FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
Commission file number: 1-5731
REXEL, INC.
(Exact name of registrant as
specified in its charter)
New York 13-1474527
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 Alhambra Circle, Coral Gables, Florida 33134
(Address of principal executive offices) (Zip Code)
(305) 446-8000
(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.
Yes [X] No ___
Indicate number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Date Class Shares Outstanding
---- ----- ------------------
April 25, 1996 Common Stock 25,649,990
-------------- ------------ ----------
</TABLE>
<PAGE>
REXEL, INC.
INDEX
-----
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
Part I - Financial Information
Condensed Consolidated Balance Sheets (Unaudited)
at March 31, 1996 and December 31, 1995 .......... 1
Condensed Consolidated Statements of Income
(Unaudited) for the Three Months Ended March 31,
1996 and 1995 .................................... 2
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Three Months Ended March 31,
1996 and 1995 .................................... 3
Notes to Unaudited Condensed Consolidated Financial
Statements ....................................... 4
Report of Independent Accountants .................... 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations .............. 6
Part II - Other Information .................................... 9
</TABLE>
<PAGE>
<PAGE>
REXEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted, except for share amounts)
<TABLE>
<CAPTION>
Mar. 31, Dec. 31,
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Current Assets
Cash $ 4,058 $ 10,013
Accounts and Notes Receivable - Net 142,436 138,604
Inventories 100,121 102,239
Prepaid Expenses and Other Current Assets 7,684 8,344
Deferred Income Taxes 3,849 3,849
-------- --------
Total Current Assets 258,148 263,049
Investments and Noncurrent Receivables 1,152 1,069
Fixed Assets - Net 49,465 49,453
Other Assets 1,976 2,135
Deferred Income Taxes 834 834
Goodwill - Net 58,548 58,953
-------- --------
$370,123 $375,493
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Short-Term Debt $ 17,550 $ 8,050
Current Portion of Long-Term Debt 7,786 7,757
Accounts and Notes Payable -
Trade and Other Liabilities 134,101 147,031
Income Taxes Payable 3,636 3,725
-------- --------
Total Current Liabilities 163,073 166,563
Long-Term Debt 29,911 37,219
Other Long-Term Liabilities 3,185 3,363
Deferred Income Taxes 2,029 2,029
Stockholders' Equity
Preferred Stock (Authorized 2,000,000
Shares, None Issued) 0 0
Common Stock (26,258,933 and
26,258,133 Shares Issued) 26,259 26,258
Capital Surplus 94,211 94,206
Retained Earnings 56,199 50,580
Treasury Stock, at Cost (610,743
and 609,143 Shares) (4,744) (4,725)
-------- --------
171,925 166,319
-------- --------
$370,123 $375,493
======== ========
</TABLE>
See accompanying report of independent accountants and notes
to unaudited condensed consolidated financial statements.
<PAGE>
REXEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(000's omitted, except for per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------
1996 1995
--------- ---------
(UNAUDITED)
-----------------------------
<S> <C> <C>
Net Sales $ 264,757 $ 278,828
Cost Of Goods Sold 208,497 223,512
--------- ---------
Gross Profit 56,260 55,316
Selling and Administrative Expenses 45,011 45,564
--------- ---------
Operating Profit 11,249 9,752
--------- ---------
Interest Expense 1,292 2,410
--------- ---------
Other Income - Net 77 211
--------- ---------
Income Before Income Taxes 10,034 7,553
Provision For Income Taxes 4,415 3,323
--------- ---------
Net Income $ 5,619 $ 4,230
========= =========
Income Per Common Share
Primary $ .22 $ .18
========= =========
Fully Diluted $ .22 $ .16
========= =========
Average Number of Common and Common
Equivalent Shares
Primary 26,076 24,153
========= =========
Fully Diluted 26,076 29,378
========= =========
Dividends Per Common Share $ 0.00 $ 0.00
========= =========
</TABLE>
See accompanying report of independent accountants and notes
to unaudited condensed consolidated financial statements.
<PAGE>
<PAGE>
REXEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------
1996 1995
-------- --------
(UNAUDITED)
-----------------------
<S> <C> <C>
Net Cash (Used In) Provided By Operating
Activities $ (6,399) $ 1,697
-------- --------
Cash Flows From Investing Activities:
Capital Expenditures (1,583) (721)
Other Investing Activities (3) (11)
-------- --------
Net Cash Used In Investing Activities (1,586) (732)
-------- --------
Cash Flows From Financing Activities:
Net Borrowings under Line of Credit
Arrangements 9,500 0
Acquisition of Treasury Shares (19) 0
Proceeds From Exercise of Stock Options 6 0
Other Debt Payments and Sundry
Financing Activities (7,457) (7,634)
-------- --------
Net Cash Provided by (Used In)
Financing Activities 2,030 (7,634)
-------- --------
Net Decrease In Cash (5,955) (6,669)
Cash and Cash Equivalents at Beginning
of Period 10,013 23,843
-------- --------
Cash and Cash Equivalents at End of Period $ 4,058 $ 17,174
======== ========
</TABLE>
See accompanying report of independent accountants and notes
to unaudited condensed consolidated financial statements.
<PAGE>
REXEL, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying financial information should be read in conjunction with
the consolidated financial statements, including the notes thereto, for
the year ended December 31, 1995. The condensed consolidated balance
sheet as of December 31, 1995 has been summarized from the Company's
audited consolidated balance sheet as of that date.
2. Results for interim periods are not necessarily indicative of the results
to be expected for the year. The accompanying financial information
reflects all adjustments which are, in the opinion of Management, of a
normal, recurring nature and necessary for a fair statement of the results
for the periods.
3. Inventories are stated at the lower of LIFO cost or market.
4. Primary income per common share is computed by dividing net income by the
weighted average number of common and common equivalent shares outstanding
during the periods. Fully diluted income per share assumes the conversion
of convertible debentures in 1995 and the resultant reduction in interest
costs, net of tax.
5. On August 11, 1995, the Company redeemed all of its outstanding 7%
Convertible Subordinated Debentures Due 2014, which had an original
principal amount of $50 million. Of such principal amount, $35.5 million
was redeemed for cash at a redemption price of 102.8% of principal, plus
accrued and unpaid interest to the redemption date, or a total redemption
payment of $36.5 million. The balance of the Debentures were converted in
accordance with the terms thereof into Common Stock of Rexel at a
conversion price of $9.57 per share, or a total of 1.5 million shares.
6. Certain prior year amounts have been reclassified to conform with the 1996
presentation.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Rexel, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
Rexel, Inc. (the "Company") as of March 31, 1996, and the related condensed
consolidated statements of income and cash flows for the three-month periods
ended March 31, 1996 and 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995, and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for the year then ended (not presented herein), and in our report
dated February 23, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1995, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Miami, Florida
April 16, 1996
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
- ---------------------
Net income for the first quarter ended March 31, 1996 increased 32.8%
to $5.6 million from $4.2 million in the first quarter of 1995. While sales
were down 5.0% (down 3.8% on same branch sales) to $264.8 million for the first
quarter of 1996 compared to very strong sales of $278.8 million in the first
quarter of 1995, improvement in gross margin and reductions in operating and
interest expenses resulted in an increase in operating profit and net income of
15.4% and 32.8%, respectively. Earnings per share increased 22.2% to $.22 per
share in 1996 from $.18 per share in 1995.
The following table sets forth the percentages which certain income
and expense items bear to net sales:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
----- -----
<S> <C> <C>
Net Sales 100.0% 100.0%
===== =====
Gross Margin 21.2% 19.8%
Selling and Administrative Expenses 17.0 16.3
----- -----
Operating Profit 4.2 3.5
Interest Expense .4 .9
Other Income - .1
----- -----
Income Before Taxes 3.8% 2.7%
===== =====
</TABLE>
The decrease in sales in the first quarter of 1996 is the result of
the continuation of a general slowdown in construction activity that began
during the third quarter of 1995 relative to a very strong first quarter of
1995. No branches were opened or closed during the first quarter of 1996.
Gross margin increased $0.9 million to $56.3 million, or 1.7% over
the same period in 1995, despite lower sales. As a percentage of sales, gross
profit improved to 21.2% from 19.8% in the first quarter of 1995. The
improvement in the gross profit percentage of 1.4 percentage points can be
analyzed as follows:
<TABLE>
<CAPTION>
Percentage
Increase/Decrease
-----------------
<S> <C>
Trading margin improvement 1.2%
Effect of LIFO 0.2
----
1.4%
====
</TABLE>
<PAGE>
The trading margin improvement reflects gross profit improvement
initiatives implemented during 1995, which focused on developing improved
pricing capabilities and control over price change authority within our
branches. This improvement was tempered by a lower gross profit percentage for
the Company's utility division's sales. There was no LIFO provision in the
first quarter of 1996 compared to $0.6 million in the first quarter of 1995.
The mix of stock sales (sales from inventory) and direct sales (sales shipped
directly to the customer from the vendor) was the same for both periods.
Selling and administrative expenses decreased $0.6 million to $45.0
million, or 1.2% compared to the same period of the prior year. As a
percentage of sales, selling and administrative expenses were 17.0% in the
first quarter of 1996 compared to 16.3% in the first quarter of 1995,
principally due to the reduced level of sales. As a percentage of gross
profit, selling and administrative expenses improved to 80.0% in the first
quarter of 1996 from 82.4% in the first quarter of 1995. The average number of
employees was 2,661 in the first quarter of 1996 compared to 2,744 in the first
quarter of 1995, or a decrease of 3.0%.
Interest expense decreased $1.1 million in the first quarter of 1996
compared to the first quarter of 1995, reflecting the payment of debt,
particularly the redemption of the 7% Convertible Debentures in August 1995 and
installment payments on the Senior Notes in March 1996 and 1995.
Liquidity and Capital Resources
- -------------------------------
Total assets at March 31, 1996 decreased $5.4 million or 1.4%
compared to year-end 1995. Cash decreased $5.9 million to $4.1 million at
March 31, 1996 compared to $10.0 million at December 31, 1995 because $6.4
million of cash was used in operating activities in the first quarter of 1996,
driven mainly by the payment of year-end 1995 compensation and bonuses.
Accounts and notes receivable increased $3.8 million to $142.4 million at March
31, 1996 compared to $138.6 million at December 31, 1995 with the number of
days sales represented by accounts receivable increasing to 48 days from 46
days at December 31, 1995. Inventory decreased $2.1 million to $100.1 million
at March 31, 1996 compared to $102.2 million at December 31, 1995 with
inventory days decreasing to 74 days from 78 days at December 31, 1995.
Total liabilities at March 31, 1996 decreased $11.0 million or 5.2%
compared to year-end 1995. At March 31, 1996, the Company had $55.2 million of
indebtedness for borrowed money compared to $53.0 million at December 31, 1995.
The increase in debt from December 31, 1995 to March 31, 1996 reflects the cash
used in operating activities of $6.4 million and capital expenditures of $1.6
million, net of the use of existing cash balances.
The Company's debt to equity ratio (defined as the ratio of debt
including capital lease obligations to total stockholders' equity) was 0.3 to 1
at both March 31, 1996 and December 31, 1995. The current ratio was 1.6 at the
end of both periods.
During the first quarter of 1996, the Company repurchased 1,600
shares of its outstanding Common Stock in open market transactions.
<PAGE>
The Company's working capital requirements are generally met by
internally generated funds and short-term borrowings under the Credit
Agreement. Management believes sufficient cash resources will be available to
support its long-term growth strategies through internally generated funds,
credit arrangements and the ability of the Company to obtain additional
financing. However, no assurance can be given that financing will continue to
be available on attractive terms.
<PAGE>
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
<S> <C> <C>
Exhibit No. Description
----------- -----------
11.1 Computation of net income per common and
common equivalent shares.
15.1 Awareness letter of independent accountants.
27.1 Financial Data Schedule (Filed with EDGAR
filing only)
</TABLE>
<PAGE>
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
undersigned thereunto duly authorized.
REXEL, INC.
Date: May 14, 1996 By: /s/ Allan Gonopolsky
------------------------
Allan Gonopolsky
Vice President and
Chief Accounting Officer
<PAGE>
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C> <C>
11.1 Computation of net income per common and common
equivalent shares.
15.1 Awareness letter of independent accountants.
27.1 Financial Data Schedule (Filed with EDGAR filing
only)
</TABLE>
<TABLE>
<CAPTION>
REXEL, INC.
COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
(000's Omitted, Except Per Share Amounts)
THREE MONTHS ENDED
MARCH 31,
----------------------
1996 1995
------- -------
<S> <C> <C>
Income Applicable To Primary Common And
Common Equivalent Shares $ 5,619 $ 4,230
======= =======
Income Applicable To Fully Diluted
Common And Common Equivalent Shares
Net Income $ 5,619 $ 4,230
Interest Reduction, Net of Taxes,
Upon Conversion Of Convertible
Subordinated Debentures 0 490
------- -------
Net Income $ 5,619 $ 4,720
======= =======
Primary Shares:
Weighted Average Number Of Common Shares
And Common Share Equivalents Outstanding
During The Period:
Common (Net Of Treasury Shares) 25,649 24,114
Options 427 39
------- -------
Total 26,076 24,153
======= =======
Fully Diluted Shares:
Weighted Average Number Of Common Shares
And Common Share Equivalents Outstanding
During The Period:
Common (Net Of Treasury Shares) 25,649 24,114
Options 427 39
Conversion Of Subordinated Debentures 0 5,225
------- -------
Total 26,076 29,378
======= =======
Income Per Common Share
Primary $ .22 $ .18
======= =======
Fully Diluted $ .22 $ .16
======= =======
</TABLE>
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: REXEL, INC. REGISTRATION ON FORM S-8
-----------------------------------------
We are aware that our report dated April 16, 1996 on our review of the
condensed consolidated balance sheet of Rexel, Inc. as of March 31, 1996, and
the related condensed consolidated statements of income and cash flows for the
three-month periods ended March 31, 1996 and 1995 included in the Company's
Form 10-Q for the quarter ended March 31, 1996 is incorporated by reference in
Registration Nos. 33-4584, 33-14148 and 33-32648 on Form S-8. Pursuant to Rule
436(c) under the Securities Act of 1933, this report should not be considered a
part of such registration statements prepared or certified by us within the
meaning of Sections 7 and 11 of the Act.
COOPERS & LYBRAND L.L.P.
Miami, Florida
April 16, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REXEL, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRE
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1996
<CASH> 4,058
<SECURITIES> 0
<RECEIVABLES> 145,293
<ALLOWANCES> 2,857
<INVENTORY> 100,121
<CURRENT-ASSETS> 258,148
<PP&E> 76,620
<DEPRECIATION> 27,155
<TOTAL-ASSETS> 370,123
<CURRENT-LIABILITIES> 163,073
<BONDS> 29,911
0
0
<COMMON> 26,259
<OTHER-SE> 145,666
<TOTAL-LIABILITY-AND-EQUITY> 370,123
<SALES> 264,757
<TOTAL-REVENUES> 264,757
<CGS> 208,497
<TOTAL-COSTS> 208,497
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (188)
<INTEREST-EXPENSE> 1,292
<INCOME-PRETAX> 10,034
<INCOME-TAX> 4,415
<INCOME-CONTINUING> 5,619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,619
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
