-----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, TzOh2f0BS8lHlomjgt2p/sb1fg68dc3WnBeVbMAJCmTNmul1HsPT1TH/sE49Z9ld +siVI0RvrluFRZtNMHsT/g== 0000916797-96-000006.txt : 19960724 0000916797-96-000006.hdr.sgml : 19960724 ACCESSION NUMBER: 0000916797-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELECTRONIC FAB TECHNOLOGY CORP CENTRAL INDEX KEY: 0000916797 STANDARD INDUSTRIAL CLASSIFICATION: 3672 IRS NUMBER: 840854616 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23332 FILM NUMBER: 96564012 BUSINESS ADDRESS: STREET 1: 7251 WEST 4TH ST CITY: GREELEY STATE: CO ZIP: 80634-9763 BUSINESS PHONE: 3033533100 10-Q 1 U. S. 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 31, 1996 [ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-23332 ELECTRONIC FAB TECHNOLOGY CORP. (Exact name of registrant as specified in its charter) Colorado 84-0854616 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 7251 West 4th Street Greeley, Colorado 80634-9763 (Address of principal executive offices) (970) 353-3100 (Issuer's telephone number) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES X NO State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Class of Common Stock Outstanding at May 1, 1996 Common Stock, par value $0.01 3,940,860 shares ELECTRONIC FAB TECHNOLOGY CORP. FORM 10-Q INDEX PART I. FINANCIAL INFORMATION PAGE NUMBER Item 1. Financial Statements (unaudited) Condensed Balance Sheets -- March 31, 3 1996 and December 31, 1995 Condensed Statements of Income -- Three 4 months ended March 31, 1996 and 1995 Condensed Statements of Cash Flows -- 5 Three months ended March 31, 1996 and 1995 Notes to Condensed Financial Statements 6 -- March 31, 1996 Item 2. Management's Discussion and Analysis of 7 Results of Operations and Financial Condition PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURES 11 ELECTRONIC FAB TECHNOLOGY CORP. CONDENSED BALANCE SHEETS (unaudited)
March 31, December 31, 1996 1995 ASSETS Current assets Cash and cash equivalents $46,075 $481,086 Accounts receivable, net of allowances of $20,000 4,841,754 4,982,450 Inventories (note 2) 11,586,547 9,859,414 Income taxes receivable 177,847 74,922 Prepaid expenses and other current assets 356,898 528,466 Total current assets 17,009,121 15,926,338 Property, plant and equipment, at cost 13,374,123 12,839,976 Less accumulated depreciation 4,185,921 3,949,163 Net property, plant and equipment 9,188,202 8,890,813 Other assets 169,804 167,148 $26,367,127 $24,984,299 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Note payable $2,250,000 $ - Current portion of long-term debt 170,000 170,000 Accounts payable 4,434,198 4,986,757 Accrued expenses and other liabilities 871,770 901,738 Total current liabilities 7,725,968 6,058,495 Long-term debt, net of current portion 2,975,000 3,060,000 Deferred income taxes 344,568 356,606 Shareholders' equity Preferred stock, $.01 par value. Authorized 5,000,000 shares; none issued or outstanding - - Common stock, $.01 par value. Authorized 45,000,000 shares; issued 3,940,860 shares 39,409 39,409 Additional paid-in capital 10,181,204 10,181,204 Retained earnings 5,100,978 5,288,585 Total shareholders' equity 15,321,591 15,509,198 $26,367,127 $24,984,299 See notes to condensed financial statements.
ELECTRONIC FAB TECHNOLOGY CORP. CONDENSED STATEMENTS OF INCOME (unaudited)
Three months ended March 31, 1996 1995 Net sales $15,002,959 $12,118,557 Cost of goods sold 14,403,137 11,172,542 Gross profit 599,822 946,015 Selling, general, and administrative expense 811,620 724,509 Operating income (loss) (211,798) 221,506 Other income (expense): Interest expense (95,526) (84,570) Other, net (7,144) 52,823 (102,670) (31,747) Income (loss) before income taxes (314,468) 189,759 Income tax expense (benefit) (126,861) 64,979 Net income (loss) ($187,607) $124,780 Income (loss) per common and common equivalent share ($0.05) $0.03 Weighted average shares outstanding 3,958,335 3,947,067 See notes to condensed financial statements.
TABLE ELECTRONIC FAB TECHNOLOGY CORP. CONDENSED STATEMENTS OF CASH FLOWS (unaudited) Three months ended March 31, 1996 1995 Cash Flows From Operating Activities: Net income (loss) ($187,607) $124,780 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 324,465 404,620 Deferred income taxes (23,936) (2,421) (Gain) loss on sale of assets 14,441 - Changes in operating assets and liabilities: Accounts receivable 140,696 (656,040) Inventories (1,727,133) 219,966 Prepaid expenses and other current assets 159,671 (58,970) Accounts payable and accrued expenses (582,527) (188,305) Income taxes (102,925) 2,745 Other assets (2,656) 375 Net cash (used in) operating activities (1,987,511) (153,250) Cash flows from investing activities Proceeds from sale of equipment 95,600 - Purchase of property, plant and equipment (708,100) (1,050,071) Net cash (used in) investing activities (612,500) (1,050,071) Cash flows from financing activities Common stock issued, net - 9,490 Principal payments on long-term debt (85,000) (85,000) Borrowings (payments) on notes payable, net 2,250,000 1,160,000 Net cash provided by financing activities 2,165,000 1,084,490 Decrease in cash and cash equivalents (435,011) (118,831) Cash and cash equivalents: Beginning of period 481,086 153,483 End of period $46,075 $34,652 See notes to condensed financial statements. ELECTRONIC FAB TECHNOLOGY CORP. NOTES TO CONDENSED FINANCIAL STATEMENTS Note 1--Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ending March 31,1996 are not necessarily indicative of the results that may be expected for the year ended December 31, 1996. The unaudited condensed financial statements should be read in conjunction with the financial statements and footnotes thereto included in the Company's annual report and Form 10-K for the year ended December 31, 1995. Note 2--Inventories The components of inventory consist of the following: March 31, December 31, 1996 1995 Purchased parts and completed subassemblies $9,182,597 $8,051,648 Work-in-process 2,403,950 1,807,766 $11,586,547 $9,859,414 Note 3--Supplemental Disclosure of Cash Flow Information Three months ended March 31, 1996 1995 Cash paid during the period for: Interest $96,797 $74,965 Income taxes $ -0- $ -0- MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION THREE MONTHS ENDED MARCH 31, 1996 RESULTS OF OPERATIONS Net sales. Net sales are net of discounts and are recognized upon shipment to a customer. The Company's net sales increased by 23.8% to $15,002,959 for the first quarter of fiscal 1996, from $12,118,557 during the same period in fiscal 1995. The increase in net sales is due to increased shipments to new and existing customers consisting primarily of increased material sales associated with turnkey manufacturing. Gross profit. Gross profit equals net sales less cost of goods sold (such as salaries, leasing costs, and depreciation charges related to production operations); and non-direct, variable manufacturing costs (such as supplies and employee benefits). In the first quarter of fiscal 1996, gross profit decreased 36.6% to $599,822 compared to $946,015 for the same period in 1995. The gross profit margin for the first quarter of fiscal 1996 was 4.0% compared to 7.8% for the same period of fiscal 1995. The primary reason for the decline in gross profit is related to decreased efficiencies manifested in increased costs related to the start-up of manufacturing of new assemblies and other costs. Direct labor costs and related benefits increased approximately $543,000 in the first quarter of 1996 compared to the first quarter of 1995, an increase of 34.6%. Manufacturing supplies and expenses increased approximately $134,400 in the first quarter of 1996 compared to first quarter of 1995, an increase of 50.4%. The Company also experienced incremental costs associated with its current reengineering project such as expenses related to moving of surface mount lines, productions lines and various manufacturing equipment and personnel costs associated with reorganization of business processes. These costs were approximately $75,000 to $100,000 in the first quarter of 1996. Selling, General and Administrative Expenses. Selling, general, and administrative expenses ("SGA expense") consist primarily of non-manufacturing salaries, sales commissions, and other general expenses. SGA expense increased by 12.0% or $87,111 to $811,620 in the first quarter of 1996, compared with $724,509 a year earlier. The increase is due primarily to increased variable selling costs associated with higher sales volume. As a percentage of net sales SGA expenses decreased from 6.0% of net sales in the first quarter of fiscal 1995 to 5.4% of net sales in fiscal 1996. Operating income. Operating income for the first quarter of fiscal 1996 decreased 191.1% to a loss of $211,798 from income of $221,506 in the first quarter of fiscal 1995. Operating income as a percentage of net sales decreased to -1.4% in the first quarter of fiscal 1996 from 1.8% in the same period last year. The decrease in operating income was the result of factors noted above. Interest expense. Interest expense for the first quarter of 1996 was $95,526 compared to $84,570 for the same period in fiscal 1995. The need to fund the increase in inventory levels with operating debt was the primary reason for the increase in interest expense. Income tax expense. The estimate of the Company's effective income tax rate for the first quarter of fiscal 1996 and 1995 was 40.3% and 34.2% respectively. This percentage fluctuates substantially because relatively small dollar amounts tend to move the rate significantly as estimates change. State tax credits generated from capital investment and job creation also continue to effect state taxes because of the Company's location in a state-designated "enterprise" zone. LIQUIDITY AND CAPITAL RESOURCES During the first quarter of fiscal 1996 cash used in operations was $1,987,511 compared to cash used in operations of $153,250 in the same period last year. Cash used to fund inventory growth and a net loss from operations were the key factors that created this use of cash. As of March 31,1996, working capital totaled $9,283,153 compared to $9,867,843 at December 31,1995. The decline is attributable primarily to the purchase of fixed assets in the first quarter of 1996. Accounts receivable increased 7.2% to $4,841,754 at March 31,1996 from $4,514,563 at March 31,1995. A comparison of receivable turns (i.e. annualized sales divided by current accounts receivable) for the first quarter of fiscal 1996 and the first quarter of fiscal 1995 is 12.4 and 10.7 turns, respectively. Inventories increased 59.6% to $11,586,547 at March 31,1996 from $7,259,408 at March 31,1995. A comparison of inventory turns (i.e. annualized cost of sales divided by current inventory) for the first quarter of fiscal 1996 and 1995 shows a decrease to 5.0 from 6.2, respectively. The Company used cash to purchase capital equipment totaling $708,100 in the first quarter of 1996, compared with $1,050,071 in the same period last year. Capital purchases in the first quarter of 1996 consist primarily of test equipment and upgrades to the Company's management information systems. The Company has budgeted capital expenditures for 1996 of approximately $3,800,000. The Company is in the process of reengineering its business processes and developing and purchasing new management information systems which are projected to cost approximately $2,300,000 of which $380,000 was spent in 1995 and another $140,000 was spent in the first quarter of 1996. The new systems budget includes hardware, software and consulting fees. In addition, the Company has another $1,500,000 budgeted for new manufacturing and test equipment. These acquisitions will be funded out of existing debt facilities. At March 31, 1996, the Company had available a revolving line of credit and a term loan aggregating $10,000,000 under which $2,250,000 was outstanding. Interest on this credit facility accrues when drawn down at the Bank One Prime rate plus .25% (9.0% at March 31,1996). The credit facility is collateralized by substantially all of the Company's assets, other than real estate. The loan agreements from the credit facilities contain restrictive covenants relating to capital expenditures, borrowing and payment of dividends. These credit facilities may be withdrawn/canceled at the bank's option under certain conditions such as default or in the event the Company experiences a material negative change in financial condition. The Company also has a term loan that is secured by deeds of trust on both of the Company's buildings and land. The term of the loan is seven years with a 20 year amortization. Principal payments are semi-annual with monthly payments of interest. The loan rate floats at the Citibank prime rate plus 1% (9.25% at March 31,1996) with a cap of 9.5%. The rate is adjusted annually on September 15th. The balance due on this loan was $3,145,000 at March 31,1996. The Company may require additional capital to finance enhancements to, or expansions of, its manufacturing capacity in accordance with its business strategy. Management believes that the need for working capital will continue to grow at a rate generally consistent with the growth of the Company's operations. Although no assurance can be given that financing will be available on terms acceptable to the Company, the Company may seek additional funds, from time to time, through public or private debt or equity offerings, bank borrowing, or leasing arrangements. QUARTERLY RESULTS Although management does not believe that the Company's business is affected by seasonal factors, the Company's sales and earnings may vary from quarter to quarter, depending primarily upon the timing of customer orders and product mix. Therefore, the Company's operating results for any particular quarter may not be indicative of the results for any future quarter or year. Item 6. Exhibits and Reports on Form 8-K (a) none (b) The Company did not file any report on Form 8-K during the three months ended March 31, 1996. 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. ELECTRONIC FAB TECHNOLOGY CORP. (Registrant) Date: May 13, 1996 Gerald J. Reid Gerald J. Reid President and Chairman of the Board Date: May 13, 1996 Stuart W. Fuhlendorf Stuart W. Fuhlendorf Treasurer and Chief Financial Officer Date: May 13, 1996 Brent L. Hofmeister Brent L. Hofmeister Controller -----END PRIVACY-ENHANCED MESSAGE-----