U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q\A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1997
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15 (d)
OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-23332
EFTC CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-0854616
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9351 Grant Street
Denver, Colorado 80229
(Address of principal executive offices)
(303) 451-8200
(Issuer's telephone number)
Electronic Fab Technology Corp.
7251 West 4th Street
Greeley, Colorado 80634-9763
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class of Common Stock Outstanding at May 6, 1997
Common Stock, par value $0.01 5,937,060 shares
<PAGE>
INTRODUCTION
EFTC Corporation, (the "Company") hereby amends its Quarterly Report on
Form 10-Q for the three months ended March 31, 1997, by deleting its response to
Part I, Item 2, contained in its original filing and replacing such section with
the following:
PART I. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION THREE MONTHS ENDED MARCH 31,
1997
This information set forth below contains "forward looking statements"
within the meaning of the federal securities laws and other statements of
expectations, beliefs, plans, and similar expressions concerning matters that
are not historical facts. These statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed in the statements.
RESULTS OF OPERATIONS
Net sales. Net sales are net of discounts and are recognized upon
shipment to a customer. The Company's net sales decreased by 6.4% to $14,036,876
for the first quarter of fiscal 1997, from $15,002,959 during the same period in
fiscal 1996. The decrease in net sales is due primarily to the loss of three
customers in 1996 which were not totally backfilled with new sales or sales from
existing customer's new programs in the first quarter of 1997. The effect of the
loss of these three customers was lessened by the acquisition of the CE
Companies on February 24,1997, which contributed sales from the day of the
acquisition to the end of the quarter.
Gross profit. Gross profit equals net sales less cost of goods sold
(such as salaries, leasing costs, and depreciation charges related to production
operations); and non-direct, variable manufacturing costs (such as supplies and
employee benefits). In the first quarter of fiscal 1997 gross profit increased
151.3% to $1,507,565 compared to $599,822 for the same period in 1996. The gross
profit margin for the first quarter of fiscal 1997 was 10.7% compared to 4.1%
for the same period of fiscal 1996. The primary reason for the increase in gross
profit is the adoption of the Asynchronous Process Manufacturing (APM) in the
later part of 1996. APM standardizes processes and sets them up in a parallel
pattern on the manufacturing floor. Product can flow to any process, i.e., any
board to any line. This unique arrangement combined with proprietary information
technologies allows for the manufacture of high-mix product in a high speed
mode. The key to making APM work is to increase throughput by decreasing setup
time, standardizing work centers and processing smaller lot sizes. EFTC has done
this by designating teams to set up off-line feeders and standardizing loading
methods regardless of product complexity. APM has allowed EFTC to increase
productivity by producing product with less people which ultimately reduces
costs and increases gross profit. The Company also realized improvements in
gross profit from the acquisition of the CE Companies which contributed to the
increase by including their
<PAGE>
operations from the closing date of the merger and acquisition (February 24,
1997) to the end of the quarter.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses (SGA expense) consist primarily of non-manufacturing
salaries, sales commissions, and other general expenses. SGA expense increased
by 35.9% to $1,102,975 in the first quarter of 1997, compared with $811,620 a
year earlier. As a percentage of net sales SGA expenses increased from 5.4% of
net sales in the first quarter of fiscal 1996 to 7.9% of net sales in fiscal
1997. The primary reason for the increase in SGA expense is the inclusion of the
CE Companies SGA expenses from February 24, 1997 to March 31, 1997.
Operating income. Operating income for the first quarter of fiscal 1997
increased to $381,782 from a loss of $211,798 for the first quarter of fiscal
1996. Operating income as a percentage of net sales increased to 2.71% in the
first quarter of fiscal 1997 from (1.4%) in the same period last year. The
increase in operating income is attributable to increased efficiencies
associated with APM and the acquisition of the CE Companies as explained above.
Interest expense. Interest expense for the first quarter of 1997 was
$185,355 compared to $95,526 for the same period in fiscal 1996. The increase in
interest is primarily the result of the acquisition debt associated with the
merger and acquisition of the CE Companies and increased operating debt used to
finance both inventories and receivables for EFTC and the CE Companies in the
first quarter of 1997.
Income tax expense. The estimate of the Company's effective income tax
rate for the first quarter of fiscal 1997 and 1996 was 34.4% and 40.3%
respectively. This percentage fluctuates substantially because relatively small
dollar amounts tend to move the rate significantly as estimates change. The
Company expects that the rate will normalize in future quarters and be around
the 37% range.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal 1997 cash used in operations was
$626,051 compared to cash used in operations of $1,987,511 in the same period
last year.
As of March 31, 1997, working capital totaled $10,605,830 compared to
$8,508,489 at December 31, 1996. The increase is attributable to the inclusion
of the acquisition of the CE Companies that occurred on February 24, 1997.
Accounts receivable increased 64.5% to $6,359,773 at March 31, 1997
from $3,866,991 at March 31, 1996. A comparison of receivable turns (i.e.
annualized sales divided by current accounts receivable) for the first quarter
of fiscal 1997 and the first quarter of fiscal 1996 is 8.8 and 15.5 turns,
respectively. The 1997 receivable turn is distorted because the sales for the
first quarter includes only one month and four days of the CE Companies
revenues. Based on historical annual revenues of the CE Companies and EFTC
combined, the receivable turns for the first quarter of fiscal 1997 would be
14.1 times. Inventories increased 60.1% to $14,645,127
<PAGE>
at March 31, 1997 from $9,146,505 at March 31,1996. A comparison of inventory
turns (i.e. annualized cost of sales divided by current inventory) for the first
quarter of fiscal 1997 and 1996 shows a decrease to 3.4 from 6.3, respectively.
The 1997 inventory turn is distorted because the cost of sales for the first
quarter includes only one month and four days of the CE Companies costs. Based
on historical annual cost of sales of the CE Companies and EFTC combined, the
inventory turns would be 5.5 times.
The Company used cash to purchase capital equipment totaling $547,858
in the first quarter of 1997, compared with $708,100 in the same period last
year. The Company also used cash to purchase the CE Companies, as explained
earlier in the amount of $7,279,601. Proceeds from long-term borrowings of
$6,700,000 were used to help fund the purchase of the CE Companies.
On February 24, 1997, the Company renegotiated its revolving line of
credit, negotiated a 90 day bridge loan and incurred additional equipment debt
in conjunction with the merger and acquisition of the CE Companies. The
revolving line of credit was increased to $15,000,000 and has a maturity date of
June 5, 1998. Interest on this credit facility accrues at the Bank One Prime
rate plus .25% (8.5% on March 31, 1997). The credit facility is collateralized
by substantially all of the Company's assets, other than real estate. The loan
agreement from this facility contains restrictive covenants relating to capital
expenditures, borrowings and payment of dividends, and certain financial
statement ratios. The credit facility may be withdrawn/canceled at the banks
option under certain conditions such as default or in the event the Company
experiences a material negative change in financial condition. The short term
bridge facility was for $4,900,000 and has a maturity date of May 24, 1997. The
interest rate accrues at the Bank One Prime rate plus .25% (8.5% on March 31,
1997). The proceeds from this loan were used to pay the cash portion of the
consideration to be paid in the merger and acquisition noted above. The Company
has engaged in discussions for issuance of convertible debt or preferred stock,
the proceeds of which would be used to repay the bridge facility. The bridge
facility was conditioned on the Company's receipt of a third party commitment
for the purchase of the convertible debt or preferred stock which has been
obtained. The Company also issued a $1,800,000 five year note with a maturity
date of April 5,2002. The interest rate will be 8.95% per annum. The Company
will pay this loan in 60 regular monthly payments of $36,983 and one final
payment of $41,983. These payments include both principal and interest. The
proceeds of this loan were used to pay off equipment debt of the CE Companies as
per the merger agreement.
The Company has committed to construct a new manufacturing facility in
Oregon to replace the present location in Oregon at an approximate cost of
$5,000,000. The Company is currently negotiating the financing on this new
facility and expects to start construction in late May or early June of 1997.
The Company may require additional capital to finance enhancements to,
or expansions of, its manufacturing capacity in accordance with its business
strategy. Management believes that the need for working capital will continue to
grow at a rate generally consistent with the growth of the Company's operations.
Although no assurance can be given that financing will be available on terms
acceptable to the Company, the Company may seek additional funds, from
<PAGE>
time to time, through public or private debt or equity offerings, bank
borrowing, or leasing arrangements.
QUARTERLY RESULTS
Although management does not believe that the Company's business is
affected by seasonal factors, the Company's sales and earnings may vary from
quarter to quarter, depending primarily upon the timing of customer orders and
product mix. Therefore, the Company's operating results for any particular
quarter may not be indicative of the results for any future quarter of the year.
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.
EFTC CORPORATION
(Registrant)
Date: November 12, 1997 \s\ Brent Hoffmeister
------------------------
Brent Hoffmeister, Controller
(Chief Accounting Officer)
<PAGE>
