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 June 30, 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:
Date Class Shares Outstanding
---- ----- ------------------
August 2, 1996 Common Stock 25,664,790
-------------- ------------ ----------
<PAGE>
REXEL, INC.
INDEX
Page
Number
Part I - Financial Information
Condensed Consolidated Balance Sheets (Unaudited)
at June 30, 1996 and December 31, 1995.......................... 1
Condensed Consolidated Statements of Income
(Unaudited) for the Six and Three Months Ended June 30, 1996
and 1995.........................................................2
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Six Months Ended June 30, 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
<PAGE>
REXEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's omitted, except for share amounts)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1996 1995
-------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 13,033 $ 10,013
Accounts and Notes Receivable - Net 149,601 138,604
Inventories 103,496 102,239
Prepaid Expenses and Other Current Assets 7,657 8,344
Income Taxes Receivable 68 0
Deferred Income Taxes 3,868 3,849
--------- ---------
Total Current Assets 277,723 263,049
Investments and Noncurrent Receivables 905 1,069
Fixed Assets - Net 48,962 49,453
Other Assets 2,282 2,135
Deferred Income Taxes 1,127 834
Goodwill - Net 58,132 58,953
--------- ---------
$ 389,131 $ 375,493
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-Term Debt $ 15,000 $ 8,050
Current Portion of Long-Term Debt 7,761 7,757
Accounts and Notes Payable - Trade and Other Liabilities 151,508 147,031
Income Taxes Payable 0 3,725
Deferred Income Taxes 4 0
--------- ---------
Total Current Liabilities 174,273 166,563
Long-Term Debt 29,859 37,219
Other Long-Term Liabilities 3,044 3,363
Deferred Income Taxes 2,393 2,029
Stockholders' Equity
Preferred Stock (Authorized 2,000,000 Shares, None Issued) 0 0
Common Stock (26,270,933 and 26,258,133 Shares Issued) 26,271 26,258
Capital Surplus 94,278 94,206
Retained Earnings 63,757 50,580
Treasury Stock, at Cost (610,743 and 609,143 Shares) (4,744) (4,725)
--------- ---------
179,562 166,319
--------- ---------
$ 389,131 $ 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>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30 JUNE 30
------------------- --------------------
1996 1995 1996 1995
------- -------- -------- ---------
(UNAUDITED) (UNAUDITED)
------------------- --------------------
<S> <C> <C> <C> <C>
Net Sales $556,648 $567,514 $291,891 $288,686
Cost Of Goods Sold 439,323 455,420 230,826 231,908
-------- -------- -------- --------
Gross Profit 117,325 112,094 61,065 56,778
Selling and Administrative Expenses 91,494 91,376 46,483 45,812
-------- -------- -------- --------
Operating Profit 25,831 20,718 14,582 10,966
-------- -------- -------- --------
Interest Expense 2,543 4,812 1,251 2,402
-------- -------- -------- --------
Other Income - Net 242 474 165 263
-------- -------- -------- --------
Income Before Income Taxes 23,530 16,380 13,496 8,827
Provision For Income Taxes 10,353 7,208 5,938 3,885
-------- -------- -------- --------
Net Income $ 13,177 $ 9,172 $ 7,558 $ 4,942
======== ======== ======== ========
Income Per Common Share
Primary $ 0.51 $ 0.38 $ 0.29 $ 0.20
======== ======== ======== ========
Fully Diluted $ 0.51 $ 0.34 $ 0.29 $ 0.18
======== ======== ======== ========
Average Number of Common and Common Equivalent Shares
Primary 26,000 24,250 25,923 24,348
======== ======== ======== ========
Fully Diluted 26,000 29,475 25,923 29,572
======== ======== ======== ========
Dividends Per Common Share $ 0.00 $ 0.00 $ 0.00 $ 0.00
======== ======== ======== ========
</TABLE>
See accompanying report of independent accountants and notes
to unaudited condensed consolidated financial statements.
<PAGE>
REXEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's omitted)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------
1996 1995
---------- ---------
(UNAUDITED)
<S> <C> <C>
Net Cash Provided By Operating Activities $ 6,399 $ 18,073
-------- --------
Cash Flows From Investing Activities:
Capital Expenditures (2,584) (1,841)
Other Investing Activities (137) 78
-------- --------
Net Cash Used In Investing Activities (2,721) (1,763)
-------- --------
Cash Flows From Financing Activities:
Net Borrowings under Line of Credit Arrangements 6,950 0
Acquisition of Treasury Shares (19) 0
Proceeds From Exercise of Stock Options 85 0
Other Debt Payments and Sundry Financing Activities (7,674) (24,863)
-------- --------
Net Cash Used In Financing Activities (658) (24,863)
-------- --------
Net Increase (Decrease) In Cash 3,020 (8,553)
Cash and Cash Equivalents at Beginning of Period 10,013 23,843
-------- --------
Cash and Cash Equivalents at End of Period $ 13,033 $ 15,290
======== ========
</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 June 30, 1996, and the related condensed consolidated
statements of income for the three-month and six-month periods ended June 30,
1996 and 1995 and the related condensed consolidated statements of cash flows
for the six-month periods ended June 30, 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
August 7, 1996
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
- ---------------------
Net income for the second quarter ended June 30, 1996 increased 52.9%
to $7.6 million from $4.9 million in 1995. Net income for the six months ended
June 30, 1996 increased 43.7% to $13.2 million from $9.2 million in 1995.
Sales were up 1.1% (up 1.4% on same branch sales) to $291.9 million for
the second quarter ended June 30, 1996 compared to second quarter 1995 sales of
$288.7 million and up 10.3% compared to the first quarter 1996. For the six
months ended June 30, 1996, sales were down 1.9% (down 1.2% on same branch
sales) to $556.6 million from $567.5 million for 1995.
Improvement in gross margins and reductions in operating and interest
expenses resulted in an increase in operating profit and net income of 33.0% and
52.9%, respectively, in the second quarter of 1996 compared to the second
quarter of 1995 and 24.7% and 43.7%, respectively, for the six months ended June
30, 1996 compared to the same period of the prior year.
Primary earnings per share for the second quarter increased 45.0% to
$.29 per share in 1996 from $.20 per share in 1995, and for the six months
primary earnings per share increased 34.2% to $.51 per share in 1996 from $.38
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 Six Months Ended
June 30, June 30,
--------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Gross Margin 20.9% 19.7% 21.1% 19.8%
Selling and Administrative Expenses 15.9 15.9 16.4 16.1
----- ----- ----- -----
Operating Profit 5.0 3.8 4.7 3.7
Interest Expense .4 .8 .5 .9
Other Income - .1 - .1
----- ----- ----- -----
Income Before Taxes 4.6% 3.1% 4.2% 2.9%
===== ===== ===== =====
</TABLE>
The decrease in sales of 1.9% (1.2% on same branch sales) for the six
months ended June 30, 1996 compared to the same period of the prior year
reflects a general slowdown in commercial construction activity that began
towards the end of the second quarter of 1995 relative to a very strong first
quarter of 1995. As noted above, however, sales for the second quarter of 1996
were up 1.1% (1.4% on same branch sales) compared to the same period of the
prior year and up 10.3% compared to the first quarter of 1996. The improvement
in sales in the second quarter of 1996, compared to the first quarter of 1996,
occurred principally in the southeastern, central and western U.S. markets of
the Company as a result of improvement in direct sales associated with
construction projects. Second quarter 1996 results also include $0.8 million of
sales from acquisitions and branch openings in 1996. There were no branch
openings or acquisitions in the first quarter of 1996 and no branch closures
during the first six months of 1996.
For the second quarter of 1996, gross margins increased $4.3 million to
$61.1 million, or 7.6% over the same period in 1995. For the six months ended
June 30, 1996, gross margin increased $5.2 million to $117.3 million, or 4.7%
over the same period in 1995, despite lower sales. As a percentage of sales,
gross profit improved to 20.9% in the second quarter of 1996 from 19.7% in the
second quarter of 1995. For the six months ended June 30, 1996, the improvement
was to 21.1% from 19.8% for the same period of 1995. The improvement in the
gross profit percentage points can be analyzed as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1996
------------------ ----------------
<S> <C> <C>
Trading margin improvement 1.0% 0.9%
Effect of LIFO 0.2 0.4
---- ----
1.2% 1.3%
==== ====
</TABLE>
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. Utility companies have been
consolidating their purchasing and reducing the number of their electrical
suppliers, thereby putting pressure on sales prices. Gross profit was favorably
impacted by a $0.1 million decrease in LIFO inventory reserves for both the
quarter and six months ended June 30, 1996 compared to increases of $0.8 million
and $1.4 million, respectively, for the comparable periods of 1995 resulting
primarily from the deflation in copper prices in 1996. The mix of stock sales
(sales from inventory) and direct sales (sales shipped directly to the customer
from the vendor) for the quarter and six months ended June 30, 1996 was the same
for the comparable periods of 1995. In an effort to drive sales and because of
pressure on copper related sales due to declining copper prices, the gross
margin for the second quarter of 1996 was lower than the first quarter of 1996.
For the quarter ended June 30, 1996, selling and administrative
expenses increased $0.7 million to $46.4 million, or 1.5% compared to the same
period of the prior year. For the six months ended June 30, 1996, selling and
administrative expenses increased $0.1 million to $91.5 million compared to the
same period of the prior year. As a percentage of sales, selling and
administrative expenses were 15.9% and 16.4%, respectively, for the quarter and
six months ended June 30, 1996, as compared to 15.9% and 16.1%, respectively,
for the quarter and six months ended June 30, 1995, with all variances
principally due to the level of sales in the respective periods. As a percentage
of gross profit, selling and administrative expenses improved to 76.1% in the
second quarter of 1996 from 80.7% in the second quarter of 1995. For the six
months ended June 30, 1996, the improvement was to 78.0% from 81.5% for the
comparable period in 1995. The average number of employees was 2,649 in the
second quarter of 1996 compared to 2,661 in the first quarter of 1996 and
compared to 2,680 in the second quarter of 1995.
Interest expense decreased by $1.2 million and $2.3 million,
respectively, for the quarter and six months ended June 30, 1996 compared to the
same periods of the prior year, reflecting the payment of debt, particularly the
redemption of the 7% Convertible Subordinated Debentures in August 1995 and
installment payments on the Senior Notes in March 1996 and 1995.
Liquidity and Capital Resources
- -------------------------------
Total assets at June 30, 1996 increased $13.6 million or 3.6% compared
to year-end 1995. Cash increased $3.0 million to $13.0 million at June 30, 1996
compared to $10.0 million at December 31, 1995. The net cash provided by
operating activities of $6.4 million reflects an increase in trade working
capital of approximately $7.2 million. Accounts and notes receivable increased
$11.0 million to $149.6 million at June 30, 1996 compared to $138.6 million at
December 31, 1995 with the number of days sales represented by accounts
receivable at 46 days at both June 30, 1996 and December 31, 1995. Inventory
increased $1.3 million to $103.5 million at June 30, 1996 compared to $102.2
million at December 31, 1995 with inventory days decreasing to 70 days from 78
days at December 31, 1995.
Total liabilities at June 30, 1996 increased $0.4 million compared to
year-end 1995. At June 30, 1996, the Company had $52.6 million of indebtedness
for borrowed money compared to $53.0 million at December 31, 1995. Capital
expenditures were $2.6 million during the first half of 1996.
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 June 30, 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.
On August 7, 1996, the Company completed its acquisition of Utility
Products Supply of Denver, Colorado for cash of $5.0 million. Utility Products
Supply is a distributor of electrical products to the utility industry with
sales of $29.0 million for its year ended May 31, 1996.
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
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on May 17, 1996. At
the meeting, the following persons were elected as directors of the Company by
the votes indicated below:
<TABLE>
<CAPTION>
Name For Authority Withheld
---- --- ------------------
<S> <C> <C>
R. Gary Gentles 22,363,637 29,916
Gerald E. Morris 22,362,337 31,216
Serge Weinberg 22,364,537 29,016
</TABLE>
In addition, the terms as directors of the Company of Frederic de Castro, John
B. Fraser, Austin List, Eric Lomas, Nicolas Sokolow and Alain Viry continued
after the meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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)
<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: August 12, 1996 By:/s/ Allan Gonopolsky
--------------------
Allan Gonopolsky
Vice President and
Chief Accounting Officer
<PAGE>
Index to Exhibits
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)
Exhibit 11.1
REXEL, INC.
COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
(000's Omitted, Except Per Share Amounts)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Income Applicable To Primary Common And Common
Equivalent Shares $13,177 $ 9,172 $ 7,558 $ 4,942
======= ====== ====== ======
Income Applicable To Fully Diluted
Common And Common Equivalent Shares
Net Income $13,177 $ 9,172 $ 7,558 $ 4,942
Interest Reduction, Net of Taxes,
Upon Conversion Of Convertible
Subordinated Debentures 0 980 0 490
------- ------- ------- -------
Net Income $13,177 $10,152 $ 7,558 $ 5,432
======= ====== ====== ======
Primary Shares:
Weighted Average Number Of Common Shares And
Common Share Equivalents Outstanding During
The Period:
Common (Net Of Treasury Shares) 25,652 24,114 25,655 24,114
Options 348 136 268 234
------- ------- ------- -------
Total 26,000 24,250 25,923 24,348
======= ====== ====== ======
Fully Diluted Shares:
Weighted Average Number Of Common Shares
And Common Share Equivalents
Outstanding During The Period:
Common (Net Of Treasury Shares) 25,652 24,114 25,655 24,114
Options 348 136 268 233
Conversion Of Subordinated
Debentures 0 5,225 0 5,225
------- ------- ------- -------
Total 26,000 29,475 25,923 29,572
======= ====== ====== ======
Income Per Common Share
Primary $ .51 $ .38 $ .29 $ .20
======= ====== ====== ======
Fully Diluted $ .51 $ .34 $ .29 $ .18
======= ====== ====== ======
</TABLE>
Exhibit 15.1
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 August 7, 1996 on our review of the condensed
consolidated balance sheet of Rexel, Inc. as of June 30, 1996, and the related
condensed consolidated statements of income for the three-month and six-month
periods ended June 30, 1996 and 1995 and the condensed consolidated statement of
cash flows for the six-month periods ended June 30, 1996 and 1995 included in
the Company's Form 10-Q for the quarter ended June 30, 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
August 7, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REXEL, INC.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRE BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 13,033
<SECURITIES> 0
<RECEIVABLES> 152,642
<ALLOWANCES> 3,041
<INVENTORY> 103,496
<CURRENT-ASSETS> 277,723
<PP&E> 77,219
<DEPRECIATION> 28,257
<TOTAL-ASSETS> 389,131
<CURRENT-LIABILITIES> 174,273
<BONDS> 29,859
0
0
<COMMON> 26,271
<OTHER-SE> 153,291
<TOTAL-LIABILITY-AND-EQUITY> 389,131
<SALES> 556,648
<TOTAL-REVENUES> 556,648
<CGS> 439,323
<TOTAL-COSTS> 439,323
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (161)
<INTEREST-EXPENSE> 2,543
<INCOME-PRETAX> 23,530
<INCOME-TAX> 10,353
<INCOME-CONTINUING> 13,177
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,177
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
