<PAGE>
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 January 31, 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 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 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.
[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 8,095,966 outstanding shares of COMMON STOCK at March 8,
2000.
<PAGE>
MANCHESTER EQUIPMENT CO., INC. AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION Page
- ------- --------------------- ----
Item 1. Condensed Consolidated Balance Sheets
January 31, 2000 (unaudited) and July 31, 1999 3
Condensed Consolidated Statements of Income
Three months and six months ended
January 31, 2000 and 1999 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Six months ended January 31, 2000 and 1999 (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 4. Submission of Matters to a Vote of Security Holders 13
Item 6. Exhibits and Reports 13
2
<PAGE>
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>
January 31, 2000 July 31, 1999
Unaudited)
<S> <C> <C>
------------ ----------
Assets:
Cash and cash equivalents $ 10,743 $ 5,749
Accounts receivable, net 33,188 34,747
Inventory 10,023 8,245
Deferred income taxes 538 538
Prepaid expenses and other current assets 487 340
--- ---
Total current assets 54,979 49,619
Property and equipment, net 6,240 6,248
Goodwill, net 5,735 5,070
Deferred income taxes 560 560
Other assets 200 281
----- ------
$67,714 $61,778
====== ======
Liabilities:
Current maturities under capital
lease obligation $ 27 $ 85
Accounts payable and accrued expenses 25,169 20,824
Deferred service revenue 595 581
Income taxes payable 511 668
--- ---
Total current liabilities 26,302 22,158
Deferred compensation payable 34 34
-- --
Total liabilities 26,336 22,192
------ ------
Shareholders' equity:
Preferred stock, $.01 par value; 5,000,000
shares authorized, none issued - -
Common stock, $.01 par value; 25,000,000
shares authorized 8,041,800 and 8,084,800
issued and outstanding 80 81
Additional paid-in capital 18,667 18,799
Deferred compensation (24) (38)
Retained earnings 22,655 20,744
------ ------
Total shareholders' equity 41,378 39,586
------ ------
$67,714 $61,778
====== ======
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
Manchester Equipment Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except share and per share amounts)
Unaudited
<TABLE>
<CAPTION>
Three months ended January 31, Six months ended January 31,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue
Products $68,916 $51,778 $132,364 $107,453
Services 1,931 1,611 3,843 3,435
----- ----- ------- -----
70,847 53,389 136,207 110,888
------ ------ ------- -------
Cost of revenue
Products 60,691 45,066 114,978 93,448
Services 1,186 1,061 2,516 2,165
----- ----- ----- -----
61,877 46,127 117,494 95,613
------ ------ ------- ------
Gross profit 8,970 7,262 18,713 15,275
Selling, general and
administrative expenses 7,727 7,224 15,746 14,409
----- ----- ------ ------
Income from operations 1,243 38 2,967 866
Interest expense (1) (3) (2) (5)
Interest income 153 105 271 220
--- ---- --- ----
Income before income taxes 1,395 140 3,236 1,081
Provision for income taxes 570 67 1,325 440
--- -- ----- ---
Net income $825 $73 $1,911 $641
=== === ===== ===
Net Income per share
Basic $0.10 $0.01 $0.24 $0.08
===== ===== ==== ====
Diluted $0.10 $0.01 $0.24 $0.08
===== ===== ==== ====
Weighted average
shares outstanding
Basic 8,041,800 8,096,600 8,057,981 8,096,600
========= ========= ========= =========
Diluted 8,069,169 8,096,600 8,072,499 8,096,600
========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
Manchester Equipment Co., Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
For the six months ended
January 31,
2000 1999
(Unaudited)
-----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,911 $ 641
Adjustments to reconcile net income
to net cash from operating activities:
Depreciation and amortization 939 877
Allowance for doubtful accounts (99) 74
Non cash compensation and commission expense 14 49
Change in assets and liabilities:
(Increase) decrease in accounts receivable 1,658 (166)
(Increase) decrease in inventory (1,778) 260
Increase in prepaid income taxes - (245)
(Increase) decrease in prepaid expenses and
other current assets (147) 7
Decrease in other assets 81 26
Increase (decrease) in accounts payable and
accrued expenses 3,545 (2,110)
Increase(decrease)in deferred service
contract revenue 14 (176)
Decrease in income taxes payable (157) (225)
Sale of investments - 1,501
------ -----
Net cash provided by operating activities 5,981 513
----- ---
Cash flows from investing activities:
Capital expenditures (796) (842)
--- ---
Net cash used in investing activities (796) (842)
--- ---
Cash flows from financing activities:
Payments on capital lease obligation (58) (56)
Purchase and retirement of Treasury stock (133) -
--- ---
Net cash used in financing activities (191) (56)
--- --
Net increase (decrease) in cash and cash equivalents 4,994 (385)
Cash and cash equivalents at beginning of period 5,749 7,816
----- -----
Cash and cash equivalents at end of period $10,743 $7,431
====== =====
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
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 network 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 the
majority of the Company's revenue. 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 January 31, 2000 and the results
of operations for the three and six months ended January 31, 2000 and 1999
and cash flows for the six months ended January 31, 2000 and 1999.
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, 1999, included in the Company's Annual
Report on Form 10-K as filed with the Securities and Exchange Commission.
2. Net Income Per Share
Basic net income per share has been computed by dividing net income by
the weighted average number of common shares outstanding. Diluted net
income per share has been computed by dividing net income by the weighted
average number of common shares outstanding, plus the assumed exercise of
dilutive stock options and warrants, less the number of treasury shares
assumed to be purchased from the proceeds of such exercises using the
average market price of the Company's common stock during each respective
period. Stock options and warrants are excluded from the calculation of
diluted net income per share when the result would be antidilutive.
3. Acquisition of Coastal Office Products, Inc.
On January 2, 1998, the Company acquired all of the outstanding shares
of Coastal Office Products, Inc. ("Coastal"), a reseller and provider of
microcomputer services and peripherals to companies in the greater
Baltimore, Maryland area. The acquisition, which has been accounted for as
a purchase, had an aggregate purchase price of $4.8 million consisting of
a cash payment of $3.1 million plus performance based payments of $871,000
(paid on March 15, 1999) and $800,000 (to be paid on March 15, 2000). The
cash payments were made from the Company's cash balances. At January 31,
2000, the contingent payment due on March 15, 2000, which may be paid in
cash or under certain circumstances in Company stock, has been included
with accounts payable and accrued expenses. The selling shareholders
received employment agreements that also provided for the issuance of
20,000 shares of common stock. The fair value of the common stock,
amounting to $80,000, was recorded as deferred compensation and is being
expensed over the three-year vesting period.
Operating results of Coastal are included in the Condensed Consolidated
Statements of Income from the date of acquisition. The acquisition
resulted in goodwill of $4,776,000, which is being amortized on the
straight-line basis over 20 years.
6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis of financial condition and
results of operations of the Company 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
Annual Report on Form 10-K. This discussion and analysis contains certain
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 involve risks and
uncertainties that could cause actual results to differ materially from
the results anticipated in those forward-looking statements. These risks
and uncertainties include, but are not limited to, those set forth below,
those set forth in the Company's Annual Report on Form 10-K for the year
ended July 31, 1999, and those set forth in the Company's other filings
from time to time with the Securities and Exchange Commission.
General
The Company is an 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 integrating its analysis, design and
implementation services with hardware, software, networking products and
peripherals from leading vendors. To date, most of the Company's revenue
has 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 per unit prices as well as on its gross profit and
operating margins with respect to the sale of products. Manchester'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 has experienced a significant increase
in selling, general and administrative expenses, primarily in the form of
increased personnel costs, in connection with the implementation of this
strategy. The Company's future performance will depend in part on its
ability to manage successfully a continuing shift in its operations
towards services.
The Company directly competes with local, regional and national
systems integrators, value-added resellers ("VARs") and distributors as
well as with certain computer manufacturers that market through direct
sales forces and/or the Internet. In the future, the Company may face
further competition from new market entrants and possible alliances
between existing competitors. In addition, certain suppliers and
manufacturers may choose to market products directly to end users through
a direct sales force and/or the Internet rather than or in addition to
channel distribution. Some of the Company's competitors have, or may have,
greater financial, marketing and other resources, and may offer a broader
range of products and services, than the Company. As a result, they may be
able to respond more quickly to new or emerging technologies or changes in
customer requirements, benefit from greater purchasing economies, offer
more aggressive hardware and service pricing or devote greater resources
to the promotion of their products and services. There can be no assurance
that the Company will be able to compete successfully in the future with
these or other current or potential future competitors.
The Company's business is dependent upon its relationships with major
manufacturers in the computer industry. There can be no assurance that the
pricing and related terms offered by major manufacturers will not
adversely change in the future. The failure to obtain an adequate supply
of products, the loss of a major manufacturer, the deterioration of the
Company's relationship with a major manufacturer or the Company's
inability in the future to develop new relationships with other
manufacturers could have a material adverse effect on the Company's
business, results of operations and financial condition.
7
<PAGE>
The Company's largest customer accounted for approximately 5% and 8%
(or $6,305,000 and $8,376,000, respectively) of the Company's revenue for
the six months ended January 31, 2000 and 1999, respectively,
substantially all of which revenue was derived from the sale of hardware
products. This customer accounted for 7% of revenue for the fiscal year
ended July 31, 1999. There can be no assurance that the Company will
continue to derive substantial revenue 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. The Company believes that its
inventory controls have contributed to its ability to respond effectively
to these technological changes. As of January 31, 2000 and July 31, 1999,
inventories represented 15% and 13%, respectively, of total assets. For
the six months ended January 31, 2000 and 1999, annualized inventory
turnover was 25 and 21 times, respectively. Inventory turned 22 times in
the fiscal year ended July 31, 1999. 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 less than 0.2% of total revenues in each of the six month
periods ended January 31, 2000 and 1999. For the fiscal year ended July
31, 1999, bad debt expense represented 0.1% of total revenues.
The Company's quarterly revenue and operating results have varied
significantly in the past and are expected to continue to do so in the
future. Quarterly revenue 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, the
timely availability of product supply, competitive conditions and economic
conditions. In particular, the Company currently is increasing certain of
its fixed operating expenses, 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. Recently the
computer industry has experienced rapid declines in average selling prices
of personal computers. In some instances, the Company has been able to
offset these price declines with increases in units shipped. There can be
no assurance that average selling prices will not continue to decline or
that the Company will be able to offset declines in average selling prices
with increases in units shipped.
Most of the personal computers shipped by the Company utilize
operating systems developed by Microsoft Corporation. The United States
Department of Justice has brought an antitrust action against Microsoft,
which could delay the introduction and distribution of Microsoft products.
The potential unavailability of Microsoft products could have a material
adverse effect on the Company's business, results of operations and
financial condition.
8
<PAGE>
Year 2000 Issue
Many existing computer systems, including certain of the Company's
internal systems as well as those that the Company sells to customers, use
only the last two digits to identify years in the date field. As a result,
those systems may not accurately distinguish years in the 21st century
from years in the 20th century, or may not function properly when faced
with years later than 1999. This problem is generally referred to as the
"Year 2000 Issue." Computer systems that are able to deal correctly with
dates after 1999 are referred to as "Year-2000-Compliant."
The Company has reviewed its operations relating to the Year 2000
Issue. The Company upgraded its systems during 1998 and 1999 using
primarily internal information technology and other personnel, and
remediation and testing are complete for both information technology
("IT") and non-IT systems that required attention and resources to be
Year-2000-Compliant. The costs associated with the Year 2000 Issue have
not been material to the Company's financial position or results of
operations. Although nothing has come to the Company's attention which
would cause it to believe that its effort to be Year-2000-Compliant effort
was not successful, it is not possible to conclude that all aspects of the
Year 2000 Issue that may affect the Company, including those relating to
third parties with whom the Company has material business relationships
(such as customers, licensees, transportation carriers, utility and other
general service providers), have been resolved. To date, the Company has
not experienced any material impact relating to the Year 2000 Issue, and
is not aware of any major customers or third-party suppliers who have
experienced such an impact.
E-Commerce
On February 16, 2000, the Company launched its enhanced website and
electronic commerce system. The new site, located at www.e-manchester.com
allows both existing customers, corporate shoppers and others to find
product specifications, compare products, check price and availability and
place and track orders quickly and easily 24 hours a day seven days a
week. The Company has made, and expects to continue to make, significant
investments and improvements in its e-commerce capabilities. There can be
no assurance that the Company will be successful in enhancing and
increasing its business through its expanded Internet presence.
On June 25, 1999, the Company announced the launch of a new consumer
products on-line super store, Marketplace4U.com ("MP4U"). MP4U offers
products in categories such as consumer electronics, automotive
accessories, outdoor and camping equipment from its main and outlet
stores. The main store offers top brand products at competitive prices;
the Outlet store offers top name brand factory refurbished, warranteed
products at even greater savings. To date revenue from MP4U is immaterial.
There can be no assurance that MP4U will generate significant revenue or
that any of the Company's on-line stores will operate profitably.
9
<PAGE>
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 related revenue or total revenue.
<TABLE>
<CAPTION>
Percentage of Revenue
Three Months Ended Six Months Ended
January 31, January 31,
--------------------------- -----------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
---- ---- ---- ----
Product sales 97.3% 97.0% 97.2% 96.9%
Services 2.7 3.0 2.8 3.1
--- --- --- ---
Total revenue 100.0 100.0 100.0 100.0
----- ----- ----- -----
Cost of product sales 88.1 87.0 86.9 87.0
Cost of services 61.4 65.9 65.5 63.0
---- ---- ---- ----
Cost of revenue 87.3 86.4 86.3 86.2
----- ---- ---- ----
Product gross profit 11.9 13.0 13.1 13.0
Services gross profit 38.6 34.1 34.5 37.1
---- ---- ---- ----
Gross profit 12.7 13.6 13.7 13.8
---- ---- ---- ----
Selling, general and
administrative expenses 10.9 13.5 11.5 13.0
---- ---- ---- ----
Income from operations 1.8 0.1 2.2 0.8
Interest and other income, net 0.2 0.2 0.2 0.2
--- --- --- ---
Income before income taxes 2.0 0.3 2.4 1.0
Provision for income taxes 0.8 0.1 1.0 0.4
--- ---- --- ---
Net income 1.2% 0.2% 1.4% 0.6%
==== === === ===
</TABLE>
Three Months Ended January 31, 2000 Compared to Three Months Ended January
31, 1999
Revenue. The Company's revenue increased $17.5 million or 32.7% from
$53.4 million for the three months ended January 31, 1999 to $70.8 million
for the three months ended January 31, 2000. Product revenue increased by
$17.1 million (33.1%) due primarily to increases in shipments of displays,
as well as higher per unit prices for personal computers. Service revenue
increased $320,000 (19.9%) as a result of the Company's continued emphasis
on providing value-added services.
Gross Profit. Cost of revenue 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 $1.7 million or 23.5%
from $7.3 million for the second quarter of fiscal 1999 to $9.0 million
for the most recent fiscal quarter. Gross profit from the sale of products
increased by $1.5 million while gross profit from the sale of services
increased by $195,000. The changes in gross profit primarily result from
the changes in revenue discussed above, partially offset by lower margins
on products sold due to the very competitive marketplace. As a percentage
of revenue, gross profit decreased to 12.7% in the second quarter of
fiscal 2000 as compared to 13.6% in fiscal 1999. Competitive pressures,
changes in types of products or services sold and product availability
result in fluctuations in gross profit.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $503,000 or 7.0% from $7.2 million in
10
<PAGE>
the second quarter of fiscal 1999 to $7.7 million in the second quarter of
fiscal 2000. This increase is principally a result of higher advertising
and marketing costs, primarily related to the Company's new retail consumer
on-line store, Marketplace4U.
Interest Income. Interest income increased from $105,000 in the
second quarter of 1999 to $153,000 in the second quarter of 2000 due to
higher cash balances available for investment as well as higher interest
rates received on investments.
Provision for Income Taxes. The effective income tax rate
decreased to 41% in the current period compared to 48% of pre-tax income
in the prior year period principally as a result of the impact of certain
non deductible expenses.
Six Months Ended January 31, 2000 Compared to Six Months Ended January 31,
1999
Revenue. The Company's revenue increased by $25.3 million or 22.8%
from $110.9 million for the six months ended January 31, 1999 to $136.2
million for the six months ended January 31, 2000. Revenue from the sale
of products increased by $24.9 million (23.2%) while revenue from service
offerings increased by $408,000 (11.9%). The increases in revenue were
largely attributable to growth in shipments of displays and peripherals as
well as higher average selling prices for personal computers.
Gross Profit.Gross profit increased by $3.4 million (22.5%) to
$18.7 million for the first six months of fiscal 2000 from $15.3 million
in the comparable period a year ago. Gross profit from product sales
increased by 24.1% ($3.4 million) from $14.0 million in the first six
months of fiscal 1999 to $17.4 million in the most recent six month
period. Service offerings generated $1.3 million of gross profit in the
first six months of both fiscal 2000 and 1999. The growth in gross profit
dollars is principally due to the increase in revenue discussed above.
Gross margin percentages declined in the recent period due to generally
lower vendor incentives and the highly competitive marketplace for
computer products.
Selling, General and Administrative Expenses. Selling general and
administrative expenses increased by $1.3 million or 9.3% from $14.4
million for the first six months of fiscal 1999 to $15.7 million for the
first six months of fiscal 2000. The increase is principally due to higher
salaries and personnel costs, as well as higher advertising costs
primarily relating to the Company's new retail consumer on-line store,
Marketplace4U. These increases were partially offset by lower insurance
and bad debt expenses.
Interest Income. Interest income increased due to higher cash balances
available for investment as well as higher interest rates.
Provision for Income Taxes. The effective income tax rate
increased slightly from 40.7% for the first six months of fiscal 1999 to
40.9% in the most recent fiscal period.
Liquidity and Capital Resources
The Company's primary sources of financing have been internally
generated working capital from operations and a line of credit from
financial institutions.
For the six months ended January 31, 2000, cash provided by operating
activities was $6.0 million consisting primarily of net income and
depreciation and amortization, decreases in accounts receivable and an
increase in accounts payable and accrued expenses, partially offset by an
increase in 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
11
<PAGE>
addition, during the six months ended January 31, 2000 the Company used
approximately $796,000 for capital expenditures and $133,000 to repurchase
and retire its common stock.
The Company has available a line of credit with financial
institutions in the aggregate amount of $15.0 million. No amounts were
outstanding under this line as of January 31, 2000.
The Company believes that its current balances in cash and cash
equivalents, 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 2000. The Company currently has no material commitments for
capital expenditures. The Company has a contingent purchase payment due to
the former owners of its Coastal subsidiary amounting to $800,000. This
payment is due on March 15, 2000 and is expected to be paid from the
Company's available cash balances or through the issuance of stock. In
addition, the Company has signed a letter of intent for the purchase of
two companies. The purchase is expected to close in March 2000 and may
require $1.0 million in cash, consisting of an initial payment of the
purchase price of $400,000 and approximately $600,000 to repay liabilities
that are assumed. These payments are also expected to be made from
available cash balances. 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, the possible opening of new offices, potential acquisitions,
and expansion of the Company's e-commerce capabilities.
12
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On January 19, 2000 the Company held its Annual Meeting of Shareholders
to (1) elect six Directors to serve until the 2001 Annual Meeting of
Shareholders; and (2) ratify the reappointment of KPMG LLP as independent
auditors of the Company for the year ending July 31, 2000.
The results of the voting for the election of Directors were as
follows:
Broker
Nominee For Withheld Abstain Non-votes
-------------- --- -------- ------- ---------
Barry R. Steinberg 7,340,474 29,500 0 0
Joel G. Stemple 7,340,474 29,500 0 0
Joel Rothlein 7,340,474 29,500 0 0
Bert Rudofsky 7,340,474 29,500 0 0
Michael E. Russell 7,340,474 29,500 0 0
Julian Sandler 7,340,474 29,500 0 0
Each of six nominees received a plurality of the total votes that were
cast and were accordingly elected.
The results of the voting on the ratification of the appointment of
KPMG LLP as the Company's independent auditors were as follows:
Broker
For Against Abstain Non-votes
--- ------- ------- ---------
7,363,724 3,150 3,100 0
The number of shares voted for the ratification of the appointment of
KPMG LLP constituted a majority of the shares present in person or
represented by proxy, and such ratification was accordingly approved.
No other items were voted on at the annual meeting of shareholders or
during the quarter ended January 31, 2000.
Item 6. Exhibits and Reports
(a) Exhibits
Exhibit No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K
None
13
<PAGE>
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: March 10, 2000 s/s/ Barry Steinberg
President and Chief Executive Officer
DATE: March 10, 2000 s/s/ Joseph Looney
------------------
Joseph Looney
Vice President of Finance and
Chief Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-END> JAN-31-2000
<CASH> 10,743
<SECURITIES> 0
<RECEIVABLES> 34,313
<ALLOWANCES> 1,125
<INVENTORY> 10,023
<CURRENT-ASSETS> 54,979
<PP&E> 11,881
<DEPRECIATION> 5,641
<TOTAL-ASSETS> 67,714
<CURRENT-LIABILITIES> 26,302
<BONDS> 0
0
0
<COMMON> 80
<OTHER-SE> 41,298
<TOTAL-LIABILITY-AND-EQUITY> 67,714
<SALES> 136,207
<TOTAL-REVENUES> 136,207
<CGS> 117,494
<TOTAL-COSTS> 117,494
<OTHER-EXPENSES> 15,746
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2)
<INCOME-PRETAX> 3,236
<INCOME-TAX> 1,325
<INCOME-CONTINUING> 1,911
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,911
<EPS-BASIC> .24
<EPS-DILUTED> .24
</TABLE>
