<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
September 9, 1997
(Date of earliest event reported)
EFTC CORPORATION
(Exact name of registrant as specified in its charter)
Commission file number: 0-23332
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
(Registrant's telephone number, including area code)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Businesses Acquired
The following financial statements of Circuit Test, Inc. and affiliates
are attached as Appendix I:
i. Combined Balance Sheets as of June 30, 1997
(unaudited) and December 31, 1996 and 1995;
ii. Combined Statements of Operations for the six months
ended June 30, 1997 and 1996 (unaudited) and the
three years ended December 31, 1996, 1995, and 1994;
<PAGE> 2
iii. Combined Statements of Stockholders' Equity for the
six months ended June 30, 1997 (unaudited) and the
three years ended December 31, 1996, 1995, and 1994;
and
iv. Combined Statement of Cash Flows for the six months
ended June 30, 1997 and 1996 (unaudited) and the
three years ended December 31, 1996, 1995, and 1994.
(b) Pro Forma Financial Information
The following proforma financial information is attached as Appendix
II:
i. Unaudited Pro Forma Condensed Combined Balance Sheet
as of June 30, 1997;
ii. Unaudited Pro Forma Condensed Combined Statement of
Operations for the Six Months Ended June 30, 1997;
iii. Unaudited Pro Forma Condensed Combined Statement of
Operations for the Year Ended December 31, 1996.
Exhibits
23.1 Consent of Independent auditors
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EFTC CORPORATION
By: /s/ Stuart W. Fuhlendorf
--------------------------------
Stuart W. Fuhlendorf
V.P. Finance and CFO
Dated: December 15, 1997
<PAGE> 3
APPENDIX I
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Circuit Test, Inc. and Affiliates:
We have audited the accompanying combined balance sheets of Circuit Test,
Inc. and affiliates as of December 31, 1996 and 1995, and the related combined
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996. These combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Circuit Test, Inc.
and affiliates as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in note 1(a), the companies included in the combined financial
statements changed in 1996.
Our audits were made for the purpose of forming an opinion on the combined
financial statements taken as a whole. The combining information in the
accompanying schedules is presented for purposes of additional analysis of the
combined financial statements rather than to present the financial position,
results of operations and cash flows of the individual companies. The combining
information has been subjected to the auditing procedures applied in the audits
of the combined financial statements and, in our opinion, is fairly stated in
all material respects in relation to the combined financial statements taken as
a whole.
KPMG PEAT MARWICK LLP
Memphis, Tennessee
July 11, 1997
F-1
<PAGE> 4
CIRCUIT TEST, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
ASSETS (NOTE 2)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------------
1997 1996 1995
------------ ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 367,350 $ 1,490,336 $ 758,087
Accounts receivable, net of allowance for doubtful
accounts of $544,830 in 1997, $544,830 in 1996 and
$181,675 in 1995 (note 6)............................... 5,050,110 4,110,743 3,750,733
Inventory................................................. 3,704,089 4,242,152 2,467,679
Prepaid expenses and other current assets................. 391,814 8,847 21,599
----------- ----------- ----------
TOTAL CURRENT ASSETS................................ 9,513,363 9,852,078 6,998,098
----------- ----------- ----------
Property and equipment, at cost:
Land, buildings and improvements.......................... 605,409 605,409 685,134
Leasehold improvements.................................... 686,071 655,029 626,226
Machinery and equipment................................... 3,459,098 2,845,745 1,731,370
Furniture and fixtures.................................... 425,946 382,440 280,011
Vehicles.................................................. 137,074 137,074 157,817
----------- ----------- ----------
5,313,598 4,625,697 3,480,558
Less accumulated depreciation and amortization.......... 1,639,285 1,400,285 1,293,583
----------- ----------- ----------
NET PROPERTY AND EQUIPMENT.......................... 3,674,313 3,225,412 2,186,975
Other assets, net........................................... 112,830 96,245 60,079
----------- ----------- ----------
TOTAL ASSETS........................................ $13,300,506 $13,173,735 $9,245,152
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of notes payable (note 2).............. $ 4,728,752 $ 4,256,293 $2,869,360
Accounts payable.......................................... 1,447,489 3,935,078 1,755,099
Accrued expenses.......................................... 2,599,119 1,069,762 949,866
Due to related parties.................................... (137,391) 260,377 397,813
Shareholder loans (note 3)................................ 943,000 1,135,871 975,871
----------- ----------- ----------
TOTAL CURRENT LIABILITIES........................... 9,580,969 10,657,381 6,948,009
Long-term portion of notes payable (note 2)................. 148,229 594,509 239,882
----------- ----------- ----------
TOTAL LIABILITIES................................... $ 9,729,198 $11,251,890 $7,187,891
----------- ----------- ----------
STOCKHOLDERS' EQUITY:
Circuit Test, Inc. common stock, $.01 par value; 50,000
shares authorized; 5 shares issued and outstanding...... $ 1 $ 1 $ 1
Circuit Test, Inc. non-voting common stock, $.01 par
value; 50,000 shares authorized; 12,162 and 9,995 shares
issued and outstanding at 1996 and 1995, respectively... 121 121 99
Airhub Service Group, L.C. members' deficit:
Allen S. Braswell, Jr................................... (70,800) (70,800) --
Circuit Test International Limited Partnership.......... (70,800) (70,800) --
Circuit Test International L.C. members' equity:
Allen S. Braswell, Jr................................... 4,330 4,330 4,330
Circuit Test International Limited Partnership.......... 4,330 4,330 4,330
Additional paid-in capital................................ 147,498 147,498 17,500
Retained earnings......................................... 3,556,628 1,907,165 2,031,001
----------- ----------- ----------
TOTAL STOCKHOLDERS' EQUITY.......................... 3,571,308 1,921,845 2,057,261
Commitments, contingencies and related party transactions
(notes 3, 4 and 5)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $13,300,506 $13,173,735 $9,245,152
=========== =========== ==========
</TABLE>
See accompanying notes to combined financial statements.
F-2
<PAGE> 5
CIRCUIT TEST, INC. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31,
-------------------------- --------------------------------------
1997 1996 1996 1995 1994
------------ ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues (note 6)....... $19,895,878 $9,754,621 $26,509,725 $16,183,590 $9,028,587
Costs of revenues........... 13,288,642 7,495,668 19,580,340 10,799,490 6,310,630
----------- ---------- ----------- ----------- ----------
GROSS PROFIT...... 6,607,236 2,258,953 6,929,385 5,384,100 2,717,957
Selling, general and
administrative expenses... 3,946,054 2,834,812 6,251,364 3,793,320 2,524,796
Interest expense, net....... 262,152 191,871 434,345 291,061 111,250
Other expense............... 11,565 -- 9,112 -- --
----------- ---------- ----------- ----------- ----------
NET INCOME........ $ 2,387,465 $ (767,730) $ 234,564 $ 1,299,719 $ 81,911
=========== ========== =========== =========== ==========
</TABLE>
See accompanying notes to combined financial statements
F-3
<PAGE> 6
CIRCUIT TEST, INC. AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
CIRCUIT TEST
CIRCUIT TEST, INC. AIRHUB SERVICE GROUP, L.C. INTERNATIONAL, L.C.
---------------------------- ----------------------------- -----------------------------
NON- CIRCUIT TEST CIRCUIT TEST
VOTING VOTING ADDITIONAL INTERNATIONAL INTERNATIONAL
COMMON COMMON PAID-IN ALLEN S. LIMITED ALLEN S. LIMITED
STOCK STOCK CAPITAL BRASWELL, JR. PARTNERSHIP BRASWELL, JR. PARTNERSHIP
------ ------ ---------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1993.................. $ 1 $ 99 $ 17,500 $ -- $ -- $4,330 $4,330
Distributions to
stockholders.......... -- -- -- -- -- -- --
Net income (loss)....... -- -- -- -- -- -- --
--- ---- -------- -------- -------- ------ ------
Balances at December 31,
1994.................. 1 99 17,500 -- -- 4,330 4,330
Net income (loss)....... -- -- -- -- -- -- --
--- ---- -------- -------- -------- ------ ------
Balances at December 31,
1995.................. 1 99 17,500 -- -- 4,330 4,330
Sale of stock........... -- 22 129,998 -- -- -- --
Allocation of net
deficit to members at
date of transfer...... -- -- -- (70,800) (70,800) -- --
Distributions to
stockholders.......... -- -- -- -- -- -- --
Net income (loss)....... -- -- -- -- -- -- --
--- ---- -------- -------- -------- ------ ------
Balances at December 31,
1996.................. 1 121 147,498 (70,800) (70,800) 4,330 4,330
Distributions to
stockholders.......... -- -- -- -- -- -- --
Net income (loss)....... -- -- -- -- -- -- --
--- ---- -------- -------- -------- ------ ------
Balances at June 30,
1997.................. $ 1 $122 $147,498 $(70,800) $(70,800) $4,330 $4,330
=== ==== ======== ======== ======== ====== ======
<CAPTION>
RELATED EARNINGS
------------------------------------------------------------------------
AIRHUB CIRCUIT TEST TOTAL
CIRCUIT SERVICE INTERNATIONAL, STOCKHOLDERS'
TEST, INC. GROUP, L.C. L.C. TOTAL EQUITY
----------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31,
1993.................. $ 2,227,684 $ -- $ (505,291) $ 1,772,393 $ 1,748,653
Distributions to
stockholders.......... (1,073,022) -- -- (1,073,022) (1,073,022)
Net income (loss)....... 372,735 -- (290,824) 81,911 81,911
----------- --------- ---------- ----------- -----------
Balances at December 31,
1994.................. 1,527,397 -- (796,115) 731,282 757,542
Net income (loss)....... 355,566 (141,600) 1,085,753 1,299,719 1,299,719
----------- --------- ---------- ----------- -----------
Balances at December 31,
1995.................. 1,882,963 (141,600) 289,638 2,031,001 2,057,261
Sale of stock........... -- -- -- -- 130,020
Allocation of net
deficit to members at
date of transfer...... -- 141,600 -- 141,600 --
Distributions to
stockholders.......... -- -- (500,000) (500,000) (500,000)
Net income (loss)....... (189,383) (107,545) 531,492 234,564 234,564
----------- --------- ---------- ----------- -----------
Balances at December 31,
1996.................. 1,693,580 (107,545) 321,130 1,907,165 1,921,845
Distributions to
stockholders.......... -- (31,000) (707,000) (738,000) (738,000)
Net income (loss)....... 935,079 665,943 786,443 2,387,465 2,387,465
----------- --------- ---------- ----------- -----------
Balances at June 30,
1997.................. $ 2,628,658 $ 385,798 $ 400,572 $ 3,415,028 $ 3,571,308
=========== ========= ========== =========== ===========
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE> 7
CIRCUIT TEST, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
------------------------ ------------------------------------
1997 1996 1996 1995 1994
----------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ 2,387,465 $ (767,730) $ 234,564 $1,299,719 $ 81,911
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization................... 234,999 185,815 344,203 296,669 252,579
Increase in accounts receivable, net............ (939,367) (568,323) (360,010) (2,381,058) (430,908)
(Increase) decrease in inventory................ 538,063 361,836 (1,774,473) (1,073,683) (560,235)
Decrease (increase) in prepaid expenses and
other assets.................................. (399,552) (291,280) (23,414) (15,620) 102,603
(Decrease) increase in accounts payable......... (2,487,589) (412,555) 2,179,979 1,327,841 265,409
(Decrease) increase in accrued expenses......... 1,529,357 429,501 119,896 482,517 133,998
Change in due to (from) related parties......... (397,768) -- (137,436) (114,321) 242,458
----------- ---------- ---------- ---------- ----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES................................ 465,608 (1,063,735) 583,309 (177,936) 87,815
----------- ---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net......................... (683,902) (629,041) (1,382,640) (621,754) (368,538)
----------- ---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from notes payable and other
obligations..................................... (166,692) 702,851 1,901,560 1,434,578 1,257,802
Proceeds from sale of stock....................... -- -- 130,020 -- --
Distributions to stockholders..................... (738,000) (500,000) (500,000) -- (1,073,022)
----------- ---------- ---------- ---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES... (904,692) 202,851 1,531,580 1,434,578 184,780
----------- ---------- ---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................... (1,122,986) (1,551,925) 732,249 634,888 (95,943)
Cash and cash equivalents at beginning of period.... 1,490,336 691,856 758,087 123,199 219,142
----------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of period.......... $ 367,350 $ (860,068) $1,490,336 $ 758,087 $ 123,199
=========== ========== ========== ========== ==========
Supplemental disclosure of cash flow information --
Interest paid..................................... $ 262,152 $ 191,871 $ 418,000 $ 291,000 $ 164,000
=========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to combined financial statements
F-5
<PAGE> 8
CIRCUIT TEST, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994 AND SIX MONTHS
ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Description of Business and Principles of Combination
Circuit Test, Inc. and affiliates (the Company) are primarily engaged in
the business of repairing computer components and related peripherals.
The combined financial statements include the financial statements of
Circuit Test, Inc., located in Tampa, Florida, and affiliates Circuit Test
International, L.C., located in Memphis, Tennessee and Airhub Service Group,
L.C., located in Louisville, Kentucky. The financial statements are combined
because of common ownership. All significant intercompany accounts and
transactions have been eliminated in combination.
On February 28, 1996, Airhub Service Group, L.C., a Kentucky limited
liability company, was formed with two 50%/50% members. In a tax-free transfer,
the net liabilities of Circuit Test International, L.C.'s Kentucky division were
transferred to Airhub Service Group, L.C. on March 1, 1996. Management has
elected to include Airhub Service Group, L.C. in its 1996 combined financial
statements. The 1995 Airhub Service Group, L.C. financial statements represent
the Kentucky division balances.
The members of a limited liability company have no personal liability
related to the company other than to the extent of their equity balances. Both
members have equal economic and voting interests. Unless previously terminated,
Airhub Services Group, L.C. will continue in existence until February 28, 2026
and Circuit Test International, L.C. will continue in existence until August 13,
2022.
During November 1995, the Company decided to close one of its two Tampa
facilities. This facility was closed in early 1996 upon the expiration of the
Company's facility lease. The Company's affiliate near Boston, Massachusetts,
Disk Maintenance, Inc., was closed in August 1996 subsequent to the expiration
of the facility lease. During 1996, owners of the Company opened a facility in
Brazil.
In connection with the closing of the Tampa facility, the Company incurred
costs of approximately $490,000 and $223,000 in 1996 and 1995, respectively.
In prior years, the financial statements of Disk Maintenance, Inc. were
included in the combined financial statements. Management has elected to omit
Disk Maintenance, Inc. from the 1996 combination due to its closure. The
accompanying 1995 and 1994 combined financial statements have been restated to
reflect the change in reporting entity. Net income (loss) for 1996, 1995 and
1994 would have been $(439,357), $1,124,608 and $468,993, respectively, had Disk
Maintenance, Inc. been included in the combination.
(b) Revenue Recognition
Revenues are recognized when products are shipped.
(c) Accounting Estimates
Management is required to make estimates and assumptions during the
preparation of the combined financial statements in conformity with generally
accepted accounting principles. These estimates and assumptions affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the dates of the combined financial statements. They
also affect the reported amounts of net income. Actual results could differ from
these estimates and assumptions.
F-6
<PAGE> 9
CIRCUIT TEST, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(d) Cash and Cash Equivalent
The Company considers all highly liquid investments with original
maturities of six months or less to be cash equivalents.
(e) Inventory
Inventory consists primarily of computer parts and components and is valued
at the lower of cost or market. Cost is determined using the weighted average
method. In October 1996, the Company entered into an agreement with a third
party which included the purchase of inventory in the amount of $1,188,000, with
payments to be made according to a predetermined schedule during 1997. Such
purchased inventory remaining on hand was approximately $1,028,000 at December
31, 1996 (note 7).
(f) Property and Equipment
Property and equipment are stated at cost. Equipment under capital leases
is stated at the present value of minimum lease payments.
Depreciation on property and equipment is calculated on the straight-line
method over the estimated useful lives of the assets. Equipment held under
capital leases and leasehold improvements are amortized straight line over the
shorter of the lease term or estimated useful life of the assets.
(g) Pre-Opening Expenses
Circuit Test International, L.C. began operations in January 1993 and is
amortizing pre-opening expenses, which are included in other assets (net balance
of approximately $8,510 at June 30, 1997, $17,600 at December 31, 1996 and
$36,900 at December 31, 1995) using the straight-line method over 60 months.
(h) Income Taxes
Circuit Test, Inc. has elected to be treated as an "S" Corporation under
provisions of the Internal Revenue Code. Circuit Test International, L.C. and
Airhub Service Group, L.C. have each elected to be treated as a limited
liability company. Under these elections, the stockholders or partners are
individually responsible for reporting their share of taxable income or loss.
Accordingly, no provision for federal or state income taxes has been reflected
in the accompanying combined financial statements.
(i) Gain-Sharing Bonuses
The Company has a gain-sharing bonus plan whereby employees are rewarded
for attaining quality and profit goals. Gain-sharing bonuses paid for the six
months ended June 30, 1997 and years ended December 31, 1996, 1995 and 1994 were
$321,026, $309,174, $220,431 and $81,932, respectively.
(j) Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with the
1996 presentation.
F-7
<PAGE> 10
CIRCUIT TEST, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(2) NOTES PAYABLE
Notes payable at June 30, 1997 and December 31, 1996 and 1995 consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------------------
1997 1996 1995
----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
$4,000,000 revolving bank line of credit;
borrowings bear interest at the lender's
prime rate (8.5% at June 30, 1997),
interest payable monthly with principal
due on demand; collateralized by
substantially all assets of the Company
and guaranteed by certain of the
Company's stockholders................... $3,693,900 $3,747,418 $2,545,129
$1,000,000 nonrevolving bank line of
credit; advances bear interest at either
the lender's prime rate or a prevalent
fixed rate at the time of the advance
(8.5% at June 30, 1997); master note
payable on demand with individual
advances payable in three years
consisting of monthly principal and
interest payments; collateralized by
substantially all of the Company's
machinery, equipment, fixtures and
furniture and guaranteed by certain of
the Company's stockholders............... 1,024,857 861,790 138,241
$525,000 bank term loan; bears interest at
the lender's prime rate (8.5% at June 30,
1997); monthly principal and interest
payments through June 1, 1998;
collateralized by substantially all of
the Company's machinery, equipment,
fixtures and furniture and guaranteed by
certain of the Company's stockholders.... 151,267 233,333 408,303
Other...................................... 6,957 8,261 17,569
---------- ---------- ----------
Total notes payable........................ 4,876,981 4,850,802 3,109,242
Less current maturities of notes payable... 4,728,752 4,256,293 2,869,360
---------- ---------- ----------
Long-term portion of notes payable......... $ 148,229 $ 594,509 $ 239,882
========== ========== ==========
</TABLE>
The various loan agreements limit borrowings based on eligible collateral
and subject the Company to certain covenants regarding financial maintenance and
ratios. At December 31, 1996, the Company was not in compliance with certain of
the covenants. On July 9, 1997 the lender waived the instances of
non-compliance.
(3) SHAREHOLDER LOANS AND OBLIGATIONS
At June 30, 1997, the Company has loans payable to a stockholder of
$160,000, at 8.5% and $783,000 at 6.5%. At December 31, 1996, the Company has
loans payable to a stockholder of $352,871 at 8.5% and $783,000 at 6.5%. At
December 31, 1995, balances on these loans were $192,871 and $783,000.
F-8
<PAGE> 11
CIRCUIT TEST, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Stockholders of the Company have personal revolving lines of credit
totaling $975,000, with $157,000, $779,500 and $107,600 outstanding at June 30,
1997 and December 31, 1996 and 1995, respectively. The credit lines are payable
on demand and are guaranteed by the Company.
(4) LEASES
The Company is obligated for two capital leases that will expire in 1998.
The Company leases one of its Tampa facilities from a stockholder at a rate
of $5,080 per month under an operating lease. Rent expense for the six months
ended June 30, 1997 and 1996 and the years ended December 31, 1996, 1995 and
1994 was $30,480, $0, $25,520, $65,232 and $62,701, respectively.
The Company has a noncancelable operating lease with a third party for
facility rental. The Company is charged $1.06 per square foot per month for
office space and warehouse space occupied by certain equipment. Rent expense was
$264,454 and $36,000 for the six months ended June 30, 1997 and 1996,
respectively, and $206,776 and $28,800 for the years ended December 31, 1996 and
1995, respectively.
The Company also has several noncancelable operating leases with third
parties, primarily for facility rental, that expire over the next three years.
Rent expense for these facilities for the six months ended June 30, 1997 and
1996 and the years ended December 31, 1996, 1995 and 1994 was $176,969,
$108,252, $384,181, $296,810 and $147,350, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of June 30, 1997 are
as follows:
<TABLE>
<S> <C>
1997........................................................ $ 511,219
1998........................................................ 291,685
1999........................................................ 283,865
2000........................................................ 282,432
2001........................................................ 141,216
----------
$1,510,417
</TABLE>
(5) COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
The Company pays sales commissions to a company in which certain Company
stockholders have a majority ownership interest. Commissions paid for the six
months ended June 30, 1997 and 1996 and the years ended December 31, 1996, 1995
and 1994 were $12,600, $16,680, $27,240, $29,517 and $68,681, respectively.
Certain corporate charges paid by Circuit Test, Inc. are allocated, based
on a percentage of net revenues, to affiliates included in the combined
financial statements and another related party which is not included in the
combination. The amounts charged to the related party for 1996, 1995 and 1994
were approximately $162,000, $247,000 and $287,000, respectively.
In the normal course of business, the Company is party to certain
litigation. Management of the Company is of the opinion that the ultimate
outcome of such matters will not have a material adverse impact on the Company's
combined financial statements.
F-9
<PAGE> 12
CIRCUIT TEST, INC. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(6) SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK
The Company's customers are primarily manufacturers of computers and
related peripherals and integrated transportation and logistics companies.
Certain customers of the Company comprise a significant portion of accounts
receivable and net revenues as of and for the years ended December 31, 1996,
1995 and 1994. These customers are summarized as follows:
<TABLE>
<CAPTION>
PERCENTAGE
CUSTOMERS OF TOTAL
--------- ----------
<S> <C> <C>
Accounts receivable:
December 31, 1996......................................... 4 65%
December 31, 1995......................................... 4 57%
December 31, 1994......................................... 4 72%
Net revenues:
Year ended December 31, 1996.............................. 4 81%
Year ended December 31, 1995.............................. 4 71%
Year ended December 31, 1994.............................. 4 79%
</TABLE>
The net revenues concentration numbers include one customer which accounted
for 46% of net revenues during 1996, 36% during 1995 and 39% during 1994.
(7) SUBSEQUENT EVENT
In May 1997, a third party requested to terminate an agreement that the
Company had entered into to purchase certain assets and other rights. A new
agreement was reached that resulted in a reduction in purchase price for the
assets previously purchased. In June 1997, the Company reduced the assets which
are included in inventory and the corresponding payable to the third party by
approximately $1,000,000.
On July 9, 1997, the Company entered into an Agreement and Plan of Merger
(Agreement) with EFTC Corporation (EFTC). The Agreement provides that EFTC will
acquired the Company through the merger of the Company with and into EFTC
(Merger). In the Merger, subject to adjustment and certain exceptions,
stockholders of Circuit Test, Inc. will have the right to receive 1,858,974
shares of EFTC common stock and the members of Airhub Service Group, L.C. and
Circuit Test International, L.C. will receive approximately $19,500,000 and have
certain liabilities assumed by EFTC. Stockholders and members of the Company
will also participate in an earnout based on future earnings. The obligations of
the Company and EFTC to consummate the Merger are subject to various conditions,
including the condition that the holders of a majority of the outstanding shares
of common stock of EFTC vote to approve the Agreement. If the necessary
stockholder vote is obtained and all other conditions to the Merger are
satisfied, the Merger is expected to be completed on or before October 30, 1997.
F-10
<PAGE> 13
CIRCUIT TEST, INC. AND AFFILIATES
COMBINING SCHEDULE -- BALANCE SHEET INFORMATION
DECEMBER 31, 1996
ASSETS
<TABLE>
<CAPTION>
AIRHUB
CIRCUIT SERVICE CIRCUIT TEST
TEST, INC. GROUP, L.C. INTERNATIONAL, L.C. COMBINED
---------- ----------- ------------------- -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............. $ (169,421) $ 634,756 $1,025,001 $ 1,490,336
Accounts receivable, net.............. 1,074,345 1,268,588 1,767,810 4,110,743
Inventory............................. 223,380 2,706,234 1,312,538 4,242,152
Prepaid expenses and other current
assets............................. 2,843 -- 6,004 8,847
Intercompany accounts................. 533,288 (400,846) (132,442) --
---------- ---------- ---------- -----------
TOTAL CURRENT ASSETS.......... 1,664,435 4,208,732 3,978,911 9,852,078
---------- ---------- ---------- -----------
PROPERTY AND EQUIPMENT, AT COST:
Land, buildings and improvements...... 605,409 -- -- 605,409
Leasehold improvements................ -- -- 655,029 655,029
Machinery and equipment............... 1,030,977 680,431 1,134,337 2,845,745
Furniture and fixtures................ 121,255 111,680 149,505 382,440
Vehicles.............................. 137,074 -- -- 137,074
---------- ---------- ---------- -----------
1,894,715 792,111 1,938,871 4,625,697
Less accumulated depreciation and
amortization....................... 1,026,834 65,590 307,861 1,400,285
---------- ---------- ---------- -----------
NET PROPERTY AND EQUIPMENT.... 867,881 726,521 1,631,010 3,225,412
Other assets, net....................... 24,553 -- 71,692 96,245
---------- ---------- ---------- -----------
$2,556,869 $4,935,253 $5,681,613 $13,173,735
========== ========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of notes payable... $ 121,498 $1,943,867 $2,190,928 $ 4,256,293
Accounts payable...................... 243,389 2,575,667 1,116,022 3,935,078
Accrued expenses...................... 260,647 454,507 354,608 1,069,762
Due to (from) related parties......... (306,765) (12,455) 579,597 260,377
Shareholder loans..................... 352,871 -- 783,000 1,135,871
---------- ---------- ---------- -----------
TOTAL CURRENT LIABILITIES..... 671,640 4,961,586 5,024,155 10,657,381
Long-term portion of notes payable...... 44,029 222,812 327,668 594,509
---------- ---------- ---------- -----------
TOTAL LIABILITIES............. 715,669 5,184,398 5,351,823 11,251,890
---------- ---------- ---------- -----------
STOCKHOLDERS' EQUITY:
Common stock.......................... 122 -- -- 122
Members' equity....................... -- (141,600) 8,660 (132,940)
Additional paid-in capital............ 147,498 -- -- 147,498
Retained earnings (deficit)........... 1,693,580 (107,545) 321,130 1,907,165
---------- ---------- ---------- -----------
TOTAL STOCKHOLDERS' EQUITY.... 1,841,200 (249,145) 329,790 1,921,845
---------- ---------- ---------- -----------
$2,556,869 $4,935,253 $5,681,613 $13,173,735
========== ========== ========== ===========
</TABLE>
See accompanying independent auditors' report.
F-11
<PAGE> 14
CIRCUIT TEST, INC. AND AFFILIATES
COMBINING SCHEDULE -- BALANCE SHEET INFORMATION
DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
AIRHUB
CIRCUIT SERVICE CIRCUIT TEST
TEST, INC. GROUP, L.C. INTERNATIONAL, L.C. COMBINED
---------- ----------- ------------------- ----------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............... $ 210,987 $ 38,372 $ 508,728 $ 758,087
Accounts receivable, net................ 1,332,405 449,172 1,969,156 3,750,733
Inventory............................... 1,034,222 97,280 1,336,177 2,467,679
Prepaid expenses and other current
assets............................... 2,843 -- 18,756 21,599
Intercompany accounts................... 112,463 -- (112,463) --
---------- --------- ---------- ----------
TOTAL CURRENT ASSETS............ 2,692,920 584,824 3,720,354 6,998,098
---------- --------- ---------- ----------
PROPERTY AND EQUIPMENT, AT COST:
Land, buildings and improvements........ 685,134 -- -- 685,134
Leasehold improvements.................. 208,505 29,378 388,343 626,226
Machinery and equipment................. 998,188 89,710 643,472 1,731,370
Furniture and fixtures.................. 170,160 28,022 81,829 280,011
Vehicles................................ 157,817 -- -- 157,817
---------- --------- ---------- ----------
2,219,804 147,110 1,113,644 3,480,558
Less accumulated depreciation and
amortization......................... 1,140,678 4,268 148,637 1,293,583
---------- --------- ---------- ----------
NET PROPERTY AND EQUIPMENT...... 1,079,126 142,842 965,007 2,186,975
Other assets, net............... 24,553 -- 35,526 60,079
---------- --------- ---------- ----------
$3,796,599 $ 727,666 $4,720,887 $9,245,152
========== ========= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of notes payable..... $ 925,306 $ 448,241 $1,495,813 $2,869,360
Accounts payable........................ 340,298 379,400 1,035,401 1,755,099
Accrued expenses........................ 299,316 43,832 606,718 949,866
Due to (from) related parties........... (25,011) (2,207) 425,031 397,813
Shareholder loans....................... 192,871 -- 783,000 975,871
---------- --------- ---------- ----------
TOTAL CURRENT LIABILITIES....... 1,732,780 869,266 4,345,963 6,948,009
Long-term portion of notes
payable....................... 163,256 -- 76,626 239,882
---------- --------- ---------- ----------
TOTAL LIABILITIES............... 1,896,036 869,266 4,422,589 7,187,891
---------- --------- ---------- ----------
STOCKHOLDERS' EQUITY:
Common stock............................ 100 -- -- 100
Members' equity......................... -- -- 8,660 8,660
Additional paid-in capital.............. 17,500 -- -- 17,500
Retained earnings (deficit)............. 1,882,963 (141,600) 289,638 2,031,001
---------- --------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY...... 1,900,563 (141,600) 298,298 2,057,261
---------- --------- ---------- ----------
$3,796,599 $ 727,666 $4,720,887 $9,245,152
========== ========= ========== ==========
</TABLE>
See accompanying independent auditors' report.
F-12
<PAGE> 15
CIRCUIT TEST, INC. AND AFFILIATES
COMBINING SCHEDULE -- OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
AIRHUB CIRCUIT TEST
CIRCUIT SERVICE INTERNATIONAL, ELIMINATING
TEST, INC. GROUP, L.C. L.C. ENTRIES COMBINED
---------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues................. $4,590,711 $8,211,422 $13,854,357 $(146,765) $26,509,725
Costs of revenues............ 3,348,588 6,421,699 9,956,818 (146,765) 19,580,340
---------- ---------- ----------- --------- -----------
GROSS PROFIT....... 1,242,123 1,789,723 3,897,539 -- 6,929,385
Selling, general and
administrative expenses.... 1,348,581 1,799,830 3,102,953 -- 6,251,364
Interest expense, net........ 100,587 70,664 263,094 -- 434,345
Other (income) expense....... (17,662) 26,774 -- -- 9,112
---------- ---------- ----------- --------- -----------
NET INCOME (LOSS).. $ (189,383) $ (107,545) $ 531,492 $ -- $ 234,564
========== ========== =========== ========= ===========
</TABLE>
See accompanying independent auditors' report.
F-13
<PAGE> 16
CIRCUIT TEST, INC. AND AFFILIATES
COMBINING SCHEDULE -- OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
AIRHUB CIRCUIT TEST
CIRCUIT SERVICE INTERNATIONAL, ELIMINATING
TEST, INC. GROUP, L.C. L.C. ENTRIES COMBINED
---------- ----------- -------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenues................... $7,668,419 $ 302,531 $8,356,249 $(143,609) $16,183,590
Costs of revenues.............. 5,593,172 238,617 5,111,310 (143,609) 10,799,490
---------- --------- ---------- --------- -----------
GROSS PROFIT......... 2,075,247 63,914 3,244,939 -- 5,384,100
Selling, general and
administrative expenses...... 1,591,408 198,810 2,003,102 -- 3,793,320
Interest expense, net.......... 128,273 6,704 156,084 -- 291,061
---------- --------- ---------- --------- -----------
NET INCOME (LOSS).... $ 355,566 $(141,600) $1,085,753 $ -- $ 1,299,719
========== ========= ========== ========= ===========
</TABLE>
See accompanying independent auditors' report.
F-14
<PAGE> 17
CIRCUIT TEST, INC. AND AFFILIATES
COMBINING SCHEDULE -- OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
CIRCUIT TEST
CIRCUIT INTERNATIONAL, ELIMINATING
TEST, INC. L.C. ENTRIESE COMBINED
---------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues............................. $7,032,786 $2,069,931 $(74,130) $9,028,587
Costs of revenues........................ 4,891,004 1,493,756 (74,130) 6,310,630
---------- ---------- -------- ----------
GROSS PROFIT................... 2,141,782 576,175 -- 2,717,957
Selling, general and administrative
expenses............................... 1,721,680 803,116 -- 2,524,796
Interest expense, net.................... 47,367 63,883 -- 111,250
---------- ---------- -------- ----------
NET INCOME (LOSS).............. $ 372,735 $ (290,824) $ -- $ 81,911
========== ========== ======== ==========
</TABLE>
See accompanying independent auditors' report.
F-15
<PAGE> 18
CIRCUIT TEST, INC. AND AFFILIATES
COMBINING SCHEDULE -- CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
AIRHUB CIRCUIT TEST
CIRCUIT SERVICE INTERNATIONAL
TEST, INC. GROUP, L.C. L.C. COMBINED
----------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:.... $ (189,383) $ (107,545) $ 531,492 $ 234,564
Net income (loss)
Adjustments to reconcile net income
(loss) to net cash flows provided by
(used in) operating activities:
Depreciation and amortization........ 162,822 59,287 122,094 344,203
(Increase) decrease in accounts
receivables, net.................. 258,060 (819,416) 201,346 (360,010)
(Increase) decrease in inventory..... 810,842 (2,608,954) 23,639 (1,774,473)
Increase in prepaids and other
assets............................ -- -- (23,414) (23,414)
Increase (decrease) in accounts
payable........................... (96,909) 2,196,267 80,621 2,179,979
Increase (decrease) in accrued
expenses.......................... (38,669) 410,675 (252,110) 119,896
Change in due to (from) related
parties........................... (281,754) (10,248) 154,566 (137,436)
Change in intercompany account....... (1,017,309) 1,019,433 (2,124) --
----------- ----------- ---------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES.......... (392,300) 139,499 836,110 583,309
----------- ----------- ---------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES -- capital expenditures,
net.................................... 48,423 (642,966) (788,097) (1,382,640)
----------- ----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from notes payable and
other obligations.................... (166,551) 1,099,851 968,260 1,901,560
Proceeds from sale of stock............ 130,020 -- -- 130,020
Distributions to stockholders.......... -- -- (500,000) (500,000)
----------- ----------- ---------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES.......... (36,531) 1,099,851 468,260 1,531,580
----------- ----------- ---------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS.......... (380,408) 596,384 516,273 732,249
----------- ----------- ---------- -----------
Cash and cash equivalents at beginning of
year................................... 210,987 38,372 508,728 758,087
----------- ----------- ---------- -----------
Cash and cash equivalents at end of
year................................... (169,421) 634,756 1,025,001 1,490,336
=========== =========== ========== ===========
Supplemental disclosure of cash
information -- Interest paid........... $ 98,000 $ 71,000 $ 249,000 $ 418,000
=========== =========== ========== ===========
</TABLE>
See accompanying independent auditors' report.
F-16
<PAGE> 19
CIRCUIT TEST, INC. AND AFFILIATES
COMBINING SCHEDULE -- CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
AIRHUB
CIRCUIT SERVICE CIRCUIT TEST
TEST, INC. GROUP, L.C. INTERNATIONAL, L.C. COMBINED
---------- ----------- ------------------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)..................... $ 355,566 (141,600) 1,085,753 1,299,719
Adjustments to reconcile net income
(loss) to net cash flows provided
by (used in) operating activities:
Depreciation and amortization...... 203,597 8,368 84,704 296,669
Increase in accounts receivables,
net.............................. (370,082) (449,172) (1,561,804) (2,381,058)
(Increase) decrease in inventory... 242,180 (97,280) (1,218,583) (1,073,683)
(Increase) decrease in prepaids and
other assets..................... (17,798) -- 2,178 (15,620)
Increase in accounts payable....... 36,453 379,400 911,988 1,327,841
Increase in accrued expenses....... 49,573 43,832 389,112 482,517
Change in due to (from) related
parties.......................... (255,947) (2,207) 143,833 (114,321)
Change in intercompany account..... (11,439) -- 11,439 --
--------- --------- ----------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES........ 232,103 (258,659) (151,380) (177,936)
--------- --------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES --
capital expenditures, net............. 42,130 (151,210) (512,674) (621,754)
--------- --------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
net proceeds from notes payable and
other obligations.................. (219,440) 448,241 1,205,777 1,434,578
--------- --------- ----------- -----------
NET INCREASE IN CASH AND CASH
EQUIVALENTS................. 54,793 38,372 541,723 634,888
Cash and cash equivalents at beginning
of year............................... 156,194 -- (32,995) 123,199
--------- --------- ----------- -----------
Cash and cash equivalents at end of
year.................................. $ 210,987 38,372 508,728 758,087
========= ========= =========== ===========
Supplemental disclosure of cash
information -- Interest paid.......... $ 128,000 7,000 156,000 291,000
========= ========= =========== ===========
</TABLE>
See accompanying independent auditors' report.
F-17
<PAGE> 20
CIRCUIT TEST, INC. AND AFFILIATES
COMBINING SCHEDULE -- CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
CIRCUIT TEST
CIRCUIT INTERNATIONAL,
TEST, INC. L.C. COMBINED
----------- -------------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).............................. $ 372,735 $(290,824) $ 81,911
Adjustments to reconcile net income (loss) to
net cash flows provided by (used in)
operating activities:
Depreciation and amortization............... 195,200 57,379 252,579
Increase in accounts receivables, net....... (211,334) (219,574) (430,908)
Increase in inventory....................... (511,571) 48,664 (560,235)
(Increase) decrease in prepaids and other
assets.................................... 106,122 (3,519) 102,603
Increase in accounts payable................ 165,421 99,988 265,409
Increase (decrease) in accrued expenses..... (20,694) 154,692 133,998
Change in due to (from) related parties..... 239,655 2,803 242,458
Change in intercompany account.............. (101,024) 101,024 --
----------- --------- -----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES................. 234,510 (146,695) 87,815
----------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -- capital
expenditures, net.............................. (37,560) (330,978) (368,538)
----------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from notes payable and other
obligations................................. 871,140 386,662 1,257,802
Distributions to stockholders.................. (1,073,022) -- (1,073,022)
----------- --------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES................. (201,882) 386,662 184,780
----------- --------- -----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS.......................... (4,932) (91,011) (95,943)
Cash and cash equivalents at beginning of year... 161,126 58,016 219,142
----------- --------- -----------
Cash and cash equivalents at end of year......... $ 156,194 $ (32,995) $ 123,199
=========== ========= ===========
Supplemental disclosure of cash information --
Interest paid.................................. $ 54,000 $ 110,000 $ 164,000
=========== ========= ===========
</TABLE>
See accompanying independent auditors' report.
F-18
<PAGE> 21
APPENDIX II
UNAUDITED PRO FORMA CONDENSED
FINANCIAL INFORMATION
The following unaudited pro forma condensed financial information is based
upon the historical financial statements of EFTC Corporation ("EFTC"), the
historical combined financial statements of Current Electronics, Inc. (the "CE
Companies") and the historical combined financial statements of Circuit Test,
Inc. and the CTI LLCs (collectively, the "CTI Companies").
The unaudited pro forma condensed combined balance sheet presents the
combined financial position of EFTC, including the CE Companies, and the CTI
Companies as of June 30, 1997, assuming EFTC had completed the Merger and the
Acquisition as of that date using the purchase method of accounting, and also
assuming that EFTC had completed the Asset Purchase as of June 30, 1997. The
purchase accounting adjustments are included in the EFTC June 30, 1997
balances. Accordingly, the combined identifiable assets and liabilities of the
CTI Companies have been adjusted to their estimated fair values based upon a
preliminary purchase price of approximately $28.5 million. The unaudited
condensed combined pro forma statements of operations for the six months ended
June 30, 1997 and the year ended December 31, 1996 assume the CE Companies and
CTI Companies business combinations occurred on January 1, 1996 and include the
historical operations of EFTC and the CTI Companies for those periods and the
CE Companies (for the period from January 1, 1997 to February 24, 1997 and the
year ended September 30, 1996), adjusted for the pro forma effects of the
business combinations.
The following unaudited condensed pro forma financial information has been
prepared based upon assumptions deemed appropriate by EFTC and are not
necessarily indicative of the consolidated financial position or results of
operations if the business combination had been consummated on the assumed
dates and are not necessarily indicative of the actual results of the future
operations of the combined companies.
EFTC Corporation
Unaudited Pro Forma Condensed Combined Balance Sheet
June 30, 1997
<TABLE>
<CAPTION>
CTI AlliedSignal
Pro Forma Pro Forma Pro Forma
EFTC CTI Companies Adjustments Adjustments Combined
------------ ------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents .................. $ 897,579 367,350 (19,750,000)(1) 7,650,000 (7) 1,014,929
(23,000,000)(2) (7,650,000)(8)
(3,500,000)(6)
Accounts receivable .......... 7,032,934 5,050,110 -- -- 12,083,044
Inventories .................. 17,859,385 3,704,089 -- 10,500,000 (8) 32,063,474
Income taxes receivable ...... 469,774 -- -- -- 469,774
Other current assets ......... 1,110,661 391,814 -- -- 1,502,475
------------ ---------- ---------- ---------- -----------
Total current assets .... 27,370,333 9,513,363 (250,000) 10,500,000 47,133,696
Property, plant and
equipment, net .................. 10,659,362 3,674,313 -- 2,700,000 (8) 17,033,675
Goodwill ........................ 7,974,933 -- 24,915,692 (1) -- 36,390,625
3,500,000 (6) --
Other assets .................... 114,943 112,830 -- -- 227,773
------------ ---------- ---------- ---------- -----------
$ 46,119,571 13,300,506 28,165,692 13,200,000 100,785,769
============ ========== ========== ========== ===========
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Current liabilities:
Notes payable ................ $ 5,800,000 4,728,752 -- -- 10,528,752
Shareholder loans ............ -- 943,000 -- -- 943,000
Current portion of long-
term debt .................... 468,655 -- -- -- 468,655
Accounts payable ............. 7,893,819 1,447,489 -- -- 9,341,308
Other current liabilities .... 2,490,015 2,461,728 -- 5,550,000 (8) 10,501,743
------------ ---------- ---------- ---------- -----------
Total current
liabilities ............. $ 16,652,489 9,580,969 5,550,000 31,783,458
Long-term debt, net of
current portion ................... 9,140,117 148,229 23,000,000 (2) 7,650,000 (7) 39,938,346 (11)
Deferred income taxes ............. 328,482 -- -- -- 328,482
------------ ---------- ---------- ---------- -----------
26,121,088 9,729,198 23,000,000 13,200,000 72,050,286
------------ ---------- ---------- ---------- -----------
Shareholders' equity:
Common stock and
additional paid-in capital ... 15,720,724 156,280 8,737,000 (1) 24,457,724
(156,280)(1)
Retained earnings ............ 4,277,759 3,415,028 (3,415,028)(1) -- 4,277,759
------------ ---------- ---------- ---------- -----------
19,998,483 3,571,308 5,165,692 -- 28,735,483
------------ ---------- ---------- ---------- -----------
$ 46,119,571 13,300,506 28,165,692 13,200,000 100,785,769
============ ========== ========== ========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Financial Information.
1
<PAGE> 22
EFTC Corporation
Unaudited Pro Forma Condensed Combined Statement of Operations
Six Months Ended June 30, 1997
<TABLE>
<CAPTION>
Pro forma
CE Companies Combined CTI Companies
CE Pro forma with CE CTI Pro Forma Pro Forma
EFTC Companies Adjustments Companies Companies Adjustments Combined
----------- ---------- ------------ ---------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ........................ $36,782,349 4,475,732 41,258,081 19,895,878 -- 61,153,959
Cost of goods sold ............... 32,285,782 4,025,431 (5,000)(9) 36,306,213 13,288,642 -- 49,594,855
----------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit .................. 4,496,567 450,301 5,000 4,951,868 6,607,236 -- 11,559,104
Selling, general and
administrative expenses ....... 2,986,655 1,368,366 -- 4,355,021 3,957,619 -- 8,312,640
Goodwill amortization ............ 89,601 -- 27,083 (4) 116,684 -- 473,500 (4) 590,184
----------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss) ....... 1,420,311 (918,065) (22,083) 480,163 2,649,617 (473,500) 2,656,280
----------- ---------- ---------- ---------- ---------- ---------- ----------
Other income (expense):
Interest expense .............. (537,143) (30,889) (52,063)(3) (620,095) (262,152) (948,750)(3) (1,830,997)(11)
Other income (expense), net ... 37,528 (17,273) -- 20,265 -- -- 20,265
----------- ---------- ---------- ---------- ---------- ---------- ----------
(499,605) (48,162) (52,063) (599,830) (262,152) (948,750) (1,810,732)
----------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes ............... 920,706 (966,227) (74,146) (119,667) 2,387,465 (1,422,250) 845,548
Income tax expense (benefit) ..... 338,567 (362,354) (9,411)(10) (33,198) -- 399,244 (5) 366,046
----------- ---------- ---------- ---------- ---------- ---------- ----------
Net income ................. $ 582,139 (603,873) (64,735) (86,469) 2,387,465 (1,821,494) 479,502
=========== ========== ========== ========== ========== ========== ==========
Income per common share .......... $ 0.10 0.06
=========== ==========
Weighted average common and
common equivalent shares
outstanding ................... 6,120,897 1,858,975 7,979,872
=========== ========== ==========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Financial Information.
2
<PAGE> 23
EFTC Corporation
Unaudited Pro Forma Condensed Combined Statement of Operations
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Pro forma
CE Companies Combined
CE Pro forma with CE CTI Pro Forma Pro Forma
EFTC Companies Adjustments Companies Companies Adjustments Combined
------------ ---------- ------------ ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ........................ $ 56,880,067 32,520,438 -- 89,400,505 26,509,725 -- 115,910,230
Cost of goods sold ............... 53,980,067 27,075,305 (30,000)(9) 81,025,372 19,580,340 -- 100,605,712
------------ ---------- ---------- ---------- ---------- ---------- -----------
Gross profit .................. 2,900,000 5,445,133 30,000 8,375,133 6,929,385 -- 15,304,518
Selling, general and
administrative expenses ....... 4,195,784 2,792,814 -- 6,988,598 6,251,364 -- 13,239,962
Goodwill amortization ............ -- -- 162,495 (4) 162,495 -- 947,000 (4) 1,109,495
Impairment of fixed assets ....... 725,869 -- -- 725,869 -- -- 725,869
------------ ---------- ---------- ---------- ---------- ---------- -----------
Operating income (loss) ....... (2,021,653) 2,652,319 (132,495) 498,171 678,021 (947,000) 229,192
------------ ---------- ---------- ---------- ---------- ---------- -----------
Other income (expense):
Interest expense .............. (525,854) (101,192) (312,375)(3) (939,421) (434,345) (1,897,500)(3) (3,271,266)(11)
Other income, net ............. 82,428 9,345 -- 91,773 (9,112) -- 82,661
------------ ---------- ---------- ---------- ---------- ---------- -----------
(443,426) (91,847) (312,375) (847,648) (443,457) (1,897,500) (3,188,605)
------------ ---------- ---------- ---------- ---------- ---------- -----------
Income (loss) before income
taxes ....................... (2,465,079) 2,560,472 (444,870) (349,477) 234,564 (2,844,500) (2,959,413)
Income tax expense (benefit) ..... (872,114) 754,000 (56,465)(10) (174,579) -- (904,150)(5) (1,078,729)
------------ ---------- ---------- ---------- ---------- ---------- -----------
Net income (loss) ............. $ (1,592,965) 1,806,472 (388,405) (174,898) 234,564 (1,940,350) (1,880,684)
============ ========== ========== ========== ========== ========== ===========
Income (loss) per common share.... $ (0.40) (0.24)
============ ===========
Weighted average common and
common equivalent shares
outstanding.................... 3,942,139 1,980,000 1,858,975 7,781,114
============ ========== ========== ===========
</TABLE>
See Notes to Unaudited Pro Forma Condensed Financial Information.
3
<PAGE> 24
EFTC Corporation
Notes to Unaudited Pro Forma Condensed Financial Information
(A) BASIS OF PRESENTATION
On July 9, 1997, EFTC and CTI entered into the Merger Agreement that
provides for the merger of CTI with and into a newly formed subsidiary of EFTC.
Additionally, EFTC and the members of the CTI LLCs entered into the Purchase
Agreement that provides for the acquisition by EFTC of all of the limited
liability company interests of the CTI LLCs. The CTI Companies are affiliates
as a result of common ownership. Under the terms of the Merger Agreement and
the Purchase Agreement, EFTC will pay approximately $19.5 million in cash and
issue 1,858,975 shares of its common stock to the stockholders of the CTI
Companies. The Merger and the Acquisition will both be accounted for using the
purchase method of accounting for business combinations. Actual adjustments
may differ from those presented herein upon finalization of the purchase
accounting adjustments. Additionally, EFTC acquired the CE Companies in
February 1997 and entered into an agreement with AlliedSignal to purchase
certain assets and inventory for an approximate amount of $13.2 million.
(B) PRO FORMA ADJUSTMENTS
The following pro forma adjustments have been made to the accompanying
pro forma condensed financial information:
1. To record goodwill in the amount of $24.9 million based upon the
allocation of the estimated $28.5 million ($19.5 million in cash
and 1,858,975 shares of Common Stock at $4.70 per share, based upon
fair value of the Common Stock and $250,000 in transaction costs)
cost of the Merger and the Acquisition and to eliminate the equity
accounts of the CTI Companies.
2. To record the borrowings for the Merger and the Acquisition of $23
million to be paid by the Company from a portion of the proceeds
of the Bank One Loan. See "MANAGEMENTS' DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Liquidity and
Capital Resources."
3. To record interest expense on the borrowings under the Bank One
loan at an assumed interest rate of 8.25% per annum.
4. To record amortization of goodwill resulting from the Merger and
the Acquisition over a 30 year period.
5. To record income tax expense for taxable income of CTI, an S
Corporation, and the CTI LLCs, net of the income tax effect of the
pro forma adjustments.
6. To record liability for bonuses to be paid to employees of the CTI
Companies prior to closing as additional goodwill.
7. To record additional borrowing to purchase inventory and assets
from AlliedSignal. See "THE COMPANIES-- EFTC
Corporation--General."
8. To record assets and inventory of $13.2 million purchased from
AlliedSignal. See "THE COMPANIES--EFTC Corporation--General."
9. Elimination of depreciation expense relating to certain leasehold
improvements that were abandoned after consummation of the
acquisition of the CE Companies.
10. To record income tax expense for the taxable income of Current
Electronics (Washington), Inc., one of the CE Companies, an S
corporation, net of the effect of the pro forma adjustments.
11. In September 1997, the Company issued $15 million in Subordinated
Notes to a director, which include warrants to purchase 500,000
shares of the Company's Common Stock. See "MANAGEMENTS'
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--Liquidity and Capital Resources." The warrants have
been recorded at fair value using the Black-Scholes option pricing
model as additional paid in capital and debt discount. The
discount will be amortized as additional interest expense over the
term of the
4
<PAGE> 25
Subordinated Notes. If the Subordinated Notes and warrants had
been issued on January 1, 1996, pro forma net income and income
per common share would have decreased by 402,025 and $0.05,
respectively, for the six months ended June 30, 1997 and pro forma
net loss and loss per common share would have increased by
$804,049 and $0.10, respectively, for the year ended December 31,
1996.
5
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
The Board of Directors
Circuit Test, Inc. and Affiliates:
We consent to the inclusion of our report dated July 11, 1997, with respect to
the combined balance sheets of Circuit Test, Inc. and affiliates as of December
31, 1996 and 1995, and the related combined statements of earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1996, which report appears in the Form 8-K/A of EFTC
Corporation dated December 15, 1997.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Memphis, Tennessee
December 11, 1997
