-----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, TLDarLAznx7jXEFFCJqcxLAwu7GrMM72ldXwL0uX/tI+pKP4U8HAuDhndeHIL2yH wblJfDapvmbsrL0MgYqP2A== 0001035704-97-000460.txt : 19971216 0001035704-97-000460.hdr.sgml : 19971216 ACCESSION NUMBER: 0001035704-97-000460 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970909 ITEM INFORMATION: FILED AS OF DATE: 19971215 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EFTC CORP/ CENTRAL INDEX KEY: 0000916797 STANDARD INDUSTRIAL CLASSIFICATION: PRINTED CIRCUIT BOARDS [3672] IRS NUMBER: 840854616 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-23332 FILM NUMBER: 97738395 BUSINESS ADDRESS: STREET 1: 7251 WEST 4TH ST CITY: GREELEY STATE: CO ZIP: 80634-9763 BUSINESS PHONE: 3033533100 FORMER COMPANY: FORMER CONFORMED NAME: ELECTRONIC FAB TECHNOLOGY CORP DATE OF NAME CHANGE: 19940103 8-K/A 1 AMENDMENT TO FORM 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 September 9, 1997 (Date of earliest event reported) EFTC CORPORATION (Exact name of registrant as specified in its charter) Commission file number: 0-23332 COLORADO 84-0854616 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9351 GRANT STREET DENVER, COLORADO 80229 (Address of principal executive offices) (303) 451-8200 (Registrant's telephone number, including area code) ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Businesses Acquired The following financial statements of Circuit Test, Inc. and affiliates are attached as Appendix I: i. Combined Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996 and 1995; ii. Combined Statements of Operations for the six months ended June 30, 1997 and 1996 (unaudited) and the three years ended December 31, 1996, 1995, and 1994; 2 iii. Combined Statements of Stockholders' Equity for the six months ended June 30, 1997 (unaudited) and the three years ended December 31, 1996, 1995, and 1994; and iv. Combined Statement of Cash Flows for the six months ended June 30, 1997 and 1996 (unaudited) and the three years ended December 31, 1996, 1995, and 1994. (b) Pro Forma Financial Information The following proforma financial information is attached as Appendix II: i. Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 1997; ii. Unaudited Pro Forma Condensed Combined Statement of Operations for the Six Months Ended June 30, 1997; iii. Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 1996. Exhibits 23.1 Consent of Independent auditors SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. EFTC CORPORATION By: /s/ Stuart W. Fuhlendorf -------------------------------- Stuart W. Fuhlendorf V.P. Finance and CFO Dated: December 15, 1997 3 APPENDIX I INDEPENDENT AUDITORS' REPORT The Board of Directors Circuit Test, Inc. and Affiliates: We have audited the accompanying combined balance sheets of Circuit Test, Inc. and affiliates as of December 31, 1996 and 1995, and the related combined statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Circuit Test, Inc. and affiliates as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. As discussed in note 1(a), the companies included in the combined financial statements changed in 1996. Our audits were made for the purpose of forming an opinion on the combined financial statements taken as a whole. The combining information in the accompanying schedules is presented for purposes of additional analysis of the combined financial statements rather than to present the financial position, results of operations and cash flows of the individual companies. The combining information has been subjected to the auditing procedures applied in the audits of the combined financial statements and, in our opinion, is fairly stated in all material respects in relation to the combined financial statements taken as a whole. KPMG PEAT MARWICK LLP Memphis, Tennessee July 11, 1997 F-1 4 CIRCUIT TEST, INC. AND AFFILIATES COMBINED BALANCE SHEETS ASSETS (NOTE 2)
DECEMBER 31, JUNE 30, ------------------------- 1997 1996 1995 ------------ ----------- ---------- (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents................................. $ 367,350 $ 1,490,336 $ 758,087 Accounts receivable, net of allowance for doubtful accounts of $544,830 in 1997, $544,830 in 1996 and $181,675 in 1995 (note 6)............................... 5,050,110 4,110,743 3,750,733 Inventory................................................. 3,704,089 4,242,152 2,467,679 Prepaid expenses and other current assets................. 391,814 8,847 21,599 ----------- ----------- ---------- TOTAL CURRENT ASSETS................................ 9,513,363 9,852,078 6,998,098 ----------- ----------- ---------- Property and equipment, at cost: Land, buildings and improvements.......................... 605,409 605,409 685,134 Leasehold improvements.................................... 686,071 655,029 626,226 Machinery and equipment................................... 3,459,098 2,845,745 1,731,370 Furniture and fixtures.................................... 425,946 382,440 280,011 Vehicles.................................................. 137,074 137,074 157,817 ----------- ----------- ---------- 5,313,598 4,625,697 3,480,558 Less accumulated depreciation and amortization.......... 1,639,285 1,400,285 1,293,583 ----------- ----------- ---------- NET PROPERTY AND EQUIPMENT.......................... 3,674,313 3,225,412 2,186,975 Other assets, net........................................... 112,830 96,245 60,079 ----------- ----------- ---------- TOTAL ASSETS........................................ $13,300,506 $13,173,735 $9,245,152 =========== =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of notes payable (note 2).............. $ 4,728,752 $ 4,256,293 $2,869,360 Accounts payable.......................................... 1,447,489 3,935,078 1,755,099 Accrued expenses.......................................... 2,599,119 1,069,762 949,866 Due to related parties.................................... (137,391) 260,377 397,813 Shareholder loans (note 3)................................ 943,000 1,135,871 975,871 ----------- ----------- ---------- TOTAL CURRENT LIABILITIES........................... 9,580,969 10,657,381 6,948,009 Long-term portion of notes payable (note 2)................. 148,229 594,509 239,882 ----------- ----------- ---------- TOTAL LIABILITIES................................... $ 9,729,198 $11,251,890 $7,187,891 ----------- ----------- ---------- STOCKHOLDERS' EQUITY: Circuit Test, Inc. common stock, $.01 par value; 50,000 shares authorized; 5 shares issued and outstanding...... $ 1 $ 1 $ 1 Circuit Test, Inc. non-voting common stock, $.01 par value; 50,000 shares authorized; 12,162 and 9,995 shares issued and outstanding at 1996 and 1995, respectively... 121 121 99 Airhub Service Group, L.C. members' deficit: Allen S. Braswell, Jr................................... (70,800) (70,800) -- Circuit Test International Limited Partnership.......... (70,800) (70,800) -- Circuit Test International L.C. members' equity: Allen S. Braswell, Jr................................... 4,330 4,330 4,330 Circuit Test International Limited Partnership.......... 4,330 4,330 4,330 Additional paid-in capital................................ 147,498 147,498 17,500 Retained earnings......................................... 3,556,628 1,907,165 2,031,001 ----------- ----------- ---------- TOTAL STOCKHOLDERS' EQUITY.......................... 3,571,308 1,921,845 2,057,261 Commitments, contingencies and related party transactions (notes 3, 4 and 5) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.......... $13,300,506 $13,173,735 $9,245,152 =========== =========== ==========
See accompanying notes to combined financial statements. F-2 5 CIRCUIT TEST, INC. AND AFFILIATES COMBINED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31, -------------------------- -------------------------------------- 1997 1996 1996 1995 1994 ------------ ----------- ----------- ----------- ---------- (UNAUDITED) Net revenues (note 6)....... $19,895,878 $9,754,621 $26,509,725 $16,183,590 $9,028,587 Costs of revenues........... 13,288,642 7,495,668 19,580,340 10,799,490 6,310,630 ----------- ---------- ----------- ----------- ---------- GROSS PROFIT...... 6,607,236 2,258,953 6,929,385 5,384,100 2,717,957 Selling, general and administrative expenses... 3,946,054 2,834,812 6,251,364 3,793,320 2,524,796 Interest expense, net....... 262,152 191,871 434,345 291,061 111,250 Other expense............... 11,565 -- 9,112 -- -- ----------- ---------- ----------- ----------- ---------- NET INCOME........ $ 2,387,465 $ (767,730) $ 234,564 $ 1,299,719 $ 81,911 =========== ========== =========== =========== ==========
See accompanying notes to combined financial statements F-3 6 CIRCUIT TEST, INC. AND AFFILIATES COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CIRCUIT TEST CIRCUIT TEST, INC. AIRHUB SERVICE GROUP, L.C. INTERNATIONAL, L.C. ---------------------------- ----------------------------- ----------------------------- NON- CIRCUIT TEST CIRCUIT TEST VOTING VOTING ADDITIONAL INTERNATIONAL INTERNATIONAL COMMON COMMON PAID-IN ALLEN S. LIMITED ALLEN S. LIMITED STOCK STOCK CAPITAL BRASWELL, JR. PARTNERSHIP BRASWELL, JR. PARTNERSHIP ------ ------ ---------- ------------- ------------- ------------- ------------- Balances at December 31, 1993.................. $ 1 $ 99 $ 17,500 $ -- $ -- $4,330 $4,330 Distributions to stockholders.......... -- -- -- -- -- -- -- Net income (loss)....... -- -- -- -- -- -- -- --- ---- -------- -------- -------- ------ ------ Balances at December 31, 1994.................. 1 99 17,500 -- -- 4,330 4,330 Net income (loss)....... -- -- -- -- -- -- -- --- ---- -------- -------- -------- ------ ------ Balances at December 31, 1995.................. 1 99 17,500 -- -- 4,330 4,330 Sale of stock........... -- 22 129,998 -- -- -- -- Allocation of net deficit to members at date of transfer...... -- -- -- (70,800) (70,800) -- -- Distributions to stockholders.......... -- -- -- -- -- -- -- Net income (loss)....... -- -- -- -- -- -- -- --- ---- -------- -------- -------- ------ ------ Balances at December 31, 1996.................. 1 121 147,498 (70,800) (70,800) 4,330 4,330 Distributions to stockholders.......... -- -- -- -- -- -- -- Net income (loss)....... -- -- -- -- -- -- -- --- ---- -------- -------- -------- ------ ------ Balances at June 30, 1997.................. $ 1 $122 $147,498 $(70,800) $(70,800) $4,330 $4,330 === ==== ======== ======== ======== ====== ====== RELATED EARNINGS ------------------------------------------------------------------------ AIRHUB CIRCUIT TEST TOTAL CIRCUIT SERVICE INTERNATIONAL, STOCKHOLDERS' TEST, INC. GROUP, L.C. L.C. TOTAL EQUITY ----------- ----------- -------------- ----------- ------------- Balances at December 31, 1993.................. $ 2,227,684 $ -- $ (505,291) $ 1,772,393 $ 1,748,653 Distributions to stockholders.......... (1,073,022) -- -- (1,073,022) (1,073,022) Net income (loss)....... 372,735 -- (290,824) 81,911 81,911 ----------- --------- ---------- ----------- ----------- Balances at December 31, 1994.................. 1,527,397 -- (796,115) 731,282 757,542 Net income (loss)....... 355,566 (141,600) 1,085,753 1,299,719 1,299,719 ----------- --------- ---------- ----------- ----------- Balances at December 31, 1995.................. 1,882,963 (141,600) 289,638 2,031,001 2,057,261 Sale of stock........... -- -- -- -- 130,020 Allocation of net deficit to members at date of transfer...... -- 141,600 -- 141,600 -- Distributions to stockholders.......... -- -- (500,000) (500,000) (500,000) Net income (loss)....... (189,383) (107,545) 531,492 234,564 234,564 ----------- --------- ---------- ----------- ----------- Balances at December 31, 1996.................. 1,693,580 (107,545) 321,130 1,907,165 1,921,845 Distributions to stockholders.......... -- (31,000) (707,000) (738,000) (738,000) Net income (loss)....... 935,079 665,943 786,443 2,387,465 2,387,465 ----------- --------- ---------- ----------- ----------- Balances at June 30, 1997.................. $ 2,628,658 $ 385,798 $ 400,572 $ 3,415,028 $ 3,571,308 =========== ========= ========== =========== ===========
See accompanying notes to combined financial statements. F-4 7 CIRCUIT TEST, INC. AND AFFILIATES COMBINED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, YEARS ENDED DECEMBER 31, ------------------------ ------------------------------------ 1997 1996 1996 1995 1994 ----------- ---------- ---------- ---------- ---------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income........................................ $ 2,387,465 $ (767,730) $ 234,564 $1,299,719 $ 81,911 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization................... 234,999 185,815 344,203 296,669 252,579 Increase in accounts receivable, net............ (939,367) (568,323) (360,010) (2,381,058) (430,908) (Increase) decrease in inventory................ 538,063 361,836 (1,774,473) (1,073,683) (560,235) Decrease (increase) in prepaid expenses and other assets.................................. (399,552) (291,280) (23,414) (15,620) 102,603 (Decrease) increase in accounts payable......... (2,487,589) (412,555) 2,179,979 1,327,841 265,409 (Decrease) increase in accrued expenses......... 1,529,357 429,501 119,896 482,517 133,998 Change in due to (from) related parties......... (397,768) -- (137,436) (114,321) 242,458 ----------- ---------- ---------- ---------- ---------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES................................ 465,608 (1,063,735) 583,309 (177,936) 87,815 ----------- ---------- ---------- ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures, net......................... (683,902) (629,041) (1,382,640) (621,754) (368,538) ----------- ---------- ---------- ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from notes payable and other obligations..................................... (166,692) 702,851 1,901,560 1,434,578 1,257,802 Proceeds from sale of stock....................... -- -- 130,020 -- -- Distributions to stockholders..................... (738,000) (500,000) (500,000) -- (1,073,022) ----------- ---------- ---------- ---------- ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES... (904,692) 202,851 1,531,580 1,434,578 184,780 ----------- ---------- ---------- ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................... (1,122,986) (1,551,925) 732,249 634,888 (95,943) Cash and cash equivalents at beginning of period.... 1,490,336 691,856 758,087 123,199 219,142 ----------- ---------- ---------- ---------- ---------- Cash and cash equivalents at end of period.......... $ 367,350 $ (860,068) $1,490,336 $ 758,087 $ 123,199 =========== ========== ========== ========== ========== Supplemental disclosure of cash flow information -- Interest paid..................................... $ 262,152 $ 191,871 $ 418,000 $ 291,000 $ 164,000 =========== ========== ========== ========== ==========
See accompanying notes to combined financial statements F-5 8 CIRCUIT TEST, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED) (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Description of Business and Principles of Combination Circuit Test, Inc. and affiliates (the Company) are primarily engaged in the business of repairing computer components and related peripherals. The combined financial statements include the financial statements of Circuit Test, Inc., located in Tampa, Florida, and affiliates Circuit Test International, L.C., located in Memphis, Tennessee and Airhub Service Group, L.C., located in Louisville, Kentucky. The financial statements are combined because of common ownership. All significant intercompany accounts and transactions have been eliminated in combination. On February 28, 1996, Airhub Service Group, L.C., a Kentucky limited liability company, was formed with two 50%/50% members. In a tax-free transfer, the net liabilities of Circuit Test International, L.C.'s Kentucky division were transferred to Airhub Service Group, L.C. on March 1, 1996. Management has elected to include Airhub Service Group, L.C. in its 1996 combined financial statements. The 1995 Airhub Service Group, L.C. financial statements represent the Kentucky division balances. The members of a limited liability company have no personal liability related to the company other than to the extent of their equity balances. Both members have equal economic and voting interests. Unless previously terminated, Airhub Services Group, L.C. will continue in existence until February 28, 2026 and Circuit Test International, L.C. will continue in existence until August 13, 2022. During November 1995, the Company decided to close one of its two Tampa facilities. This facility was closed in early 1996 upon the expiration of the Company's facility lease. The Company's affiliate near Boston, Massachusetts, Disk Maintenance, Inc., was closed in August 1996 subsequent to the expiration of the facility lease. During 1996, owners of the Company opened a facility in Brazil. In connection with the closing of the Tampa facility, the Company incurred costs of approximately $490,000 and $223,000 in 1996 and 1995, respectively. In prior years, the financial statements of Disk Maintenance, Inc. were included in the combined financial statements. Management has elected to omit Disk Maintenance, Inc. from the 1996 combination due to its closure. The accompanying 1995 and 1994 combined financial statements have been restated to reflect the change in reporting entity. Net income (loss) for 1996, 1995 and 1994 would have been $(439,357), $1,124,608 and $468,993, respectively, had Disk Maintenance, Inc. been included in the combination. (b) Revenue Recognition Revenues are recognized when products are shipped. (c) Accounting Estimates Management is required to make estimates and assumptions during the preparation of the combined financial statements in conformity with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the combined financial statements. They also affect the reported amounts of net income. Actual results could differ from these estimates and assumptions. F-6 9 CIRCUIT TEST, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (d) Cash and Cash Equivalent The Company considers all highly liquid investments with original maturities of six months or less to be cash equivalents. (e) Inventory Inventory consists primarily of computer parts and components and is valued at the lower of cost or market. Cost is determined using the weighted average method. In October 1996, the Company entered into an agreement with a third party which included the purchase of inventory in the amount of $1,188,000, with payments to be made according to a predetermined schedule during 1997. Such purchased inventory remaining on hand was approximately $1,028,000 at December 31, 1996 (note 7). (f) Property and Equipment Property and equipment are stated at cost. Equipment under capital leases is stated at the present value of minimum lease payments. Depreciation on property and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Equipment held under capital leases and leasehold improvements are amortized straight line over the shorter of the lease term or estimated useful life of the assets. (g) Pre-Opening Expenses Circuit Test International, L.C. began operations in January 1993 and is amortizing pre-opening expenses, which are included in other assets (net balance of approximately $8,510 at June 30, 1997, $17,600 at December 31, 1996 and $36,900 at December 31, 1995) using the straight-line method over 60 months. (h) Income Taxes Circuit Test, Inc. has elected to be treated as an "S" Corporation under provisions of the Internal Revenue Code. Circuit Test International, L.C. and Airhub Service Group, L.C. have each elected to be treated as a limited liability company. Under these elections, the stockholders or partners are individually responsible for reporting their share of taxable income or loss. Accordingly, no provision for federal or state income taxes has been reflected in the accompanying combined financial statements. (i) Gain-Sharing Bonuses The Company has a gain-sharing bonus plan whereby employees are rewarded for attaining quality and profit goals. Gain-sharing bonuses paid for the six months ended June 30, 1997 and years ended December 31, 1996, 1995 and 1994 were $321,026, $309,174, $220,431 and $81,932, respectively. (j) Reclassifications Certain 1995 and 1994 amounts have been reclassified to conform with the 1996 presentation. F-7 10 CIRCUIT TEST, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (2) NOTES PAYABLE Notes payable at June 30, 1997 and December 31, 1996 and 1995 consist of the following:
DECEMBER 31, JUNE 30, ------------------------ 1997 1996 1995 ----------- ---------- ---------- (UNAUDITED) $4,000,000 revolving bank line of credit; borrowings bear interest at the lender's prime rate (8.5% at June 30, 1997), interest payable monthly with principal due on demand; collateralized by substantially all assets of the Company and guaranteed by certain of the Company's stockholders................... $3,693,900 $3,747,418 $2,545,129 $1,000,000 nonrevolving bank line of credit; advances bear interest at either the lender's prime rate or a prevalent fixed rate at the time of the advance (8.5% at June 30, 1997); master note payable on demand with individual advances payable in three years consisting of monthly principal and interest payments; collateralized by substantially all of the Company's machinery, equipment, fixtures and furniture and guaranteed by certain of the Company's stockholders............... 1,024,857 861,790 138,241 $525,000 bank term loan; bears interest at the lender's prime rate (8.5% at June 30, 1997); monthly principal and interest payments through June 1, 1998; collateralized by substantially all of the Company's machinery, equipment, fixtures and furniture and guaranteed by certain of the Company's stockholders.... 151,267 233,333 408,303 Other...................................... 6,957 8,261 17,569 ---------- ---------- ---------- Total notes payable........................ 4,876,981 4,850,802 3,109,242 Less current maturities of notes payable... 4,728,752 4,256,293 2,869,360 ---------- ---------- ---------- Long-term portion of notes payable......... $ 148,229 $ 594,509 $ 239,882 ========== ========== ==========
The various loan agreements limit borrowings based on eligible collateral and subject the Company to certain covenants regarding financial maintenance and ratios. At December 31, 1996, the Company was not in compliance with certain of the covenants. On July 9, 1997 the lender waived the instances of non-compliance. (3) SHAREHOLDER LOANS AND OBLIGATIONS At June 30, 1997, the Company has loans payable to a stockholder of $160,000, at 8.5% and $783,000 at 6.5%. At December 31, 1996, the Company has loans payable to a stockholder of $352,871 at 8.5% and $783,000 at 6.5%. At December 31, 1995, balances on these loans were $192,871 and $783,000. F-8 11 CIRCUIT TEST, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) Stockholders of the Company have personal revolving lines of credit totaling $975,000, with $157,000, $779,500 and $107,600 outstanding at June 30, 1997 and December 31, 1996 and 1995, respectively. The credit lines are payable on demand and are guaranteed by the Company. (4) LEASES The Company is obligated for two capital leases that will expire in 1998. The Company leases one of its Tampa facilities from a stockholder at a rate of $5,080 per month under an operating lease. Rent expense for the six months ended June 30, 1997 and 1996 and the years ended December 31, 1996, 1995 and 1994 was $30,480, $0, $25,520, $65,232 and $62,701, respectively. The Company has a noncancelable operating lease with a third party for facility rental. The Company is charged $1.06 per square foot per month for office space and warehouse space occupied by certain equipment. Rent expense was $264,454 and $36,000 for the six months ended June 30, 1997 and 1996, respectively, and $206,776 and $28,800 for the years ended December 31, 1996 and 1995, respectively. The Company also has several noncancelable operating leases with third parties, primarily for facility rental, that expire over the next three years. Rent expense for these facilities for the six months ended June 30, 1997 and 1996 and the years ended December 31, 1996, 1995 and 1994 was $176,969, $108,252, $384,181, $296,810 and $147,350, respectively. Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of June 30, 1997 are as follows: 1997........................................................ $ 511,219 1998........................................................ 291,685 1999........................................................ 283,865 2000........................................................ 282,432 2001........................................................ 141,216 ---------- $1,510,417
(5) COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS The Company pays sales commissions to a company in which certain Company stockholders have a majority ownership interest. Commissions paid for the six months ended June 30, 1997 and 1996 and the years ended December 31, 1996, 1995 and 1994 were $12,600, $16,680, $27,240, $29,517 and $68,681, respectively. Certain corporate charges paid by Circuit Test, Inc. are allocated, based on a percentage of net revenues, to affiliates included in the combined financial statements and another related party which is not included in the combination. The amounts charged to the related party for 1996, 1995 and 1994 were approximately $162,000, $247,000 and $287,000, respectively. In the normal course of business, the Company is party to certain litigation. Management of the Company is of the opinion that the ultimate outcome of such matters will not have a material adverse impact on the Company's combined financial statements. F-9 12 CIRCUIT TEST, INC. AND AFFILIATES NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED) (6) SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK The Company's customers are primarily manufacturers of computers and related peripherals and integrated transportation and logistics companies. Certain customers of the Company comprise a significant portion of accounts receivable and net revenues as of and for the years ended December 31, 1996, 1995 and 1994. These customers are summarized as follows:
PERCENTAGE CUSTOMERS OF TOTAL --------- ---------- Accounts receivable: December 31, 1996......................................... 4 65% December 31, 1995......................................... 4 57% December 31, 1994......................................... 4 72% Net revenues: Year ended December 31, 1996.............................. 4 81% Year ended December 31, 1995.............................. 4 71% Year ended December 31, 1994.............................. 4 79%
The net revenues concentration numbers include one customer which accounted for 46% of net revenues during 1996, 36% during 1995 and 39% during 1994. (7) SUBSEQUENT EVENT In May 1997, a third party requested to terminate an agreement that the Company had entered into to purchase certain assets and other rights. A new agreement was reached that resulted in a reduction in purchase price for the assets previously purchased. In June 1997, the Company reduced the assets which are included in inventory and the corresponding payable to the third party by approximately $1,000,000. On July 9, 1997, the Company entered into an Agreement and Plan of Merger (Agreement) with EFTC Corporation (EFTC). The Agreement provides that EFTC will acquired the Company through the merger of the Company with and into EFTC (Merger). In the Merger, subject to adjustment and certain exceptions, stockholders of Circuit Test, Inc. will have the right to receive 1,858,974 shares of EFTC common stock and the members of Airhub Service Group, L.C. and Circuit Test International, L.C. will receive approximately $19,500,000 and have certain liabilities assumed by EFTC. Stockholders and members of the Company will also participate in an earnout based on future earnings. The obligations of the Company and EFTC to consummate the Merger are subject to various conditions, including the condition that the holders of a majority of the outstanding shares of common stock of EFTC vote to approve the Agreement. If the necessary stockholder vote is obtained and all other conditions to the Merger are satisfied, the Merger is expected to be completed on or before October 30, 1997. F-10 13 CIRCUIT TEST, INC. AND AFFILIATES COMBINING SCHEDULE -- BALANCE SHEET INFORMATION DECEMBER 31, 1996 ASSETS
AIRHUB CIRCUIT SERVICE CIRCUIT TEST TEST, INC. GROUP, L.C. INTERNATIONAL, L.C. COMBINED ---------- ----------- ------------------- ----------- CURRENT ASSETS: Cash and cash equivalents............. $ (169,421) $ 634,756 $1,025,001 $ 1,490,336 Accounts receivable, net.............. 1,074,345 1,268,588 1,767,810 4,110,743 Inventory............................. 223,380 2,706,234 1,312,538 4,242,152 Prepaid expenses and other current assets............................. 2,843 -- 6,004 8,847 Intercompany accounts................. 533,288 (400,846) (132,442) -- ---------- ---------- ---------- ----------- TOTAL CURRENT ASSETS.......... 1,664,435 4,208,732 3,978,911 9,852,078 ---------- ---------- ---------- ----------- PROPERTY AND EQUIPMENT, AT COST: Land, buildings and improvements...... 605,409 -- -- 605,409 Leasehold improvements................ -- -- 655,029 655,029 Machinery and equipment............... 1,030,977 680,431 1,134,337 2,845,745 Furniture and fixtures................ 121,255 111,680 149,505 382,440 Vehicles.............................. 137,074 -- -- 137,074 ---------- ---------- ---------- ----------- 1,894,715 792,111 1,938,871 4,625,697 Less accumulated depreciation and amortization....................... 1,026,834 65,590 307,861 1,400,285 ---------- ---------- ---------- ----------- NET PROPERTY AND EQUIPMENT.... 867,881 726,521 1,631,010 3,225,412 Other assets, net....................... 24,553 -- 71,692 96,245 ---------- ---------- ---------- ----------- $2,556,869 $4,935,253 $5,681,613 $13,173,735 ========== ========== ========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of notes payable... $ 121,498 $1,943,867 $2,190,928 $ 4,256,293 Accounts payable...................... 243,389 2,575,667 1,116,022 3,935,078 Accrued expenses...................... 260,647 454,507 354,608 1,069,762 Due to (from) related parties......... (306,765) (12,455) 579,597 260,377 Shareholder loans..................... 352,871 -- 783,000 1,135,871 ---------- ---------- ---------- ----------- TOTAL CURRENT LIABILITIES..... 671,640 4,961,586 5,024,155 10,657,381 Long-term portion of notes payable...... 44,029 222,812 327,668 594,509 ---------- ---------- ---------- ----------- TOTAL LIABILITIES............. 715,669 5,184,398 5,351,823 11,251,890 ---------- ---------- ---------- ----------- STOCKHOLDERS' EQUITY: Common stock.......................... 122 -- -- 122 Members' equity....................... -- (141,600) 8,660 (132,940) Additional paid-in capital............ 147,498 -- -- 147,498 Retained earnings (deficit)........... 1,693,580 (107,545) 321,130 1,907,165 ---------- ---------- ---------- ----------- TOTAL STOCKHOLDERS' EQUITY.... 1,841,200 (249,145) 329,790 1,921,845 ---------- ---------- ---------- ----------- $2,556,869 $4,935,253 $5,681,613 $13,173,735 ========== ========== ========== ===========
See accompanying independent auditors' report. F-11 14 CIRCUIT TEST, INC. AND AFFILIATES COMBINING SCHEDULE -- BALANCE SHEET INFORMATION DECEMBER 31, 1995 ASSETS
AIRHUB CIRCUIT SERVICE CIRCUIT TEST TEST, INC. GROUP, L.C. INTERNATIONAL, L.C. COMBINED ---------- ----------- ------------------- ---------- CURRENT ASSETS: Cash and cash equivalents............... $ 210,987 $ 38,372 $ 508,728 $ 758,087 Accounts receivable, net................ 1,332,405 449,172 1,969,156 3,750,733 Inventory............................... 1,034,222 97,280 1,336,177 2,467,679 Prepaid expenses and other current assets............................... 2,843 -- 18,756 21,599 Intercompany accounts................... 112,463 -- (112,463) -- ---------- --------- ---------- ---------- TOTAL CURRENT ASSETS............ 2,692,920 584,824 3,720,354 6,998,098 ---------- --------- ---------- ---------- PROPERTY AND EQUIPMENT, AT COST: Land, buildings and improvements........ 685,134 -- -- 685,134 Leasehold improvements.................. 208,505 29,378 388,343 626,226 Machinery and equipment................. 998,188 89,710 643,472 1,731,370 Furniture and fixtures.................. 170,160 28,022 81,829 280,011 Vehicles................................ 157,817 -- -- 157,817 ---------- --------- ---------- ---------- 2,219,804 147,110 1,113,644 3,480,558 Less accumulated depreciation and amortization......................... 1,140,678 4,268 148,637 1,293,583 ---------- --------- ---------- ---------- NET PROPERTY AND EQUIPMENT...... 1,079,126 142,842 965,007 2,186,975 Other assets, net............... 24,553 -- 35,526 60,079 ---------- --------- ---------- ---------- $3,796,599 $ 727,666 $4,720,887 $9,245,152 ========== ========= ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of notes payable..... $ 925,306 $ 448,241 $1,495,813 $2,869,360 Accounts payable........................ 340,298 379,400 1,035,401 1,755,099 Accrued expenses........................ 299,316 43,832 606,718 949,866 Due to (from) related parties........... (25,011) (2,207) 425,031 397,813 Shareholder loans....................... 192,871 -- 783,000 975,871 ---------- --------- ---------- ---------- TOTAL CURRENT LIABILITIES....... 1,732,780 869,266 4,345,963 6,948,009 Long-term portion of notes payable....................... 163,256 -- 76,626 239,882 ---------- --------- ---------- ---------- TOTAL LIABILITIES............... 1,896,036 869,266 4,422,589 7,187,891 ---------- --------- ---------- ---------- STOCKHOLDERS' EQUITY: Common stock............................ 100 -- -- 100 Members' equity......................... -- -- 8,660 8,660 Additional paid-in capital.............. 17,500 -- -- 17,500 Retained earnings (deficit)............. 1,882,963 (141,600) 289,638 2,031,001 ---------- --------- ---------- ---------- TOTAL STOCKHOLDERS' EQUITY...... 1,900,563 (141,600) 298,298 2,057,261 ---------- --------- ---------- ---------- $3,796,599 $ 727,666 $4,720,887 $9,245,152 ========== ========= ========== ==========
See accompanying independent auditors' report. F-12 15 CIRCUIT TEST, INC. AND AFFILIATES COMBINING SCHEDULE -- OPERATIONS INFORMATION YEAR ENDED DECEMBER 31, 1996
AIRHUB CIRCUIT TEST CIRCUIT SERVICE INTERNATIONAL, ELIMINATING TEST, INC. GROUP, L.C. L.C. ENTRIES COMBINED ---------- ----------- -------------- ----------- ----------- Net revenues................. $4,590,711 $8,211,422 $13,854,357 $(146,765) $26,509,725 Costs of revenues............ 3,348,588 6,421,699 9,956,818 (146,765) 19,580,340 ---------- ---------- ----------- --------- ----------- GROSS PROFIT....... 1,242,123 1,789,723 3,897,539 -- 6,929,385 Selling, general and administrative expenses.... 1,348,581 1,799,830 3,102,953 -- 6,251,364 Interest expense, net........ 100,587 70,664 263,094 -- 434,345 Other (income) expense....... (17,662) 26,774 -- -- 9,112 ---------- ---------- ----------- --------- ----------- NET INCOME (LOSS).. $ (189,383) $ (107,545) $ 531,492 $ -- $ 234,564 ========== ========== =========== ========= ===========
See accompanying independent auditors' report. F-13 16 CIRCUIT TEST, INC. AND AFFILIATES COMBINING SCHEDULE -- OPERATIONS INFORMATION YEAR ENDED DECEMBER 31, 1995
AIRHUB CIRCUIT TEST CIRCUIT SERVICE INTERNATIONAL, ELIMINATING TEST, INC. GROUP, L.C. L.C. ENTRIES COMBINED ---------- ----------- -------------- ----------- ----------- Net revenues................... $7,668,419 $ 302,531 $8,356,249 $(143,609) $16,183,590 Costs of revenues.............. 5,593,172 238,617 5,111,310 (143,609) 10,799,490 ---------- --------- ---------- --------- ----------- GROSS PROFIT......... 2,075,247 63,914 3,244,939 -- 5,384,100 Selling, general and administrative expenses...... 1,591,408 198,810 2,003,102 -- 3,793,320 Interest expense, net.......... 128,273 6,704 156,084 -- 291,061 ---------- --------- ---------- --------- ----------- NET INCOME (LOSS).... $ 355,566 $(141,600) $1,085,753 $ -- $ 1,299,719 ========== ========= ========== ========= ===========
See accompanying independent auditors' report. F-14 17 CIRCUIT TEST, INC. AND AFFILIATES COMBINING SCHEDULE -- OPERATIONS INFORMATION YEAR ENDED DECEMBER 31, 1994
CIRCUIT TEST CIRCUIT INTERNATIONAL, ELIMINATING TEST, INC. L.C. ENTRIESE COMBINED ---------- -------------- ----------- ---------- Net revenues............................. $7,032,786 $2,069,931 $(74,130) $9,028,587 Costs of revenues........................ 4,891,004 1,493,756 (74,130) 6,310,630 ---------- ---------- -------- ---------- GROSS PROFIT................... 2,141,782 576,175 -- 2,717,957 Selling, general and administrative expenses............................... 1,721,680 803,116 -- 2,524,796 Interest expense, net.................... 47,367 63,883 -- 111,250 ---------- ---------- -------- ---------- NET INCOME (LOSS).............. $ 372,735 $ (290,824) $ -- $ 81,911 ========== ========== ======== ==========
See accompanying independent auditors' report. F-15 18 CIRCUIT TEST, INC. AND AFFILIATES COMBINING SCHEDULE -- CASH FLOWS INFORMATION YEAR ENDED DECEMBER 31, 1996
AIRHUB CIRCUIT TEST CIRCUIT SERVICE INTERNATIONAL TEST, INC. GROUP, L.C. L.C. COMBINED ----------- ----------- ------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES:.... $ (189,383) $ (107,545) $ 531,492 $ 234,564 Net income (loss) Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities: Depreciation and amortization........ 162,822 59,287 122,094 344,203 (Increase) decrease in accounts receivables, net.................. 258,060 (819,416) 201,346 (360,010) (Increase) decrease in inventory..... 810,842 (2,608,954) 23,639 (1,774,473) Increase in prepaids and other assets............................ -- -- (23,414) (23,414) Increase (decrease) in accounts payable........................... (96,909) 2,196,267 80,621 2,179,979 Increase (decrease) in accrued expenses.......................... (38,669) 410,675 (252,110) 119,896 Change in due to (from) related parties........................... (281,754) (10,248) 154,566 (137,436) Change in intercompany account....... (1,017,309) 1,019,433 (2,124) -- ----------- ----------- ---------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES.......... (392,300) 139,499 836,110 583,309 ----------- ----------- ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES -- capital expenditures, net.................................... 48,423 (642,966) (788,097) (1,382,640) ----------- ----------- ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from notes payable and other obligations.................... (166,551) 1,099,851 968,260 1,901,560 Proceeds from sale of stock............ 130,020 -- -- 130,020 Distributions to stockholders.......... -- -- (500,000) (500,000) ----------- ----------- ---------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.......... (36,531) 1,099,851 468,260 1,531,580 ----------- ----------- ---------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.......... (380,408) 596,384 516,273 732,249 ----------- ----------- ---------- ----------- Cash and cash equivalents at beginning of year................................... 210,987 38,372 508,728 758,087 ----------- ----------- ---------- ----------- Cash and cash equivalents at end of year................................... (169,421) 634,756 1,025,001 1,490,336 =========== =========== ========== =========== Supplemental disclosure of cash information -- Interest paid........... $ 98,000 $ 71,000 $ 249,000 $ 418,000 =========== =========== ========== ===========
See accompanying independent auditors' report. F-16 19 CIRCUIT TEST, INC. AND AFFILIATES COMBINING SCHEDULE -- CASH FLOWS INFORMATION YEAR ENDED DECEMBER 31, 1995
AIRHUB CIRCUIT SERVICE CIRCUIT TEST TEST, INC. GROUP, L.C. INTERNATIONAL, L.C. COMBINED ---------- ----------- ------------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)..................... $ 355,566 (141,600) 1,085,753 1,299,719 Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities: Depreciation and amortization...... 203,597 8,368 84,704 296,669 Increase in accounts receivables, net.............................. (370,082) (449,172) (1,561,804) (2,381,058) (Increase) decrease in inventory... 242,180 (97,280) (1,218,583) (1,073,683) (Increase) decrease in prepaids and other assets..................... (17,798) -- 2,178 (15,620) Increase in accounts payable....... 36,453 379,400 911,988 1,327,841 Increase in accrued expenses....... 49,573 43,832 389,112 482,517 Change in due to (from) related parties.......................... (255,947) (2,207) 143,833 (114,321) Change in intercompany account..... (11,439) -- 11,439 -- --------- --------- ----------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES........ 232,103 (258,659) (151,380) (177,936) --------- --------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES -- capital expenditures, net............. 42,130 (151,210) (512,674) (621,754) --------- --------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: net proceeds from notes payable and other obligations.................. (219,440) 448,241 1,205,777 1,434,578 --------- --------- ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS................. 54,793 38,372 541,723 634,888 Cash and cash equivalents at beginning of year............................... 156,194 -- (32,995) 123,199 --------- --------- ----------- ----------- Cash and cash equivalents at end of year.................................. $ 210,987 38,372 508,728 758,087 ========= ========= =========== =========== Supplemental disclosure of cash information -- Interest paid.......... $ 128,000 7,000 156,000 291,000 ========= ========= =========== ===========
See accompanying independent auditors' report. F-17 20 CIRCUIT TEST, INC. AND AFFILIATES COMBINING SCHEDULE -- CASH FLOWS INFORMATION YEAR ENDED DECEMBER 31, 1994
CIRCUIT TEST CIRCUIT INTERNATIONAL, TEST, INC. L.C. COMBINED ----------- -------------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss).............................. $ 372,735 $(290,824) $ 81,911 Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities: Depreciation and amortization............... 195,200 57,379 252,579 Increase in accounts receivables, net....... (211,334) (219,574) (430,908) Increase in inventory....................... (511,571) 48,664 (560,235) (Increase) decrease in prepaids and other assets.................................... 106,122 (3,519) 102,603 Increase in accounts payable................ 165,421 99,988 265,409 Increase (decrease) in accrued expenses..... (20,694) 154,692 133,998 Change in due to (from) related parties..... 239,655 2,803 242,458 Change in intercompany account.............. (101,024) 101,024 -- ----------- --------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES................. 234,510 (146,695) 87,815 ----------- --------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES -- capital expenditures, net.............................. (37,560) (330,978) (368,538) ----------- --------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from notes payable and other obligations................................. 871,140 386,662 1,257,802 Distributions to stockholders.................. (1,073,022) -- (1,073,022) ----------- --------- ----------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES................. (201,882) 386,662 184,780 ----------- --------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS.......................... (4,932) (91,011) (95,943) Cash and cash equivalents at beginning of year... 161,126 58,016 219,142 ----------- --------- ----------- Cash and cash equivalents at end of year......... $ 156,194 $ (32,995) $ 123,199 =========== ========= =========== Supplemental disclosure of cash information -- Interest paid.................................. $ 54,000 $ 110,000 $ 164,000 =========== ========= ===========
See accompanying independent auditors' report. F-18 21 APPENDIX II UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION The following unaudited pro forma condensed financial information is based upon the historical financial statements of EFTC Corporation ("EFTC"), the historical combined financial statements of Current Electronics, Inc. (the "CE Companies") and the historical combined financial statements of Circuit Test, Inc. and the CTI LLCs (collectively, the "CTI Companies"). The unaudited pro forma condensed combined balance sheet presents the combined financial position of EFTC, including the CE Companies, and the CTI Companies as of June 30, 1997, assuming EFTC had completed the Merger and the Acquisition as of that date using the purchase method of accounting, and also assuming that EFTC had completed the Asset Purchase as of June 30, 1997. The purchase accounting adjustments are included in the EFTC June 30, 1997 balances. Accordingly, the combined identifiable assets and liabilities of the CTI Companies have been adjusted to their estimated fair values based upon a preliminary purchase price of approximately $28.5 million. The unaudited condensed combined pro forma statements of operations for the six months ended June 30, 1997 and the year ended December 31, 1996 assume the CE Companies and CTI Companies business combinations occurred on January 1, 1996 and include the historical operations of EFTC and the CTI Companies for those periods and the CE Companies (for the period from January 1, 1997 to February 24, 1997 and the year ended September 30, 1996), adjusted for the pro forma effects of the business combinations. The following unaudited condensed pro forma financial information has been prepared based upon assumptions deemed appropriate by EFTC and are not necessarily indicative of the consolidated financial position or results of operations if the business combination had been consummated on the assumed dates and are not necessarily indicative of the actual results of the future operations of the combined companies. EFTC Corporation Unaudited Pro Forma Condensed Combined Balance Sheet June 30, 1997
CTI AlliedSignal Pro Forma Pro Forma Pro Forma EFTC CTI Companies Adjustments Adjustments Combined ------------ ------------- ----------- ------------ ---------- ASSETS Current assets: Cash and cash equivalents .................. $ 897,579 367,350 (19,750,000)(1) 7,650,000 (7) 1,014,929 (23,000,000)(2) (7,650,000)(8) (3,500,000)(6) Accounts receivable .......... 7,032,934 5,050,110 -- -- 12,083,044 Inventories .................. 17,859,385 3,704,089 -- 10,500,000 (8) 32,063,474 Income taxes receivable ...... 469,774 -- -- -- 469,774 Other current assets ......... 1,110,661 391,814 -- -- 1,502,475 ------------ ---------- ---------- ---------- ----------- Total current assets .... 27,370,333 9,513,363 (250,000) 10,500,000 47,133,696 Property, plant and equipment, net .................. 10,659,362 3,674,313 -- 2,700,000 (8) 17,033,675 Goodwill ........................ 7,974,933 -- 24,915,692 (1) -- 36,390,625 3,500,000 (6) -- Other assets .................... 114,943 112,830 -- -- 227,773 ------------ ---------- ---------- ---------- ----------- $ 46,119,571 13,300,506 28,165,692 13,200,000 100,785,769 ============ ========== ========== ========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable ................ $ 5,800,000 4,728,752 -- -- 10,528,752 Shareholder loans ............ -- 943,000 -- -- 943,000 Current portion of long- term debt .................... 468,655 -- -- -- 468,655 Accounts payable ............. 7,893,819 1,447,489 -- -- 9,341,308 Other current liabilities .... 2,490,015 2,461,728 -- 5,550,000 (8) 10,501,743 ------------ ---------- ---------- ---------- ----------- Total current liabilities ............. $ 16,652,489 9,580,969 5,550,000 31,783,458 Long-term debt, net of current portion ................... 9,140,117 148,229 23,000,000 (2) 7,650,000 (7) 39,938,346 (11) Deferred income taxes ............. 328,482 -- -- -- 328,482 ------------ ---------- ---------- ---------- ----------- 26,121,088 9,729,198 23,000,000 13,200,000 72,050,286 ------------ ---------- ---------- ---------- ----------- Shareholders' equity: Common stock and additional paid-in capital ... 15,720,724 156,280 8,737,000 (1) 24,457,724 (156,280)(1) Retained earnings ............ 4,277,759 3,415,028 (3,415,028)(1) -- 4,277,759 ------------ ---------- ---------- ---------- ----------- 19,998,483 3,571,308 5,165,692 -- 28,735,483 ------------ ---------- ---------- ---------- ----------- $ 46,119,571 13,300,506 28,165,692 13,200,000 100,785,769 ============ ========== ========== ========== ===========
See Notes to Unaudited Pro Forma Condensed Financial Information. 1 22 EFTC Corporation Unaudited Pro Forma Condensed Combined Statement of Operations Six Months Ended June 30, 1997
Pro forma CE Companies Combined CTI Companies CE Pro forma with CE CTI Pro Forma Pro Forma EFTC Companies Adjustments Companies Companies Adjustments Combined ----------- ---------- ------------ ---------- ---------- ------------- ---------- Net sales ........................ $36,782,349 4,475,732 41,258,081 19,895,878 -- 61,153,959 Cost of goods sold ............... 32,285,782 4,025,431 (5,000)(9) 36,306,213 13,288,642 -- 49,594,855 ----------- ---------- ---------- ---------- ---------- ---------- ---------- Gross profit .................. 4,496,567 450,301 5,000 4,951,868 6,607,236 -- 11,559,104 Selling, general and administrative expenses ....... 2,986,655 1,368,366 -- 4,355,021 3,957,619 -- 8,312,640 Goodwill amortization ............ 89,601 -- 27,083 (4) 116,684 -- 473,500 (4) 590,184 ----------- ---------- ---------- ---------- ---------- ---------- ---------- Operating income (loss) ....... 1,420,311 (918,065) (22,083) 480,163 2,649,617 (473,500) 2,656,280 ----------- ---------- ---------- ---------- ---------- ---------- ---------- Other income (expense): Interest expense .............. (537,143) (30,889) (52,063)(3) (620,095) (262,152) (948,750)(3) (1,830,997)(11) Other income (expense), net ... 37,528 (17,273) -- 20,265 -- -- 20,265 ----------- ---------- ---------- ---------- ---------- ---------- ---------- (499,605) (48,162) (52,063) (599,830) (262,152) (948,750) (1,810,732) ----------- ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) before income taxes ............... 920,706 (966,227) (74,146) (119,667) 2,387,465 (1,422,250) 845,548 Income tax expense (benefit) ..... 338,567 (362,354) (9,411)(10) (33,198) -- 399,244 (5) 366,046 ----------- ---------- ---------- ---------- ---------- ---------- ---------- Net income ................. $ 582,139 (603,873) (64,735) (86,469) 2,387,465 (1,821,494) 479,502 =========== ========== ========== ========== ========== ========== ========== Income per common share .......... $ 0.10 0.06 =========== ========== Weighted average common and common equivalent shares outstanding ................... 6,120,897 1,858,975 7,979,872 =========== ========== ==========
See Notes to Unaudited Pro Forma Condensed Financial Information. 2 23 EFTC Corporation Unaudited Pro Forma Condensed Combined Statement of Operations Year Ended December 31, 1996
Pro forma CE Companies Combined CE Pro forma with CE CTI Pro Forma Pro Forma EFTC Companies Adjustments Companies Companies Adjustments Combined ------------ ---------- ------------ ---------- ---------- ------------- ----------- Net sales ........................ $ 56,880,067 32,520,438 -- 89,400,505 26,509,725 -- 115,910,230 Cost of goods sold ............... 53,980,067 27,075,305 (30,000)(9) 81,025,372 19,580,340 -- 100,605,712 ------------ ---------- ---------- ---------- ---------- ---------- ----------- Gross profit .................. 2,900,000 5,445,133 30,000 8,375,133 6,929,385 -- 15,304,518 Selling, general and administrative expenses ....... 4,195,784 2,792,814 -- 6,988,598 6,251,364 -- 13,239,962 Goodwill amortization ............ -- -- 162,495 (4) 162,495 -- 947,000 (4) 1,109,495 Impairment of fixed assets ....... 725,869 -- -- 725,869 -- -- 725,869 ------------ ---------- ---------- ---------- ---------- ---------- ----------- Operating income (loss) ....... (2,021,653) 2,652,319 (132,495) 498,171 678,021 (947,000) 229,192 ------------ ---------- ---------- ---------- ---------- ---------- ----------- Other income (expense): Interest expense .............. (525,854) (101,192) (312,375)(3) (939,421) (434,345) (1,897,500)(3) (3,271,266)(11) Other income, net ............. 82,428 9,345 -- 91,773 (9,112) -- 82,661 ------------ ---------- ---------- ---------- ---------- ---------- ----------- (443,426) (91,847) (312,375) (847,648) (443,457) (1,897,500) (3,188,605) ------------ ---------- ---------- ---------- ---------- ---------- ----------- Income (loss) before income taxes ....................... (2,465,079) 2,560,472 (444,870) (349,477) 234,564 (2,844,500) (2,959,413) Income tax expense (benefit) ..... (872,114) 754,000 (56,465)(10) (174,579) -- (904,150)(5) (1,078,729) ------------ ---------- ---------- ---------- ---------- ---------- ----------- Net income (loss) ............. $ (1,592,965) 1,806,472 (388,405) (174,898) 234,564 (1,940,350) (1,880,684) ============ ========== ========== ========== ========== ========== =========== Income (loss) per common share.... $ (0.40) (0.24) ============ =========== Weighted average common and common equivalent shares outstanding.................... 3,942,139 1,980,000 1,858,975 7,781,114 ============ ========== ========== ===========
See Notes to Unaudited Pro Forma Condensed Financial Information. 3 24 EFTC Corporation Notes to Unaudited Pro Forma Condensed Financial Information (A) BASIS OF PRESENTATION On July 9, 1997, EFTC and CTI entered into the Merger Agreement that provides for the merger of CTI with and into a newly formed subsidiary of EFTC. Additionally, EFTC and the members of the CTI LLCs entered into the Purchase Agreement that provides for the acquisition by EFTC of all of the limited liability company interests of the CTI LLCs. The CTI Companies are affiliates as a result of common ownership. Under the terms of the Merger Agreement and the Purchase Agreement, EFTC will pay approximately $19.5 million in cash and issue 1,858,975 shares of its common stock to the stockholders of the CTI Companies. The Merger and the Acquisition will both be accounted for using the purchase method of accounting for business combinations. Actual adjustments may differ from those presented herein upon finalization of the purchase accounting adjustments. Additionally, EFTC acquired the CE Companies in February 1997 and entered into an agreement with AlliedSignal to purchase certain assets and inventory for an approximate amount of $13.2 million. (B) PRO FORMA ADJUSTMENTS The following pro forma adjustments have been made to the accompanying pro forma condensed financial information: 1. To record goodwill in the amount of $24.9 million based upon the allocation of the estimated $28.5 million ($19.5 million in cash and 1,858,975 shares of Common Stock at $4.70 per share, based upon fair value of the Common Stock and $250,000 in transaction costs) cost of the Merger and the Acquisition and to eliminate the equity accounts of the CTI Companies. 2. To record the borrowings for the Merger and the Acquisition of $23 million to be paid by the Company from a portion of the proceeds of the Bank One Loan. See "MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Liquidity and Capital Resources." 3. To record interest expense on the borrowings under the Bank One loan at an assumed interest rate of 8.25% per annum. 4. To record amortization of goodwill resulting from the Merger and the Acquisition over a 30 year period. 5. To record income tax expense for taxable income of CTI, an S Corporation, and the CTI LLCs, net of the income tax effect of the pro forma adjustments. 6. To record liability for bonuses to be paid to employees of the CTI Companies prior to closing as additional goodwill. 7. To record additional borrowing to purchase inventory and assets from AlliedSignal. See "THE COMPANIES-- EFTC Corporation--General." 8. To record assets and inventory of $13.2 million purchased from AlliedSignal. See "THE COMPANIES--EFTC Corporation--General." 9. Elimination of depreciation expense relating to certain leasehold improvements that were abandoned after consummation of the acquisition of the CE Companies. 10. To record income tax expense for the taxable income of Current Electronics (Washington), Inc., one of the CE Companies, an S corporation, net of the effect of the pro forma adjustments. 11. In September 1997, the Company issued $15 million in Subordinated Notes to a director, which include warrants to purchase 500,000 shares of the Company's Common Stock. See "MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--Liquidity and Capital Resources." The warrants have been recorded at fair value using the Black-Scholes option pricing model as additional paid in capital and debt discount. The discount will be amortized as additional interest expense over the term of the 4 25 Subordinated Notes. If the Subordinated Notes and warrants had been issued on January 1, 1996, pro forma net income and income per common share would have decreased by 402,025 and $0.05, respectively, for the six months ended June 30, 1997 and pro forma net loss and loss per common share would have increased by $804,049 and $0.10, respectively, for the year ended December 31, 1996. 5 EX-23.1 2 CONSENT OF INDEPENDENT AUDITORS 1 EXHIBIT 23.1 INDEPENDENT AUDITOR'S CONSENT The Board of Directors Circuit Test, Inc. and Affiliates: We consent to the inclusion of our report dated July 11, 1997, with respect to the combined balance sheets of Circuit Test, Inc. and affiliates as of December 31, 1996 and 1995, and the related combined statements of earnings, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 1996, which report appears in the Form 8-K/A of EFTC Corporation dated December 15, 1997. /s/ KPMG PEAT MARWICK LLP KPMG Peat Marwick LLP Memphis, Tennessee December 11, 1997 -----END PRIVACY-ENHANCED MESSAGE-----