Struggling to improve its cash position, EFTC Corp. turned to two private equity companies this week which agreed to provide $54 million in securities to help refinance the financially strapped organization.
EFTC, a Denver, Colo.-based contract electronics manufacturer, signed deals with Thayer Equity Investor IV LP, Washington, D.C., and Blum Capital Partners, LP, San Franciso, through which the companies will issue $54 million in senior subordinated exchangeable notes and warrants to EFTC. Under the deal, the private equity companies can obtain as many as 8.25 million but not less than 500,000 shares of EFTC's outstanding common stock at a price of $4 a share.
EFTC also obtained a $45 million revolving line of credit with Bank of America that matures in March 2003.
Observers said that EFTC desperately needed refinancing to offset a heavy debt load and a thin customer base. Even Wall Street has shied away from the mid-tier CEM. In a 52-week period, EFTC shares listed on the New York Stock Exchange fell to as low as $1.50, compared with a high of $6.75 last June. For most of this week, EFTC stock traded in the mid $2 range.
"They needed to do something. They need an infusion of cash," said Stuart Bogard, an analyst with Stephens Inc. in Little Rock, Ark. "They have a disproportionately large customer -- Honeywell International -- that makes up 80% of their sales. It puts you at risk."
After a two-month delay, EFTC reported fourth quarter 1999 results on Thursday for the period ended Dec. 31. The company's revenue increased 6.7% to $62 million from $58 million in the year-ago quarter. However, for the recent quarter EFTC's net loss widened to $20 million, or $1.29 per share, from $7.8 million, or 51 cents per share, in the 1998 quarter.
For the year, EFTC's revenue fell 2% to $221 million, from $226 million posted in 1998. The company's net loss increased to $67 million, or $4.35 per share, from $4 million, or 31 cents per share, in 1998.
In March, EFTC sold a portion of its Tucson, Ariz., plant that makes military and aerospace products back to Honeywell International. Last year, EFTC sold off assets of its services division to Jabil Circuit Inc., a St. Petersburg, Fla., CEM, for $28 million.
In a related company development, Stuart Fuhlendorf, EFTC's chief financial officer resigned after eight years with the company to take a senior vice president/chief financial officer post with Metawave Communications Corp. in Redmond, Wash.