-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QOgy4Ny6ImBUFB8K4SEcsJMbCFpBOBImZeOd8pwJW/6yhDY1GtkypBNUen8udny7 mo6jzjJd9lyL6RUJlWK8+w== 0000950135-03-003556.txt : 20030619 0000950135-03-003556.hdr.sgml : 20030619 20030619154031 ACCESSION NUMBER: 0000950135-03-003556 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030329 FILED AS OF DATE: 20030619 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PCD INC CENTRAL INDEX KEY: 0001007594 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC CONNECTORS [3678] IRS NUMBER: 042604950 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-27744 FILM NUMBER: 03750272 BUSINESS ADDRESS: STREET 1: TWO TECHNOLOGY DR STREET 2: CENTENNIAL PARK CITY: PEABODY STATE: MA ZIP: 01960 BUSINESS PHONE: 5085328800 MAIL ADDRESS: STREET 1: 2 TECHNOLOGY DRIVE CITY: PEABODY STATE: MA ZIP: 01960 10-Q 1 b46974pce10vq.txt PCD INC. ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 29, 2003 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 0-27744 PCD INC. (Exact Name of Registrant as Specified in its Charter) MASSACHUSETTS 04-2604950 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 2 TECHNOLOGY DRIVE CENTENNIAL PARK PEABODY, MASSACHUSETTS 01960-7977 (Address of Principal Executive Offices, Including Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (978) 532-8800 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 ____ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ____ No X Number of shares of common stock, $0.01 par value, outstanding at June 5, 2003: 8,951,945. ================================================================================ PCD INC. TABLE OF CONTENTS
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements....................................................................................... 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk................................................. 16 Item 4. Controls and Procedures.................................................................................... 16 PART II. OTHER INFORMATION Item 1. Legal Proceedings.......................................................................................... 17 Item 4. Submission of Matters to a Vote of Security Holders........................................................ 17 Item 5. Other Information.......................................................................................... 17 Item 6. Exhibits and Reports on Form 8-K........................................................................... 17 Signatures............................................................................................. 19
- 1 - PCD INC. FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 2003 FORWARD-LOOKING INFORMATION STATEMENTS IN THIS REPORT CONCERNING THE FINANCIAL CONDITION AND BUSINESS OF PCD INC. AND OTHER STATEMENTS IN THIS REPORT CONTAIN CERTAIN "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. FOR EACH OF THESE STATEMENTS, PCD INC. CLAIMS THE PROTECTION OF THE SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS CONTAINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS INCLUDE STATEMENTS REGARDING ONGOING OPERATIONS. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL OR CURRENT FACTS REGARDING FUTURE PLANS, EVENTS AND PROSPECTS ARE FORWARD-LOOKING STATEMENTS. THE STATEMENTS ARE SUBJECT TO SIGNIFICANT RISKS, CONTINGENCIES AND UNCERTAINTIES INCLUDING, BUT NOT LIMITED TO: CHANGES IN GENERAL ECONOMIC CONDITIONS, AND THE LIKE. THE COMPANY'S MOST RECENT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING FORM 10-K, CONTAIN ADDITIONAL INFORMATION CONCERNING MANY OF THESE RISK FACTORS, AND COPIES OF THESE FILINGS ARE AVAILABLE FROM THE COMPANY UPON REQUEST AND WITHOUT CHARGE. PCD INC. DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS, ANY OBLIGATION TO RELEASE PUBLICLY THE RESULT OF ANY REVISIONS THAT MAY BE MADE TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS - 2 - PCD INC. CONSOLIDATED BALANCE SHEETS (CONDENSED AND UNAUDITED) (IN THOUSANDS, EXCEPT SHARE DATA)
3/29/03 12/31/02 -------- --------- ASSETS Current assets: Cash and cash equivalents.............................. $ 1,388 $ 919 Accounts receivable, net............................... 4,881 4,639 Inventory.............................................. 4,313 4,295 Prepaid expenses and other current assets.............. 536 486 -------- -------- Total current assets................................. 11,118 10,339 Equipment and improvements: Equipment and improvements............................. 12,091 11,995 Accumulated depreciation............................... 8,640 8,391 -------- -------- Equipment and improvements, net...................... 3,451 3,604 Debt financing fees...................................... 201 321 Other assets............................................. 336 367 -------- -------- Total assets................................... $ 15,106 $ 14,631 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short term debt....................................... $ 17,585 $ 16,885 Current portion of long-term debt...................... 24,000 24,000 Accounts payable - trade............................... 2,223 1,483 Accrued interest....................................... 1,448 1,076 Accrued liabilities.................................... 1,630 2,100 -------- -------- Total current liabilities............................ 46,886 45,544 Accumulated other comprehensive (loss) income............ (81) 40 Stockholders' equity..................................... (31,699) (30,953) -------- -------- Total liabilities and stockholders' equity..... $ 15,106 $ 14,631 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. - 3 - PCD INC. CONSOLIDATED STATEMENTS OF OPERATIONS (CONDENSED AND UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
QUARTER ENDED -------------------- 3/29/03 3/30/02 -------- -------- Net sales.................................................. $ 6,608 $ 6,143 Cost of sales.............................................. 4,096 4,952 -------- -------- Gross profit............................................. 2,512 1,191 Operating expenses......................................... 2,461 2,321 Amortization of intangibles................................ - 277 Loss on debt extinguishment................................ - 3,867 Interest expense........................................... 838 777 Other (income)/expense, net................................ (41) (6) -------- -------- Loss before income taxes, and cumulative effect of change in accounting principle (746) (6,045) Benefit for income taxes................................... - (2,700) -------- -------- Loss before cumulative effect of change in accounting principle...... (746) (3,345) Cumulative effect of change in accounting principle........ - 12,500 -------- -------- Net loss................................................. $ (746) $(15,845) ======== ======== Net loss per share, basic and diluted: Net loss before cumulative effect of change in accounting principle $ (0.08) $ (0.37) Cumulative effect of change in accounting principle...... - (1.40) -------- -------- Net loss per share..................................... $ (0.08) $ (1.77) ======== ======== Weighted average number of shares outstanding: Basic and diluted..................................... 8,952 8,938 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. - 4 - PCD INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (CONDENSED AND UNAUDITED) (IN THOUSANDS)
QUARTER ENDED -------------------- 3/29/03 3/30/02 --------- -------- Cash flows from operating activities: Net loss.......................................................... $ (746) $(15,845) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation.................................................... 250 1,231 Amortization.................................................... 120 453 Impairment of goodwill.......................................... - 12,500 Loss on debt extinguishment..................................... - 3,867 Changes in operating assets and liabilities: Accounts receivable........................................... (248) (22) Income tax refund receivable.................................. - (2,700) Inventory..................................................... (34) 13 Prepaid expenses and other current assets..................... (51) 170 Other assets ................................................. 31 - Accounts payable.............................................. 817 (197) Accrued liabilities........................................... (256) (774) -------- -------- Net cash used in operating activities....................... (117) (1,304) Cash flows from investing activities: Capital expenditures.............................................. (110) (272) -------- -------- Net cash used in investing activities....................... (110) (272) Cash flows from financing activities: Borrowings of short-term debt..................................... 700 1,980 Deferred financing and loan amendment fees........................ - (247) -------- -------- Net cash provided by financing activities................... 700 1,733 Net increase in cash................................................ 473 157 Effect of exchange rate on cash..................................... (4) 1 Cash and cash equivalents at beginning of period.................... 919 543 -------- -------- Cash and cash equivalents at end of period.......................... $ 1,388 $ 701 ======== ========
The accompanying notes are an integral part of the consolidated financial statements - 5 - PCD INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (MARCH 29, 2003 UNAUDITED) NOTE 1. INTERIM FINANCIAL STATEMENTS: The condensed consolidated financial statements included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation. This financial data should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2002. NOTE 2. BANKRUPTCY FILING: On March 21, 2003, PCD Inc. entered into definitive agreements to sell the assets of its two business units. PCD agreed to sell its Industrial/Avionics Division, headquartered in Peabody, MA, to Amphenol Corporation ("Amphenol") for $14 million, less assumed liabilities and agreed to sell the Wells-CTI Division which has headquarters in Phoenix, AZ, to UMD Technology Inc. ("UMD") for approximately $2 million plus assumed liabilities. To facilitate the sales, PCD Inc. and its domestic subsidiary, Wells-CTI, Inc., filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Massachusetts. The Chapter 11 filings allow the sale of the assets of the domestic entities to be free and clear from certain liabilities that the prospective purchasers do not wish to assume. On May 1, 2003 PCD Inc. completed the sale of substantially all of the assets and operations of the Industrial/Avionics division to Amphenol and on May 6, 2003, PCD Inc., through its subsidiary, Wells-CTI, Inc., completed the sale of the Wells-CTI division to UMD. On May 20, 2003, the Company's plan of reorganization was confirmed by the Court. As a result, PCD's creditors will receive the proceeds from the sale of PCD's assets to Amphenol and UMD as well as any additional cash on PCD's balance sheet after the close of the transactions. The Company will then be liquidated and there will be no distribution to shareholders. - 6 - NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS: In December 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure - an amendment of FASB Statement No. 123." SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No.148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. As provided for in SFAS No. 123, the Company has elected to apply Accounting Principles Board ("APB") No. 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for our stock based compensation plans. We intend to continue to apply the provisions of APB No. 25. In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN No. 45 elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Company realized no material impact upon adoption. NOTE 4. STOCK BASED COMPENSATION: The Company accounts for stock based employee compensation arrangements in accordance with the provisions of APB No. 25, Accounting for Stock Issued to Employees, and comply with the disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 requires that companies either recognize compensation expense for grants of stock, stock options, and other equity instruments based on fair value, or provide pro forma disclosure of net income and earnings per share in the notes to the financial statements. The Company adopted the disclosure provisions of SFAS No. 123 in 1996 and has applied APB Opinion 25 and related Interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for its stock option plans. Had compensation cost for the Company's stock-based compensation plans been determined based on the fair value at the grant dates as calculated in accordance with SFAS No. 123, the Company's net loss and loss per share for the three months ended March 29, 2003 and March 30, 2002 would have been increased to the pro forma amounts indicated below: - 7 -
(In thousands) 3/29/03 3/29/02 -------- -------- Net loss, as reported $ (746) $(15,845) Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (2) (45) -------- -------- Pro forma net loss $ (748) $(15,890) -------- -------- Loss per share: Basic and diluted - as reported $ (0.08) $ (1.77) -------- -------- Basic and diluted - pro forma $ (0.08) $ (1.78) -------- --------
The fair value of each stock option is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
3/29/03 3/30/02 ------- ------- Dividend yield........... None None Expected volatility...... 100.0% 72.44% Risk free interest rate.. 3.1% 3.7% Expected life (years).... 5.0 5.0
NOTE 5. NET LOSS PER SHARE: The following tables reconcile net loss and weighted average shares outstanding to the amounts used to calculate basic and diluted earnings per share for the periods ended March 29, 2003 and March 30, 2002:
[ ](In thousands, except per share amounts) PER SHARE NET LOSS SHARES AMOUNT -------- ------ ------ FOR THE PERIOD ENDED MARCH 29, 2003 Basic and diluted loss......................... $ (746) 8,952 $ (0.08) ============ ===== ======= FOR THE PERIOD ENDED MARCH 30, 2002 Basic and diluted loss......................... $ (15,845) 8,938 $ (1.77) ============ ===== =======
Potential common stock shares of 1,727,835 and 615,888 for the quarters ended March 29, 2003 and March 30, 2002, respectively, have been excluded from the calculation of EPS, as their inclusion would be anti-dilutive. - 8 - NOTE 6. INVENTORY: Inventory consisted of the following:
(IN THOUSANDS) 3/29/03 12/31/02 ------- -------- Raw materials and finished subassemblies.... $ 3,151 $ 2,940 Work in process............................. 58 26 Finished goods.............................. 1,104 1,329 ------- --------- Total....................................... $ 4,313 $ 4,295 ======= ========
NOTE 7. COMPREHENSIVE LOSS: Our only other comprehensive loss is foreign currency translation adjustments. For the three months ended March 29, 2003 and March 30, 2002, our total comprehensive loss was as follows:
THREE MONTHS ENDED ------------------- (IN THOUSANDS) 3/29/03 3/30/02 -------- -------- Net loss............................ $ (746) $(15,845) Other comprehensive loss, net....... (121) (12) -------- -------- Total comprehensive loss............ $ (867) $(15,857) ======== ========
NOTE 8. COMMITMENTS AND CONTINGENCIES: Bankruptcy: On March 21, 2003, PCD Inc. entered into definitive agreements to sell the assets of its two business units. PCD agreed to sell its Industrial/Avionics Division, headquartered in Peabody, MA, to Amphenol Corporation ("Amphenol") for $14 million, less assumed liabilities and agreed to sell the Wells-CTI Division which has headquarters in Phoenix, AZ, to UMD Technology Inc. ("UMD") for approximately $2 million plus assumed liabilities. To facilitate the sales, PCD Inc. and its domestic subsidiary, Wells-CTI, Inc., filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Massachusetts. The Chapter 11 filings allow the sale of the assets of the domestic entities to be free and clear from certain liabilities that the prospective purchasers do not wish to assume. On May 1, 2003 PCD Inc. completed the sale of substantially all of the assets and operations of the Industrial/Avionics division to Amphenol and on May 6, 2003, PCD Inc., through its subsidiary, Wells-CTI, Inc., completed the sale of the Wells-CTI division to UMD. On May 20, 2003, the Company's plan of reorganization was confirmed by the Court. As a result, PCD's creditors will receive the proceeds from the sale of PCD's assets to Amphenol and UMD as well as any additional cash on PCD's balance sheet after the close of the transactions. The Company will then be liquidated and there will be no distribution to shareholders. - 9 - Litigation: The Company and its subsidiaries are subject to legal proceedings arising in the ordinary course of business. On the basis of information presently available and on the advice received from legal counsel, it is our opinion that the disposition or ultimate determination of such legal proceedings will not have a material adverse effect on the Company's consolidated financial position, its consolidated results of operations or its consolidated cash flows. Guarantees: The Company, to the extent legally permissible under Massachusetts law, indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was serving, at the Company's request in such capacity. The term of the indemnification period is for the officer's or director's lifetime. The potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited. No person shall have any right to indemnification for liabilities or expenses imposed or incurred in connection with any matter as to which such person shall be finally adjudged in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was in the best interest of the Company or to the extent that such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan. No claim for indemnification has been made by any person covered by said agreements, and/or the relevant provisions of the Company's Articles or By-laws, the Company believes that its estimated exposure for these indemnification obligations is currently minimal. NOTE 9. TAX REFUND: A provision of the Job Creation and Worker Assistance Act of 2002 passed by Congress in March 2002, allowed companies to carry back their 2001 and 2002 tax operating losses for a period of five years instead of two. The legislation allowed us to carry back tax losses from 2001 to offset taxable income in 1996 and 1997, resulting in a refund of approximately $2.7 million. We recorded a tax benefit and receivable for this amount in the first quarter of 2002 and received the refund in July 2002. NOTE 10. GOODWILL AND INTANGIBLE ASSETS: During 2002 we adopted SFAS No. 142 and recorded a transitional impairment charge of $12.5 million during the first quarter as a cumulative effect of a change in accounting principle. This charge was based on discounted cash flow analysis for the Wells-CTI semiconductor burn in division. This goodwill originated from our acquisition of Wells-Electronics in 1997. We completed our required annual impairment test of goodwill as of December 31, 2002 and recorded an additional impairment of $36.8 million. This impairment was based on the fair value of the Wells-CTI reporting unit as determined by the then proposed sale of our Wells-CTI division to UMD. - 10 - At December 31, 2002 we recorded an additional impairment charge of $9.3 million related to the intangible assets of our Wells-CTI segment thereby reducing the value of these assets to zero. This impairment was based on the fair value of the Wells-CTI business as determined by the then proposed sale of our Wells-CTI division to UMD. Accordingly, there was no aggregate amortization expense for the three month period ended March 29, 2003 and the aggregate amortization expense for the three month period ended March 30, 2002 was $259,000. NOTE 11. SEGMENT INFORMATION: The Company designs, manufactures and markets electronic connectors for use in Semiconductor burn-in applications, industrial equipment and avionics. The Company has two principal businesses: Semiconductor burn-in segment and industrial and avionics segment. Each of these is a business segment with its respective financial performance detailed in this report. Net income of the two principal businesses excludes the effects of special charges and gains. The results for Semiconductor burn-in include the effects of royalty revenues from IC package-related cross-license agreements. Business assets are the owned or allocated assets used by each business. Included in corporate activities are general corporate expenses, net of elimination of inter-segment transactions, which are generally intended to approximate market prices. Assets of corporate activities include cash, corporate equipment and improvements, net.
THREE MONTHS ENDED -------------------- (IN THOUSANDS) 3/29/03 3/30/02 -------- -------- SALES: Industrial/Avionics......... $ 3,737 $ 3,475 Semiconductor Burn-in....... 2,871 2,668 -------- -------- Totals.................... $ 6,608 $ 6,143 ======== ======== NET INCOME (LOSS): Industrial/Avionics......... $ 205 $ 290 Semiconductor Burn-in....... 262 (14,829) Corporate activities........ (1,213) (1,306) -------- -------- Totals.................... $ (746) $(15,845) ======== ========
3/29/03 12/31/02 ------- -------- ASSETS: Industrial/Avionics......... $ 8,248 $ 8,001 Semiconductor Burn-in....... 4,495 4,379 Corporate activities........ 2,363 2,251 ------- ------- Totals...................... $15,106 $14,631 ======= =======
NOTE 12. DEBT On December 26, 1997, the Company entered into a secured Revolving Credit Agreement ("Revolver") and secured term loan agreements (collectively referred to as the - 11 - "Senior Credit Facility") with several banks. On February 27, 2002, the Senior Credit Facility was replaced by an Amended and Restated Loan Agreement comprised of a $20.0 million Revolving Credit Loan and secured term loans aggregating $24.0 million (collectively referred to as the "Amended Senior Credit Facility"). The Amended Senior Credit Facility is collateralized by all of the assets of PCD and its subsidiaries. In conjunction with the Amended Senior Credit Facility, PCD and Wells-CTI (formerly Wells Electronics, Inc. and CTI Technologies, Inc.) each entered into a stock pledge agreement pledging all or substantially all of the stock of the subsidiaries of PCD and Wells-CTI. Each of PCD, Wells-CTI and certain of their subsidiaries also entered into a security agreement and certain other collateral or conditional assignments of assets. In connection with Amended Senior Credit Facility, the lenders received warrants, exercisable immediately and for a period of ten years, to purchase 1,450,000 shares of common stock of the Company at $0.01 per share. In addition, warrants previously issued in 2000 to the lenders to purchase 203,949 shares of the Company's common stock at $4.90 per share were re-priced to $0.01 per share. The new and re-priced warrants were valued at $2.0 million utilizing the Black Scholes pricing method. The assumptions utilized under the Black Scholes method were 96% volatility, 1.82% risk free rate of return, no dividends and a term of ten years. The replacement of the Senior Credit Facility with the Amended Senior Credit Facility was accounted for as an extinguishment of the existing debt and an issuance of new debt under the provisions of SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities, and Emerging Issues Task Force ("EITF") 96-19, Debtors Accounting for a Modification or Exchange of Debt Instruments. The transaction resulted in a loss of $3.9 million in 2002. The loss was subsequently reclassified in accordance with SFAS No. 145, Rescission of FAS Nos. 4, 44 and 64, Amendment of SFAS No. 13 and Technical Corrections as of April 2002. Included in this loss are the cost of the re-priced warrants, the new warrants issued to the lenders ($2.1 million) and unamortized bank fees on the old debt ($1.8 million). At March 29, 2003 and December 31, 2002 the amounts outstanding under the Amended Senior Credit Facility were $41.6 million and $40.9 million, respectively. At March 29, 2003, the Company had no borrowing availability and its borrowing availability at December 31, 2002 was capped based upon projected borrowing needs as submitted by the Company and as approved by the lenders on a monthly basis. The Company was only permitted to borrow during the first quarter of 2003 to fund professional fees in connection with the bankruptcy ($400,000) and to settle the South Bend lease ($300,000) in March 2003. On May 1, 2003 PCD Inc. completed the sale of substantially all of the assets and operations of the Industrial/Avionics division to Amphenol and on May 6, 2003, PCD Inc., through its subsidiary, Wells-CTI, Inc., completed the sale of the Wells-CTI division to UMD. - 12 - On May 20, 2003, the Company's plan of reorganization was confirmed by the Court. As a result, PCD's creditors will receive the proceeds from the sale of PCD's assets to Amphenol and UMD as well as any additional cash on PCD's balance sheet after the close of the transactions. - 13 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS QUARTER ENDED MARCH 29, 2003 COMPARED TO THE QUARTER ENDED MARCH 30, 2002 Net Sales. Net sales of $6.6 million for the quarter ended March 29, 2003 increased by $0.5 million or 8% from net sales of $6.1 million during the prior year quarter. Net sales of $2.9 million in the semiconductor burn-in socket product lines were up $0.2 million or 8% from the prior year quarter due to higher shipments from the Company's Japan subsidiary. Industrial/Avionics division net sales were $3.7 million, up $0.3 million or 8% from the prior year. This increase was due primarily to increased demand from customers. Gross Profit. Gross profit was $2.5 million for the quarter ended March 29, 2003 as compared with $1.2 million during the prior year quarter. As a percentage of net sales, gross profit was 38% during the quarter as compared with 19% during the prior year. The increase from last year was due primarily to a $1.2 million reduction in manufacturing expense primarily as a result of lower depreciation. The lower depreciation resulted from the Wells-CTI division having written its property plant and equipment down to fair value at December 31, 2002 based on the then proposed sale to UMD. Operating Expenses. Operating expenses were $2.5 million during the quarter ended March 29, 2003 as compared to $2.3 million during the prior year quarter. Operating expenses include selling, general and administrative expenses and costs of product development. The increase from the prior year was due primarily to higher professional fees expense in connection with the Company's sales of assets and bankruptcy filing. Loss on Debt Extinguishment. In connection with our debt restructuring, we recognized a non-cash charge of $3.9 million during the quarter ended March 30, 2002. The charge consisted of $2.1 million of valuation on new and re-priced warrants as well as $1.8 million of unamortized bank fees and previous warrant valuation. Interest Expense and Other Income, Net. Interest expense during the quarter ended March 29, 2003 was $838,000 and was $777,000 during the quarter ended March 30, 2002. The increase in 2003 was due to a higher outstanding balance and the higher weighted average interest rates on the Amended Senior Credit Facility in 2003. Amortization of Goodwill and Other Intangibles and Cumulative Effect of Change in Accounting Principle. We adopted SFAS No. 142, on January 1, 2002. In accordance with SFAS No. 142, goodwill amortization was discontinued as of January 1, 2002. The Company completed the transitional impairment test and recorded a goodwill impairment charge of $12.5 million, related to our semiconductor burn-in segment as a cumulative effect of change in accounting principle in the first quarter of 2002. Amortization of $277,000 during the quarter ended March 30, 2002 - 14 - consisted of amortization of other intangible assets, principally patents and trademarks. Amortization was zero during the three months ended March 29, 2003 as a result of the Wells-CTI division having written its patents and trademarks down to fair value at December 31, 2002 as determined by the then proposed sale of our Wells-CTI division to UMD. Benefit For Income Taxes. During the quarter ended March 30, 2002 we recognized a tax benefit of $2.7 million resulting from recent legislation that extended the tax loss carry back period for 2001 and 2002 tax years from two to five years. The $2.7 million benefit consisted entirely of an anticipated tax refund, which was received during the second quarter of 2002. LIQUIDITY AND CAPITAL RESOURCES Cash used in operating activities was $117,000 during the quarter ended March 29, 2003 as compared with $1.3 million during the previous year. The reduction in cash used in operating activities was due primarily to higher revenue in 2003 together with reduced payments to vendors as a result of the bankruptcy filing. On March 21, 2003, PCD Inc. entered into definitive agreements to sell the assets of its two business units. PCD agreed to sell its Industrial/Avionics Division, headquartered in Peabody, MA, to Amphenol Corporation ("Amphenol") for $14 million, less assumed liabilities and agreed to sell the Wells-CTI Division which has headquarters in Phoenix, AZ, to UMD Technology Inc. ("UMD") for approximately $2 million plus assumed liabilities. To facilitate the sales, PCD Inc. and its domestic subsidiary, Wells-CTI, Inc., filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Massachusetts. The Chapter 11 filings allow the sale of the assets of the domestic entities to be free and clear from certain liabilities that the prospective purchasers do not wish to assume. On May 1, 2003 PCD Inc. completed the sale of substantially all of the assets and operations of the Industrial/Avionics division to Amphenol and on May 6, 2003, PCD Inc., through its subsidiary, Wells-CTI, Inc., completed the sale of the Wells-CTI division to UMD. On May 20, 2003, the Company's plan of reorganization was confirmed by the Court. As a result, PCD's creditors will receive the proceeds from the sale of PCD's assets to Amphenol and UMD as well as any additional cash on PCD's balance sheet after the close of the transactions. The Company will then be liquidated and there will be no distribution to shareholders. - 15 - ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Company was exposed to certain market risks including primarily the effects of changes in foreign currency exchange rates and interest rates. Investments in foreign subsidiaries, and their resultant operations, denominated in foreign currencies, create exposures to changes in exchange rates. Prior to March 21, 2003, the Company was exposed to fluctuations in interest rates in connection with its variable rate term loan. ITEM 4. CONTROLS AND PROCEDURES Within the 90 days prior to the date of this Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chairman of the Board, Chief Executive Officer and President along with the Company's Vice President, Finance and Administration, Chief Financial Officer and Treasurer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Company's Chairman of the Board, Chief Executive Officer and President along with the Company's Vice President, Finance and Administration, Chief Financial Officer and Treasurer, concluded that the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. There have been no significant changes in the Company's internal controls or other factors which could significantly affect internal controls subsequent to the date the Company carried out its evaluation. - 16 - PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS See Note 8 to the Company's Condensed Consolidated Financial Statements (above). ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE ITEM 5. OTHER INFORMATION On June 5, 2003, with the approval of the Bankruptcy Court, the Company filed Articles of Amendment with the Secretary of State of the Commonwealth of Massachusetts changing its name from PCD Inc. to MJS Liquidation Corp. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Articles of Amendment to Articles of Organization, dated June 5, 2003 99.1 Chief Executive Officer Certification 99.2 Chief Financial Officer Certification (b) Reports on Form 8-K Amendment and Temporary Waiver No. 4, dated December 31, 2002 Announcement of Receipt of Nasdaq Delisting Notice, dated January 28, 2003 Announcement of filing of voluntary petition under Chapter 11 of U.S. Bankruptcy Code, and approval of "first day motions", dated March 31, 2003 Monthly Operating Statements for PCD Inc. and Wells-CTI, Inc. for the period from February 23, 2003 through March 29, 2003 Amended Form 8-K reconciling the U.S. Bankruptcy Trustee filings to GAAP dated May 5, 2003. - 17 - Announcement of sales of assets and operations of the Industrial/Avionics and Wells-CTI businesses dated May 7, 2003. Monthly Operating Statements for PCD Inc. and Wells-CTI, Inc. for the period from March 30, 2003 through April 30, 2003 dated June 4, 2003. Announcement of Plans of Reorganization confirmed by the bankruptcy court dated June 5, 2003. - 18 - S I G N A T U R E S 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. PCD Inc. (Registrant) Dated: June 19, 2003 /s/ John L. Dwight, Jr. ----------------------- John L. Dwight, Jr. Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) Dated: June 19, 2003 /s/ John J. Sheehan III ----------------------- John J. Sheehan III Vice President, Finance and Administration, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) - 19 - CERTIFICATIONS I, John L. Dwight, Jr., certify that: 1. I have reviewed this quarterly report on Form 10-Q of PCD Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including it consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 19, 2003 /s/ John L. Dwight, Jr. --------------------------------- John L. Dwight, Jr. Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) - 20 - CERTIFICATIONS I, John J. Sheehan III, certify that: 1. I have reviewed this quarterly report on Form 10-Q of PCD Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including it consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 19, 2003 /s/ John J. Sheehan III --------------------------------- John J. Sheehan III Vice President, Finance and Administration, Chief Financial Officer and Treasurer (Chief Financial and Accounting Officer) - 21 - EX-3.1 3 b46974pcexv3w1.txt ARTICLES OF AMENDMENT TO ARTICLES OF ORGANIZATION EXHIBIT 3.1 FEDERAL IDENTIFICATION NO. 04-2604950 THE COMMONWEALTH OF MASSACHUSETTS WILLIAM FRANCIS GALVIN Secretary of the Commonwealth One Ashburton Place, Boston, Massachusetts 02108-1512 ARTICLES OF AMENDMENT (GENERAL LAWS, CHAPTER 156B, SECTION 72) We, John J. Sheehan III ******/*Vice President, and Melissa J. Solomon ******/*Assistant Clerk, of PCD Inc. , ----------------------------------------------------------------------------- (Exact name of corporation) located at 2 Technology Drive, Peabody, MA 01960 , --------------------------------------------------------------------- (Street address of corporation in Massachusetts) certify that these Articles of Amendment affecting articles numbered: 1 - -------------------------------------------------------------------------------- (Number those articles 1, 2, 3, 4, 5 and/or 6 being amended) of the Articles of Organization were ******************************************* /1/***************************************************************************** /2/***************************************************************************** authorized by Order of the United States Bankruptcy Court, District of Massachusetts (Eastern Division) on May 20, 2003, and these Articles of Amendment are being filed pursuant to and in accordance with General Laws, Chapter 156B, Section 73. Docket #101. *Delete the inapplicable words. *Delete the inapplicable clause. (1)For amendments adopted pursuant to Chapter 156B, Section 70. (2)For amendments adopted pursuant to Chapter 156B, Section 71. NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS INSUFFICIENT, ADDITIONS SHALL BE SET FORTH ON ONE SIDE ONLY OF SEPARATE 8 1/2 x 11 SHEETS OF PAPER WITH A LEFT MARGIN OF AT LEAST 1 INCH. ADDITIONS TO MORE THAN ONE ARTICLE MAY BE MADE ON A SINGLE SHEET SO LONG AS EACH ARTICLE REQUIRING EACH ADDITION IS CLEARLY INDICATED. To change the number of shares and the par value (if any) of any type, class or series of stock which the corporation is authorized to issue, fill in the following: The total presently authorized is:
- ------------------------------------------------------------------------------------------------------------ WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - ------------------------------------------------------------------------------------------------------------ TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ------------------------------------------------------------------------------------------------------------ Common: Common: - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ Preferred: Preferred: - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------
Change the total authorized to:
- ------------------------------------------------------------------------------------------------------------ WITHOUT PAR VALUE STOCKS WITH PAR VALUE STOCKS - ------------------------------------------------------------------------------------------------------------ TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE - ------------------------------------------------------------------------------------------------------------ Common: Common: - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ Preferred: Preferred: - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------
The Articles of Organization of the Corporation are amended by deleting Article 1 thereof and replacing it with a new Article 1 providing: "The name by which the corporation shall be known is: MJS LIQUIDATION CORP." The foregoing amendment(s) will become effective when these Articles of Amendment are filed in accordance with General Laws, Chapter 156B, Section 6 unless these articles specify, in accordance with the vote adopting the amendment, a later effective date not more than thirty days after such filing, in which event the amendment will become effective on such later date. Later effective date: ________________________________________ . SIGNED UNDER THE PENALTIES OF PERJURY, this 5th day of June, 2003, /s/ John J. Sheehan III , *****/*Vice President, - ------------------------------------------------------- John J. Sheehan III /s/ Melissa J. Solomon , *****/*Assistant Clerk. - ------------------------------------------------------- Melissa J. Solomon *Delete the inapplicable words. THE COMMONWEALTH OF MASSACHUSETTS ARTICLES OF AMENDMENT (GENERAL LAWS, CHAPTER 156B, SECTION 72) I hereby approve the within Articles of Amendment and, the filing fee in the amount of $100.00 having been paid, said articles are deemed to have been filed with me this 5th day of June 2003. Effective date: _______________________________________________ WILLIAM FRANCIS GALVIN Secretary of the Commonwealth TO BE FILLED IN BY CORPORATION CONTACT INFORMATION: Melissa J. Solomon, Esq. Day, Berry & Howard LLP 260 Franklin St., Boston, MA 02110 Telephone: 617-345-4719 E-mail: mjsolomon@dbh.com EX-99.1 4 b46974pcexv99w1.txt CERTIFICATION CHIEF EXECUTIVE OFFICER EXHIBIT 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PCD Inc. (the "Company") on Form 10-Q for the period ended March 29, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John L. Dwight, Jr., Chief Executive Officer of the Company, certify, pursuant to U.S.C. Sections. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of March 29, 2003 (the last date of the period covered by the Report). /s/ John L. Dwight, Jr. ----------------------- John L. Dwight, Jr. Chief Executive Officer June 19, 2003 EX-99.2 5 b46974pcexv99w2.txt CERTIFICATION CHIEF FINANCIAL OFFICER EXHIBIT 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PCD Inc. (the "Company") on Form 10-Q for the period ended March 29, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John J. Sheehan, III, Chief Financial Officer of the Company, certify, pursuant to U.S.C. Section 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of March 29, 2003 (the last date of the period covered by the Report). /s/ John J. Sheehan III ----------------------- John J. Sheehan, III Chief Financial Officer June 19, 2003 -----END PRIVACY-ENHANCED MESSAGE-----