-----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, AukZ6PpvsAchJVj05OZkfe1M0qVwIYlShM3gY2FR94nxyTEF/sdB/E18uvxgGcHM 4aP6tM2y7VdE0pKNuAigpQ== 0000950135-98-002849.txt : 19980504 0000950135-98-002849.hdr.sgml : 19980504 ACCESSION NUMBER: 0000950135-98-002849 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980320 ITEM INFORMATION: FILED AS OF DATE: 19980501 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HADCO CORP CENTRAL INDEX KEY: 0000729533 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 042393279 STATE OF INCORPORATION: MA FISCAL YEAR END: 1030 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-12102 FILM NUMBER: 98607484 BUSINESS ADDRESS: STREET 1: 12A MANOR PKWY CITY: SALEM STATE: NH ZIP: 03079 BUSINESS PHONE: 6038988000 MAIL ADDRESS: STREET 1: 12A MONOR PARKWAY CITY: SALEM STATE: NH ZIP: 03079 8-K/A 1 HADCO CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Commission Date of Report (Date of earliest event reported): March 20, 1998 Hadco Corporation (Exact name of Registrant as specified in its charter) Massachusetts 0-12102 04-2393279 - ---------------------------- ------------------------ ---------------------------------- (State or other jurisdiction (Commission File Number) (IRS Employer Identification No.) of Incorporation
12A Manor Parkway, Salem, New Hampshire, 03079 ---------------------------------------- (Address of principal executive offices) (603) 898-8000 ---------------------------------------- Registrant's telephone number, including area code 2 Item 7. FINANCIAL STATEMENTS AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED Report of Independent Auditors Consolidated Balance Sheets at July 31, 1996 and 1997 and January 31, 1998 (unaudited) Consolidated Statements of Income for the Years Ended July 31, 1995, 1996 and 1997 and for the six-months ended February 2, 1997 (unaudited) and January 31, 1998 (unaudited) Consolidated Statements of Cash Flow for the Years Ended July 31, 1995, 1996 and 1997 and for the six-months ended February 2, 1997 (unaudited) and January 31, 1998 (unaudited) Consolidated Statements of Shareholders' Equity for the Years Ended July 31, 1995, 1996 and 1997 and for the six-months ended January 31, 1998 (unaudited) Notes to Consolidated Financial Statements (b) PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Pro Forma Condensed Consolidated Balance Sheet as of January 31, 1998 2. Pro Forma Condensed Consolidated Statement of Operations for the Year Ended October 25, 1997 3. Pro Forma Consolidated Statement of Operations for the Three-months Ended January 31, 1998 4. Note to Pro Forma Condensed Consolidated Financial Statements 3 CONTINENTAL CIRCUITS CORP. INDEX TO FINANCIAL STATEMENTS Report of Independent Auditors......................................... F-1 Consolidated Balance Sheets at July 31, 1996 and 1997 and January 31, 1998 (unaudited)........................................... F-2 Consolidated Statements of Income for the Years Ended July 31, 1995, 1996 and 1997 and for the six-months ended February 2, 1997 (unaudited) and January 31, 1998 (unaudited)........................... F-3 Consolidated Statements of Cash Flow for the Years Ended July 31, 1995, 1996 and 1997 and for the six-months ended February 2, 1997 (unaudited) and January 31, 1998 (unaudited)...................... F-4 Consolidated Statements of Shareholders' Equity for the Years Ended July 31, 1995, 1996 and 1997 and for the six-months ended January 31, 1998 (unaudited)........................................... F-5 Notes to Consolidated Financial Statements ............................ F-6 4 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders Continental Circuits Corp. We have audited the accompanying consolidated balance sheets of Continental Circuits Corp. and subsidiaries as of July 31, 1996 and 1997, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended July 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Continental Circuits Corp. and subsidiaries at July 31, 1996 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended July 31, 1997 in conformity with generally accepted accounting principles. /S/ ERNST & YOUNG LLP Phoenix, Arizona August 22, 1997 F-1 5 CONTINENTAL CIRCUITS CORP. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
JULY 31, JULY 31, JANUARY 31, 1996 1997 1998 -------- -------- ----------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................ $ 3,851 $ 85 $ 180 Accounts receivable, less allowance of $167 in 1996 and $152 in 1997...................................... 15,114 21,431 20,150 Inventories.............................................. 4,796 8,805 13,081 Refundable income taxes.................................. 240 420 420 Deferred income taxes.................................... 714 125 125 Prepaid expenses and other............................... 259 946 1,109 ------- ------- -------- Total current assets.................................. 24,974 31,812 35,065 Property, plant, and equipment: Land..................................................... 2,899 3,586 3,586 Buildings and improvements............................... 18,353 24,677 30,733 Machinery and equipment.................................. 53,065 69,123 80,333 ------- ------- -------- 74,317 97,386 114,652 Accumulated Depreciation................................. 40,200 46,422 50,774 ------- ------- -------- 34,117 50,964 63,878 Other assets............................................... 495 83 3,340 ------- ------- -------- Total assets............................................. $59,586 $82,859 $102,283 ======= ======= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable......................................... $ 7,193 $14,665 $ 15,774 Accrued vacation expense................................. 720 688 497 Other accrued expenses................................... 1,332 2,443 1,965 Current portion of long-term debt........................ 1,000 -- -- ------- ------- -------- Total current liabilities............................. 10,245 17,796 18,236 Long-term debt, less current portion..................... 3,333 10,312 29,375 Deferred income taxes.................................... 1,976 2,507 2,507 Commitments and contingencies Shareholders' equity: Preferred stock, $.01 par value -- Authorized shares 1,000,000................................................ -- -- -- Issued and outstanding shares none Common stock, $.01 par value -- Authorized shares 20,000,000 Issued and outstanding shares -- 7,194,000 in 1996, 7,252,000 in 1997, and 7,292,000 1998............... 72 73 73 Additional paid-in capital............................... 10,077 10,266 10,511 Retained earnings........................................ 33,883 41,905 41,581 ------- ------- -------- Total shareholders' equity............................... 44,032 52,244 52,165 ------- ------- -------- Total liabilities and shareholders' equity............ $59,586 $82,859 $102,283 ======= ======= ========
See accompanying notes F-2 6 CONTINENTAL CIRCUITS CORP. CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS EXCEPT PER SHARE INFORMATION)
SIX MONTHS SIX MONTHS ENDED ENDED JULY 31, JULY 31, JULY 31, FEBRUARY 2, JANUARY 31, 1995 1996 1997 1997 1998 -------- -------- -------- ----------- ----------- (UNAUDITED) (UNAUDITED) Net sales................................ $95,372 $108,362 $120,752 $56,685 $69,650 Cost of products sold.................... 76,174 89,502 98,698 47,052 58,763 ------- -------- -------- ------- ------- Gross profit............................. 19,198 18,860 22,054 9,633 10,887 Selling, general and administrative expense................................ 7,381 7,991 8,487 3,839 4,616 In-process research and development...... -- -- -- -- 4,300 ------- -------- -------- ------- ------- 11,817 10,869 13,567 5,794 1,971 Other expense: Interest................................. 878 470 354 123 734 Other.................................... 25 123 365 325 15 ------- -------- -------- ------- ------- Income before income taxes............... 10,914 10,276 12,848 5,346 1,222 Income taxes............................. 4,260 3,993 4,826 2,096 1,546 ------- -------- -------- ------- ------- Net income (loss)........................ $ 6,654 $ 6,283 $ 8,022 $ 3,250 $ (324) ======= ======== ======== ======= ======= Net income (loss) per share Basic.................................... $ 0.93 $ 0.88 $ 1.11 $ 0.45 $ (0.04) ======= ======== ======== ======= ======= Diluted.................................. $ 0.90 $ 0.85 $ 1.08 $ 0.44 $ (0.04) ======= ======== ======== ======= ======= Number of shares used in computing Basic.................................... 7,120 7,152 7,213 7,206 7,267 ======= ======== ======== ======= ======= Diluted.................................. 7,409 7,430 7,432 7,428 7,267 ======= ======== ======== ======= =======
See accompanying notes F-3 7 CONTINENTAL CIRCUITS CORP. CONSOLIDATED STATEMENTS OF CASH FLOW (IN THOUSANDS)
SIX MONTHS SIX MONTHS ENDED ENDED JULY 31, JULY 31, JULY 31, FEBRUARY 2, JANUARY 31, 1995 1996 1997 1997 1998 -------- -------- -------- ----------- ----------- (UNAUDITED) (UNAUDITED) OPERATING ACTIVITIES Net income (loss)........................ $ 6,654 $ 6,283 $ 8,022 $ 3,250 $ (324) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation........................... 5,612 6,572 6,292 2,838 4,351 In process research and development writeoff............................ -- -- -- -- 4,300 Loss on sale of property, plant, and equipment........................... 70 139 6 -- -- Deferred income taxes.................. 101 (418) 1,120 -- -- Provision (recovery) for doubtful accounts............................ 24 424 (15) (133) 16 Changes in operating assets and liabilities: Accounts receivable.................... (1,327) (1,040) (6,302) (2,971) 2,136 Inventories............................ (1,129) 320 (4,009) (1,919) (3,881) Refundable income taxes................ -- (240) (180) -- -- Prepaid expenses and other............. (417) 365 (687) 154 (163) Other assets........................... 77 (801) 412 291 (1,870) Accounts payable....................... 1,135 (1,513) 7,472 3,748 535 Accrued expenses....................... 418 (158) 1,079 (72) (1,061) Income taxes........................... 164 (386) -- 692 -- -------- ------- -------- ------- -------- Net cash provided by operating activities............................. 11,382 9,547 13,210 5,878 4,039 INVESTING ACTIVITIES Purchases of property, plant, and equipment.............................. (11,676) (8,682) (20,562) (7,589) (16,361) Proceeds from disposal of property, plant, and equipment................... 31 102 17 -- -- Acquisition of Flexible Circuits Technology............................. -- -- -- -- (6,891) Acquisition of a division of Radian International LLC...................... -- -- (2,600) -- -- -------- ------- -------- ------- -------- Net cash used in investing activities.... (11,645) (8,580) (23,145) (7,589) (23,252) FINANCING ACTIVITIES Borrowings under line of credit agreement.............................. -- -- 9,312 1,000 19,063 Principal payments on long-term debt..... (11,143) (4,167) (4,333) (500) -- Borrowings under long-term debt.......... -- 5,000 1,000 -- -- Proceeds from issuance of common stock, net of issuance cost................... 9,504 13 190 135 245 Payments to repurchase common stock...... (57) -- -- -- -- -------- ------- -------- ------- -------- Net cash provided by (used in) financing activities............................. (1,696) 846 6,169 635 19,308 -------- ------- -------- ------- -------- Net increase (decrease) in cash and cash equivalents............................ (1,959) 1,813 (3,766) (1,076) 95 Cash and cash equivalents at beginning of period.............................. 3,997 2,038 3,851 3,851 85 -------- ------- -------- ------- -------- Cash and cash equivalents at end of period................................. $ 2,038 $ 3,851 $ 85 $ 2,775 $ 180 ======== ======= ======== ======= ========
See accompanying notes F-4 8 CONTINENTAL CIRCUITS CORP. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS)
COMMON STOCK --------------- ADDITIONAL RETAINED SHARES AMOUNT PAID-IN-CAPITAL EARNINGS TOTAL ------ ------ ---------------- -------- ------- BALANCE AT JULY 31, 1994........................ 6,133 $61 $ 581 $20,993 $21,635 Cash proceeds from issuance of common stock, net of share issuance costs....................... 1,000 10 9,396 -- 9,406 Shares issued in connection with options exercised..................................... 10 -- 98 -- 98 Shares repurchased and canceled................. (13) -- (10) (47) (57) Net income...................................... -- -- -- 6,654 6,654 ----- --- ------- ------- ------- BALANCE AT JULY 31, 1995........................ 7,130 71 10,065 27,600 37,736 Shares issued in connection with options exercised..................................... 64 1 199 -- 200 Share issuance costs............................ -- -- (187) -- (187) Net income...................................... -- -- -- 6,283 6,283 ----- --- ------- ------- ------- BALANCE AT JULY 31, 1996........................ 7,194 72 10,077 33,883 44,032 Shares issued in connection with options exercised and for employee stock purchase plan.......................................... 58 1 189 -- 190 Net income...................................... -- -- -- 8,022 8,022 ----- --- ------- ------- ------- BALANCE AT JULY 31, 1997........................ 7,252 73 10,266 41,905 52,244 Shares issued in connection with options exercised and for employee stock purchase plan (unaudited)................................... 40 -- 245 -- 245 Net loss (unaudited)............................ -- -- -- (324) (324) ----- --- ------- ------- ------- BALANCE AT JANUARY 31, 1998 (UNAUDITED)......... 7,292 $73 $10,511 $41,581 $52,165 ===== === ======= ======= =======
See accompanying notes F-5 9 CONTINENTAL CIRCUITS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JULY 31, 1997 (THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998 IS UNAUDITED) 1. ACCOUNTING POLICIES DESCRIPTION OF BUSINESS The Company is in one line of business as a manufacturer of complex multilayer, surface mount circuit boards used in sophisticated electronic equipment in the computer, communications, instrumentation and industrial controls industries. The Company sells its products primarily to leading original equipment manufacturers and to contract assemblers in the United States and abroad. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its subsidiaries, which are wholly owned. Significant intercompany accounts and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS Cash and cash equivalents consists of checking accounts and funds invested in overnight repurchase agreements and is stated at cost, which approximates market value. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. INVENTORIES Inventories are carried at the lower of cost or market using the first-in, first-out (FIFO) method. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment is stated at cost. Depreciation is computed using the double declining balance and the straight-line methods based on the estimated useful lives of the related assets ranging from three to forty years. FAIR VALUE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments," requires that the Company disclose estimated fair values of financial instruments. Cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at amounts that reasonably approximate their fair values. The carrying amounts of the Company's borrowings under its line of credit arrangement approximates its fair value based on the variable nature of its interest rates. REVENUE RECOGNITION Sales are recorded at the time individual items are shipped. ADVERTISING COSTS Advertising costs are expensed as incurred. Advertising expense for the years ended July 31, 1995, 1996, and 1997 and for the six months ended January 31, 1998 were $55,000, $54,000, $47,000 and $64,000, respectively. INCOME TAXES The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes". EARNINGS PER SHARE In February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"), adopted by the Company in the second quarter of fiscal year 1998. SFAS No. 128 replaced the previously reported primary or fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants, and convertible securities. Diluted earnings per share is very similar to the previously reported primary earnings per share. All earnings per share amounts for all periods have been presented, and where necessary, restated to conform to the SFAS No. 128 requirements. The impact of SFAS No. 128 on the calculation of fully diluted earnings per share for each of the periods presented was not material. SUPPLEMENTAL EARNINGS PER SHARE Supplemental earnings per share, assuming the proceeds from the issuance of 922,000 common shares at the public offering of $10.50, net of issuance costs, were used to repay $9.0 million of the Company's indebtedness as of August 1, 1994, would have reduced diluted earnings per share from $0.90 to $0.85 in 1995. F-6 10 CONTINENTAL CIRCUITS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) JULY 31, 1997 (THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998 IS UNAUDITED) STOCK BASED COMPENSATION The Company grants stock options for a fixed number of shares to employees with an exercise price equal to the fair value of the shares at the date of grant. The Company accounts for stock option grants to employees in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees," (APB 25) and, accordingly, recognizes no compensation expense for the stock option grants. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. INTERIM FINANCIAL INFORMATION The consolidated financial statements for the six months ended February 2, 1997 and January 31, 1998 are unaudited but include all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair presentation of financial position and results of operations. Operating results for the six months ended January 31, 1998 are not necessarily indicative of the results that may be expected for any future periods. 2. ACQUISITIONS In April 1997, the Company acquired the assets and assumed certain liabilities of a division of Radian International LLC (Radian) for $2,600,000. The acquisition was accounted for as a purchase, and accordingly, the results of its operations have been included in the consolidated results of operations since the transaction date. The purchase price has been allocated to the assets and liabilities acquired based on fair values at acquisition. The results of operations of Radian were not significant in relation to the Company for periods prior to the acquisition. On November 17, 1997, the Company acquired substantially all of the assets of Flexible Circuits Technology, dba Dynaflex Technology, for approximately $6.9 million in cash. The purchase price has been allocated to the assets acquired and included an allocation of $4.3 million to in process research and development. The results of the acquired business were not significant in relation to the Company for periods prior to the acquisition. F-7 11 CONTINENTAL CIRCUITS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) JULY 31, 1997 (THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998 IS UNAUDITED) 3. INVENTORIES Inventories consisted of the following:
JULY 31, JULY 31, JANUARY 31, 1996 1997 1998 -------- -------- ----------- Raw material.................................. $ 649 $2,117 $ 2,943 Work-in-process............................... 2,487 4,878 8,344 Finished Goods................................ 1,660 1,810 1,794 ------ ------ ------- $4,796 $8,805 $13,081 ====== ====== =======
4. LONG-TERM DEBT On July 25, 1997, the Company entered into a $45,000,000 long-term line of credit agreement with a bank. Up to $25,000,000 of the line of credit agreement can be converted into a long-term note payable. At July 31, 1997 there were no amounts converted to a long-term note. The line of credit bears interest at LIBOR plus a fixed rate factor, as defined, and/or the prime rate, payable monthly, and the interest rate can be converted by the Company to a fixed rate when the Company draws above $2,000,000. The line of credit expires on October 31, 2000 and provides for maximum borrowings of the lessor of $45,000,000 less any converted long-term note payable amounts. At July 31, 1997, amounts available under the line of credit were approximately $34,700,000. The weighted average interest rate under the line of credit was 8.5 percent in 1997. The above long-term debt agreements are collateralized by substantially all available assets of the Company. The line of credit agreement contains covenants which place various restrictions on financial ratios, transactions with related parties, and prohibits the payment of dividends. In addition, the line of credit agreement contains an event of default provision whereby all outstanding amounts would be due and payable should there be a change in ownership control. Long-term debt consisted of the following:
JULY 31, JULY 31, JANUARY 31, 1996 1997 1998 -------- -------- ----------- (IN THOUSANDS) $45,000,000 long-term line of credit agreement with a bank, interest payable monthly at LIBOR plus a fixed rate factor, as defined, and/or the prime rate, maturing October 31, 2000.......................................... $ -- $ 9,312 $28,375 $1,000,000 long-term adjustable rate industrial development revenue bond, interest payable monthly at a variable rate until September 1, 2011 when all outstanding interest and principal is due and payable; secured by $1,000,000 irrevocable letter of credit; bond is subject to certain optional and mandatory redemption, as defined............. -- 1,000 1,000 $5,000,000 long-term note payable to a bank, paid in full during 1997............................................... 4,333 -- -- ------ ------- ------- 4,333 10,312 29,375 Less current portion 1,000 -- -- ------ ------- ------- $3,333 $10,312 $29,375 ====== ======= =======
Maturities of long-term debt for the five years succeeding July 31, 1997 are as follows: July 31, 1998 $0, 1999 $0, 2000 $0, 2001 $9,312,000, 2002 $0, and thereafter $1,000,000. Interest payments approximated interest expense during the years ended July 31, 1995, 1996, 1997 and for the six months ended January 31, 1997 and 1998. F-8 12 CONTINENTAL CIRCUITS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) JULY 31, 1997 (THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998 IS UNAUDITED) 5. STOCK OPTIONS The Company has elected to follow APB 25 and related Interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123, Accounting for Stock-Based Compensation (Statement 123), requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation is recognized. During 1987, the Company's stockholders adopted a stock option plan (the 1987 Plan) that provides for the granting of options to employees (including officers) and non-employee directors at fair value at the date of the grant. The 1987 Plan provides for the issuance of options at fair value to purchase a maximum of 750,000 shares of common stock. All options under the 1987 Plan are exercisable cumulatively, beginning on the third anniversary of the date of grant. Generally, after three years from the date of grant, the optionee may purchase 40 percent of the shares granted; an additional 20 percent after four years; an additional 20 percent after five years; and the final 20 percent after six years. However, with respect to 200,000 options granted on August 25, 1994, the options become exercisable at the rate of 15 percent a year. All options expire between seven and ten years after the date of grant. The options granted under the 1987 Plan become fully exercisable if the Company is dissolved, liquidated, merged, consolidated, or undergoes a change in control as defined in the Plan document. During 1996, the Company's stockholders adopted a second stock option plan (the 1996 Plan) that provides for the granting of options to employees (including officers) and non-employee directors at fair value at the date of the grant. The 1996 plan provides for the issuance of options at fair value at the date of the grant. The 1996 plan provides for the issuance of options at fair value to purchase a maximum of 1,000,000 shares of common stock. All options under the 1996 plan are exercisable cumulatively, beginning on the first anniversary of the date of grant. Generally, after one year from the date of grant, the optionee may purchase 20 percent of the shares granted; an additional 20 after two years; an additional 20 percent after three years; an additional 20 percent after four years; and the final 20 percent after five years. All options expire ten years after the date of grant. The options granted under the 1996 Plan become fully exercisable if the Company is dissolved, liquidated, merged, consolidated, or undergoes a change in control as defined in the Plan document. Pro forma information regarding net income and earnings per share is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1997 and 1996: risk-free interest rate of 5.5 percent, dividend yield of zero percent, volatility factor of the expected market price of the Company's common stock of .46, and a weighted-average expected life of the option of 6.26 years and seven years, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. F-9 13 CONTINENTAL CIRCUITS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) JULY 31, 1997 (THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998 IS UNAUDITED) Because Statement No. 123 is applicable to options granted subsequent to December 31, 1994, its pro forma effect will not be fully reflected until approximately 2003. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the option's vesting period. The Company's pro forma information follows (in thousands except for earnings per share information):
JULY 31, JULY 31, 1996 1997 -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Net income, as reported................................... $6,283 $8,022 Pro forma compensation expense for options................ 74 142 ------ ------ Pro forma net income...................................... $6,209 $7,880 ====== ====== Diluted earnings per share, as reported................... $ 0.85 $ 1.08 Diluted earnings per share, pro forma..................... $ 0.84 $ 1.06
Information regarding stock options outstanding under the Plans are as follows:
WEIGHTED-AVERAGE SHARES EXERCISE PRICE ------- ---------------- Outstanding at July 31, 1994........................ 186,000 $ 3.11 Granted........................................... 225,000 3.27 Exercised......................................... (9,600) 6.72 Forfeited (canceled).............................. (25,000) 3.10 ------- ------ Outstanding at July 31, 1995........................ 376,400 3.11 Granted........................................... 110,000 15.00 Exercised......................................... (64,040) 3.12 Forfeited (canceled).............................. (24,000) 12.50 ------- ------ Outstanding at July 31, 1996........................ 398,360 5.69 Granted........................................... 432,000 14.03 Exercised......................................... (40,960) 2.50 Forfeited (canceled).............................. (26,750) 12.85 ------- ------ Outstanding at July 31, 1997........................ 762,650 $10.48 ======= ======
OPTIONS OUTSTANDING OPTIONS EXERCISEABLE - -------------------------------------------------- ----------------------------------------------- WEIGHTED- AVERAGE WEIGHTED- WEIGHTED- RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE - --------------- ----------- ---------------- -------------- ----------- -------------- $2.50 -- $ 3.25 258,900 6.83 years...... $ 3.14 15,100 $2.50 $ 4.00 5,000 7.29 years...... $ 4.00 -- -- $10.63 -- $15.00 368,750 9.24 years...... $12.85 -- -- $18.00 130,000 9.99 years...... $18.00 -- --
Exercise prices for options outstanding at July 31, 1997, range from $2.50 to $18.00. The weighted-average fair value of options granted during 1997 and 1996 was $7.43 and $8.36, respectively. F-10 14 CONTINENTAL CIRCUITS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) JULY 31, 1997 (THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998 IS UNAUDITED) 6. INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
JULY 31 ---------------- 1996 1997 ------ ------ (IN THOUSANDS) Deferred tax liabilities: Tax over book depreciation.................. $1,970 $2,499 Receivables adjustments..................... -- 493 Other, net.................................. 52 52 ------ ------ Total deferred tax liabilities.............. 2,022 3,044 ------ ------ Deferred tax assets: Receivables allowances...................... 227 61 Inventory allowances........................ 116 136 Accrued vacation............................ 227 220 Accrued expenses............................ 80 87 Unicap and other............................ 110 158 ------ ------ Total deferred tax assets................... 760 662 ------ ------ Net deferred taxes.......................... $1,262 $2,382 ====== ======
Significant components of the federal and state income tax expense are:
YEAR ENDED JULY 31 -------------------------- 1995 1996 1997 ------ ------ ------ (IN THOUSANDS) Current: Federal..................................... $3,287 $3,486 $3,053 State....................................... 872 925 653 ------ ------ ------ Total current............................ 4,159 4,411 3,706 Deferred: Federal..................................... 84 (347) 929 State....................................... 17 (71) 191 ------ ------ ------ Total deferred........................... 101 (418) 1,120 ------ ------ ------ $4,260 $3,993 $4,826 ====== ====== ======
Total income tax payments, net of any refunds received, during the years ended July 31, 1995, 1996 and 1997, were approximately $3,962,000, $5,037,000 and $3,997,000, respectively. A reconciliation of the Company's effective income tax rate to the federal statutory rate follows:
SIX MONTHS ENDED YEAR ENDED JULY 31 JANUARY 31 -------------------- ------------ 1995 1996 1997 1997 1998 ---- ---- ---- ---- ---- Federal statutory rate................. 34% 34% 34% 34% 34% State tax net of federal benefit....... 7 7 7 7 5 In process research and development write-offs........................... -- -- -- -- 136 Tax credits............................ -- -- -- -- (48) Other.................................. (2) (2) (3) (2) -- ---- ---- ---- ---- ---- 39% 39% 38% 39% 127% ==== ==== ==== ==== ====
F-11 15 CONTINENTAL CIRCUITS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) JULY 31, 1997 (THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998 IS UNAUDITED) The effective income tax rate for the six months ended January 31, 1998 includes a year to date adjustment to reflect one time and ongoing tax credits available to the Company, which reduced its estimated income tax rate for the year ending July 31, 1998 to approximately 28% based on estimated earnings for the year. 7. SIGNIFICANT CUSTOMERS AND EXPORT SALES The percentages of total sales to significant customers were as follows:
YEAR ENDED JULY 31 -------------------- 1995 1996 1997 ---- ---- ---- Customer A............................................... 0% 5% 15% Customer B............................................... 15 11 7 Customer C............................................... 15 21 20
The amount of total export sales by geographic area was as follows:
YEAR ENDED JULY 31 --------------------------- 1995 1996 1997 ------- ------- ------- (IN THOUSANDS) Canada.............................................. $ 3,500 $ 3,800 $ 2,700 Singapore........................................... 10,800 6,900 5,800 United Kingdom and others........................... 10,100 9,600 15,600 ------- ------- ------- Total export sales.................................. $24,400 $20,300 $24,100 ======= ======= =======
The Company performs ongoing credit risk evaluations of its customers' financial conditions and generally does not require collateral. The Company's significant customers are major, well-known businesses in the electronic equipment industry. Credit losses have been provided for in the financial statements and have been within management's expectations. 8. COMMITMENTS AND CONTINGENCIES The Company leases certain equipment and buildings under noncancelable operating leases that expire in various years through 2004. Total rental expense for all operating leases was approximately $122,000, $357,000 and $397,000, during the years ended July 31, 1995, 1996 and 1997, respectively. Future minimum payments under noncancelable operating leases with initial terms of one year or more consisted of the following at July 31, 1997:
(IN THOUSANDS) 1998........................................................ $ 672,115 1999........................................................ 636,480 2000........................................................ 636,480 2001........................................................ 636,480 2002........................................................ 636,480 Thereafter.................................................. 1,092,624 ---------- $4,310,659 ==========
The Company is a party to certain litigation in the normal course of business. Management does not anticipate any material adverse impact from the resolution of such matters. 9. BENEFIT PLANS The Company has a 401(k) Retirement Plan (Plan) covering all employees who reside in the United States, have completed six months of service, and have attained age 21. Under the terms of the Plan, employees may contribute up to 15 percent of their annual compensation, subject to Internal Revenue Service limitations. The Company matched 25 percent of employee contributions up to 6 percent of the employee's F-12 16 CONTINENTAL CIRCUITS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) JULY 31, 1997 (THE INFORMATION FOR THE SIX MONTHS ENDED FEBRUARY 2, 1997 AND JANUARY 31, 1998 IS UNAUDITED) annual compensation. Additional contributions to the Plan can be made at the discretion of the Board of Directors. Company contributions to the Plan during the years ended July 31, 1995, 1996, and 1997, were approximately $164,000, $198,000 and $212,000, respectively. During 1996, the Company adopted the Continental Circuits Corp. Employee Stock Purchase Plan. All employees who are regularly scheduled to work at least 20 hours per week and have completed at least six (6) months of continuous service with the Company are eligible to participate in the plan. Eligible employees are entitled to purchase shares of common stock through payroll deductions of up to 10 percent of their compensation. The price paid for the common stock is equal to 85 percent of the fair market value of the Company's common stock on the last business day of the quarterly investment period. At the Company's option, common stock can either be purchased on the open market or through new shares issued. Total shares reserved for issuance are 200,000, with 17,937 purchased through July 31, 1997 at a market price ranging from $10.75 to $13.88 per share. 10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) A summary of the quarterly results of operations for the years ended July 31, 1996 and 1997 follows:
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER ----------- ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997: Net sales......................................... $27,123 $29,562 $31,862 $32,205 Gross margin...................................... $ 4,463 $ 5,170 $ 6,148 $ 6,273 Net income........................................ $ 1,433 $ 1,817 $ 2,379 $ 2,393 Earnings per share................................ $ .19 $ .24 $ .32 $ .32 Weighted average common and equivalent shares outstanding..................................... 7,424 7,432 7,457 7,497
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER ----------- ----------- ----------- ----------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1996: Net sales......................................... $28,508 $28,860 $26,464 $24,530 Gross margin...................................... $ 5,733 $ 6,215 $ 4,406 $ 2,506 Net income........................................ $ 2,248 $ 2,305 $ 1,380 $ 350 Earnings per share................................ $ .30 $ .31 $ .19 $ .05 Weighted average common and equivalent shares outstanding..................................... 7,430 7,431 7,413 7,420
The 1997 quarterly results for net earnings per share, when totaled, do not equal the net earnings per share for the year ended July 31, 1997 due to rounding. 11. SUBSEQUENT EVENTS On February 9, 1998, the Company announced that it had completed the purchase of substantially all of the assets of a wholly owned subsidiary of CCIR of California Corp., named PCA Design, PCA Design has annual sales of approximately $2.0 million. On February 11, 1998, the Company, through one of its recently acquired businesses, obtained $6.0 million in tax-exempt revenue bonds. On March 20, 1998, Hadco Corporation acquired all of the outstanding capital stock of the Company for approximately $188 million (including costs). F-13 17 HADCO CORPORATION PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In January 1997, Hadco Corporation (the "Company") acquired all of the outstanding capital stock of Zycon Corporation ("Zycon") for approximately $212 million (including acquisition costs). The acquisition of Zycon (the "Zycon Acquisition") was accounted for as a purchase. A significant portion of the purchase price was identified in an appraisal as intangible assets, including approximately $78 million of acquired in-process research and development. In March 1998, the Company acquired all of the outstanding capital stock of Continental Circuits Corp. ("Continental") for approximately $188 million (including acquisition costs)(the "Continental Acquisition"). The acquisition of Continental has been accounted for as a purchase. A significant portion of the purchase price was identified in an appraisal as intangible assets, including approximately $63 million of acquired in-process research and development. Collectively, the Zycon Acquisition and Continental Acquisition are referred to as the "Acquisitions." The Pro Forma Condensed Consolidated Statement of Operations for the year ended October 25, 1997 assumes the Acquisitions had occurred on October 27, 1996 and includes the actual results of operations of Hadco for its fiscal year ended October 25, 1997 (including Zycon's actual results of operations from January 10, 1997 through October 25, 1997), Zycon's actual results of operations for the three months ended December 31, 1996 and Continental's actual results of operations for its fiscal year ended July 31, 1997. The Pro Forma Condensed Consolidated Statement of Operations for the three months ended January 31, 1998 assumes the Continental Acquisition had occurred on October 25, 1997 and reflects Hadco's actual results of operations for the three months ended January 31, 1998 and Continental's actual results of operations for the three months ended November 1, 1997. The Pro Forma Condensed Consolidated Balance Sheet as of January 31, 1998 gives effect to the Continental Acquisition as if it had occurred on January 31, 1998 and reflects Hadco's and Continental's balance sheets both as of January 31, 1998, the most recent historical balance sheets for both companies. The Pro Forma Condensed Consolidated Statements of Operations do not include the effect of any non-recurring write-offs directly attributable to the Acquisitions and are not necessarily indicative of the actual results that would have been achieved had the Acquisitions occurred at the beginning of the respective periods, nor do they purport to indicate the results of future operations of the Company. The accompanying Pro Forma Condensed Consolidated Financial Statements should be read in conjunction with the Company's and Continental's historical financial statements and related notes thereto. F-14 18 HADCO CORPORATION PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(1) FOR THE YEAR ENDED OCTOBER 25, 1997 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA ---------------------------------------------------- COMBINED HADCO ZYCON CONTINENTAL ZYCON CONTINENTAL AS ADJUSTED YEAR ENDED QUARTER ENDED YEAR ENDED PRO FORMA PRO FORMA FOR THE OCTOBER 25, 1997 DECEMBER 31, 1996 JULY 31, 1997 ADJUSTMENTS ADJUSTMENTS ACQUISITIONS ---------------- ----------------- ------------- ----------- ----------- ------------ Net sales............. $648,705 $ 61,011 $120,752 $ -- $ -- $830,468 Cost of sales......... 507,313 52,650 98,698 -- 1,035(2) 659,696 -------- -------- -------- -------- -------- -------- Gross profit.......... 141,392 8,361 22,054 -- (1,035) 170,772 Operating expenses.... 64,586 4,753 8,487 1,188(3) 5,703(4) 84,717 Write-off of acquired in-process research and development...... 78,000 -- -- (78,000)(5) -- -- -------- -------- -------- -------- -------- -------- Income (loss) from operations........... (1,194) 3,608 13,567 76,812 (6,738) 86,055 Other expense......... -- (6,019) (365) 6,019(6) -- (365) Interest and other income............... 3,296 167 -- (496)(7) -- 2,967 Interest expense...... (10,923) (1,033) (354) (2,703)(8) (12,531)(9) (27,544) -------- -------- -------- -------- -------- -------- Income (loss) before provision for income taxes................ (8,821) (3,277) 12,848 79,632 (19,269) 61,113 Provision for income taxes................ 27,672 1,247 4,826 (1,953)(10) (6,889)(10) 24,903 -------- -------- -------- -------- -------- -------- Net income (loss)..... $(36,493) $ (4,524) $ 8,022 $ 81,585 $(12,380) $ 36,210 ======== ======== ======== ======== ======== ======== Net income (loss) per share Basic................ $ (3.18) $ 3.16 Diluted.............. $ (3.18) $ 3.03 Weighted average shares outstanding Basic................ 11,458 11,458 Diluted.............. 11,458 11,942
- --------------- (1) For purposes of the Pro Forma Condensed Consolidated Statement of Operations, acquired in-process research and development of approximately $63 million related to the Continental Acquisition was assumed to have been written off prior to the period presented herein, so that the Pro Forma Condensed Consolidated Statement of Operations includes only recurring costs. (2) Gives effect to conforming Continental's accounting policy of capitalizing certain inventory and spare parts costs to Hadco's policy of expensing these inventory and spare parts costs. (3) Gives effect to amortization for three months of acquired intangible assets totaling $106.4 million recognized in the Zycon Acquisition over lives ranging from 12 to 30 years. (4) Gives effect to the amortization of intangible assets totaling $97.3 million recognized in the Continental Acquisition over lives ranging from 12 to 20 years. (5) Gives effect to the elimination of a non-recurring write-off of acquired in-process research and development related to the Zycon Acquisition. (6) Gives effect to the elimination of non-recurring acquisition costs incurred by Zycon in connection with the Zycon Acquisition. (7) Gives effect to a reduction in interest income as a result of utilizing cash for the Zycon Acquisition. (8) Gives effect to interest expense related to $212 million of net additional bank debt to finance the Zycon Acquisition at an assumed 7.5% weighted average interest rate. (9) Gives effect to the interest expense related to the $187.9 million of bank debt to finance the Continental Acquisition at an assumed 7% weighted average interest rate. (10) Gives effect to an adjustment in the tax provision as a result of the combination and pro forma adjustments. F-15 19 HADCO CORPORATION PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS(1) FOR THE THREE MONTHS ENDED JANUARY 31, 1998 (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL ----------------------------------- HADCO CONTINENTAL QUARTER ENDED QUARTER ENDED PRO FORMA PRO FORMA JANUARY 31, 1998 NOVEMBER 1, 1997 ADJUSTMENTS COMBINED ---------------- ---------------- ----------- --------- Net sales............. $198,276 $ 34,306 $ -- $232,582 Cost of sales......... 159,208 28,384 1,433(2) 189,025 -------- -------- -------- -------- Gross profit.......... 39,068 5,922 (1,433) 43,557 Operating expenses.... 17,784 2,064 1,426(3) 21,274 -------- -------- -------- -------- Income from operations.......... 21,284 3,858 (2,859) 22,283 Interest and other income.............. 533 -- -- 533 Interest expense...... (2,099) (134) (3,133)(4) (5,366) -------- -------- -------- -------- Income before provision for income taxes............... 19,718 3,724 (5,992) 17,450 Provision for income taxes............... 7,591 1,410 (2,064)(5) 6,937 -------- -------- -------- -------- Net Income............ $ 12,127 $ 2,314 $ (3,928) $ 10,513 ======== ======== ======== ======== Net Income per share Basic............... $ 0.93 $ 0.80 Diluted............. $ 0.90 $ 0.78 Weighted Average Shares Outstanding Basic............... 13,096 13,096 Diluted............. 13,505 13,505
- --------------- (1) For purposes of the Pro Forma Condensed Consolidated Statement of Operations, acquired in-process research and development of approximately $63 million related to the Continental Acquisition was assumed to have been written off prior to the period presented herein, so that the Pro Forma Condensed Consolidated Statement of Operations includes only recurring costs. (2) Gives effect to conforming Continental's accounting policy of capitalizing certain inventory and spare parts costs to Hadco's policy of expensing these inventory and spare parts costs. (3) Gives effect to the amortization of acquired intangible assets totalling $97.3 million recognized in the Continental Acquisition over lives ranging from 12 to 20 years. (4) Gives effect to interest expense related to $187.9 million in bank debt to finance the Continental Acquisition at an assumed 7% interest rate. (5) Gives effect to an adjustment in the tax provision as a result of the combination and pro forma adjustments. F-16 20 HADCO CORPORATION PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AS OF JANUARY 31, 1998 (UNAUDITED) (IN THOUSANDS)
HISTORICAL ----------------------------------- HADCO CONTINENTAL AS OF AS OF PRO FORMA PRO FORMA JANUARY 31, 1998 JANUARY 31, 1998 ADJUSTMENTS COMBINED ---------------- ---------------- ----------- --------- ASSETS: Cash, cash equivalents and short-term investments.......... $ 11,395 $ 180 $ -- $ 11,575 Accounts receivable, net.................. 99,912 20,150 -- 120,062 Inventories............ 54,016 13,081 (3,089)(1) 64,008 Other current assets... 15,214 1,654 -- 16,868 -------- -------- --------- -------- Total current assets... 180,537 35,065 (3,089) 212,513 Property, plant and equipment, net....... 239,819 63,878 -- 303,697 Other assets........... 7,601 1,620 -- 9,221 Acquired intangible assets, net.......... 97,870 1,720 95,555(2) 195,145 -------- -------- --------- -------- Total assets........... $525,827 $102,283 $ 92,466 $720,576 ======== ======== ========= ======== LIABILITIES: Current portion of long-term debt....... $ 4,793 $ -- $ -- $ 4,793 Accounts payable and accrued expenses..... 109,227 18,236 4,418(3) 131,881 -------- -------- --------- -------- Total current liabilities.......... 114,020 18,236 4,418 136,674 Long-term debt, net of current portion...... 118,769 29,375 187,876(4) 336,020 Deferred tax liability............ 31,185 2,507 18,476(5) 52,168 Other long-term liabilities.......... 9,192 -- 9,192 -------- -------- --------- -------- Total liabilities...... 273,166 50,118 210,770 534,054 -------- -------- --------- -------- STOCKHOLDERS' INVESTMENT: Common stock........... $ 656 $ 73 $ (73)(6) $ 656 Paid-in capital........ 168,843 10,511 (10,511)(6) 168,843 Deferred compensation......... (93) -- -- (93) Retained earnings...... 83,255 41,581 (107,720)(6)(7) 17,116 -------- -------- --------- -------- Total stockholders' investment........... 252,661 52,165 (118,304) 186,522 -------- -------- --------- -------- Total liabilities and stockholders' investment........... $525,827 $102,283 $ 92,466 $720,576 ======== ======== ========= ========
Note: Allocation of Purchase Price The following outlines the allocations of purchase price for the acquisition of Continental Circuits Corp.
Purchased in-process R&D (1) $ 63,050 Developed technology 22,190 Customer relationships 18,000 Assembled workforce 6,000 Goodwill 51,084 -------- 160,324 Net book value of assets acquired 46,028 -------- 206,352 Less: Deferred Taxes (18,476) -------- 187,876 ========
- --------------- (1) Gives effect to conforming Continental's accounting policy of capitalizing certain inventory and spare parts costs to Hadco's policy of expensing these inventory and spare parts costs. (2) Gives effect to acquired intangible assets related to the Continental Acquisition. (3) Gives effect to acquisition costs incurred in connection with the Continental Acquisition. (4) Gives effect to borrowings under the Credit Facility to finance the Continental Acquisition. (5) Gives effect to deferred income taxes related to the Continental Acquisition. (6) Gives effect to the elimination of Continental's equity as a result of the Continental Acquisition. (7) Gives effect to the write-off of $63 million of acquired in-process research and development related to the Continental Acquisition. F-17 21 (c) EXHIBITS 23.1 Consent of Independent Public Accountants - Arthur Andersen LLP, Boston 23.2 Consent of Independent Auditors - Ernst & Young LLP, Phoenix 22 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. HADCO CORPORATION Dated: May 1, 1998 By: /s/ Timothy P. Losik ------------------------ Timothy P. Losik Chief Financial Officer 23 EXHIBIT INDEX Exhibit Exhibit Description - ------- ------------------- 23.1 Consent of Independent Public Accountants - Arthur Andersen, LLP Boston 23.2 Consent of Independent Public Accountants - Ernst & Young LLP, Phoenix EX-23.1 2 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 8-K/A into Hadco Corporation's previously filed Registration Statements on Form S-8, File No. 33-2915, File No. 33-12555, File No. 33-24975, File No. 33-24976, File No. 33-40616, File No. 33-48288, File No. 333-11485 and File No. 333-47589. /s/ ARTHUR ANDERSEN LLP Boston, Massachusetts April 30, 1998 EX-23.2 3 CONSENT OF ERNST & YOUNG LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to incorporation by reference in the registration statements (Nos. 33-2915, 33- 12555, 33-24975, 33-24976, 33-40616, 33-48288, 333-11485 and 333-47589) on Form S-8 of Hadco Corporation of our report dated August 22, 1997, with respect to the consolidated financial statements of Continental Circuits Corp. and subsidiaries as of July 31, 1997 and for each of the years in the three-year period ended July 31, 1997, included in the May 1, 1998 Current Report on Form 8-K/A of Hadco Corporation. /s/ Ernst & Young LLP Phoenix, Arizona May 1, 1998 -----END PRIVACY-ENHANCED MESSAGE-----