<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(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, 2000
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 000-21561
MCSI, INC.
(FORMERLY MIAMI COMPUTER SUPPLY CORPORATION)
(Exact name of registrant as specified in its articles of incorporation)
MARYLAND 31-1001529
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4750 HEMPSTEAD STATION DRIVE, DAYTON, OHIO 45429
(Address of principal executive offices)
(937) 291-8282
(Registrant's telephone number, including area code)
Indicate by check 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) had been subject to such
filing requirements for the past 90 days.
Yes X No_____
At August 3, 2000, 12,437,528 shares of common stock, no par value per
share, of the registrant were outstanding.
<PAGE>
MCSI, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 2000
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements:
Consolidated Balance Sheet ......................................................... 3
Consolidated Statement of Operations ............................................... 4
Consolidated Statement of Cash Flows ............................................... 5
Notes to Consolidated Financial Statements.......................................... 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ........................................ 8-10
Item 3. Quantitative and Qualitative Disclosures About Market Risk ................. 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ........................................................... 12
Item 2. Changes in Securities and Use of Proceeds ................................... 12
Item 3. Default Upon Senior Securities .............................................. 12
Item 4. Submission of Matters to a Vote of Security Holders ......................... 12
Item 5. Other Information ........................................................... 12
Item 6. Exhibits and Reports on Form 8-K ............................................ 13-14
Signatures ........................................................................... 15
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
MCSI, INC
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 2000 1999
------ ------
<S> <C> <C>
Current assets:
Cash and cash equivalents ......................................................... $ 3,426 $ 5,135
Accounts receivable ............................................................... 141,158 104,219
Inventories ....................................................................... 77,939 76,923
Prepaid expenses .................................................................. 2,105 998
Deferred income taxes ............................................................. 621 621
------------ ------------
Total current assets ........................................................... 225,249 187,896
Property and equipment - net of accumulated
depreciation ...................................................................... 34,338 30,384
Intangible assets - net of accumulated
amortization of $6,414 and $4,686 at
June 30, 2000 and December 31, 1999, respectively ................................. 146,092 132,379
Other assets .......................................................................... 2,507 3,619
------------ ------------
Total assets ................................................................... $ 408,186 $ 354,278
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable - trade .......................................................... $ 89,927 $ 59,781
Accrued expenses, payroll and income taxes ........................................ 9,095 9,104
Notes payable in connection with business
combinations .................................................................... 507 8,206
Current portion of long-term debt ................................................. 578 596
------------ ------------
Total current liabilities ................................................... 100,107 77,687
Long-term debt .................................................................... 167,134 149,461
Deferred income taxes ............................................................. 974 974
------------ ------------
Total liabilities ........................................................... 268,215 228,122
------------ ------------
Commitments and contingencies...................................................... -- --
Redeemable minority interest in subsidiary ........................................ 4,295 3,977
------------ ------------
Stockholders' equity:
Preferred stock, no par value; 5,000,000 shares
authorized, none outstanding .................................................... -- --
Common stock, no par value; 30,000,000 shares
authorized, 12,429,198 and 12,084,604 shares
outstanding at June 30, 2000 and
December 31, 1999, respectively ................................................. -- --
Additional paid-in capital ........................................................ 105,008 100,041
Retained earnings ................................................................. 30,633 23,413
Cumulative other comprehensive income ............................................. 50 802
Treasury stock, at cost (2000-1,800;
1999-84,944, shares respectively) ............................................... (15) (2,077)
------------ -------------
Total stockholders' equity .................................................. 135,676 122,179
------------ -------------
Total liabilities and stockholders' equity .................................. $ 408,186 $ 354,278
============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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MCSI, INC.
CONSOLIDATED STATEMENT OF OPERATONS
(UNAUDITED)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales ............................. $ 238,581 $ 158,516 $ 444,519 $ 312,385
Cost of sales ......................... 185,925 127,053 343,913 251,895
------------ ----------- ------------ ------------
Gross profit .......................... 52,656 31,463 100,606 60,490
Selling, general and administrative
expenses .......................... 42,201 24,541 80,593 47,031
------------ ----------- ------------ ------------
Operating income ...................... 10,455 6,922 20,013 13,459
Interest expense ...................... (3,761) (2,393) (7,180) (4,524)
Other income (expense) ................ (255) 152 (117) 260
------------ ----------- ------------ ------------
Income before income taxes ............ 6,439 4,681 12,716 9,195
Provision for income taxes ............ 2,725 2,157 5,496 4,251
------------ ----------- ------------ ------------
Net income ............................ $ 3,714 $ 2,524 $ 7,220 $ 4,944
============ =========== ============ ============
Earnings per share of common stock-
basic ............................. $ 0.29 $ 0.22 $ 0.57 $ 0.43
============ =========== ============ ============
Earnings per share of common stock-
diluted ........................... $ 0.29 $ 0.22 $ 0.56 $ 0.42
============ =========== ============ ============
Weighted average number of common
shares outstanding-basic .......... 12,452,152 11,433,345 12,224,110 11,396,425
------------ ----------- ------------ ------------
Weighted average number of common
shares outstanding-diluted ......... 12,664,553 11,633,652 12,492,034 11,646,914
------------ ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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MCSI, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................................... $ 7,220 $ 4,944
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization ................................................ 4,711 3,005
Other non-cash items ......................................................... (20) --
Changes in assets and liabilities, net of effects of acquisitions
of businesses:
Accounts receivable ........................................................ (31,393) 2,655
Inventories ................................................................ 1,651 (15,001)
Other assets ............................................................... (1,049) 1,434
Accounts payable - trade ................................................... 26,136 (4,536)
Accrued expenses, payroll and income taxes ................................. (946) 574
----------- -----------
Cash provided by (used in) operating activities ................................ 6,310 (6,925)
----------- -----------
Cash flows from investing activities:
Capital expenditures ......................................................... (4,797) (4,506)
Investments in cash surrender officers' life insurance ....................... 885 132
Business combinations ........................................................ (10,943) (5,786)
Cash included in acquisitions ................................................ 1,203 25
----------- ------------
Cash used in investing activities .............................................. (13,652) (10,135)
----------- ------------
Cash flows from financing activities:
Net proceeds from sale of common stock ....................................... -- 7
Net (decrease) increase in long-term debt .................................... 16,681 19,850
Net payment of debt acquired in business combinations ........................ (7,699) (2,176)
Proceeds from the exercise of stock options .................................. 620 --
Treasury stock purchases ..................................................... (3,267) (4,001)
------------ ------------
Cash provided by financing activities .......................................... 6,335 13,680
------------ ------------
Effects of exchange rates ...................................................... (702) (496)
------------ ------------
Net increase/(decrease) in cash ................................................ (1,709) (3,876)
Cash and cash equivalents - beginning of period .............................. 5,135 4,115
------------ ------------
Cash and cash equivalents - end of period .................................... $ 3,426 $ 239
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
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MCSI, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars in thousands, except per share data)
NOTE 1 - GENERAL
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Rule 10-01 of SEC Regulation S-X. Consequently, they
do not include all the disclosures required under generally accepted accounting
principles for complete financial statements. However, in the opinion of the
management of MCSi, Inc. (the "Company"), the consolidated financial statements
presented herein contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows of the Company and its consolidated subsidiaries. For
further information regarding the Company's accounting policies and the basis of
presentation of the financial statements, refer to the consolidated financial
statements and notes included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
NOTE 2 - ACQUISITIONS
As disclosed in the Annual Report on Form 10-K, the Company has been
involved in an active acquisition program. Results of operations for the six
months ended June 30, 2000 include the impact of entities acquired during 1999,
which are not included in the results of operations for the six months ended
June 30, 1999. Acquisitions for the six months ended June 30, 2000 were not
material. The following pro forma information illustrates the effect of these
1999 acquisitions assuming they had occurred on January 1, 1999.
<TABLE>
<CAPTION>
Six months ended
June 30, 1999
---------------
<S> <C>
Net sales ............................................. $379,808
Net income ............................................ $ 4,655
Basic earnings per share .............................. $ 0.38
Diluted earnings per share ............................ $ 0.38
</TABLE>
The pro forma statement of operations data reflect the effects of the
purchase price allocation and the resultant amortization and additional interest
expense associated with the cash used to fund the acquisitions, along with other
adjustments directly attributable to the transactions. The pro forma data
reflects adjustments directly related to the acquisitions and does not include
adjustments that may arise as a consequence of the acquisitions, such as cost
savings, improved efficiencies, etc. Therefore, the pro forma data is not
necessarily indicative of operating results that would have occurred for the six
month period ended June 30, 1999, or in future periods, had the acquisitions
actually occurred on January 1, 1999.
NOTE 3 - COMPREHENSIVE INCOME
Comprehensive income was $6,468 and $5,119 for the six months ended
June 30, 2000 and 1999, respectively.
NOTE 4 - BASIC AND DILUTED EARNINGS PER COMMON SHARE
The only dilutive securities of the Company relate to stock options.
The computation of basic and diluted earnings per common share is shown below:
6
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<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, 2000 June 30, 1999
------------- ---------------
Income Shares Income Shares
(Numerator) (Denominator) (Denominator) (Numerator)
----------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Net income as reported ........... $ 3,714 $ 7,220
Effect of accretion of
redeemable stock of
subsidiary ................. (99) (198)
------------ ------------
Income available to
common stockholders ........... $ 3,615 12,452,152 $ 7,022 12,224,110
============ ============
Effect of dilutive securities .... 212,401 267,924
---------- -----------
Income available to common
stockholders plus assumed
exercise ................... $ 3,615 12,664,553 12,492,034
=========== =========== ===========
Basic earnings per common
share ......................... $ 0.29 $ 0.57
=========== ===========
Diluted earnings per common
share ......................... $ 0.29 $ 0.56
=========== ===========
</TABLE>
All stock options outstanding at June 30, 2000 and June 30, 1999 were
included in the computation of diluted earnings per common share for the six
months ended June 30, 2000 and 1999, respectively.
NOTE 5 - SUBSEQUENT EVENT
On July 7, 2000, the Company sold certain of the assets and
liabilities of its specialty wholesale business, Azerty Canada. This
transaction will be recorded in the quarter ending September 30, 2000; the
resulting gain or loss is not expected to be material. Sales of this division
were approximately $115,000 in the year ended December 31, 1999.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
information contained in the unaudited consolidated financial statements and
Notes to unaudited consolidated financial statements. The following information
contains "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act") and is subject to the safe
harbor created by that Act. The words "estimate," "project," "anticipate,"
"expect," "intend," "believe," "plans" and similar expressions are intended to
identify forward-looking statements. Because such forward-looking statements
involve risks and uncertainties, there are important factors that could cause
actual results to differ materially from those expressed or implied by such
forward-looking statements. Factors that could cause actual results to differ
materially include, but are not limited to, changes in general economic and
business conditions, the availability of capital on acceptable terms, actions of
competitors and key suppliers, risks inherent in acquiring, integrating and
operating new businesses, exchange rate fluctuations, the regulatory and trade
environment (both domestic and foreign), and changes in business strategies and
other factors as discussed in Exhibit 99 hereto.
OVERVIEW
MCSi is emerging as a leading systems integrator of state-of-the-art
presentation and broadcast facilities. The ability to provide innovative,
technically sophisticated solutions to meet the increasing demand for
improved communication comes from a solid background in audio-visual systems,
broadcast media, and computer technology. The Company's ability to converge
these three industries, combined with design-build and engineering expertise,
computer networking and configuration services, an extensive product line,
and quality technical support services, has given the Company an advantage in
the systems integration marketplace and contributed to the dramatic growth of
the company.
To aid in establishing its position as a sophisticated systems
integration company, MCSi recently introduced system documentation standards,
including signal flow, CAD and VidCAD documentation standards and
open-architecture standardized applications for creating flexible wire-run
databases. These standards, coupled with the Company's existing physical
installation standards - cabling and interconnect, wire number identification
placement templates, and marker nomenclature - are working to create a high
level of client satisfaction.
The Company distributes most of its computer technology products,
the sales of which represent a large percentage of revenue from its 250,000
square foot, automated warehouse located in Erlanger, Kentucky, which
is leased from a partnership consisting of the directors and executive
officers of the Company. The warehouse maintains inventory and handles
products from more than 500 manufacturers. Centralizing inventory in a
facility located near a hub of United Parcel Service allows the Company to
accept and process orders for products until 9:00p.m. EST and provide next
day delivery virtually anywhere in the continental United States. The Company
is not aware of any competitor having such capacity.
The Company intends to continue the tactical implementation of its
business plan and continue to leverage and grow as a leading provider of
convergent products and services in multiple market spaces. The focused
emphasis of the sales, engineering and support personnel is the delivery of
comprehensive multi-vendor solutions to more than 50,000 active clients. The
Company intends to continue its vigorous expansion over the next few quarters
through internal growth and strategic mergers. The Company also intends to
enter new markets by hiring certain experienced sales representatives in and
outside of the Company's current market areas (some of whom may be
constrained from working in their present locations for a period of time).
There can be no assurance that any acquisition can or will be consummated on
terms favorable to the Company or that the Company will not need additional
debt or equity financing to continue its acquisition strategy.
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
NET SALES. Net sales for the three months ended June 30, 2000
increased by $80.1 million, or 50.5%, to $238.6 million from $158.5 million
for the three months ended June 30, 1999. Of the net sales increase, $46.0
million was attributable to the impact of acquisitions made during 2000 and
the second half of 1999. The remainder of the increase was primarily a result
of increased sales penetration, increased product offerings to existing
customers and an expanded sales force.
GROSS PROFIT. Gross profit for the three months ended June 30, 2000
increased by $21.2 million, or 67.4% to $52.7 million from $31.5 million for
the three months ended June 30, 1999. Gross profit as a percentage of net
sales for the three months ended June 30, 2000 was 22.1% compared to 19.8%
for the three months ended June 30, 1999. The increase in the gross profit
percentage was due primarily to the increase in audio-visual system projects
sales, which have a higher gross profit percentage, as compared to computer
supply sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the three months ended June 30, 2000 increased by
$17.7 million, to $42.2 million from $24.5 million for the three months ended
June 30, 1999. Of that increase, 67.5% was due to the impact of acquisitions
during the second half of 1999. Selling, general and administrative expenses
were 17.7% and 15.5% of sales for the three months ended June 30, 2000 and
1999, respectively. The 2.2% increase was due primarily to
8
<PAGE>
increased visual communications product sales, which incur a higher
percentage of selling, general and administrative expenses than computer
supply sales.
OPERATING INCOME. Operating income for the three months ended June
30, 2000 increased by $3.5 million to $10.5 million from $6.9 million for the
three months ended June 30, 1999. This increase was primarily due to
increased sales volume and acquisitions as discussed above.
INTEREST EXPENSE. Interest expense for the three months ended June
30, 2000 increased by $1.4 million to $3.8 million from $2.4 million for the
three months ended June 30, 1999 due primarily to the increased level of
indebtedness during 2000, resulting from the Company's acquisition program.
PROVISION FOR INCOME TAXES. The provision for income taxes for the
three months ended June 30, 2000 increased $0.5 million to $2.7 million from
$2.2 million for the three months ended June 30, 1999. The Company's
effective tax rate was 42.3% for the three months ended June 30, 2000 and
46.1% for the three months ended June 30, 1999. The decrease was primarily
due to reduced state and local taxes.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
NET SALES. Net sales for the six months ended June 30, 2000
increased by $132.1 million, or 42.3%, to $444.5 million from $312.4 million
for the six months ended June 30, 1999. Of the net sales increase, $78.0
million was attributable to the impact of acquisitions made during 2000 and
the second half of 1999. The remainder of the increase was primarily a result
of increased sales penetration, increased product offerings to existing
customers and an expanded sales force.
GROSS PROFIT. Gross profit for the six months ended June 30, 2000
increased by $40.1 million, or 66.3% to $100.6 million from $60.5 million for
the six months ended June 30, 1999. Gross profit as a percentage of net sales
for the six months ended June 30, 2000 was 22.6% compared to 19.4% for the
six months ended June 30, 1999. The increase in the gross profit percentage
was due primarily to the increase in audio-visual system projects sales,
which have a higher gross profit percentage, as compared to computer supply
sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for the six months ended June 30, 2000 increased by
$33.6 million, to $80.6 million from $47.0 million for the six months ended
June 30, 1999. As a percentage of net sales, selling, general and
administrative expenses were 18.1% for the six months ended June 30, 2000
compared to 15.0% for the six months ended June 30, 1999. The 3.1% increase
was due primarily to increased visual communication product sales, which have
a higher percentage of selling, general and administrative expenses than
computer supply sales.
OPERATING INCOME. Operating income for the six months ended June 30,
2000 increased by $6.5 million to $20.0 million from $13.5 million for the
six months ended June 30, 1999, for the reasons stated above. Operating
margins were 4.5% for the six months ended June 30, 2000 compared to 4.3% for
the six months ended June 30, 1999.
INTEREST EXPENSE. Interest expense for the six months ended June 30,
2000 increased to $7.2 million from $4.5 million for the six months ended
June 30, 1999 due primarily to the increased level of indebtedness incurred
during 2000, which was used for business combinations and working capital.
PROVISION FOR INCOME TAXES. The provision for income taxes for the
six months ended June 30, 2000 increased $1.2 million to $5.5 million from
$4.3 million for the six months ended June 30, 1999 due to an increase in
pre-tax income. The Company's effective tax rate was 43.3% for the six months
ended June 30, 2000 as compared to 46.2% for the corresponding period of the
prior year. The decrease was primarily due to reduced state and local taxes.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by operating activities totaled $6.3 million
for the first six months of 2000 compared to $6.9 million used in operating
activities during the first six months of 1999. The change in net cash flows
from operating activities in the first six months of 2000 was due primarily
to increases in net income, depreciation and amortization and trade accounts
payable, offset by higher levels of accounts receivable.
Net cash used in investing activities was $13.7 million for the six
months ended June 30, 2000 versus $10.1 million for the six months ended June
30, 1999. The net cash used in investing activities primarily reflects the
acquisitions completed during the quarter and capital expenditures for the
period. Net cash provided by financing activities totaled $13.4 million for
the six months ended June 30, 2000 compared with $13.7 million for the six
months ended June 30, 1999. The primary source of cash provided by financing
activities was borrowings under the Company's line of credit.
9
<PAGE>
Capital expenditures for the six months ended June 30, 2000 of $4.8
million were used primarily for the Company's management information systems
and distribution facilities.
The Company believes that its cash on hand and borrowing capacity
under the Credit Facility (see below) will be sufficient to fund its ongoing
operations and budgeted capital expenditures for the next twelve months,
although actual capital needs may change, particularly in connection with
acquisitions which the Company may make in the future. The Company's
long-term requirements, including capital expenditures and acquisitions, are
expected to be financed by a combination of additional borrowings and other
sources of external financing as needed.
CREDIT FACILITY
Since January 1998, the Company has maintained its credit facility
with PNC Bank, N.A. (the "Bank"), Key Corporate Capital, Inc. and National
City Bank, under a secured general revolving line of credit of $50.0 million.
In December 1998, the Company increased the line of credit to $125.0 million
by amendment to the credit facility adding Firstar Bank and Bank One as
facility participants. During August 1999, the Company increased the line of
credit to $150.0 million by amendment to the credit facility adding
Huntington Bank as a facility participant. In January 2000, the Company
increased the line of credit facility to $175.0 million by an amendment to
the credit facility adding Provident Bank as a facility participant. Loans
under the Credit Facility may be incurred by the Company from time to time to
finance "permitted acquisitions" and may be made at the Bank's prime rate (as
defined) or at the defined published eurodollar rate plus a "eurodollar
margin" that ranges from 100 to 200 basis points based on certain
indebtedness ratios of the Company. Borrowings over $160 million have margins
that are higher by 50 basis points. Borrowings under the Credit Facility are
secured by substantially all of the assets and property of the Company and
its subsidiaries, including accounts receivable, equipment and inventory. The
loan commitment terminates on the maturity date (December 10, 2003), unless
terminated earlier. The Company may voluntarily prepay any advance without
penalty or premium at any time or from time to time.
The Credit Facility contains restrictive covenants which may have an
adverse effect on the Company's operations in the future. The Company has
covenanted that, among other things, it will not: (i) change the nature of
its business; (ii) liquidate or dissolve its affairs, merge, consolidate or
acquire the property or assets of any person, other than permitted
acquisitions that comply with the financial covenants of the Credit Facility,
certain intercompany mergers, permitted investments, permitted dispositions,
certain capital expenditures and leases; (iii) permit the incurrence of any
lien on the Company's property and assets; (iv) incur other indebtedness,
except for up to $7.0 million of indebtedness incurred by foreign
subsidiaries and for certain capital leases up to $10.0 million, certain
guaranties and existing indebtedness; (v) pay cash dividends or repurchase
more than a certain amount of its capital stock; (vi) violate certain
financial covenants; or (vii) engage in certain other transactions.
10
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
No significant market risk changes occurred in the six-month period
ended June 30, 2000. Refer to the Company's Annual Report on Form 10-K for
further information.
11
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PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in routine legal proceedings occurring in the
ordinary course of business, which, in the aggregate, are believed by management
to be immaterial.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 9, 2000, the Company held its Annual Shareholders Meeting at The
Presidential Banquet Center 4548 Presidential Way, Dayton, Ohio 45429 at 10:30
a.m., Eastern time.
There were 12,070,450 shares of Common Stock of the Company which could
be voted at the Annual Meeting, and 10,617,414 shares were represented at such
meeting by the holders thereof in person or by proxy, which constituted a
quorum. Matters voted upon were as follows:
NOMINEES FOR BOARD OF DIRECTORS FOR A ONE-YEAR TERM EXPIRING IN 2001
<TABLE>
<CAPTION>
NAME FOR WITHHELD NOT VOTED
<S> <C> <C> <C>
a. Robert G. Hecht 10,550,687 66,727 --
b. Harry F. Radcliffe 10,550,687 66,727 --
c. Thomas C. Winstel 10,550,687 66,727 --
d. Michael E. Peppel 10,550,687 66,727 --
e. Richard L. Posen 10,550,687 66,727 --
</TABLE>
The shareholders also voted by ballot and proxy to approve the
reincorporation of the Company in Maryland and the result of the vote taken was
as follows:
FOR AGAINST ABSTAIN NOT VOTED
9,275,519 75,612 43,343 1,222,940
The shareholders also voted by ballot and by proxy to approve the 2000
Stock Option Plan and the result of the vote taken was as follows:
FOR AGAINST ABSTAIN NOT VOTED
7,809,025 1,447,952 130,297 1,230,140
The shareholders also voted by ballot and by proxy to approve the 2000
Non-Employee Director Stock Option Plan ("Director Plan") and the result of the
vote taken was as follows:
FOR AGAINST ABSTAIN NOT VOTED
8,489,974 845,856 49,914 1,231,670
After obtaining the approval by the shareholders of the Director Plan
at the Annual Meeting of Shareholders of the Company on May 9, 2000, it was
noted that the printed version of the Director Plan and the description thereof
that appeared in the Annual Meeting proxy materials was inaccurate. Section 3 of
the Director Plan contains authority for the Company's Board of Directors to
interpret its meaning. Section 10 of the Director Plan permits the Board to
amend it without the necessity of obtaining an additional shareholder vote. In
light of the foregoing, the Director Plan was amended by the Board of Directors
in order to correct the inaccuracies contained therein, including the correction
of the dates of grant and the removal of the limitation on the number of options
which may be granted under the Plan to any one individual eligible to
participate thereunder. The total number of options available under the plan,
100,000, has not changed and represents less than one-tenth of a percent of the
total outstanding shares as set forth on the cover hereof. See Exhibit 10.10.
The shareholders also voted by ballot and by proxy to ratify the
appointment by the Board of Directors of PricewaterhouseCoopers, LLP as the
Company's independent auditors for the fiscal year ending December 31, 2000, and
the result of the vote taken was as follows:
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FOR AGAINST ABSTAIN NOT VOTED
10,563,725 8,989 44,700 --
The shareholders also voted by ballot and by proxy to approve the
adjournment of the Annual Meeting for the purpose of soliciting additional
proxies and the result of the vote taken was as follows:
FOR AGAINST ABSTAIN NOT VOTED
8,597,838 1,886,416 133,160 --
The said proposals were approved by the requisite number of the total
votes eligible to be cast and these matters have been adopted by the
stockholders of the Company.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Amendment No. 1 to the Amended and Restated Credit Agreement,
dated as of December 1, 1998 among the Company, as the
Borrower, the Financial Institutions Named herein, as Lenders,
National City Bank, as a Lender and as Documentation Agent,
PNC Bank, National Association, as a Lender, the Swing Line
Lender, a Letter of Credit of Issuer and as Administrative
Agent, dated March 31, 1999.
10.2 Amendment No. 2 to the Amended and Restated Credit Agreement,
dated as of December 1, 1998 among the Company, as the
Borrower, the Financial Institutions Named herein, as Lenders,
National City Bank, as a Lender and as Documentation Agent,
PNC Bank, National Association, as a Lender, the Swing Line
Lender, a Letter of Credit of Issuer and as Administrative
Agent, dated April 19, 1999.
10.3 Amendment No. 3 to the Amended and Restated Credit Agreement,
dated as of December 1, 1998 among the Company, as the
Borrower, the Financial Institutions Named herein, as Lenders,
National City Bank, as a Lender and as Documentation Agent,
PNC Bank, National Association, as a Lender, the Swing Line
Lender, a Letter of Credit of Issuer and as Administrative
Agent, dated August 13, 1999.
10.4 Amendment No. 4 to the Amended and Restated Credit Agreement,
dated as of December 1, 1998 among the Company, as the
Borrower, the Financial Institutions Named herein, as Lenders,
National City Bank, as a Lender and as Documentation Agent,
PNC Bank, National Association, as a Lender, the Swing Line
Lender, a Letter of Credit of Issuer and as Administrative
Agent, dated August 31, 1999.
10.5 Amendment No. 5 to the Amended and Restated Credit Agreement,
dated as of December 1, 1998 among the Company, as the
Borrower, the Financial Institutions Named herein, as Lenders,
National City Bank, as a Lender and as Documentation Agent,
PNC Bank, National Association, as a Lender, the Swing Line
Lender, a Letter of Credit of Issuer and as Administrative
Agent, dated December 20, 1999.
10.6 Amendment No. 6 to the Amended and Restated Credit Agreement,
dated as of December 1, 1998 among the Company, as the
Borrower, the Financial Institutions Named herein, as Lenders,
National City Bank, as a Lender and as Documentation Agent,
PNC Bank, National Association, as a Lender, the Swing Line
Lender, a Letter of Credit of Issuer and as Administrative
Agent, dated January 10, 2000.
10.7 Amendment No. 7 to the Amended and Restated Credit Agreement,
dated as of December 1, 1998 among the Company, as the
Borrower, the Financial Institutions Named herein, as Lenders,
National City Bank, as a Lender and as Documentation Agent,
PNC Bank, National Association, as a Lender, the Swing Line
Lender, a Letter of Credit of Issuer and as Administrative
Agent, dated February 4, 2000.
10.8 Amendment No. 8 to the Amended and Restated Credit Agreement,
dated as of December 1, 1998 among the Company, as the
Borrower, the Financial Institutions Named herein, as Lenders,
National City Bank, as a Lender and as Documentation Agent,
PNC Bank, National Association, as a Lender, the Swing Line
Lender, a Letter of Credit of Issuer and as Administrative
Agent, dated April 30, 2000.
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10.9 Amendment No. 9 to the Amended and Restated Credit Agreement,
dated as of December 1, 1998 among the Company, as the
Borrower, the Financial Institutions Named herein, as Lenders,
National City Bank, as a Lender and as Documentation Agent,
PNC Bank, National Association, as a Lender, the Swing Line
Lender, a Letter of Credit of Issuer and as Administrative
Agent, dated May 31, 2000.
10.10 MCSi, Inc., Amended and Restated 2000 Non-Employee Stock
Option Plan
27 Financial Data Schedule
99 Safe Harbor Under the Private Securities Litigation Reform Act
of 1995
(b) Reports on Form 8-K
Form 8-K filed on June 30, 2000 concerning the change of the Company's
reincorporation to Maryland.
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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.
MCSi, Inc.
(Registrant)
Date: August 14, 2000
By:/S/ Ira H. Stanley
Ira H. Stanley
Vice President - Chief Financial Officer, Secretary
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