses
related to PCS.
Income (Loss) from Continuing Operations
<TABLE>
<CAPTION>
For the Three Month Period Ended
March 31
1996 1995
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<S> <C> <C>
Operating income (loss) $ (126) $ 1,965
Equity in earnings of joint venture 357 515
Interest expense, net (1,511) (1,224)
------- -------
Income (loss) from continuing operations $(1,280) $ 1,256
======= =======
</TABLE>
The Company recorded an operating loss for the quarter ended March 31, 1996
primarily as a result of the adverse impact of the performance on certain
contracts that the Company is currently winding down, the impact of facility
consolidations in California and increased selling, general and administrative
expenses.
Equity in earnings of joint venture relates to the Company's ownership
interest in Modcomp/Cerplex L.P., a Delaware limited partnership
("Modcomp/Cerplex"). The decrease in the Company's share of earnings of
Modcomp/Cerplex is primarily due to lower profit margins on systems sales as a
result of a shift in product mix from proprietary systems to open, UNIX-based
systems.
Interest expense for the quarter ended March 31, 1996 increased $287,000 to
$1.5 million as a result of increased average borrowings under the Company's
credit facilities and a higher weighted average interest rate. Average
borrowings outstanding were $65.9 during the quarter ended March 31, 1996
compared to $55.9 during the quarter ended March 31, 1995. The effective
interest rate on credit facilities increased to 9.2% during the quarter ended
March 31, 1996 from 8.8% during the quarter ended March 31, 1995.
Income Taxes
Income tax expense for the quarter ended March 31, 1996 is primarily
related to income taxes on earnings of the Company's operations in Europe. The
Company has not recorded an income benefit related to operating losses in the
United States, and, accordingly, a full valuation allowance for deferred tax
assets has continued to be maintained due to uncertainties surrounding their
realization. The Company's effective tax rate for the quarter ended March 31,
1995 was 37%.
Discontinued Operations
During 1995, the Company discontinued its end-of-life programs, a segment
of the business, through a liquidation of remaining operations. During the
quarter ended March 31, 1996, net sales of discontinued operations were $3.8
million. No gain or loss on discontinued operations was recorded during the
quarter ended March 31, 1996.
10
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THE CERPLEX GROUP, INC.
LIQUIDITY AND CAPITAL RESOURCES
On October 12, 1994, the Company obtained a $60 million revolving line of
credit ("Credit Facility") from a group of banks led by Wells Fargo Bank. The
Credit Facility replaced the Company's $10 million credit line with CoastFed
Business Credit Corp. ("CoastFed"). The Company used $6.1 million to retire
the CoastFed line and $11.0 million to retire an outstanding note payable to
IBM. The Credit Facility matures in October 1997 and generally provides for
borrowings based on the Company continuing to meet certain financial covenants
for leverage, cash flow, tangible net worth and liquidity ratio as defined in
the Credit Agreement. The interest rate on the Credit Facility as of December
31, 1995 was 8.81% based upon a blend of LIBOR and prime lending rates.
Borrowings under the Credit Facility are secured by all of the Company's
assets, including the assets and stock of the Company's subsidiaries. At
December 31, 1995, the Company was not in compliance with the contractual
obligations and financial covenants of the Credit Agreement. The financial
covenants which the Company was not in compliance were liquidity ratio, minimum
cash flow coverage, maximum leverage ratio, minimum net worth, and minimum past
due accounts receivable.
In April 1996, the Company entered into an amended Credit Agreement that
reduces the maximum amount available under the line of credit from $60 million
to $48 million and requires reductions in commitments to $47 million at
September 30, 1996, $45 million at December 31, 1996, and $43 million at March
15, 1997. The interest rate on the Credit Facility has been increased to prime
plus 2.25% (or prime plus 4% if certain conditions of the amended Credit
Agreement are not met) and maturity date has been accelerated from October 1997
to March 31, 1997. In consideration for the amendment to the Credit Agreement,
the Company was required to provide the lenders warrants to purchase 125,000
shares of common stock at $6 per share and pay certain commitment fees and
out-of-pocket expenses. The amended Credit Agreement includes revised
covenants for liquidity, leverage, net worth, profitability and collateral, and
requires additional reductions in outstanding borrowings (generally determined
on the basis of percentage of proceeds) in the event of the sale of assets and
issuance of additional equity or certain excess cash flow as such terms are
defined in the amended Credit Agreement. Management believes it will remain in
compliance with the financial covenants set forth in the amended Credit
Agreement throughout 1996.
In November 1993, the Company sold $17.3 million in principal amount of its
Series A 9.0% (changed to 9.5% in October 1994) Senior Subordinated Notes and
$5.7 million in principal amount of its Series B 9.0% Senior Subordinated Notes
with 920,000 detachable warrants to purchase common stock. The detachable
warrants were issued at the option price of $.01 per share resulting in an
original issue discount of $3.6 million on the Series B 9.0% Senior
Subordinated Notes. The Series A Senior Subordinated Notes accrued interest at
the rate of 9.5% per annum, payable quarterly, with principal amount thereof
payable in three equal installments on November 9, in the years 1999, 2000 and
2001. The Company is subject to certain financial and other covenants which
include restrictions on the incurrence of additional debt, payment of any
dividends and certain other cash disbursements as well as the maintenance of
certain financial ratios as defined in the Note Purchase Agreements pursuant to
which the Senior Subordinated Notes were sold to the Company. At December 31,
1995, the Company was not in compliance with the contractual obligations and
financial covenants of the Note Purchase Agreements. The financial covenants
which the Company was not in compliance were maximum leverage ratio, minimum
net worth and minimum fixed charge ratio.
In April 1996, the Company entered into an amendment to the Note Purchase
Agreements that revised the covenants for maximum leverage, net worth and fixed
charges. In consideration for the amendment to the Note Purchase Agreements,
the Company was required to provide the Senior Note Holders warrants to
purchase 1,000,000 shares of common stock at $6 per share. The warrants issued
pursuant
11
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THE CERPLEX GROUP, INC.
to the amended Note Purchase Agreements, and the amended Credit Agreement
discussed above, will be recorded at fair market value with such amount
amortized as a charge against income over the period of the warrants.
The Company's primary sources for liquidity is cash flow from operations
and its ability to reduce working capital requirements. The Company does not
have available capacity under its Credit Agreements and is required to reduce
borrowings during 1996 and repay the remaining borrowings at March 1997.
Accordingly, additional funds will be needed to finance the Company's
operations from the sale of assets, reduction in working capital, and/or
obtaining additional equity or long-term debt. There can be no assurance that
additional funds will be available when needed or, if available, that the terms
of such transactions will not adversely affect the Company's results of
operations. Effective April 1, 1996, the Company sold its contract
manufacturing operations in Tustin, CA for $3.5 million cash and approximately
$2.0 million in restricted stock. The gain on sale of the operations is
approximately $450,000.
In April 1996, the Company acquired the remaining 51% interest in
Modcomp/Cerplex for $2.8 million utilizing the Company's share of cash
generated from the joint venture since its inception on December 1, 1994. See
Note 3 to the consolidated financial statements. In addition, either the
Company or its subsidiaries is committed to pay BT L1.8 million (approximately
$2.9 million as of March 31, 1996) in 1999 or earlier if certain sales volumes
are reached and to pay a former shareholder of PCS up to $1.0 million over the
next two years.
The Company has entered into a memorandum of understanding and has entered
into negotiations with Rank/Xerox to acquire that company's repair and
refurbishment operations located in the northern region of France, near Lille.
During 1995, Rank/Xerox performed value added services, through its workforce
of approximately 670 technicians and support personnel, of approximately $50
million. The acquisition of this facility requires approximately $5.0 million
in cash that the Company must obtain to complete the transaction. The
transaction is subject to due diligence, definitive agreements, approval of the
Company's lenders, and approval of the Board of Directors. There can be no
assurance that this transaction will be completed.
12
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THE CERPLEX GROUP, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During portions of 1995 and the beginning of 1996, the Company was in
default under its senior Credit Agreement. The Company has renegotiated and
amended such agreement to cure such defaults. See "Liquidity and Capital
Resources" herein for a more detailed discussion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
(A) RISK FACTORS
Losses and Accumulated Deficit. For the quarter ended March 31, 1996 and
the year ended December 31, 1995, the Company reported a net loss of $1.6
million and $39.4 million, respectively. As of March 31, 1996, the Company had
an accumulated deficit of $48.6 million. There can be no assurance that the
Company will operate profitably in the future. Continued losses could
materially and adversely affect the Company's business and the value of, and
the market for, the Company's equity securities.
Future Capital Needs; Uncertainty of Additional Financing. The Company's
ability to maintain its current revenue base and to grow its business is
dependent on the availability of adequate capital. Without sufficient capital,
the Company's growth may be limited. During portions of 1995 and the beginning
of 1996, the Company was in default under its senior credit agreement and
subordinated note agreements. While the Company has renegotiated such
agreements, the terms of the senior credit facility have resulted in a reduced
borrowing base which will be further reduced over the next twelve months and
the Company currently has minimal borrowing ability under such facility. The
Company is required to use a portion of cash generated from operations, from
sales of assets and from sales of equity securities to further reduce its
borrowing base under the senior credit facility. As a result, the Company
currently has limited capital. In addition, the terms of such agreements
restrict the Company's ability to incur additional indebtedness and could
adversely affect the Company's ability to obtain additional financing. General
market conditions and the Company's future performance (including its ability
to generate profits and positive cash flow) will also impact the Company's
financial resources. The failure of the Company to obtain additional capital
when needed could have a material adverse effect on the Company's business and
future prospects. No assurance can be given that the Company will be able to
maintain its current credit facilities or that additional financing will be
available or, if available, will be on acceptable terms.
13
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THE CERPLEX GROUP, INC.
Risk of Excess and Unusable Inventory. The Company is required to
maintain inventories to support its customers. At the end of 1995, inventory
constituted approximately 27% of the Company's assets. Any decrease in the
demand for the Company's repair services could result in a substantial portion
of the Company's inventory becoming excess, obsolete or otherwise unusable,
which would have a material adverse effect on the Company's business. During
both 1994 and 1995, the Company wrote down a significant amount of inventory.
There can be no assurance that the Company will not be required to write down
significant amounts of its inventory in the future.
Dependence on Key Customers. During 1995, BT, IBM, Digital Equipment
Corporation and SpectraVision accounted for approximately 23%, 11%, 7% and 7%,
respectively, of continuing operations. During 1995, IBM and SpectraVision
significantly decreased orders for certain programs which materially and
adversely affected the Company and its results of operations. SpectraVision is
currently operating under Chapter 11 of the U.S. Bankruptcy Code, and a
subsidiary of the Company is performing services for SpectraVision under a
contract which, if and when SpectraVision emerges from bankruptcy, may be
assumed or rejected at the election of SpectraVision. A significant portion of
the Company's net sales attributable to IBM in 1995 were from discontinued
operations, and, as such, the Company expects net sales attributable to IBM to
continue to account for a decreasing percentage of the Company's net sales.
Also, IBM has informed the Company that it has changed its strategy for spare
parts and as a result will not renew an agreement with the Company for such
services which expires in September of 1996. Based on discussions with IBM
representatives, however, the Company believes that the agreement, which
accounted for approximately 8% of the Company's 1995 net sales from continuing
operations, will be replaced with other programs of the Company. There can be
no assurance that major customers of the Company will not terminate any or all
of their arrangements with the Company; significantly change, reduce or delay
the amount of services ordered from the Company; or significantly change the
terms upon which the Company and these customers do business. Any such
termination, change, reduction or delay could have a material adverse effect on
the Company's business.
Dependence on Customers in the Electronics Industry. The Company is
dependent upon the continued growth, viability and financial stability of its
customers and potential customers in the electronics industry, particularly the
computer industry. The computer industry has been characterized by rapid
technological change, compressed product life cycles and pricing and margin
pressures. Improvements in technology and quality of hardware products or other
factors may result in a reduced need for parts and systems repairs in the
future which may adversely affect the Company's business. The factors
affecting segments of the electronics industry in general, and the Company's
OEM customers in particular, could have an adverse effect on the Company's
business. During 1995, several of the Company's customers experienced severe
financial difficulty resulting in significant losses to the Company as a result
of write downs of receivables and other assets. There can be no assurance that
existing customers or future customers will not experience financial
difficulty, which could have a material adverse effect on the Company's
business.
Reliance on Short-Term Purchase Orders. The Company's customer contracts
are typically subject to termination on short notice at the customer's
discretion and purchase orders under such contracts typically only cover
services over a 90-day period. The termination of any material contracts or
any substantial decrease in the orders received from major customers could have
a material adverse effect on the Company's business.
Competition. The Company competes with the in-house repair centers of
OEMs and TPMs for repair services. There is no assurance that these entities
will choose to outsource their repair needs. In certain instances, these
entities compete directly with the Company for the services of unrelated OEMs
and TPMs. In addition to competing with OEMs and TPMs, the Company also
competes for depot repair
14
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THE CERPLEX GROUP, INC.
business with a small number of independent organizations similar in size to
the Company and a large number of smaller companies. Many of the companies
with which the Company competes have significantly greater financial resources
than the Company. There can be no assurance that the Company will be able to
compete effectively in its target markets.
Management of Growth. The Company's growth has placed, and will continue
to place, a strain on the Company's managerial, operational and financial
resources. These resources may be further strained by the geographically
dispersed operations of the Company and the future addition of acquired depots
or businesses, if any. The Company's ability to manage growth effectively will
require it to continue to improve its operational, financial and management
information systems; to develop the management skills of its managers and
supervisors; and to train, motivate and effectively manage its employees. The
Company's failure to effectively manage growth, including acquired operations,
could have a material adverse effect on the Company's business.
Expansion of International Sales. During 1995, approximately 25% of the
Company's business was in Europe and the Company intends to continue to expand
its European operations. There can be no assurance that the Company will be
able to successfully market, sell and deliver its products and services in
these markets. In addition to the uncertainty as to the Company's ability to
expand its international presence, there are certain risks inherent in doing
business on an international level, such as unexpected changes in regulatory
requirements, export restrictions, tariffs and other trade barriers,
difficulties in staffing and managing foreign operations, longer payment
cycles, problems in collecting accounts receivable, political instability,
fluctuations in currency exchange rates and potentially adverse tax
consequences, which could adversely impact the success of the Company's
international operations. There can be no assurance that one or more of such
factors will not have a material adverse effect on the Company's international
operations and, consequently, on the Company's business, operating results and
financial condition.
Dependence on Acquisition Strategy. Certain of the Company's repair
programs resulted in decreasing net sales as the installed base of the
particular products under such programs decreases over time. An important
component of the Company's strategy to maintain its revenue and to grow its
business has been the acquisition of repair programs and complementary
businesses. Competition for these types of transactions is likely to
intensify. The Company's ability to effect any significant transactions
requiring capital will be limited by the terms of the Company's senior credit
facility. There can be no assurance that the Company will be able to acquire
additional repair programs or complementary businesses or, if acquired, that
such operations will prove to be profitable.
Discontinued Operations; Change in Strategy. In September 1995, Cerplex
adopted a plan to discontinue its end-of-life programs, a line of business
which historically generated a significant percentage of the Company's total
sales, but which in recent years experienced declining sales. Net sales from
end-of-life programs declined from approximately $56 million in 1993 to $33
million in 1994 to $20 million in 1995. The net loss from discontinued
operations for the year ended December 31, 1995 was $17.4 million. There can
be no assurance that the Company will not incur additional losses from these
operations. In connection with discontinuing its end-of-life business, the
Company changed certain elements of its business strategy and is undergoing
changes in management and operations, is developing a direct sales force and
terminating the majority of its outside sales representatives, is reducing its
emphasis on inventory acquisitions and focusing on targeted customers in
specific industries. While the Company believes such changes will enhance the
Company's opportunities, there can be no assurance that such changes will
positively impact the Company's business and results of operations in the short
or long term.
15
<PAGE> 16
THE CERPLEX GROUP, INC.
Risk Associated with the Ability of Existing Stockholders to Control the
Company. As of December 31, 1995, the officers, directors, principal
stockholders and their affiliates owned approximately 52.6% of the outstanding
Common Stock. Although there are currently no voting agreements or similar
arrangements among such stockholders, if they were to act in concert, they
would be able to elect a majority of the Company's directors, to determine the
outcome of most corporate actions requiring stockholder approval and otherwise
to control the business affairs of the Company. The Board of Directors of the
Company has the authority under the Company's Restated Certificate of
Incorporation to issue shares of the Company's authorized Preferred Stock in
one or more series and to fix the rights, preferences, privileges and
restrictions granted to or imposed upon any unissued shares of Preferred Stock.
The issuance of Preferred Stock may adversely affect the voting and dividend
rights, rights upon liquidation and other rights of the holders of Common
Stock. The issuance of Preferred Stock and the control by existing
stockholders, if they were to act in concert, may have the effect of delaying,
deferring or preventing a change in control of the Company.
Dependence on Key Personnel. The Company's continued success depends, to
a large extent, upon the efforts and abilities of key managerial employees,
particularly the Company's executive officers. Competition for qualified
management personnel in the industry is intense. The loss of services of
certain of these key employees could have a material adverse effect on the
Company's business.
No Assurance of Public Market for Common Stock; Possible Volatility of
Stock Price. Prior to the Company's initial public offering, there was no
public market for the Common Stock, and there can be no assurance that an
active trading market will be sustained. The trading price of the Common Stock
has been, and in the future could be, subject to significant fluctuations in
response to variations in quarterly operating results, the gain or loss of
significant contracts, changes in management or new products or services by the
Company or its competitors, general trends in the industry and other events or
factors. In addition, the stock market has experienced extreme price and volume
fluctuations which have particularly affected the market price for many
companies in similar industries and which have often been unrelated to the
operating performance of these companies. These broad market fluctuations may
adversely affect the market price of the Company's Common Stock.
The Company recently received notice from the NASD that, due to its
accumulated deficit, it no longer meets the criteria for continued listing on
the NASDAQ National Market. The Company has received a notification providing
it with a waiver until May 15, 1996, after which official action to remove the
Company from listing may occur if the Company's net tangible assets is not at
least $1 million by such date. If the Company is not able to maintain its
National Market status, it could have a material adverse effect on the market
price of, and the trading market for, the Company's Common Stock.
16
<PAGE> 17
THE CERPLEX GROUP, INC.
(B) ACQUISITION OF REMAINING INTEREST IN MODCOMP/CERPLEX L.P.
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data presents the Pro
Forma Combined Balance Sheet at March 31, 1996, giving affect to the
acquisition of the remaining 51% interest in Modcomp/Cerplex L.P.
("Modcomp/Cerplex") as if acquisition was consummated on that date. Also
presented is the Pro Forma Combined Statement of Operations for the three
months ended March 31, 1996, after giving affect to the acquisition as if it
were consummated on January 1, 1996. The pro forma data is based on the
historical financial statements of Modcomp/Cerplex giving affect to the
transaction under the assumptions and adjustments outlined in the accompanying
Notes to Unaudited Pro Forma Combined Financial Data.
The unaudited pro forma data is provided for comparative purposes only. It
does not purport to be indicative of the results that actually would have
occurred if the acquisition had been consummated on the date indicated or which
may be obtained in the future. The pro forma combined financial data should be
read in connection with the notes thereto contained elsewhere herein, the
audited financial statements of Modcomp/Cerplex with the notes thereto
contained elsewhere herein, and the audited consolidated financial statements
of the Company and the related notes thereto incorporated herein by reference.
17
<PAGE> 18
THE CERPLEX GROUP, INC.
PRO FORMA COMBINED BALANCE SHEET
(Unaudited)
MARCH 31, 1996
(dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical ------------------------------------
------------------ Adjustments
Modcomp/ Increase Adjustment Combined
Cerplex Cerplex (Decrease) Reference Total
-------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,422 $10,194 $ (6,209) a(i) $ 9,654
2,621 a(i)
(2,374) a(ii)
Accounts receivable, net 27,472 5,481 (600) a(iv) 32,353
Inventories 28,387 4,909 33,296
Net assets of discontinued operations 2,920 2,920
Prepaid expenses and other 2,623 1,400 (469) a(ii) 3,714
160 a(iv)
-------- ------- -------- --------
Total current assets 66,824 21,984 (6,871) 81,937
Property, plant and equipment, net 17,441 1,504 (1,438) a(iv) 17,507
Investment in joint venture 8,005 (2,621) a(i)
(5,384) a(iii)
Goodwill 6,361 6,361
Other long-term assets 2,793 2,793
-------- ------- -------- --------
Total assets $101,424 $23,488 $(16,314) $108,598
======== ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 20,898 $ 2,048 $ 22,946
Accrued liabilities 11,158 5,126 16,284
Short-term borrowings 47,700 47,700
Current portion of long-term debt 253 253
Income taxes payable 2,349 2,349
-------- ------- -------- --------
Total current liabilities 82,358 7,174 89,532
Long-term debt, less current portion 20,567 20,567
Stockholders' equity:
Common stock 13 13
Partner equity 16,314 $ (6,209) a(i)
(2,843) a(ii)
(5,384) a(iii)
(1,878) a(iv)
Additional paid-in capital 47,546 47,546
Notes receivable from stockholders (229) (229)
Unearned compensation (125) (125)
Accumulated deficit (48,599) (48,599)
Cumulative translation adjustments (107) (107)
-------- ------- -------- --------
Total stockholders' equity (1,501) 16,314 (16,314) (1,501)
-------- ------- -------- --------
Total liabilities and stockholders' equity $101,424 $23,488 $(16,314) $108,598
======== ======= ======== ========
</TABLE>
See accompanying notes to unaudited pro forma combined financial data
18
<PAGE> 19
THE CERPLEX GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical ------------------------------------
------------------- Adjustments
Modcomp/ Increase Adjustment Combined
Cerplex Cerplex (Decrease) Reference Total
------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net sales $40,846 $9,583 $ (17) b(i) $50,412
Cost of sales 33,915 7,153 (17) b(i) 41,051
------- ------ ----- -------
Gross profit 6,931 2,430 9,361
Selling, general & administrative expenses 7,057 1,816 8,873
------- ------ ----- -------
Operating income (loss) (126) 614 488
Equity in earnings from joint venture 357 (357) b(ii)
Interest expense, net 1,511 (114) 1,397
------- ------ ----- -------
Income (loss) from continuing operations
before taxes (1,280) 728 (357) (909)
Income taxes 293 293
------- ------ ----- -------
Income (loss) from continuing operations (1,573) 728 (357) (1,202)
------- ------ ----- -------
Discontinued operations, net of income taxes:
Income (loss) from operations
Estimated loss from liquidation of
discontinued operations
------- ------ ----- -------
Income (loss) from discontinued operations
------- ------ ----- -------
Net income (loss) $(1,573) $ 728 $(357) $(1,202)
======= ====== ===== =======
Income (loss) per share:
Continuing operations $ (0.12) (0.09)
Discontinued operations
------- -------
Net income (loss) per share $ (0.12) $ (0.09)
======= =======
Weighted average common and common
equivalent shares 13,174 13,174
======= =======
</TABLE>
See accompanying notes to unaudited pro forma combined financial data
19
<PAGE> 20
THE CERPLEX GROUP, INC.
Notes to Unaudited Pro Forma Combined Financial Data
(Unaudited)
(dollars in thousands)
(a) The pro forma combined balance sheet has been prepared to reflect the
acquisition by the Company of the remaining 51% interest in
Modcomp/Cerplex. The acquisition is reflected under the purchase
method of accounting.
The pro forma combined balance sheet has been adjusted to reflect the
above acquisition transaction as follows:
(i) To record the cash distribution of 1994 and 1995 earnings to
the Partners paid in April 1996 less certain partner
liabilities. The Company share of distributions was $2,621.
(ii) The Company used its share of the cash distribution to acquire
the stock of Modcomp Joint Venture, Inc. which subsequently
acquired the remaining interest in Modcomp/Cerplex from
Modular Computer Systems, Inc. pursuant to the Letter of
Agreement dated April 5, 1996. The total purchase price was
$2,843 of which $2,374 was paid in cash and $469 was offset
against certain partner receivables.
(iii) To eliminate the Company's investment in Modcomp/Cerplex
against its underlying partner equity in order to reflect the
consolidation of Modcomp/Cerplex previously accounted for
under the equity method of accounting.
(iv) To record a reduction in inventory and non-current assets
related to the estimated fair market value of the assets and
liabilities of 51% of Modcomp/Cerplex in excess of the
purchase price as required by APB #16, "Business
Combinations."
(b) The pro forma combined statement of operation gives affect to the
following pro forma adjustments to reflect:
(i) To eliminate recognition of the management fee charged by
Cerplex to Modcomp/Cerplex in accordance with the Partnership
Agreement to reflect the consolidation of Modcomp/Cerplex
assumed January 1, 1996.
(ii) To eliminate the Company's equity in earnings of
Modcomp/Cerplex to reflect the consolidation of
Modcomp/Cerplex assumed January 1, 1996.
20
<PAGE> 21
THE CERPLEX GROUP, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER TITLE METHOD OF FILING
- ------ ----- ----------------
<S> <C> <C>
2.1 Agreement of Merger dated as of August 30, 1993, by and Incorporated herein by reference to
among Cerplex Incorporated, Diversified Manufacturing Exhibit 2.1 to the Company's
Services, Inc. ("DMS"), EMServe, Inc. ("EMServe"), Registration Statement on Form S-1
InCirT Technology Incorporated ("InCirT") and Testar, (File No. 33-75004) which was declared
Inc. ("Testar"). effective by the Commission on April
8, 1994.
2.2 Agreement and Plan of Merger dated November 12, 1993, Incorporated herein by reference to
between The Cerplex Group Subsidiary, Inc. and Exhibit 2.2 to the Company's
Registrant (conformed copy to original). Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
2.3 Certificate of Ownership and Merger of Registrant with Incorporated herein by reference to
and into The Cerplex Group Subsidiary, Inc. dated as of Exhibit 2.3 to the Company's
November 12, 1993. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
2.4 Asset Purchase Agreement effective December 17, 1993 by Incorporated herein by reference to
and between Certech Technology, Inc., a wholly-owned Exhibit 2.4 to the Company's
subsidiary of the Registrant ("Certech"), and Registration Statement on Form S-1
Spectradyne, Inc. ("Spectradyne"). (File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
2.5 Purchase and Sale Agreement dated as of July 29, 1994, Incorporated herein by reference to
by and among The Cerplex Group, Inc., Cerplex Limited, Exhibit 2 to the Form 8-K filed July
BT Repair Services Limited and British 29, 1994.
Telecommunications plc.
2.6 Contract for repair, calibration and warehousing of Incorporated herein by reference to
certain items of BT Equipment dated as of July 29, Exhibit 10 to the Form 8-K filed July
1994, among The Cerplex Group and Cerplex Limited and 29, 1994.
BT.
</TABLE>
21
<PAGE> 22
THE CERPLEX GROUP, INC.
<TABLE>
<S> <C> <C>
2.7 Formation and Contribution Agreement effective December Incorporated herein by reference to
1, 1994 by and among Modcomp/Cerplex L.P., Modular Exhibit 2.7 to the Company's Annual
Computer Systems, Inc., Cerplex Subsidiary, Inc. and Report on Form 10-K for the fiscal
The Cerplex Group, Inc. year ended January 1, 1995.
2.8 Contingent Promissory Note dated December 1, 1994 Incorporated herein by reference to
issued by Modcomp/Cerplex L.P. to Modular Computer Exhibit 2.8 to the Company's Annual
Systems, Inc. Report on Form 10-K for the fiscal
year ended January 1, 1995.
2.9 Limited Partnership Agreement of Modcomp/Cerplex L.P. Incorporated herein by reference to
effective December 1, 1994. Exhibit 2.9 to the Company's Annual
Report on Form 10-K for the fiscal
year ended January 1, 1995.
2.10 Put/Call Option Agreement effective December 1, 1994 by Incorporated herein by reference to
and among Cerplex Subsidiary, Inc., The Cerplex Group, Exhibit 2.10 to the Company's Annual
Inc., Modular Computer Systems, Inc. and Modcomp Joint Report on Form 10-K for the fiscal
Venture Inc. year ended January 1, 1995.
2.11 Stock Purchase Agreement dated as of June 29, 1995 by Incorporated herein by reference to
and among The Cerplex Group, Inc., Tu Nguyen and Phuc Exhibit 2.11 to the Company's
Le. Quarterly Report on Form 10-Q for the
quarter ended October 1, 1995.
2.12 Letter Agreement dated April 5, 1996 by and among Incorporated herein by reference to
Modular Computer Systems, Inc., Modcomp Joint Venture, Exhibit 2.12 to the Company's Annual
Inc., AEG Aktiengesellschaft, the Company, Cerplex Report on Form 10-K for the fiscal
Subsidiary, Inc. and Modcomp/Cerplex L.P. year ended December 31, 1995.
3.1 Restated Certificate of Incorporation of the Incorporated herein by reference to
Registrant. Exhibit 3.1 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
3.2 Bylaws of the Registrant Incorporated herein by reference to
Exhibit 3.2 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
</TABLE>
22
<PAGE> 23
THE CERPLEX GROUP, INC.
<TABLE>
<S> <C> <C>
4.1 Stock Purchase Agreement dated as of November 19, 1993 Incorporated herein by reference to
by and among the Registrant, the stockholders of the Exhibit 4.1 to the Company's
Registrant identified in Part A of Schedule I thereto Registration Statement on Form S-1
and the purchasers of shares of the Registrant's Series (File No. 33-75004) which was declared
A Preferred Stock identified in Schedule I thereto effective by the Commission on April
(including the Schedules thereto; Exhibits omitted). 8, 1994.
4.2 Registration Rights Agreement dated as of November 19, Incorporated herein by reference to
1993, by and among the Registrant, the investors listed Exhibit 4.2 to the Company's
on Schedule A thereto and the security holders of the Registration Statement on Form S-1
Registrant listed on Schedule B thereto, together with (File No. 33-75004) which was declared
Amendment No.1. effective by the Commission on April
8, 1994.
4.3 Co-Sale Agreement dated as of November 19, 1993, by and Incorporated herein by reference to
among the Registrant, the managers listed on Schedule A Exhibit 4.3 to the Company's
thereto and the investors listed on Schedule B thereto. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
4.4 Warrant Agreement dated as of November 19, 1993, by and Incorporated herein by reference to
among the Registrant and the purchasers listed in Annex Exhibit 4.4 to the Company's
1 thereto. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
4.5 Placement Agent Warrant Purchase Agreement dated as of Incorporated herein by reference to
November 19, 1993, between the Registrant and Exhibit 4.5 to the Company's
Donaldson, Lufkin & Jenrette Securities Corporation. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
4.6 Observation Rights Agreement dated as of November 19, Incorporated herein by reference to
1993, between the Registrant and certain stock Exhibit 4.6 to the Company's
purchasers. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
4.7 Observation Rights Agreement dated as of November 19, Incorporated herein by reference to
1993, between the Registrant and certain note Exhibit 4.7 to the Company's
purchasers. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
</TABLE>
23
<PAGE> 24
THE CERPLEX GROUP, INC.
<TABLE>
<S> <C> <C>
4.8 Note Purchase Agreement dated as of November 19, 1993, Incorporated herein by reference to
by and among the Registrant and The Northwestern Mutual Exhibit 4.8 to the Company's
Life Insurance Company, John Hancock Mutual Life Registration Statement on Form S-1
Insurance, Registrant and Bank of Scotland London (File No. 33-75004) which was declared
Nominees Limited. effective by the Commission on April
8, 1994.
4.9 Amendment No. 2 to Registration Rights Agreement dated Incorporated herein by reference to
as of April 6, 1994, by and among the Registrant and Exhibit 4.9 to the Company's
certain of its Securities holders. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
4.10 Amendment to Note Purchase Agreement, dated as of Incorporated herein by reference to
October 27, 1994, by and among the Company, Exhibit 4.10 to the Company's Annual
Northwestern Mutual Life Insurance Company, John Report on Form 10-K for the fiscal
Hancock Mutual Life Insurance Company and North year ended December 31, 1995.
Atlantic Smaller Companies Trust P.L.C. (collectively,
the "Noteholders").
4.11 Waiver and Amendment Agreement dated April 15, 1996 by Incorporated herein by reference to
and among Company, The Northwestern Mutual Life Exhibit 4.11 to the Company's Annual
Insurance Company, John Hancock Mutual Life Insurance Report on Form 10-K for the fiscal
Company and North Atlantic Smaller Companies Investment year ended December 31, 1995.
Trust PLC.
4.12 Warrant Agreement dated as of April 15, 1996 by and Incorporated herein by reference to
among Company, The Northwestern Mutual Life Insurance Exhibit 4.12 to the Company's Annual
Company, John Hancock Mutual Life Insurance Company and Report on Form 10-K for the fiscal
North Atlantic Smaller Companies Investment Trust PLC. year ended December 31, 1995.
4.13 First Amendment to Warrant Agreement dated April 15, Incorporated herein by reference to
1996 by and among Company and each of the holders of Exhibit 4.13 to the Company's Annual
warrants listed on Schedule A thereto, with respect to Report on Form 10-K for the fiscal
that certain Warrant Agreement dated November 19, 1993. year ended December 31, 1995.
4.14 First Amendment to Observation Rights Agreement dated Incorporated herein by reference to
as of April 15, 1996 between Company and certain note Exhibit 4.14 to the Company's Annual
purchasers. Report on Form 10-K for the fiscal
year ended December 31, 1995.
4.15 Third Amendment to Registration Rights Agreement dated Incorporated herein by reference to
as of April 15, 1996 by and among Company, the Exhibit 4.15 to the Company's Annual
investors of Company listed on Schedule A thereto and Report on Form 10-K for the fiscal
the security holders of Company listed on Schedule B year ended December 31, 1995.
thereto.
</TABLE>
24
<PAGE> 25
THE CERPLEX GROUP, INC.
<TABLE>
<S> <C> <C>
4.16 Warrant Agreement dated April 15, 1996 by and among Incorporated herein by reference to
Company, Wells Fargo Bank, National Association, Exhibit 4.16 to the Company's Annual
Sumitomo Bank of California, BHF Bank Report on Form 10-K for the fiscal
Aktiengesellschaft and Comerica Bank- California. year ended December 31, 1995.
10.1 The Registrant's 1990 Stock Option Plan (the "1990 Incorporated herein by reference to
Plan"). Exhibit 10.1 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.2 Form of Stock Option Agreement pertaining to the 1990 Incorporated herein by reference to
Plan. Exhibit 10.2 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.3 Form of Stock Purchase Agreement pertaining to the 1990 Incorporated herein by reference to
Plan. Exhibit 10.3 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.4 The Registrant's 1993 Stock Option Plan (the "1993 Incorporated herein by reference to
Plan"). Exhibit 10.4 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.5 Form of Stock Option Agreement (grants to employees) Incorporated herein by reference to
pertaining to the 1993 Plan. Exhibit 10.5 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.6 Form of Stock Option Agreement (grants to directors and Incorporated herein by reference to
certain officers) pertaining to the 1993 Plan. Exhibit 10.6 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
</TABLE>
25
<PAGE> 26
THE CERPLEX GROUP, INC.
<TABLE>
<S> <C> <C>
10.7 Form of Stock Purchase Agreement for Installment Incorporated herein by reference to
Options pertaining to the 1993 Plan. Exhibit 10.7 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.8 Form of Stock Purchase Agreement for Immediately Incorporated herein by reference to
Exercisable Options pertaining to the 1993 Plan. Exhibit 10.8 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.9 The Registrant's Restated 1993 Stock Option Plan (the Incorporated herein by reference to
"Restated Plan"). Exhibit 10.9 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.10 Form of Stock Option Agreement, together with Addenda, Incorporated herein by reference to
pertaining to the Restated Plan. Exhibit 10.10 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.11 Master Agreement dated May 6, 1992 by and between IBM Incorporated herein by reference to
and the Company. Exhibit 10.11 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.12 Master Task Agreement dated December 1, 1991, by and Incorporated herein by reference to
between International Business Machines Incorporated Exhibit 10.12 to the Company's
("IBM") and the Registrant, together with Amendment to Registration Statement on Form S-1
Master Agreement and Task Order. (File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.13 Technology Services Agreement effective March 1, 1993, Incorporated herein by reference to
by and between Novadyne Computer Systems, Inc. Exhibit 10.12 to the Company's
("Novadyne") and Cerplex Incorporated (a California Registration Statement on Form S-1
corporation and a predecessor of the Registrant), (File No. 33-75004) which was declared
together with Amendments Nos. 1 and 2. effective by the Commission on April
8, 1994.
</TABLE>
26
<PAGE> 27
THE CERPLEX GROUP, INC.
<TABLE>
<S> <C> <C>
10.14 Technology Services Agreement effective December 17, Incorporated herein by reference to
1993, by and between Spectradyne, Inc. ("Spectradyne") Exhibit 10.13 to the Company's
and the Registrant. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.15 Form of Indemnity Agreement Incorporated herein by reference to
Exhibit 10.15 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.16 Lease Agreement dated April 1, 1992 by and between Incorporated herein by reference to
Henry G. Page Jr., and Diversified Manufacturing Exhibit 10.16 to the Company's
Services, Inc. ("DMS"). Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.17 Sublease dated January 1, 1994 by and between Bull and Incorporated herein by reference to
Cerplex Group, Inc. (a Massachusetts corporation). Exhibit 10.17 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.18 Standard Industrial/Commercial Single-Tenant Lease - Incorporated herein by reference to
Net dated November 29, 1990 by and among Kilroy Exhibit 10.18 to the Company's
Building 73 Partnership, Cerplex Incorporated and Registration Statement on Form S-1
InCirT, together with Amendment No. 1. (File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.19 Lease dated December 17, 1993 by and between Incorporated herein by reference to
Spectradyne and Certech. Exhibit 10.19 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.20 Sublease dated March 1, 1993 by and between Novadyne Incorporated herein by reference to
and the Registrant together with Lease Amendment dated Exhibit 10.20 to the Company's
July 22, 1991 by and between McDonnell Douglas Realty Registration Statement on Form S-1
Company and Novadyne. (File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
</TABLE>
27
<PAGE> 28
THE CERPLEX GROUP, INC.
<TABLE>
<S> <C> <C>
10.21 Standard Industrial/Commercial Lease - Net dated Incorporated herein by reference to
September 4, 1991 by and between Proficient Food Exhibit 10.21 to the Company's
Company and W.C. Cartwright Corporation ("Cartwright"), Registration Statement on Form S-1
together with Addendum and Sublease dated September 6, (File No. 33-75004) which was declared
1991 by and between Cartwright and the Registrant. effective by the Commission on April
8, 1994.
10.22 Sublease dated July 30, 1992 by and between Cartwright Incorporated herein by reference to
and DMS. Exhibit 10.22 to the Company's
Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.23 Repair Services Agreement dated January 1, 1994 by and Incorporated herein by reference to
between Bull HN Information Systems, Inc. and the Exhibit 10.14 to the Company's
Registrant. Registration Statement on Form S-1
(File No. 33-75004) which was declared
effective by the Commission on April
8, 1994.
10.24 Credit Agreement dated as of October 12, 1994 (the Incorporated herein by reference to
"Credit Agreement") among The Cerplex Group, Inc., as Exhibit 10.24 to the Company's Annual
Borrower; the lenders listed therein, as Lenders; and Report on Form 10-K for the fiscal
Wells Fargo Bank, National Association, as year ended January 1, 1995.
Administrative Agent; and those certain exhibits,
schedules and collateral documents to such Credit
Agreement.
10.25 Limited Waiver dated as of November 14, 1995 ("Waiver") Incorporated herein by reference to
by and among The Cerplex Group, Inc. (the "Company"), Exhibit 10.25 to the Company's
the financial institutions listed on the signature Quarterly Report on Form 10-Q for the
pages thereof ("Lenders"), and Wells Fargo Bank, quarter ended October 1, 1995.
National Association, as administrative agent for the
Lenders ("Administrative Agent"), and for certain
limited purposes, Certech Technology, Inc., Cerplex
Mass., Inc., Cerplex Limited, Apex Computer Company,
Cerplex Subsidiary, Inc. and Peripheral Computer
Support, Inc. (the "Subsidiaries"), which Waiver is
made with reference to the Credit Agreement.
10.26 The Cerplex Group, Inc. Restated 1993 Stock Option Plan Incorporated herein by reference to
(Restated and Amended as of January 13, 1995). Exhibit 10.26 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended October 1, 1995.
</TABLE>
28
<PAGE> 29
THE CERPLEX GROUP, INC.
<TABLE>
<S> <C> <C>
10.27 The Cerplex Group, Inc. Automatic Stock Option Incorporated herein by reference to
Agreement. Exhibit 10.27 to the Company's
Quarterly Report on Form 10-Q for the
quarter ended October 1, 1995.
10.28 First Amendment to Credit Agreement dated April 15, Incorporated herein by reference to
1996 by and among Company, the lenders whose signatures Exhibit 10.28 to the Company's Annual
appear on the signature pages thereof, as Lenders; Report on Form 10-K for the fiscal
Wells Fargo Bank, National Association, as year ended December 31, 1995.
Administrative Agent; and the Subsidiaries for certain
limited purposes.
11.1 Statement Regarding Computation of Net Income (Loss) Filed herein.
Per Share.
</TABLE>
(B) REPORTS ON FORM 8-K
On April 8, 1996, the Company filed a current report on Form 8-K regarding
acquisition of the remaining fifty-one percent (51%) of Modcomp/Cerplex L.P., a
Delaware limited partnership from AEG Aktiengesellschaft.
29
<PAGE> 30
THE CERPLEX GROUP, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE CERPLEX GROUP, INC.
Date: May 15, 1996 /s/ BRUCE D. NYE
--------------------------------------
Bruce D. Nye
Vice President and Chief
Financial Officer
(Principal financial and chief
accounting officer)
30
<PAGE> 31
THE CERPLEX GROUP, INC.
EXHIBIT INDEX
QUARTER ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Exhibit Sequential
No. Description of Exhibits Page No.
- ------- ----------------------- ----------
<S> <C> <C>
11.1 Computation of Net Income (Loss) Per Share 32
27.1 Financial Data Schedule
</TABLE>
31
<PAGE> 1
EXHIBIT 11.1
THE CERPLEX GROUP, INC.
EXHIBIT TO CONSOLIDATED FINANCIAL STATEMENTS
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended March 31
---------------------------
1996 1995
------ -------
<S> <C> <C>
WEIGHTED AVERAGE COMMON AND
COMMON SHARES EQUIVALENT SHARES
OUTSTANDING
Average common stock outstanding 13,174 13,062
Dilutive stock options and warrants
based on the treasury stock method
using the average price(1) 1,366
------- -------
Total 13,174 14,428
======= =======
COMPOSITION OF NET INCOME
Income (loss) from continuing operations $(1,573) $ 789
Income from discontinued operations 41
------- -------
Net Income $(1,573) $ 830
======= =======
PER SHARE DATA
Continuing operations $ (.12) $ .06
Discontinued operations
------- -------
Net income per share $ (.12) $ .06
======= =======
</TABLE>
(1) Stock options and warrants were not assumed to be converted under the
treasury stock method for the three month period ended March 31, 1996
because their effect would be anti-dilutive.
32
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,422
<SECURITIES> 0
<RECEIVABLES> 27,472
<ALLOWANCES> 0
<INVENTORY> 28,387
<CURRENT-ASSETS> 66,824
<PP&E> 17,441
<DEPRECIATION> 0
<TOTAL-ASSETS> 101,424
<CURRENT-LIABILITIES> 82,358
<BONDS> 20,567
0
0
<COMMON> 13
<OTHER-SE> (1,514)
<TOTAL-LIABILITY-AND-EQUITY> 101,424
<SALES> 0
<TOTAL-REVENUES> 40,846
<CGS> 0
<TOTAL-COSTS> 33,915
<OTHER-EXPENSES> 7,057
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,511
<INCOME-PRETAX> (1,280)
<INCOME-TAX> 293
<INCOME-CONTINUING> (1,573)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,573)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> 0
</TABLE>
