-----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, DyFRBktgLrxoOMreEt0dul4eXY8JIY+nFrzMyJ17ijagXefEMDmOjz0yoPD80UwT rSmHsHFwccozb3oW3hUlpw== 0001007594-97-000017.txt : 19970502 0001007594-97-000017.hdr.sgml : 19970502 ACCESSION NUMBER: 0001007594-97-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960329 FILED AS OF DATE: 19970501 SROS: NASD 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: 97592871 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 AUDIT LETTER SECURITIES AND EXCHANGE COMMISSION Washington, DC 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, 1997 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 No.) 2 Technology Drive, Centennial Park, Peabody, Massachusetts (Address of principal executive offices) 01960-7977 (Zip Code) Registrant's telephone number, including area code: 508-532-8800 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 --- --- Number of shares of common stock, $0.01 par value, outstanding at April 23, 1997: 5,912,233 PCD Inc. FORM 10-Q FOR THE QUARTER ENDED MARCH 29, 1997 Statements in this report concerning the future financial condition, results of operations and business of the Company are "forward-looking" statements as defined in the Securities Act of 1933 and Securities Exchange Act of 1934. Investors are cautioned that these forward-looking statements are inherently uncertain, and that actual performance and results are subject to many risk factors, including the Company's dependence on the integrated circuit package industry, the Company's dependence on its principal customers and independent distributors, fluctuations in demand for the Company's products, patent litigation involving the Company, rapid technological evolution in the electronics industry, and the like. The Company's filings with the Securities and Exchange Commission, including its 1996 Form 10-K, contain additional information concerning such risk factors, and copies of these filings are available from the Company upon request and without charge. PART I FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS The Consolidated Balance Sheets (unaudited) at March 29, 1997 and December 31, 1996, the Consolidated Statements of Income (unaudited) and the Consolidated Statements of Cash Flows (unaudited) for the three months ended March 29, 1997 and March 30, 1996 are presented below. See the notes to these condensed consolidated financial statements at the end thereof. 2 PCD Inc. CONSOLIDATED BALANCE SHEETS (Condensed and unaudited) (In thousands)
3/29/97 12/31/96 ------- -------- ASSETS Current assets: Cash and cash equivalents................. $20,747 $20,529 Accounts receivable, net.................. 4,109 3,578 Inventory................................. 2,862 2,608 Prepaid expenses and other current assets. 92 89 ------- ------- Total current assets............... 27,810 26,804 Equipment and improvements Equipment and improvements................ 10,108 9,716 Accumulated depreciation.................. 4,756 4,379 ------- ------- Equipment and improvements, net.............. 5,352 5,337 Other assets................................. 324 315 ------- ------- Total assets....................... $33,486 $32,456 ======= ======= LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................... $ 535 $ 627 Accrued liabilities....................... 2,830 3,123 ------- ------- Total current liabilities.......... 3,365 3,750 Stockholders' equity......................... 30,121 28,706 ------- ------- Total liabilities and stockholders' equity.......... $33,486 $32,456 ======= =======
The accompanying notes are an integral part of the consolidated financial statements. 3 PCD Inc. CONSOLIDATED STATEMENTS OF INCOME (Condensed and unaudited) (In thousands, except per share data)
Three Months Ended ------------------ 3/29/97 3/30/96 ------- ------- Net sales................................... $6,217 $7,087 Cost of sales............................... 3,264 3,852 ------ ------ Gross profit................................ 2,953 3,235 Operating expenses.......................... 1,356 1,495 ------ ------ Income from operations...................... 1,597 1,740 Other income, net........................... 261 54 ------ ------ Income before income taxes.................. 1,858 1,794 Provision for income taxes.................. 683 664 ------ ------ Net income.................................. $1,175 $1,130 ====== ====== Net income per share........................ $ 0.18 $ 0.21 ====== ====== Weighted average number of common and common equivalent shares outstanding........... 6,594 5,320 ====== ======
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)
Three Months Ended ------------------ 3/29/97 3/30/96 ------- ------- Cash flows from operating activities: Net income...................................... $1,175 $1,130 Adjustments to reconcile net income to net cash provided by operating activities Depreciation................................. 377 351 Amortization of deferred compensation........ 15 15 Allowance for uncollectible accounts......... 4 59 Tax benefit from stock options exercised..... 161 - Changes in operating assets and liabilities: Increase in accounts receivable............ (535) (159) (Increase) decrease in inventory............ (254) 29 (Increase) decrease in prepaid expenses and other current assets........ (3) 257 Increase in other assets................... (9) (9) Decrease in accounts payable............... (92) (113) Decrease in accrued liabilities............ (293) (313) ------- ------ Net cash provided by operating activities............................. 546 1,247 Cash flows from investing activities: Capital expenditures............................ (392) (494) ------- ------ Net cash used in investing activities.... (392) (494) Cash flows from financing activities: Exercise of common stock options................ 64 14 ------- ------ Net cash provided by financing activities 64 14 ------- ------ Net increase in cash.............................. 218 767 Cash and cash equivalents at beginning of period.. 20,529 3,958 ------- ------ Cash and cash equivalents at end of period........ $20,747 $4,725 ======= ======
The accompanying notes are an integral part of the consolidated financial statements. 5 PCD Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (March 29, 1997 Unaudited) Note 1. INTERIM FINANCIAL STATEMENTS The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. This financial data should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 1996 which are included in the Company's Form 10-K filing. Results for the interim period presented are not necessarily indicative of results to be anticipated for the entire year. Note 2. NET INCOME PER SHARE Net income per common share is computed using the weighted average number of shares of common stock outstanding and dilutive common stock equivalents from the exercise of stock options (using the treasury stock method). Fully diluted and primary net income per common share were the same for each period presented. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings Per Share, ("FAS 128") which specifies the computation, presentation and disclosure requirements of earnings per share and is effective for financial statements issued for periods ending after December 15, 1997. The Company has not yet determined the impact of FAS 128 on net income per share. Note 3. INVENTORY
3/29/97 12/31/96 ------- -------- (In Thousands) Inventory: Raw materials and finished subassemblies $2,102 $1,908 Work in process......................... 252 226 Finished goods.......................... 508 474 ------ ------ Total................................. $2,862 $2,608 ====== ======
6 Note 4. LITIGATION On August 21, 1995, the Company's wholly-owned subsidiary, CTi Technologies, Inc. ("CTi"), filed an action in the United States District Court for the District of Arizona seeking a declaratory judgment against Wayne K. Pfaff, an individual residing in Texas ("Pfaff"), and Plastronics Socket Company, Inc., a corporation affiliated with Pfaff, alleging and seeking a declaratory judgment that two United States patents issued to Pfaff and relating to certain burn-in sockets for "leadless" IC packages (the "Pfaff Leadless Patent") and ball grid array ("BGA") IC packages (the "Pfaff BGA Patent") (collectively, the "Pfaff Patents") are invalid and are not infringed by CTi, the products of which include burn-in sockets for certain "leaded" packages (including Quad Flat Paks)(the "CTi Leaded Products") and BGA packages (the "Cti BGA Products")(collectively, the "CTi Products"). Pfaff has filed a counterclaim alleging that CTi infringes the Pfaff Leadless Patent and has requested an award of damages; the counterclaim does not allege infringement of the Pfaff BGA Patent. Pfaff has also sought a permanent injunction against further infringement by CTi of the Pfaff Leadless Patent. The Company understands that Pfaff has been issued patents for the inventions covered by the Pfaff Leadless Patents in Germany, France, Great Britain, Japan and Malaysia (together with the United States, the "Territory"). Revenue from sales of CTi Leaded Products in the Territory in 1996 and 1995 was approximately $1.9 million and $5.8 million, respectively, which represented approximately 7% and 23% of the Company's net sales in 1996 and 1995, respectively. The CTi BGA Products will not make a significant contribution to revenues of the Company until years subsequent to 1996. The Pfaff Leadless Patent has been the subject of earlier litigation initiated by Pfaff against a burn-in connector manufacturer unrelated to the Company, Wells Electronics, Inc. ("Wells"), in which Pfaff alleged that the manufacture and sale of a wide range of Wells products infringed the Pfaff Leadless Patent. Included among the Wells products covered by the Pfaff litigation was a group of burn-in sockets produced by Wells for certain leaded packages (the "Wells Leaded Products"). The Wells Leaded Products compete directly with CTi Leaded Products and accept similar IC packages. The Company believes that Pfaff may assert in CTi's litigation with Pfaff that Wells Leaded Products are similar in design to CTi Leaded Products. In October 1995, the United States District Court for the Northern District of Texas (the "Texas Court") found certain claims in the Pfaff Leadless Patent to be invalid, but found other claims in the patent not to be invalid and to be infringed by certain Wells products, including the Wells Leaded Products. On December 19, 1995, the Texas Court issued a permanent injunction against the manufacture and sale by Wells of the products found to be infringing. In January 1996, the United 7 States Court of Appeals (Federal Circuit) stayed the injunction, pending appeal, based on its finding that Wells had demonstrated that it is likely to succeed in its contention that the Pfaff Leadless Patent is invalid. In that appeal, the Federal Circuit Court of Appeals heard oral argument in October 1996, but has not issued a decision. The Pfaff BGA Patent was not involved in the Pfaff/Wells litigation. The CTi-Pfaff action in the District of Arizona has been stayed pending the outcome of the appeal from the Pfaff-Wells case. Should the Pfaff Leadless Patent be found invalid in that appeal then Pfaff will be unable to assert that patent against CTi. Should the Federal Circuit Court of Appeals find the patent not to be invalid, then the litigation in the District of Arizona will go forward to determine whether or not the CTi Leaded Products infringe the Pfaff patent. The Company believes, based on the advice of counsel, that CTi has meritorious defenses against any claim that CTi Products infringe the Pfaff Patents, and CTi intends to prosecute and defend vigorously its position in its declaratory judgment action and any related or subsequent litigation. Although Wells invoked similar defenses on the Pfaff Leadless Patent in its lawsuit with Pfaff, the Company believes that CTi will be better positioned to present these defenses. There can be no assurance, however, that the Company or CTi will prevail in pending or any future litigation with Pfaff, and an adverse outcome could have a material adverse effect on the financial condition, results of operations and business of the Company. Such adverse effect could include, without limitation, the requirement that CTi pay substantial damages for past infringement and an injunction against the manufacture or sale in the United States of such products as are found to be infringing. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FIRST QUARTER 1997 Net sales for the first quarter ended March 29, 1997 were $6.2 million, a decrease of 12% from $7.1 million in the year-earlier period. This decline was primarily in the two product lines that service the semiconductor industry, burn-in and production/PLD products. These two product lines are down as the impact of the downturn in the semiconductor market had only slowed shipments moderately in the first quarter of 1996. However volume in both of these product lines increased over the fourth quarter of 1996, confirming the positive trend seen in the bookings' pattern. In addition, the industrial terminal block 8 product line favorably offset some of the above referenced decline. Customer bookings for the quarter ended March 29, 1997 were $6.2 million, down 20% compared to orders of $7.8 million in the year-earlier period and up slightly from orders of $6.1 million in the fourth quarter of 1996. On a year-to-year comparative basis, the decrease in customer orders was due primarily to the erratic bookings pattern experienced in 1996 by two of our largest customers effecting the production/PLD and avionic product lines. While orders for these two customers were below those of the year-earlier period, their bookings outlook remains favorable. The Company ended the quarter with an order backlog of $7.3 million which remained unchanged from that of the end of the fourth quarter of 1996. Gross profits for the quarter ended March 29, 1997 amounted to $3.0 million or 47.5% of net sales, compared to $3.2 million or 45.6% of net sales in the year-earlier period. This increase in gross profit as a percentage of net sales in the quarter from the prior period relates primarily to the absence of a one-time expense for product development in the burn-in socket product category in the first quarter of 1996. In addition, gross profit was favorably impacted by efficiency gains in our primary processes. Operating expenses for the first quarter of 1997 were $1.4 million, or 21.8% of net sales, a decrease of $0.1 million or approximately 10% compared to expenses of $1.5 million or 21.1% of net sales in the year-earlier period. This decrease was in line with the Company's plan and it reflects our ongoing efforts in cost containment. Other income increased to $261 thousand for the first quarter of 1997 compared to $54 thousand for the year-earlier period. Other income consists primarily of interest income. The effective rate for income taxes for the quarter ended March 29, 1997 declined to 36.8% from 37% for the year-earlier period. The effective rate for income taxes was down due to the effect of establishing a foreign sales corporation (FSC)during the first quarter of 1997 to take advantage of favorable federal tax laws for revenue and the related profits associated with sales to foreign corporations. MATERIAL CHANGES IN FINANCIAL CONDITION As of March 29, 1997, the Company had cash and cash equivalents of approximately $20.7 million and working capital of approximately $24.4 million. Cash provided by operating 9 activities totaled $0.5 million for the quarter ended March 29, 1997 compared to $1.2 million in the year-earlier period. Capital expenditures were $0.4 million for the first quarter of 1997 and are expected to reach $2.3 million this year, up from $1.9 million for the year 1996. The Company believes that funds generated from operations together with the net proceeds of the offering and existing cash balances will be sufficient to meet the Company's cash requirements at least through 1997. 10 PCD Inc. PART II OTHER INFORMATION Item 1. Legal Proceeding Incorporated by reference to the Company's Form 10-K filed with the Securities and Exchange Commission on March 28, 1997. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 11.1 Statement re computation of earnings per share. 21.1 Subsidiaries of the registrant 27.1 Financial Data Schedule. (b) Reports on Form 8-K There were no reports on Form 8-K filed during the period ended March 29, 1997. 11 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: May 1, 1997 /s/ John L. Dwight, Jr. ----------- ------------------------ John L. Dwight, Jr. Chairman of the Board, Chief Executive Officer and President (Principal Executive Officer) Dated: May 1, 1997 /s/ Mary L. Mandarino ----------- ------------------------ Mary L. Mandarino Vice President, Finance and Administration, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) 12 Exhibit Index - ------------- Exhibit Number Description - ------- ----------- 11.1 Statement re computation of earnings per share. 21.1 Subsidiaries of the registrant. 27.1 Financial Data Schedule. Exhibit 11.1 PCD Inc. STATEMENT RE COMPUTATION OF EARNINGS PER SHARE (1) For the quarter ended March 29, 1997 Common stock outstanding, beginning of the period...................... 5,854,733 Weighted average common stock issued during the period............................ 30,057 Dilutive effect of common stock equivalents.... 709,134 --------- Weighted average number of common and common equivalent shares outstanding................ 6,593,924 ========= Net income per share........................... 0.18 ========= For the quarter ended March 30, 1996 Common stock outstanding, beginning of the period...................... 4,597,032 Weighted average common stock issued during the period............................ 7,333 Dilutive effect of common stock equivalents.... 715,976 --------- Weighted average number of common and common equivalent shares outstanding................ 5,320,341 ========= Net income per share........................... 0.21 =========
(1) All common and common equivalent shares have been restated to reflect a 12-for-1 stock split of the Company's common stock effected in February, 1996. Exhibit 21.1 SUBSIDIARIES OF THE REGISTRANT PCD Inc. CTi Technologies, Inc. PCD Securities Corp. PCD USVI, Inc. EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL INFORMATION 1000 3-MOS DEC-31-1997 MAR-29-1997 20747 0 4345 236 2862 27810 10108 4756 33486 3365 0 0 0 59 30062 33486 6217 6217 3264 3264 1356 0 1 1858 683 1175 0 0 0 1175 0.18 0.18
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