<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
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 0-21695
MANCHESTER EQUIPMENT CO., INC.
(Exact name of registrant as specified in its charter)
NEW YORK 11-2312854
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
160 OSER AVENUE
HAUPPAUGE, NEW YORK 11788
(Address of registrant's principal executive offices)
(516) 435-1199
(Registrant's telephone number, including area code)
Indicate by check mark whether the registration (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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date.
There were 8,525,000 outstanding shares of COMMON STOCK at December 26,
1996.
<PAGE> 2
MANCHESTER EQUIPMENT CO., INC. AND SUBSIDIARIES
Index
PART I. FINANCIAL INFORMATION Page
- ------- --------------------- ----
Item 1. Condensed Consolidated Balance Sheets
October 31, 1996 (unaudited) and July 31, 1996 3
Condensed Consolidated Statements of Income
Three months ended October 31, 1996 and 1995 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Three months ended October 31, 1996 and 1995 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports 11
2
<PAGE> 3
Part I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
MANCHESTER EQUIPMENT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
October 31, 1996 July 31, 1996
(Unaudited)
---------------- -------------
<S> <C> <C>
Assets:
Cash $ 1,786 $ 5,774
Accounts receivable, net 21,835 19,068
Inventory 11,251 8,957
Deferred income taxes 334 334
Prepaid expenses and other current assets 399 197
------- -------
Total current assets 35,605 34,330
Property and equipment, net 2,085 2,244
Deferred income taxes 395 395
Other assets 768 792
------- -------
$38,853 $37,761
======= =======
Liabilities:
Current maturities under capital lease obligation $ 99 $ 99
Notes payable - bank 6,500 6,500
Notes payable - shareholder 235 353
Accounts payable and accrued expenses 16,614 17,113
Deferred service revenue 129 129
Income taxes payable 834 295
------- -------
Total current liabilities 24,411 24,489
Capital lease obligation, less current maturities 159 175
Deferred compensation payable 268 183
------- -------
Total liabilities 24,838 24,847
------- -------
Redeemable common stock -- 4,739
Shareholders' equity:
Preferred stock, $.01 par value; 5,000,000 shares authorized,
none issued -- --
Common stock, $.01 par value; 25,000,000 shares authorized,
6,200,000 shares issued and outstanding 62 62
Retained earnings 13,953 8,113
------- -------
Total equity 14,015 8,175
------- -------
Total liabilities and equity $38,853 $37,761
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
MANCHESTER EQUIPMENT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended October 31,
1996 1995
(Unaudited)
------------------------------
<S> <C> <C>
Revenues $ 50,987 $ 43,506
Cost of revenues 43,808 37,563
---------- ----------
Gross profit 7,179 5,943
Selling, general and administrative expenses 5,188 4,309
---------- ----------
Income from operations 1,991 1,634
Interest expense, net 115 80
---------- ----------
Income before income taxes 1,876 1,554
Provision for income taxes 775 625
---------- ----------
Net income $ 1,101 $ 929
========== ==========
Net Income per share $ 0.18 $ 0.15
========== ==========
Weighted average shares outstanding 6,200,000 6,262,626
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
MANCHESTER EQUIPMENT CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the three months ended October 31,
1996 1995
(Unaudited)
--------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,101 $ 929
Adjustments to reconcile net income to net cash from
operating activities:
Depreciation and amortization 150 99
Allowance for doubtful accounts 126 105
Change in assets and liabilities:
Increase in accounts receivable (2,893) (2,692)
(Increase) decrease in inventory (2,294) 81
(Increase) decrease in prepaid expenses and
other current assets (202) 57
Decrease (increase) in other assets 24 (22)
Decrease in accounts payable and
accrued expenses (499) (902)
Decrease in deferred service contract revenue -- (55)
Increase in income taxes payable 539 203
Increase in deferred compensation payable 85 --
------- -------
Net cash used in operating activities (3,863) (2,197)
------- -------
Cash flows from investing activities:
Capital expenditures (45) (85)
Proceeds from sale of assets 54 --
------- -------
Net cash provided by (used in) investing activities 9 (85)
------- -------
Cash flows from financing activities:
Net proceeds from borrowings -- 1,100
Payments on notes payable shareholder (118) --
Payments on capitalized lease obligation (16) --
------- -------
Net cash (used in) provided by financing activities (134) 1,100
------- -------
Net decrease in cash (3,988) (1,182)
Cash at beginning of period 5,774 1,834
------- -------
Cash at end of period $ 1,786 $ 652
======= =======
</TABLE>
5
<PAGE> 6
MANCHESTER EQUIPMENT CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Manchester Equipment Co., Inc. (the "Company") is a systems integrator and
reseller of computer hardware, software and networking products, primarily
for commercial customers. The Company offers its customers single-source
solutions customized to their information systems needs by combining
value-added services with hardware, software, networking products and
peripherals from leading vendors.
Sales of hardware, software and networking products comprise most of the
Company's revenues. Service revenues have not comprised a significant part
of revenues to date. The Company has entered into agreements with certain
suppliers and manufacturers which provide the Company favorable pricing
and price protection in the event the vendor reduces its prices.
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of
only normal and recurring accruals) necessary to present fairly the
financial position of the Company as of October 31, 1996 and the results
of operations for the three months ended October 31, 1996 and 1995 and
cash flows for the three months ended October 31, 1996 and 1995. Although
the Company believes that the disclosures herein are adequate to make the
information not misleading, these financial statements should be read in
conjunction with the audited financial statements and the notes thereto
for the year ended July 31, 1996, included in the Company's Prospectus
dated November 25, 1996 prepared in connection with the Company's initial
public offering.
2. NET INCOME PER SHARE
Net income per share is based upon the weighted average number of common
shares and common share equivalents outstanding during each period. Common
share equivalents include dilutive stock options and warrants, if any,
using the treasury stock method.
3. SUBSEQUENT EVENT - INITIAL PUBLIC OFFERING
On December 2, 1996, the Company completed an initial public offering (the
"Offering") of 2,325,000 shares of its common stock (including 200,000
overallotment shares) at an initial public offering price of $10 per
share. Net proceeds to the Company were approximately $20 million, after
deducting the underwriting discounts and commissions and other costs
associated with the Offering.
4. REDEEMABLE COMMON STOCK
Prior to the consummation of the offering, the Company had an agreement with
a retired shareholder whereby the Company would be required to redeem all of
the shares held by the shareholder in accordance with terms set forth in the
agreement. In September 1996, among other provisions, the retired
shareholder agreed to terminate his option to sell his remaining shares to
the Company, subject to successful completion of the offering. As a result
of the successful completion of the offering, in the October 31, 1996
Condensed Consolidated Balance Sheet, the amounts which would have been due
under this agreement have been reclassified to retained earnings.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
condensed consolidated financial statements and notes thereto included elsewhere
in this Quarterly Report on Form 10-Q and with the Company's Prospectus dated
November 25, 1996. This discussion and analysis contains forward-looking
statements within the meaning of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which are not
historical facts, and involves risks and uncertainties that could cause actual
results to differ from those expected and projected. These risks and
uncertainties include, but are not limited to, those set forth below and the
risk factors described in the Company's Prospectus.
GENERAL
Manchester is a systems integrator and reseller of computer hardware,
software and networking products, primarily for commercial customers. The
Company offers its customers single-source solutions customized to their
information systems needs by combining value-added services with hardware,
software, networking products and peripherals from leading vendors. To date,
most of the Company's revenues have been derived from product sales. The Company
generally does not develop or sell software products. However, certain computer
hardware products sold by the Company are loaded with pre-packaged software
products.
As a result of intense price competition within the computer industry as
well as other industry conditions, the Company has experienced increasing
pressure on its gross profit and operating margins with respect to the sale of
products. The Company's strategy includes increasing its focus on providing
value added services with operating margins that are higher than those obtained
with respect to the sale of products. The Company's future performance will
depend in part on its ability to manage successfully a continuing shift in its
operations to value-added services.
The Company's largest customer accounted for approximately 14% and 12% of
the Company's revenues for the fiscal quarters ended October 31, 1996 and 1995,
respectively, substantially all of which revenues were derived from the sale of
hardware products. This customer accounted for 16% of revenues for the fiscal
year ended July 31, 1996. There can be no assurance that the Company will
continue to derive substantial revenues from this customer.
The Company's profitability has been enhanced by its ability to obtain
volume discounts from certain manufacturers, which has been dependent in part
upon the Company's ability to sell large quantities of products to computer
resellers, including VARs. There can be no assurance that the Company will be
able to continue to sell products to resellers and thereby obtain the desired
discounts from the manufacturers or that the Company will be able to increase
sales to end-users to offset the need to rely upon sales to resellers.
The markets for the Company's products and services are characterized by
rapidly changing technology and frequent introductions of new hardware and
software products and services, which render many existing products
noncompetitive, less profitable or obsolete.
7
<PAGE> 8
The Company believes that its inventory controls have contributed to its ability
to respond effectively to these technological changes. As of October 31, 1996
and 1995, inventories represented 29% of total assets. For the fiscal quarters
ended October 31, 1996 and 1995, annualized inventory turnover was 16 and 17
times, respectively. Inventory turned 18 times in the fiscal year ended July 31,
1996. The failure of the Company to anticipate technology trends or to continue
to effectively manage its inventory could have a material adverse effect on the
Company's business, results of operations and financial condition.
The Company believes its controls on accounts receivable have contributed to
its profitability. The Company's bad debt expense represented .2% of total
revenues in each of the fiscal quarters ended October 31, 1996 and 1995. For the
fiscal year ended July 31, 1996, bad debt expense represented .1% of total
revenues.
The Company's quarterly revenues and operating results have varied
significantly in the past and are expected to continue to do so in the future.
Quarterly revenues and operating results generally fluctuate as a result of the
demand for the Company's products and services, the introduction of new hardware
and software technologies with improved features, the introduction of new
services by the Company and its competitors, changes in the level of the
Company's operating expenses, competitive conditions and economic conditions. In
particular, the Company currently is increasing its fixed operating expenses,
including a significant increase in personnel, as part of its strategy to
increase its focus on providing higher margin, value-added services.
Accordingly, the Company believes that period-to-period comparisons of its
operating results should not be relied upon as an indication of future
performance. In addition, the results of any quarterly period are not indicative
of results to be expected for a full fiscal year.
As a result of rapid changes which are taking place in computer and
networking technologies, product life cycles are short. Accordingly, the
Company's product offerings change constantly. Prices of products change with
generally higher prices early in the life cycle of the product and lower prices
near the end of the product's life cycle. The Company believes that the impact
of price or volume changes of any particular product or products is not material
to the Company's Consolidated Financial Statements.
The Company's Chief Executive officer has entered into an employment
agreement with the Company under which he will receive $550,000 in compensation,
exclusive of fringe benefits, for each of the fiscal years ending July 31, 1997
and 1998. In addition, the Company's Executive Vice President has agreed to
receive base compensation, exclusive of fringe benefits, of $450,000 for the
fiscal years ending July 31, 1997 and 1998. These officers have agreed that they
will not be entitled to any bonuses for fiscal 1997 and that any bonus payable
to either of these officers in fiscal 1998 will require the approval of a
majority of the independent directors of the Company. Each of the leases with
related parties has been amended effective with the closing of the Offering to
reduce the rent payable under that lease to current market rates.
8
<PAGE> 9
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, information
derived from the Company's Condensed Consolidated Statements of Income
expressed as a percentage of revenues.
<TABLE>
<CAPTION>
Percentage of Revenues
Three Months Ended
October 31
-----------
1996 1995
---- ----
<S> <C> <C>
Revenues 100.0% 100.0%
Cost of revenues 85.9 86.3
----- -----
Gross profit 14.1 13.7
Selling, general and administrative expenses 10.2 9.9
----- -----
Income from operations 3.9 3.8
Interest and other expenses, net .2 .2
----- -----
Income before income taxes 3.7 3.6
Provision for income taxes 1.5 1.5
----- ----
Net income 2.2% 2.1%
===== =====
</TABLE>
QUARTER ENDED OCTOBER 31, 1996 COMPARED TO QUARTER ENDED OCTOBER 31, 1995
Revenues. The Company's revenues increased $7.5 million or 17.2% from $43.5
million for the three months ended October 31, 1995 to $51.0 million for the
three months ended October 31, 1996 due to increased revenues from both new and
existing customers. Many factors contributed to this increase, including new
product introductions, special product purchases and volume and price changes
with no one factor having any material effect on this increase.
Gross Profit. Cost of revenues includes the direct costs of products sold,
freight and the personnel costs associated with providing technical services,
offset in part by certain market development funds provided by manufacturers.
All other operating costs are included in selling, general and administrative
expenses. Gross profit increased $1.2 million or 20.8% from $5.9 million for the
first quarter of fiscal 1996 to $7.2 million for the most recent fiscal quarter.
As a percentage of revenues, gross profit increased from 13.7% to 14.1%. The
increase in gross profit dollars is principally due to the increase in revenues
while the increase in percentage is primarily due to changes in product mix .
Competitive pressures, changes in the types of products or services sold and
product availability result in fluctuations in gross profit from period to
period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $879,000 or 20.4% from $4.3 million in the
first quarter of fiscal 1996 to $5.2 million in the first quarter of fiscal
1997. This increase is principally a result of higher payroll and related costs
due to the hiring of additional technical and administrative staff in support of
the Company's strategy to increase its value-added services revenue. In
addition, the Company incurred higher commissions paid to the Company's sales
force due to higher revenues and higher insurance expense partially offset by
lower rent. Giving pro forma effect to the changes in officers compensation and
rents to related parties, described above and under General, the pro forma
selling, general and administrative expenses would have been approximately $4.4
million or 10.1% of revenues for the three months ended October 31, 1995. Pro
forma selling general and
9
<PAGE> 10
administrative expenses for the quarter ended October 31, 1995 are higher than
actual amounts principally due to the timing of payments of officers'
compensation during fiscal 1996.
Interest Expense, net. Interest expense, net increased from $80,000 for the
three months ended October 31, 1995 to $115,000 for the three months ended
October 31, 1996, principally due to higher average borrowings under the
Company's line of credit with a financial institution.
Provision for Income Taxes. The effective income tax rate increased slightly
from 40% for the three months ended October 31, 1995 to 41% for the three months
ended October 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of financing have been internally generated
working capital from profitable operations and a line of credit from a financial
institution.
For the three months ended October 31, 1996, cash used in operating
activities was $3.9 million consisting primarily of increases in accounts
receivable and inventory. The Company's accounts receivable and accounts payable
and accrued expenses balances as well as its investment in inventory can
fluctuate significantly from one period to the next due to the receipt of large
customer orders or payments or variations in product availability and vendor
shipping patterns at any particular date. Generally, the Company's experience is
that increases in accounts receivable, inventory and accounts payable and
accrued expenses will coincide with growth in revenue and increased operating
levels. In addition, during the three months ended October 31, 1996 the Company
generated $9,000 in investing activities and utilized $134,000 for repayment of
debt.
The Company recently increased the amount of credit available under its line
of credit agreement with a financial institution from $9.5 million to $11.5
million. All amounts outstanding under this line ($7.7 million) were repaid by
the Company with the proceeds from the initial public offering described below.
On December 2, 1996, the Company completed an initial public offering (the
"Offering") of 2,325,000 (including 200,000 overallotment shares) of its common
stock resulting in net proceeds to the Company, after deducting underwriting
discount and expenses, of approximately $20 million. The Company utilized $7.7
million of the proceeds from the Offering to repay the balance outstanding under
its line of credit with a financial institution. The remaining net proceeds have
been invested in short-term, interest bearing, investment grade securities.
The Company believes that the remaining net proceeds from the Offering
together with current working capital, expected cash flows from operations and
available borrowings under the line of credit will be adequate to support
current operating levels for the foreseeable future, specifically through at
least the end of fiscal 1998. The Company currently has no major commitments for
capital expenditures. Future capital requirements of the Company include those
for the growth of working capital items such as accounts receivable and
inventory and the purchase of equipment and expansion of facilities as well as
the possible opening of new offices and potential acquisitions.
10
<PAGE> 11
Item 6. Exhibits and Reports
(a) Exhibits
Exhibit No. Description
10.6 Promissory Notes dated October 15, 1996 by Registrant to
The Bank of New York
27 Financial Data Schedule
(b) Reports on Form 8-K
None
11
<PAGE> 12
MANCHESTER EQUIPMENT CO., INC.
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.
MANCHESTER EQUIPMENT CO., INC.
-------------------------------------
(Registrant)
DATE: /s/ Barry Steinberg
-------------------------------------
December 26, 1996 Barry Steinberg
President and Chief Executive Officer
DATE: /s/ Joseph Looney
-------------------------------------
December 26, 1996 Joseph Looney
Chief Financial Officer
12
<PAGE> 1
PROMISSORY NOTE
$11,500,000.00 Date: October 15, 1996
For Value Received, MANCHESTER EQUIPMENT CO, INC., a New York
corporation (the "Borrower"), hereby promises to pay to the order of THE BANK
OF NEW YORK (the "Bank") at its 1401 Franklin Avenue, Garden City, New York
11530 office, the principal sum of Eleven Million Five Hundred Thousand Dollars
($11,500,000.00) or the aggregate unpaid principal amount of all advances made
by the Bank to the Borrower (which aggregate unpaid principal amount shall be
equal to the amount duly endorsed and set forth opposite the date last appearing
on the sheet attached to this note), whichever is less.
Advances hereunder shall bear interest at a rate per annum equal to:
(1) the "Alternate Base Rate" (as hereinafter defined), such rate to change on
the effective date of any change in the "Alternate Base Rate", or (2) such rate
(the "Note Rate") as shall be agreed to between the Bank and the Borrower at the
time of each advance, which Note Rate shall remain fixed until the Maturity Date
(as hereinafter defined) of such advance.
As used herein "Alternate Base Rate" shall mean, for any day a rate
per annum equal to the higher of (i) the Prime Rate in effect on such day and
(ii) the Federal Funds Rate in effect on such day plus 1/2 of 1%. For purposes
of this definition: (A) "Prime Rate" shall mean the prime commercial lending
rate of the Bank as publicly announced to be in effect from time to time, such
rate to be adjusted automatically, without notice, on the effective date of any
change in such rate, and (B) "Federal Funds Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published
<PAGE> 2
2
for such day (or if such day is not a business day, for the next preceding
business day) by the Federal Reserve Bank of New York, or if such rate is not so
published for any day which is a business day, the average of quotations for
such day on such transactions received by the Bank from three Federal funds
brokers of recognized standing selected by the Bank. Any advance hereunder which
shall not be paid when due shall bear interest at a rate per annum equal to the
Alternate Base Rate plus two percent (2%), such rate to change on the effective
date of any change in the Alternate Base Rate.
Advances hereunder which bear interest at the Alternate Base Rate
shall be payable on demand and may be prepaid in whole at any time or in part
from time to time. Advances hereunder which bear interest at the Note Rate shall
be payable on a maturity date (the "Maturity Date") as shall be agreed to
between the Bank and the Borrower at the time of each advance. The Borrower
shall not have the right to prepay any advance which bears interest at the Note
Rate.
Interest shall be computed on the basis of a 360 day year for the
actual number of days involved. Interest on any advance shall be payable on the
last business day of the month, and at maturity.
The Bank shall endorse the Note Rate and the Maturity Date applicable
to each advance which bears interest at the Note Rate on the sheet attached to
this note. The Bank shall charge the Borrower's deposit account maintained at
the Bank for each payment of principal and interest due hereunder on the due
date thereof. If the Bank shall make a new advance on a day on which the
Borrower is to repay an advance hereunder, the Bank shall apply the proceeds of
the new advance to make such repayment and only the amount by which the amount
being advanced exceeds the amount being repaid shall be made available to the
Borrower
<PAGE> 3
3
in accordance with the terms of this note. The Borrower hereby authorizes the
Bank to accept telephonic instructions from a duly authorized representative of
the Borrower to make an advance or receive a repayment hereunder and to endorse
the sheet attached to this note accordingly. All advances made hereunder shall
be credited to the Borrower's deposit account referred to above, which credits
shall be confirmed to the Borrower by standard advice of credit. The Borrower
agrees that the actual crediting of the sum of money so borrowed to the
Borrower's deposit account shall constitute conclusive evidence that the advance
was made, and the failure of the Bank to endorse the amount of any advance on
the sheet attached to this note or to forward to the Borrower an advice of
credit shall not affect the obligation of the Borrower to repay such advance.
All advances made hereunder are secured pursuant to the terms of a
General Loan and Security Agreement executed by the Borrower in favor of the
Bank and this note is entitled to all the benefits thereof.
All advances made hereunder shall become immediately due and payable,
together with all accrued interest, upon the insolvency, general assignment,
receivership, bankruptcy or dissolution of the Borrower. The Borrower does
hereby forever waive presentment, demand, protest, notice of protest and notice
of nonpayment or dishonor of this note.
The Borrower hereby agrees to pay all reasonable expenses incurred by
the Bank incidental to, or in any way relating to the Bank's enforcement of the
obligations of the Borrower hereunder, including but not limited to, reasonable
attorney's fees incurred by the Bank.
The Borrower waives the right to trial by jury in any action,
proceeding or counterclaim instituted with respect to this note.
<PAGE> 4
4
The provisions of this note shall be construed and interpreted and all
rights and obligations hereunder determined in accordance with the laws of the
state of New York.
MANCHESTER EQUIPMENT CO., INC.
By: /s/ Barry Steinberg
-----------------------------
Barry Steinberg
Title: President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 1,786
<SECURITIES> 0
<RECEIVABLES> 22,740
<ALLOWANCES> 905
<INVENTORY> 11,251
<CURRENT-ASSETS> 35,605
<PP&E> 5,479
<DEPRECIATION> 3,394
<TOTAL-ASSETS> 38,853
<CURRENT-LIABILITIES> 24,411
<BONDS> 0
0
0
<COMMON> 62
<OTHER-SE> 13,953
<TOTAL-LIABILITY-AND-EQUITY> 38,853
<SALES> 50,987
<TOTAL-REVENUES> 50,987
<CGS> 43,808
<TOTAL-COSTS> 43,808
<OTHER-EXPENSES> 5,188
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 115
<INCOME-PRETAX> 1,876
<INCOME-TAX> 775
<INCOME-CONTINUING> 1,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,101
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
