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FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2003
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________________ to __________________
Commission file number 0-14659
TECHDYNE, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1709103
- -------------------------------------------- --------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2230 West 77th Street, Hialeah, Florida 33016
- --------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
(305) 556-9210
----------------------------------------------------
(Registrant's telephone number, including area code)
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| or No |_|
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).
Yes |_| No |X|
Common Stock Outstanding
Common Stock, $.01 par value - 6,435,345 shares as of June 30, 2003
TECHDYNE, INC. AND SUBSIDIARIES
-------------------------------
INDEX
PART I -- FINANCIAL INFORMATION
- ------ ---------------------
The Consolidated Statements of Operations (Unaudited) for the three and
six months ended June 30, 2003 and June 30, 2002 include the accounts of the
Registrant and its subsidiaries.
Item 1. Financial Statements
- ------- --------------------
1) Consolidated Balance Sheets as of June 30, 2003 (Unaudited) and
December 31, 2002.
2) Consolidated Statements of Operations for the three and six months
ended June 30, 2003 and June 30, 2002 (Unaudited).
3) Consolidated Statements of Cash Flows for the six months ended June 30,
2003 and June 30, 2002 (Unaudited).
4) Notes to Consolidated Financial Statements as of June 30, 2003
(Unaudited).
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- ------- -----------------------------------------------------------------------
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------- ----------------------------------------------------------
Item 4. Controls and Procedures
- ------- -----------------------
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
Signatures
----------
EXHIBITS
- --------
2
PART I -- FINANCIAL INFORMATION
-------------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
TECHDYNE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2003 2002(A)
-----------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 2,289,455 $ 1,536,965
Accounts receivable, less allowances of $244,000 at June 30 and December 31 3,701,380 4,473,938
Amounts receivable from major stockholder, net 1,755,203 1,944,669
Inventories, less allowances for obsolescence of $1,042,000 at June 30
and $1,115,000 at December 31 7,290,590 7,431,382
Prepaid expenses and other current assets 845,066 802,037
----------------------------
Total current assets 15,881,694 16,188,991
----------------------------
Property and equipment (Note 6):
Land and improvements 174,120 174,120
Buildings and building improvements 672,359 672,359
Machinery, computer and office equipment 6,389,705 6,417,050
Tools and dies 266,592 259,453
Leasehold improvements 670,774 679,183
----------------------------
8,173,550 8,202,165
Less accumulated depreciation and amortization 5,454,309 5,186,660
----------------------------
2,719,241 3,015,505
----------------------------
Deferred expenses and other assets, net 6,625 8,692
----------------------------
Goodwill 2,954,995 2,954,995
----------------------------
$21,562,555 $22,168,183
============================
(A) Reference is made to the company's Annual Report on Form 10-K for the
year ended December 31, 2002 filed with the United States Securities and
Exchange Commission on March 31, 2003.
CONTINUED ON FOLLOWING PAGE
3
TECHDYNE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
June 30, December 31,
2003 2002(A)
-------------------------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 1,500,000 $ 1,500,000
Accounts payable 1,769,181 2,188,700
Accrued expenses 865,987 889,356
Accrued income taxes 487,842 519,617
Current portion of long-term debt 1,055,153 1,073,429
-------------------------------
Total current liabilities 5,678,163 6,171,102
Long-term debt 4,764,846 5,314,753
Deferred income taxes 310,800 310,800
-------------------------------
Commitments and contingencies
Total liabilities 10,753,809 11,796,655
-------------------------------
Stockholders' equity:
Common stock, $.01 par value, authorized 10,000,000 shares; issued and
outstanding 6,435,345 and 6,556,990 shares at June 30 and December 31;
respectively 64,354 65,570
Capital in excess of par value 11,386,386 11,592,995
Accumulated deficit (417,645) (854,863)
Accumulated other comprehensive loss (224,349) (224,349)
Notes receivable from options exercised -- (207,825)
-------------------------------
Total stockholders' equity 10,808,746 10,371,528
-------------------------------
$ 21,562,555 $ 22,168,183
===============================
(A) Reference is made to the company's Annual Report on Form 10-K for the
year ended December 31, 2002 filed with the United States Securities and
Exchange Commission on March 31, 2003.
See notes to consolidated condensed financial statements.
4
TECHDYNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------------------------------
2003 2002 2003 2002
--------------------------------------------------------------
Sales $ 7,719,414 $ 8,085,290 $15,095,906 $15,515,202
Cost of goods sold 6,589,047 7,063,920 12,906,479 13,491,096
--------------------------------------------------------------
Gross Margin 1,130,367 1,021,370 2,189,427 2,024,106
Selling, general and administrative expenses 685,509 731,152 1,370,848 1,444,723
--------------------------------------------------------------
Income from operations 444,858 290,218 818,579 579,383
Interest expense 57,182 72,416 117,191 143,095
Interest and other income 13,198 3,848 29,881 26,756
--------------------------------------------------------------
Income before income taxes 400,874 221,650 731,269 463,044
Income tax provision 160,051 -- 294,051 --
--------------------------------------------------------------
Net income $ 240,823 $ 221,650 $ 437,218 $ 463,044
==============================================================
Earnings per share:
Basic & deluted $ 0.04 $ 0.03 $ 0.07 $ 0.07
==============================================================
See notes to consolidated condensed financial statements
5
TECHDYNE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
------------------------------
2003 2002
------------------------------
Operating activities:
Net income $ 437,218 $ 463,044
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 355,329 437,578
Amortization 46,253 42,897
Deferred expenses and other assets 2,067 (14,944)
Provision for inventory obsolescence 114,521 129,216
Changes relating to operating activities from:
Accounts receivable 772,558 (294,129)
Inventories 26,271 (232,368)
Prepaid expenses and other current assets (43,029) 83,300
Accounts payable (419,519) (396,918)
Accrued expenses (23,369) (47,274)
Income taxes payable (31,775) --
-----------------------------
Net cash provided by operating activities 1,236,525 170,402
-----------------------------
Investing activities:
Additions to property and equipment, net of minor disposals (105,318) (134,307)
-----------------------------
Net cash used in investing activities (105,318) (134,307)
-----------------------------
Financing activities:
Payments on long-term bank borrowings (568,183) (514,668)
Receivable due from major shareholder, net borrowings (payments) 189,466 (410,690)
-----------------------------
Net cash used in financing activities (378,717) (925,358)
-----------------------------
Effect of exchange rate fluctuations on cash -- 2,527
-----------------------------
Increase (decrease) in cash and cash equivalents 752,490 (886,736)
Cash and cash equivalents at beginning of period 1,536,965 1,021,112
-----------------------------
Cash and cash equivalents at end of period $ 2,289,455 $ 134,376
=============================
Supplemental disclosure of cash flow information:
Interest paid in cash $ 125,055 $ 190,980
=============================
See notes to consolidated condensed financial statements
6
TECHDYNE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(UNAUDITED)
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of Techdyne,
Inc. ("Techdyne") and its subsidiaries, including Lytton Incorporated
("Lytton"), Techdyne (Europe) Limited ("Techdyne (Europe)"), and Techdyne
(Livingston) Limited which is a subsidiary of Techdyne (Europe), collectively
referred to as the "company." All material intercompany accounts and
transactions have been eliminated in consolidation. The company is a 72.4% owned
subsidiary of Simclar Group Limited ("Simclar"), which initially purchased a
71.3% interest of the company's former parent, Medicore, Inc. ("Medicore") on
June 27, 2001. See Note 6.
BUSINESS
The company operates in one business segment, the manufacture of
electronic and electro-mechanical products primarily manufactured to customer
specifications in the data processing, telecommunication, instrumentation and
food preparation equipment industries.
INVENTORIES
Inventories, which consist primarily of raw materials used in the
production of electronic components, are valued at the lower of cost (first-in,
first-out and/or weighted average cost method) or market value. The cost of
finished goods and work in process consists of direct materials, direct labor
and an appropriate portion of fixed and variable manufacturing overhead.
Inventories are comprised of the following:
June 30, December 31,
2003 2002
--------------------------------
Finished goods $ 796,325 $ 703,754
Work in process 1,202,340 1,359,595
Raw materials and supplies 5,291,925 5,368,033
--------------------------------
$7,290,590 $7,431,382
================================
LONG-LIVED ASSET IMPAIRMENT
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
long-lived assets to be held and used are reviewed for impairment whenever
events or circumstances indicate that the carrying amount may not be
recoverable. When required, impairment losses on assets to be held and used are
recognized based on the fair value of the asset. The fair value of these assets
is determined based upon estimates of future cash flows, market value of similar
assets, if available, or independent appraisals, if required. In analyzing the
fair value and recoverability using future cash flows, the company makes
projections based on a number of assumptions and estimates of growth rates,
future economic conditions, assignment of discount rates and estimates of
terminal values. An impairment loss is recognized if the carrying amount of the
long-lived
7
TECHDYNE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(UNAUDITED)
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
asset is not recoverable from its undiscounted cash flows. The measurement of
impairment loss is the difference between the carrying amount and fair value of
the asset. Long-lived assets to be disposed of and/or held for sale are reported
at the lower of carrying amount or fair value less cost to sell. We determine
the fair value of these assets in the same manner as described for assets held
and used. See Note 4.
REVENUE RECOGNITION
The company's sales are primarily derived from product manufacturing
including, but not limited to, finished molded and non-molded cables, wiring
harnesses, electro-mechanical and electronic assemblies. Revenue is recognized
upon shipment of the product to the customer, under contractual terms, which are
generally FOB shipping point. Upon shipment, title transfers and the customer
assumes the risks and rewards of ownership of the product. The selling price of
the product is fixed and the ability to collect for the sale to the customer is
reasonably assured when the product is shipped.
EARNINGS PER SHARE
Diluted earnings per share gives effect to potential common shares that
were dilutive and outstanding during the period, such as stock options and
warrants using the treasury stock method and average market price. No
potentially dilutive securities were included in the diluted earnings per share
computation for the three and six months ended June 30, 2003 or for the same
period of the preceding year, as a result of exercise prices.
Following is a reconciliation of amounts used in the basic and diluted
computations:
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
----------------------------------------------------------
Net income - numerator basic computation $ 240,823 $ 221,650 $ 437,218 $ 463,044
Weighted average shares - denominator basic computation 6,435,345 6,556,990 6,472,309 6,556,990
==========================================================
Earnings per share:
Basic & diluted $ 0.04 $ 0.03 $ 0.07 $ 0.07
==========================================================
COMPREHENSIVE INCOME
The company follows SFAS No. 130, "Reporting Comprehensive Income,"
which contains rules for the reporting of comprehensive income and its
components. Comprehensive income consists of net income and foreign currency
translation adjustments.
8
TECHDYNE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(UNAUDITED)
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
Below is a detail of comprehensive income for the three and six months ended
June 30, 2003 and 2002:
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
--------------------------------------------------
Net Income $240,823 $221,650 $437,218 $463,044
Foreign currency translation -- $ 2,527
--------------------------------------------------
Comprehensive Income $240,823 $221,650 $437,218 $465,571
==================================================
NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2003, the company adopted the provisions of
Statement of Financial Accounting Standards No. 145, ("SFAS No. 145") which
updates and clarifies existing accounting pronouncements related to reporting
gains and losses from the extinguishment of debt and certain lease modifications
that have economic effects similar to sale-leaseback transactions. The adoption
of SFAS No. 145 did not have any material impact on the company's financial
position or results of operations.
Effective January 1, 2003, the company adopted the provisions of SFAS,
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."
SFAS No. 146 nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3,
"Liability Recognition for Costs to Exit an Activity (Including Certain Costs
Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. Under EITF Issue 94-3, a liability for an exit cost as defined in EITF
Issue 94-3 was recognized at the date of an entity's commitment to an exit plan.
The adoption of SFAS No.146 did not have any material impact on the company's
financial position or results of operations.
Effective January 1, 2003, the company adopted the provisions of
Financial Accounting Standards Board, ("FASB") Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires that a
guarantor must recognize, at the inception of a guarantee, a liability for the
fair value of the obligation that it has undertaken in issuing a guarantee. FIN
No. 45 also addresses the disclosure requirements that a guarantor must include
in its financial statements for guarantees issued. The adoption of FIN No. 45
did not have any material impact on the company's financial position or results
of operations.
In December 2002, the FASB issued SFAS, No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS
Statement No. 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the prior disclosure guidance and requires prominent disclosures
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. The provisions of SFAS No. 148 are generally
9
TECHDYNE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(UNAUDITED)
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
effective for fiscal years ending after December 15, 2002. At this time, the
company does not plan to adopt the accounting provisions of SFAS No. 123 and
will continue to account for stock options in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities" (an interpretation of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements"), which becomes effective for the company in
June 2003. FIN No. 46 provides consolidation guidance for certain variable
interest entities ("VIE") in which equity investors of the VIE do not have the
characteristics of a controlling interest or do not have sufficient equity at
risk for the VIE to finance its activities independently. FIN No. 46 requires
each enterprise involved with a special purpose entity to determine whether it
provides financial support to the special purpose entity through a variable
interest. Variable interests may arise from financial instruments, service
contracts, minority ownership interests or other arrangements. If an entity
holds a majority of the variable interests, or a significant variable interest
that is considerably more than any other party's variable interest, that entity
would be the primary beneficiary and would be required to include the assets,
liabilities and results of operations of the special purpose entity in its
consolidated financial statements. The company does not expect the adoption of
FIN 46 to have a material impact on its financial position or results of
operations.
NOTE 2-INTERIM ADJUSTMENTS
The financial summaries for the three and six months ended June 30,
2003 and 2002, respectively, are unaudited and include, in the opinion of
management of the company, all adjustments consisting of normal recurring
accruals necessary to present fairly the earnings for such periods. Operating
results for the three and six months ended June 30, 2003 are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 2003.
While the company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these Consolidated
Condensed Financial Statements be read in conjunction with the financial
statements and notes included in the company's latest Annual Report on Form 10-K
for the year ended December 31, 2002.
NOTE 3-AMOUNTS RECEIVABLE FROM MAJOR STOCKHOLDER
On September 3, 2002, the company received a demand note from Simclar
in the amount of $1,500,000. The note bears interest at LIBOR plus 2%.
Management expects repayment of the note during 2003. The balance of the demand
note from Simclar was $1,755,203 and $1,944,669 at June 30, 2003 and December
31, 2002, respectively.
10
TECHDYNE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(UNAUDITED)
NOTE 4-NOTES RECEIVABLE FROM OPTIONS EXERCISED
On February 27, 1995 the company granted non-qualified stock options,
to directors of Techdyne and its subsidiary for 142,500 shares exercisable at
$1.75 per share for five years. In April 1995, the company granted a
non-qualified stock option for 10,000 shares, which vested immediately, to its
general counsel at the same price and terms as the directors' options. On
February 25, 2000, 145,000 of these options were exercised. The company received
cash payment of the par value and the balance in three-year promissory notes
totaling $207,825, which is presented in the stockholders' equity section of the
balance sheet, with interest at 6.19%. The notes, which were due in February
2003, were not repaid and, as a result, the notes as well as the related balance
sheet entries for common stock and capital in excess of par value were written
off in the first quarter of 2003. The common shares issued upon the exercise of
these options have been cancelled.
NOTE 5-INCOME TAXES
The company files separate federal and state income tax returns from
Simclar, with its income tax liability reflected on a separate return basis.
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
The company had $134,000 and $160,000 domestic income tax expense for
the three and six months ended June 30, 2003; respectively, and no domestic
income tax expense for the three and six months ended June 30, 2002 due to the
reversal of a tax allowance reserve established in 2001 on its available tax
loss carryforwards.
Income tax payments amounted to $158,200 and $413,200 for the three and
six months ended June 30, 2003, respectively, and $ 0 for the same period of the
preceding year.
NOTE 6-CESSATION OF SCOTLAND MANUFACTURING OPERATIONS
As a result of continuing operating losses, in 2001 the company decided
to discontinue the manufacturing operations of its European subsidiary, Techdyne
(Europe).
With the cessation of the sales and manufacturing activities, the
company made the land, building and equipment available for sale during the
third quarter of 2001. On February 28, 2002, the company agreed to transfer to
Simclar at net book value the operating assets of Techdyne (Europe) except for
the land and building. Included in property and equipment at June 30, 2003, is
the Scottish land and building, which are considered assets held for sale, at an
estimated fair value of $654,000 based upon market information obtained from an
unrelated third party.
On April 2, 2003 the Techdyne (Europe) building located in Livingston,
Scotland was destroyed by a fire started by vandalism. Management is working
with the property insurance carrier to settle this claim as soon as possible.
Management's opinion is that the claim will be settled with the insurance
carrier without any financial loss resulting from this event.
11
TECHDYNE, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
(UNAUDITED)
NOTE 7-SUBSEQUENT EVENT -ACQUISITION OF AG TECHNOLOGIES, INC.
On July 15, 2003, the company acquired for $2,000,000 in cash, all of
the outstanding stock of AG Technologies, Inc. (AG), a privately owned company
based in Schaumburg, Illinois. Additional consideration of up to $1,300,000 is
payable based on AG's sales in each of the three years ending June 30, 2004,
2005 and 2006. AG is an international value added provider of comprehensive
electronic manufacturing services to OEM's serving the automotive, industrial
controls, medical and power equipment industries. In conjunction with the
acquisition, the company recorded approximately $1,300,000 of goodwill.
Additional consideration payable based on AG's sales in the next three years
will increase the amount of this goodwill. The purchase price allocation is
preliminary and subject to further refinement based upon completion of the asset
valuation. Results of operations will be included in the company's consolidated
financial statements prospectively from the date of acquisition, beginning with
the third quarter of 2003. Pro forma financial information and other related
disclosures have not been presented because the acquisition is not material.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING INFORMATION
This report includes certain forward-looking statements with respect to
the company and its business that involve risks and uncertainties. These
statements are influenced by the company' financial position, business strategy,
budgets, projected costs and the plans and objectives of management for future
operations. They use words such as anticipate, believe, plan, estimate, expect,
intend, project and other similar expressions. Although we believe our
expectations reflected in these forward-looking statements are based on
reasonable assumptions, we cannot assure the reader that our expectations will
prove correct. Actual results and developments may differ materially from those
conveyed in the forward-looking statements. For these statements, the company
claims the protections for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
Important factors such as changes in general economic, business and
market conditions, as well as changes in such conditions that may affect
industries or the markets in which the company operate, including, in
particular, the continuation of the worldwide recession in the
telecommunications and electronics sectors, could cause actual results to differ
materially from the expectations reflected in the forward-looking statements
made in this Form 10-Q. Further, information on other factors that could affect
the financial results of Techdyne is included in the company's other filings
with the Securities and Exchange Commission (the "Commission"). These documents
are available free of charge at the Commission's website at http://www.sec.gov
and/or from Techdyne. The forward-looking statements speak only as of the date
on which they are made, and the company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this report.
The company's operations have continued to depend upon a relatively
small number of customers for a significant percentage of our net revenue.
Significant reductions in sales to any of our large customers would have a
material adverse effect on our results of operations. The level and timing of
orders placed by a customer vary due to the customer's attempts to balance its
inventory, design modifications, changes in a customer's manufacturing strategy,
acquisitions of or consolidations among customers, and variation in demand for a
customer's products due to, among other things, product life cycles, competitive
conditions and general economic conditions. Termination of manufacturing
relationships or changes, reductions or delays in orders could have an adverse
effect on our results of operations and financial condition, as has occurred in
the past. The company's results also depend to a substantial extent on the
success of our original equipment manufacturer ("OEM") customers in marketing
their products. The company continues to seek to diversify its customer base to
reduce its reliance on the company's few major customers.
The industry segments the company serves, and the electronics industry
as a whole, are subject to rapid technological change and product obsolescence.
Discontinuance or modification of products containing components manufactured by
the company could adversely affect the results of operations. The electronics
industry is also subject to economic cycles and has in the past experienced, and
is likely in the future to experience, recessionary periods. A prolonged
worldwide recession in the electronics industry, as has been experienced since
the third quarter of 2000, has had a material adverse effect on business and
financial condition and has required us to realign the company's organization
and operations beginning the second half of 2001 and continuing through the
second quarter of 2003. The company's 2003 operating results to date show signs
that these ongoing changes continue to have a positive impact on its financial
condition. The company typically does not obtain long-term volume purchase
contracts from customers, but rather we work with our customers to anticipate
future volumes of orders. Based upon these anticipated future orders and
considering the level of production schedules and facilities utilization, the
company will make commitments regarding the acceptable level of new business.
Occasionally, the company purchases raw materials without a customer order or
commitment. Customers may cancel, delay or reduce orders, usually without
penalty, for a variety of reasons, whether relating to
13
the customer or the industry in general. Any significant cancellations,
reductions or order delays could adversely affect results of operations.
The company uses "Electronic Data Interchange" ("EDI") with customers
and suppliers in an effort to continuously develop accurate forecasts of
customer volume requirements, as well as sharing future requirements with
suppliers. The company depends on the timely availability of many components.
Component shortages could result in manufacturing and shipping delays or
increased component prices, which could have a material adverse effect on
results of operations. In anticipation of future sales, it is important for the
company to efficiently manage inventory by assuring proper timing of
expenditures and allocations of physical and personnel resources used in
manufacturing.
The company must continuously develop improved manufacturing procedures
to accommodate customers' needs for increasingly complex products. To continue
to grow and be a successful competitor, the company must be able to maintain and
enhance its technological capabilities, develop and market manufacturing
services which meet changing customer needs and successfully anticipate or
respond to technological changes in manufacturing processes on a cost-effective
and timely basis. Although the company believes that its operations utilize the
assembly and testing technologies and equipment currently required by customers,
there can be no assurance that process development efforts will be successful or
that the emergence of new technologies, industry standards or customer
requirements will not render the company's technology, equipment or processes
obsolete or noncompetitive. In addition, to the extent that the company
determines that new assembly and testing technologies and equipment are required
to remain competitive, the acquisition and implementation of such technologies
and equipment are likely to require significant capital investment.
Results of operations are also affected by other factors, including
price competition, the level and timing of customer orders, fluctuations in
material costs (due to availability), the overhead efficiencies achieved by
management in managing the costs of operations, experience in manufacturing a
particular product, the timing of expenditures in anticipation of increased
orders, selling, and general and administrative expenses. Accordingly, gross
margins and operating income margins have generally improved during periods of
high volume and high capacity utilization. The company generally has idle
capacity and reduced operating margins during periods of lower-volume
production.
The company competes with much larger electronic manufacturing entities
for expansion opportunities. Any acquisitions may result in potentially dilutive
issuance of equity securities, the incidence of debt and amortization expenses
related to intangible assets, and other costs and expenses, all of which could
materially affect financial results adversely. Acquisition transactions also
involve numerous business risks, including difficulties in successfully
integrating the acquired operations, technologies and products or formalizing
anticipated synergies, and the diversion of management's attention from other
business concerns.
CRITICAL ACCOUNTING ESTIMATES
In preparing its financial statements and accounting for the underlying
transactions and balances, the company has applied the accounting policies as
disclosed in the Notes to the Consolidated Financial Statements contained in the
company's annual report on Form 10-K for the year ended December 31, 2002.
Preparation of the company's financial statements requires company management to
make estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results may differ from those estimates.
The company considers the policies discussed below as critical to an
understanding of its financial statements because their application places the
most significant demands on management's judgment, with financial reporting
results relying on estimates about the effect of matters that are inherently
uncertain. Specific risks for these critical accounting estimates are described
in the following paragraphs. The impact and any associated risks related to
these estimates on the company's business
14
operations are discussed throughout this Management's Discussion and Analysis of
Financial Condition and Results of Operations where such estimates affect
reported and expected financial results. The impact of changes in the estimates
and assumptions pertaining to restructuring, impairment, and business
combinations is directly reflected in the financial results of the individual
segment. The impact of change in estimates and assumptions related to pension
and postretirement healthcare benefit plans affect segment results through an
allocation of corporate expense. For a detailed discussion of the application of
these and other accounting policies, see "Summary of Significant Accounting
Policies" in the Notes to the Consolidated Financial Statements contained in the
company's annual report on Form 10-K for the year ended December 31, 2002.
Management has discussed the development and selection of the critical
accounting estimates and the related disclosure included herein with the Audit
Committee of the Board of Directors.
ALLOWANCE FOR DOUBTFUL ACCOUNTS-The company maintains an allowance for
doubtful accounts for estimated losses resulting from the inability of customers
to make required payments. Based on historical information, the company believes
that our allowance is adequate. However, changes in general economic, business
and market conditions could affect the ability of customers to make their
required payments; therefore, the allowance for doubtful accounts is reviewed
monthly and changes to the allowance are updated as new information is received.
ALLOWANCE FOR INVENTORY OBSOLESCENCE-The company maintains an
allowance for inventory obsolescence for losses resulting from inventory items
becoming unusable in the manufacturing operations due to loss of a specific
customer or a customer's product changes or discontinuations. Based on
historical and projected sales information and concentration of customers, the
company believes that the allowance is adequate. However, changes in general
economic, business and market conditions could cause customers to cancel, reduce
or reschedule orders. These changes could affect the company inventory turn
over; therefore, the allowance for inventory obsolescence is reviewed monthly
and changes to the allowance are updated as new information is received.
INCOME TAXES-Deferred income taxes at the end of each period are
determined by applying enacted tax rates applicable to future periods in which
the taxes are expected to be paid or recovered to differences between the
financial accounting and tax basis of assets and liabilities.
LONG-LIVED ASSETS-In accordance with Statement of Financial Accounting
Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," long-lived assets to be held and used are reviewed for
impairment whenever events or circumstances indicate that the carrying amount
may not be recoverable. When required, impairment losses on assets to be held
and used are recognized based on the fair value of the asset. The fair value of
these assets is determined based upon estimates of future cash flows, market
value of similar assets, if available, or independent appraisals, if required.
In analyzing the fair value and recoverability using future cash flows, the
company makes projections based on a number of assumptions and estimates of
growth rates, future economic conditions, assignment of discount rates and
estimates of terminal values. An impairment loss is recognized if the carrying
amount of the long-lived asset is not recoverable from its undiscounted cash
flows. The measurement of impairment loss is the difference between the carrying
amount and fair value of the asset. Long-lived assets to be disposed of and/or
held for sale are reported at the lower of carrying amount or fair value less
cost to sell. The company determines the fair value of these assets in the same
manner as described for assets held and used. See "Long-Lived Asset Impairment"
in Note 1 to the consolidated financial statements included in this report.
REVENUE RECOGNITION-The company's sales are primarily derived from
product manufacturing including, but not limited to, finished molded and
non-molded cables, wiring harnesses, electro-mechanical and electronic
assemblies. Revenue is recognized upon shipment of the product to the customer,
under contractual terms, which are generally FOB shipping point. Upon shipment,
title transfers and the customer assumes the risks and rewards of ownership of
the product. The selling price of the product is fixed and the ability to
collect for the sale to the customer is reasonably assured when the product is
shipped.
15
RESULTS OF OPERATIONS
Consolidated revenues decreased approximately $366,000 and $419,000 for
the three and six months ended June 30, 2003, respectively, compared to the same
period of the preceding year. Domestic sales decreased by $366,000 (4.5%) and
$186,000 (1.2%) for the three and six months ended June 30, 2003, respectively.
European sales decreased by $233,000 for the six months ended June 30, 2003
compared to the same period of the preceding year as a result of the decision to
exit the market in March 2002. During the quarter ended June 30, 2003, sales
have been affected by price decreases in memory components, which required the
company to reduce its selling price to one of its major customers. This decrease
has been slightly offset by an increase in sales with the company's
telecommunication customers.
Interest and other income increased by approximately $9,000 and $3,000
for the three and six months ended June 30, 2003, compared to the same period of
the preceding year. This increase is due to interest earned on the note due from
Simclar.
Approximately 48% and 38% of the company's consolidated sales for the
three and six months ended June 30, 2003, respectively, were made to three
customers, Illinois Tool Works (23% and 22%); Alcatel (13% and 8%) and Sanmina
(12% and 8%).
Cost of goods sold as a percentage of sales amounted to 85.4% and 85.5%
for the three and six months ended June 30, 2003, respectively, and 87.4% and
87.0% for the same period of the preceding year. The manpower reduction and the
conversion of the North Attleboro plant to manufacture only prototypes for the
northeast market, while transferring their production volume to the company's
Hialeah plant for manufacture during the second quarter of 2002, resulted in
increase utilization of the company's Hialeah plant. This change was a major
contributor to the improvement in the gross margin in 2003 compared to 2002.
Selling, general and administrative expenses decreased by approximately
$46,000 and $74,000 for the three and six months ended June 30, 2003,
respectively, compared to the same period of the preceding year, reflecting the
continual overall result of management's various cost reduction programs.
Interest expense decreased approximately $15,000 and $26,000 for the
three and six months ended June 30, 2003, respectively, compared to the same
period of the preceding year reflecting lower interest rates during the 2003
period. The LIBOR was 1.13% and 1.82% at June 30, 2003 and 2002, respectively.
Income taxes increased by $160,000 and 294,000 for the three and six
months ended June 30, 2003, respectively, compared to the same periods in 2002.
This increase resulted from the company utilizing the benefits of tax loss
carryforwards benefits from prior years in the 2002 period.
SUBSEQUENT EVENT
On July 15, 2003, the company acquired for $2,000,000 in cash, all of
the outstanding stock of AG Technologies, Inc. (AG), a privately owned company
based in Schaumburg, Illinois. Additional consideration of up to $1,300,000
maybe required to be paid, if AG sales over the next three years meet certain
agreed upon levels. This additional consideration would have a direct impact on
goodwill. AG is an international value added provider of comprehensive
electronic manufacturing services to OEM's serving the automotive, industrial
controls, medical and power equipment industries. In conjunction with the
acquisition, the company recorded approximately $1,300,000 of goodwill. The
purchase price allocation is preliminary and subject to further refinement based
upon completion of the asset valuation. Results of operations will be included
in the company's consolidated financial statements prospectively
16
from the date of acquisition, beginning with the third quarter of 2003. Pro
forma financial information and other related disclosures have not been
presented because the acquisition is not material.
Liquidity and Capital Resources
The company's cash and cash equivalents balance at June 30, 2003, was
approximately $2,289,000 compared to approximately $1,537,000 at December 31,
2002. Net cash provided by operating activities was approximately $1,239,000 in
the six months ended June 30, 2003, compared to approximately $170,000 provided
in the same period of the preceding year. The increase in cash provided by
operating activities were due to the operating income for the six months ended
June 30, 2003 and the reduction in trade accounts receivable
At June 30, 2003, the company's average days of sales outstanding for
the quarter was 44 days as compared to 50 days at June 30, 2002. The decrease of
average days of sales outstanding is primarily due to increased collection
activities during the quarter. Average inventory turnover was 3.5 and 3.2 times
for the six months ended June 30, 2003 and 2002, respectively. The increase in
inventory turnover is due to management's efforts to reduce inventory and the
increase in the domestic sales activities to the telecommunication industry
during the period.
Cash used in investing activities was approximately $107,000 in the six
months ended June 30, 2003, compared to approximately $134,000 used for
investing activities in the same period of the preceding year. Cash used in
investing activities was primarily for capital expenditures. Cash used in
financing activities was approximately $379,000 in the six months ended June 30,
2003, compared to approximately $925,000 used in the same period of the
preceding year. Cash used in financing activities was primarily for debt
reduction. The company made all scheduled repayments on its long term debt
during the period.
On October 24, 2001, the company entered into two credit facilities
with Bank of Scotland in Edinburgh, Scotland for an aggregate borrowing of
$10,000,000. The financing included a $3,000,000 line of credit, which expired
July 19, 2003, with an interest rate at LIBOR plus 1.5% for a one, three or six
month period, at the company's election. The company expects that the bank will
renew the terms of this agreement. The company elected the three-month interest
period at 2.85% until July 24, 2003, after this date the rate is 2.63% until
October 24, 2003. This line of credit had an outstanding balance of $1,500,000
at June 30, 2003. The financing also included a seven-year term loan of
$7,000,000 at the same interest rate as the line of credit. The term loan
specifies quarterly payments of $250,000 due in January, April, July and October
of each year, plus interest. The term loan had an outstanding balance of
$5,500,000 at June 30, 2003.
The credit facilities are collateralized by all the assets of the
company, excluding Techdyne (Europe), and require affirmative and negative
covenants be maintained by the company. Certain of the affirmative covenants
require maintenance of a consolidated adjusted net worth greater than
$10,000,000 after December 31, 2002, $10,500,000 after June 30, 2003 and
$11,000,000 after September 30, 2003; a ratio of consolidated current assets to
consolidated net borrowing not less than 1.75 to 1; a ratio of consolidated
trade receivables to consolidated net borrowings not less than .75 to 1; and a
ratio of consolidated net income before interest and income taxes to total
consolidated interest costs not less than 2 to 1. Some of the negative
covenants, among others, prohibit (1) granting or permitting a security
agreement against the consolidated assets of the companies other than permitted
security agreements, (2) declaring or paying any dividends or making any other
payments on the company's capital stock, (3) consolidating or merging with any
other entity or acquiring or purchasing any equity interest in any other entity,
or assuming any obligations of any other entity, except for notes and
receivables acquired in the ordinary course of business, (4) incurring,
assuming, guaranteeing, or remaining liable with respect to any indebtedness,
except for certain existing indebtedness disclosed in these financial
statements, or (5) undertaking any capital expenditure in excess of $1,000,000
in any one fiscal year. The agreements also preclude changes in ownership in the
companies, any material change in any of the company's business objectives,
purposes, operations and tax residence or any other circumstances or events
which will have a
17
material adverse effect as defined by the agreements. The Bank of Scotland
consented to the purchase of the AG outstanding stock on July 15, 2003.
On October 11, 2001, Techdyne (Europe) entered into a credit facility
with Bank of Scotland for an amount of (pound)275,000 ($399,025). This facility
comprises an eight-year term loan repayable in quarterly payments of
(pound)8,594 ($13,788) due in January, April, July and October of each year,
with an interest rate of Bank of Scotland base rate plus 1.5% (effectively 5.4%
at December 31, 2002). This term loan had an outstanding balance of $319,999 at
June 30, 2003.
The company's ability to comply with bank covenants may be affected by
changes in business condition or results of operations, or other events beyond
the company's control. The breach of any of these covenants would result in
default under the company's credit facilities. At June 30, 2003, the company was
in default of the consolidated trade receivables to consolidated net borrowing
covenant. The bank has issued a waiver on this default.
The company indebtedness requires it to dedicate a substantial portion
of its cash flow from operations to payments of debt, which could reduce amounts
for working capital and other general corporate purposes. The restrictions in
the company's credit facility could also limit its flexibility in reacting to
changes in business and increases vulnerability to general adverse economic and
industry conditions.
The following table summarizes the company's significant contractual obligations
at June 30, 2003:
Total Less than 1-3 4-5 Over 5
In thousands Amounts 1 Year Years Years Years
-----------------------------------------------------------
Long-term debt $ 7,450 $ 1,429 $ 2,021 $ 2,000 $ 2,000
Operating leases
(non-cancelable) 2,525 520 841 750 414
Bank line of credit 1,500 1,500 -- -- --
-----------------------------------------------------------
Total contractual $11,475 $ 3,449 $ 2,862 $ 2,750 $ 2,414
===========================================================
Management will continue to seek acquisitions that will add talent,
technology, and capabilities that advance the company's strategy and prospects.
Management believes that the combination of internally generated funds,
available cash reserves, and the credit facility are sufficient to fund the
company's operations over the next year.
OFF BALANCE SHEET ARRANGEMENTS
The company has no off balance sheet financing arrangements with
related or unrelated parties and no unconsolidated subsidiaries.
NEW PRONOUNCEMENTS
Effective January 1, 2003, the company adopted the provisions of
Statement of Financial Accounting Standards No. 145 ("SFAS No. 145"), which
updates and clarifies existing accounting pronouncements related to reporting
gains and losses from the extinguishment of debt and certain lease modifications
that have economic effects similar to sale-leaseback transactions. The adoption
of
18
SFAS No. 145 did not have any material impact on the company's financial
position or results of operations.
Effective January 1, 2003, the company adopted the provisions of SFAS,
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."
SFAS No. 146 nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3,
"Liability Recognition for Costs to Exit an Activity (Including Certain Costs
Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. Under EITF Issue 94-3, a liability for an exit cost as defined in EITF
Issue 94-3 was recognized at the date of an entity's commitment to an exit plan.
The adoption of SFAS No.146 did not have any material impact on the company's
financial position or results of operations.
Effective January 1, 2003, the company adopted the provisions of the
Financial Accounting Standards Board, ("FASB") issued Interpretation ("FIN") No.
45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." FIN No. 45 requires
that a guarantor must recognize, at the inception of a guarantee, a liability
for the fair value of the obligation that it has undertaken in issuing a
guarantee. FIN No. 45 also addresses the disclosure requirements that a
guarantor must include in its financial statements for guarantees issued. The
adoption of FIN No. 45 did not have any material impact on the company's
financial position or results of operations.
In December 2002, the FASB issued SFAS, No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS
Statement No. 123, "Accounting for Stock-Based Compensation," to provide
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the prior disclosure guidance and requires prominent disclosures
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. The provisions of SFAS No. 148 are generally effective for
fiscal years ending after December 15, 2002. At this time, the company does not
plan to adopt the accounting provisions of SFAS No. 123 and will continue to
account for stock options in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees."
In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities" (an interpretation of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements"), which becomes effective for the company in
June 2003. FIN No. 46 provides consolidation guidance for certain variable
interest entities ("VIE") in which equity investors of the VIE do not have the
characteristics of a controlling interest or do not have sufficient equity at
risk for the VIE to finance its activities independently. FIN No. 46 requires
each enterprise involved with a special purpose entity to determine whether it
provides financial support to the special purpose entity through a variable
interest. Variable interests may arise from financial instruments, service
contracts, minority ownership interests or other arrangements. If an entity
holds a majority of the variable interests, or a significant variable interest
that is considerably more than any other party's variable interest, that entity
would be the primary beneficiary and would be required to include the assets,
liabilities and results of operations of the special purpose entity in its
consolidated financial statements. The company does not expect the adoption of
FIN 46 to have a material impact on its financial position or results of
operations.
INFLATION
Inflationary factors have not had a significant effect on operations.
The company attempts to pass on increased costs and expenses by increasing
selling prices when and where possible and by developing different and improved
products for customers that can be sold at targeted profit margins.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
-----------------------------------------------------------
The company is exposed to market risks from changes in interest rates
and foreign currency exchange rates.
Sensitivity of results of operations to interest rate risks on
investments is managed by conservatively investing liquid funds in short-term
governments securities and interest-bearing accounts at financial institutions
in which the company had invested approximately $39,000 at June 30, 2003.
Interest rate risks on debt are managed by negotiation of appropriate
rates on new financing obligations based on current market rates. There is an
interest rate risk associated with the company's variable debt agreements, which
totaled approximately $7,000,000 at June 30, 2003.
The company has exposure to both rising and falling interest rates. A
1/2% decrease in rates on the company's three months ending investments would be
insignificant. A 1% increase in rates on the company's three months ending
variable rate debt would result in a negative impact of approximately $18,000 on
results of operations.
The company exposures to market risks are impacted by changes in the
foreign currency exchange rates relates to the company's European subsidiary
whose results of liquidation, when translated into U.S. dollars, are impacted by
changes in foreign exchange rate. A 10% strengthening of the U.S. dollar against
the local Scottish currency, the pound, would have an insignificant impact on
three months earnings. The company has not incurred any significant realized
losses on exchange transactions and does not utilize foreign exchange contracts
to hedge foreign currency fluctuations. If realized losses on foreign
transactions were to become significant, the company would evaluate appropriate
strategies, including the possible use of foreign exchange contracts, to reduce
such losses.
ITEM 4. CONTROLS AND PROCEDURES
-----------------------
As of the end of the period covered by this report, the company carried
out an evaluation, under the supervision and with the participation of our
principal executive officer and principal financial officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our principal executive officer and
principal financial officer concluded that our disclosure controls and
procedures are effective to provide reasonable assurance that the company's
disclosure controls and procedures will timely alert them to material
information required to be included in our periodic SEC reports
As of the end of the period covered by this report, there has been no
change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended)
during the quarter to which this report relates that has materially affected or
is reasonably likely to materially affect, our internal control over financial
reporting.
20
PART II -- OTHER INFORMATION
------- -----------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
Techdyne, Inc. held its annual meeting of shareholders on June 6, 2003,
for the purpose of electing seven directors. The nominees were: Samuel J.
Russell, Barry J. Pardon, John Ian Durie, Christina M.J. Russell, James A.
Clark, Thomas C. Foggo and Kenneth Greenhalgh. Each nominee was elected by total
of 4,830,929 shares voted for and no votes withheld.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) Exhibits
Description
Exhibit 31.1 Certification of Chief Executive Officer
pursuant to section 302 of the Sarbanes-Oxley
Act of 2002
Exhibit 31.2 Certification of Chief Financial Officer
pursuant to section 302 of the Sarbanes-Oxley
Act of 2002
Exhibit 32.1 Certification of Chief Executive Officer of
Periodic Financial Reports pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350
Exhibit 32.2 Certification of Chief Financial Officer of
Periodic Financial Reports pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350
(b) Reports on Form 8-K
Current Report on Form 8-K dated May 16, 2003, filed with the
Commission on May 16, 2003, reporting the company's financial
results for the three months ending March 31, 2003.
ITEMS 1,2 3 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED
- ----------------------------------------------------------
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 thereunto duly authorized.
TECHDYNE, INC.
By /s/ Barry J. Pardon
----------------------------------------
BARRY J. PARDON, President
By /s/ David L. Watts
----------------------------------------
DAVID L. WATTS, Chief Financial Officer
Dated: August 14, 2003
21