<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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 1-5374
WYLE LABORATORIES
(Exact name of registrant as specified in its charter)
California 95-1779998
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15370 Barranca Parkway
Irvine, California 92718
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 753-9953
(Former name, former address and former fiscal year, if changed since
last report)
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 [ ]
At October 31, 1994 registrant had 12,261,066 shares of common stock
outstanding.<PAGE>
PART I - FINANCIAL INFORMATION
- - - - ------------------------------
Item 1. Financial Statements
WYLE LABORATORIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
--------------------- ---------------------
Sept. 30, Oct. 31, Sept. 30, Oct. 31,
1994 1993 1994 1993
-------- -------- -------- --------
Net sales $204,148 $137,983 $567,831 $375,689
-------- -------- -------- --------
Costs and expenses
Cost of sales 171,081 112,080 474,588 301,813
Selling & administrative
expenses 25,745 23,157 77,118 62,654
Interest expense, net 370 73 758 123
Special charge 1,900 - 1,900 -
Miscellaneous, net (253) (313) (451) (703)
-------- -------- -------- --------
198,843 134,997 553,913 363,887
-------- -------- -------- --------
Income from continuing operations
before income taxes 5,305 2,986 13,918 11,802
Income taxes 2,180 1,015 5,358 4,084
-------- -------- -------- --------
Income from continuing operations 3,125 1,971 8,560 7,718
Discontinued operations
Income (loss) from operations,
net of taxes (250) 839 1,418 2,429
Loss on sale, net of taxes (13,442) - (13,442) -
Cumulative effect of accounting
change for postretirement
benefits other than pensions - - - (3,193)
-------- -------- -------- --------
Net income (loss) $(10,567) $ 2,810 $ (3,464) $ 6,954
======== ======== ======== ========
Income (loss) per share:
Income from continuing
operations $ .25 $ .16 $ .69 $ .63
======== ======== ======== ========
Discontinued operations
Income (loss) from operations,
net of taxes $ (.02) $ .07 $ .11 $ .20
======== ======== ======== ========
Loss on sale, net of taxes $ (1.08) $ - $ (1.08) $ -
======== ======== ======== ========
Cumulative effect of accounting
change for postretirement
benefits other than pensions $ - $ - $ - $ (.26)
======== ======== ======== ========
Net income (loss) $ (.85) $ .23 $ (.28) $ .56
======== ======== ======== ========
Average common and common
equivalent shares 12,427 12,360 12,432 12,348
======== ======== ======== ========
Dividends per share $ .07 $ .07 $ .21 $ .21
======== ======== ======== ========
See accompanying notes.
1 of 10<PAGE>
WYLE LABORATORIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
ASSETS 9/30/94 12/31/93
- - - - ------ --------- ---------
Current assets
Cash and cash equivalents $11,132 $23,748
Receivables (less allowances of $4,916 at
9/30/94 and $4,183 at 12/31/93) 104,384 87,287
Inventories 130,556 105,716
Prepaid expenses 7,418 6,949
Net assets of discontinued operations 6,899 -
-------- --------
Total current assets 260,389 223,700
-------- --------
Property, plant and equipment 30,164 77,502
Less accumulated depreciation 16,156 46,896
-------- --------
14,008 30,606
-------- --------
Other assets 11,075 6,265
-------- --------
Total Assets $285,472 $260,571
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - - - ------------------------------------
Current liabilities
Current maturities of long-term debt $ 3,000 $ 4,120
Accounts payable 83,177 60,556
Accrued expenses 18,620 15,592
-------- --------
Total current liabilities 104,797 80,268
-------- --------
Long-term debt, less current maturities 19,001 6,000
-------- --------
Deferred income taxes and other liabilities 2,807 9,947
-------- --------
Commitments and contingencies - -
-------- --------
Shareholders' equity
Common stock 86,980 86,348
Retained earnings 71,887 78,008
-------- --------
158,867 164,356
-------- --------
Total Liabilities and Shareholders' Equity $285,472 $260,571
======== ========
See accompanying notes.
2 of 10<PAGE>
WYLE LABORATORIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
----------------------
Sept. 30, Oct. 31,
1994 1993
--------- ---------
OPERATING ACTIVITIES
Net income (loss) $ (3,464) $ 6,954
Adjustments to reconcile net income (loss) to
net cash provided by (used for) operating
activities:
Depreciation and amortization 4,946 4,196
Provision for losses on receivables 1,521 1,090
Provision for deferred income taxes (1,748) (1,347)
Loss on sale of discontinued operations 13,442 -
Cumulative effect of accounting change for
postretirement benefits other than pensions - 3,193
(Increase) in receivables (35,310) (7,832)
(Increase) in inventories (29,816) (10,304)
(Increase) decrease in prepaid expenses 2,665 (732)
Increase in accounts payable 24,290 13,281
Increase in accrued expenses 7,276 541
Other, net 310 196
------- -------
Net cash provided by (used for)
operating activities (15,888) 9,236
------- -------
FINANCING ACTIVITIES
Additions to long-term debt 13,001 -
Payments of long-term debt (1,120) (422)
Dividends on common stock (2,572) (2,558)
Exercise of stock options 444 559
------- -------
Net cash provided by (used for)
financing activities 9,753 (2,421)
------- -------
INVESTING ACTIVITIES
Additions to property, plant and equipment (5,866) (3,774)
Proceeds from disposition of property, plant
and equipment - 1,704
Additions to other non-current assets (615) (916)
------- -------
Net cash (used for) investing activities (6,481) (2,986)
------- -------
Increase (decrease) in cash and cash equivalents (12,616) 3,829
Cash and cash equivalents at beginning of period 23,748 29,467
------- -------
Cash and cash equivalents at end of period $11,132 $33,296
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 950 $ 911
Income taxes 7,282 6,603
See accompanying notes.
3 of 10<PAGE>
WYLE LABORATORIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 -- Basis of Presentation
- - - - -------------------------------
The consolidated financial statements included herein have been prepared by the
company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
The accompanying consolidated financial statements have been prepared on the
same basis as the consolidated financial statements for the eleven-month fiscal
period ended December 31, 1993. These financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
company's Annual Report to Shareholders for the eleven-month fiscal period
ended December 31, 1993.
Effective December 31, 1993, the company changed its year-end from January 31
to December 31. Although the periods presented are not the same, the company
believes that this difference does not materially affect the comparability
of the financial information.
The consolidated financial statements include the accounts of the company
and all of its subsidiaries after eliminating all significant intercompany
transactions and reflect all normal recurring adjustments which are, in the
opinion of management, necessary to present a fair statement of the results
for the interim periods reported. Intersegment sales were not material for
the accounting periods reported herein. The results of operations for the
nine months ended September 30, 1994 are not necessarily indicative of the
results to be expected for the full year.
The company's fiscal quarters are on a 13-week basis. The third quarter of 1994
ended on October 2, 1994 (the Sunday nearest September 30, 1994). For clarity
of presentation, the company uses calendar month-end dates for financial
reporting purposes.
Note 2 -- Change in Accounting Principle
- - - - ----------------------------------------
In November 1992, the Financial Accounting Standards Board (the "FASB")
issued Statement No. 112, "Employers' Accounting for Postemployment
Benefits." This statement required the company to change its method of
accounting for postemployment benefits provided to qualifying former or
inactive employees and their dependents before retirement, to accrue for the
cost of these benefits during an employee's years of service. The adoption of
FASB Statement No. 112 did not have a material effect on the company's net
income or financial position.
4 of 10<PAGE>
Note 3 -- Discontinued Operations
- - - - ---------------------------------
On October 6, 1994, the company entered into a definitive agreement to sell its
Scientific Services & Systems ("SS&S") business to a management buy-out group
which includes William E. Simon & Sons and F. Stephen Wyle, son of the
founder of Wyle Laboratories, along with certain members of the SS&S
management. F. Stephen Wyle and his father, Frank S. Wyle, are members of
the company's Board of Directors. The buy-out group may also include one
other member of the company's Board of Directors. Under the terms of the
agreement, the management buy-out group will acquire certain assets and
liabilities of the SS&S operation for a purchase price of $30 million in
cash, subject to adjustment, plus additional amounts which may be received
by the company under an earnout provision. The sale is expected to close
later this year and is subject to various conditions and regulatory
approvals, including the buy-out group's completion of due diligence and
obtaining of necessary debt financing. SS&S offers research, engineering,
testing and support services to customers in the aerospace, defense and
energy industries.
During the third quarter ended September 30, 1994, the company recorded an
estimated loss on the sale of discontinued operations of $13.4 million, after
income tax benefits of $8.4 million. The estimated loss on sale included
certain transaction costs and reserves associated with the disposition such
as reserves for insurance and employee related matters, various contractual
arrangements and certain contingent liabilities.
Operating results for SS&S are classified as discontinued operations on the
company's income statement and prior periods have been restated accordingly.
The assets and liabilities of SS&S as of September 30, 1994, which are expected
to be sold, have been netted together and, along with reserves established as
part of recording the estimated loss on sale, classified as "Net assets of
discontinued operations" in current assets. Certain excess real properties of
SS&S were not included in the sale to the management buy-out group and such
assets are stated at their estimated net realizable value of $3.8 million.
The company intends to sell these assets in the future.
Sales applicable to discontinued operations were $18,443,000 and $61,076,000
for the third quarter and nine months ended September 30, 1994, respectively.
Sales totaled $22,820,000 for the third quarter and $70,387,000 for the nine
months ended October 31, 1993. Income (loss) from discontinued operations is
net of an income tax provision (benefit) of $(139,000) for the third quarter
and $1,036,000 for the nine months ended September 30, 1994. Income from
discontinued operations is net of income tax provisions of $580,000 and
$1,674,000 for the three and nine months ended October 31, 1993, respectively.
5 of 10<PAGE>
Amounts included in "Net assets of discontinued operations" at September 30,
1994 were as follows (in thousands):
Accounts receivable, net $ 16,692
Inventories 4,976
Property and other assets 13,279
Transaction reserves, accounts payable
and accrued expenses (28,048)
-------
Net assets of discontinued operations $ 6,899
=======
6 of 10<PAGE>
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results of Operations
- - - - ---------------------
On October 6, 1994, the company entered into a definitive agreement to sell its
Scientific Services & Systems business to a management buy-out group and
certain outside investors. The sale is currently expected to close later
this year. During the third quarter ended September 30, 1994, the company
recorded an estimated loss on the sale of discontinued operations of
$13.4 million, after tax, which included certain costs and reserves
associated with the disposition. Additionally, the company recorded a
special charge to continuing operations of $1.2 million, after tax, to
provide for anticipated legal expenses associated with a certain litigation
matter and certain changes in the company's organizational structure
following the sale of the Scientific Services & Systems Group.
Operating results for Scientific Services & Systems are classified as
discontinued operations on the company's income statement and prior periods
have been restated accordingly. Therefore, the company's sales and income from
continuing operations reflect only the operating results of its Electronics
Marketing Group together with corporate expenses.
Consolidated sales from continuing operations for the third quarter and nine
months ended September 30, 1994 totaled $204,148,000 and $567,831,000,
respectively. Income from continuing operations, before the special charge, was
$4,293,000 for the third quarter and $9,728,000 for the year-to-date. Sales
rose 48% for the third quarter and 51% for the first nine months compared to
last year's third quarter and nine months ended October 31, 1993. Income from
continuing operations, before the special charge, for the third quarter and
nine months ended September 30, 1994 grew by 118% and 26%, respectively,
versus earnings reported in the prior year periods. Including the special
charge of $1.9 million ($1.2 million after tax), income from continuing
operations for the third quarter and nine months ended September 30, 1994
increased 59% and 11%, respectively, in comparison to the previous year.
After recording the loss on sale and income (loss) from discontinued
operations, the company reported a net loss of $10,567,000 for the third
quarter and $3,464,000 for the nine months ended September 30, 1994,
compared to the prior year's third quarter net income of $2,810,000 and
$10,147,000 for the nine months ended October 31, 1993 (before the effect of
an accounting change).
Effective December 31, 1993, the company changed its year-end from January 31
to December 31. Although the periods presented are not the same, the company
believes this difference does not materially affect the comparability of the
financial information.
During last year's first quarter ended April 30, 1993, the company recorded a
one-time, non-cash charge of $3,193,000, after tax, for the cumulative effect
of an accounting change to adopt FASB Statement No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions."
7 of 10<PAGE>
In May 1993, the company's Electronics Marketing Group initiated a major
geographic expansion program to open ten new facilities in key eastern and
midwestern markets within the United States. The company's earnings for the
prior year were negatively impacted by initial expansion-related start-up
expenses aggregating approximately $3 million and $6 million, respectively,
in the quarter and nine months ended October 31, 1993. As anticipated, the
expansion operations incurred quarterly operating losses through June 30,
1994 during this initial investment period. Sales for the new expansion
divisions have increased steadily since inception and, as a result, the
expansion divisions' aggregate operating losses continued to decline through
the quarter ended June 30, 1994. For the third quarter ended September 30,
1994, the expansion divisions, as a whole, provided a positive income
contribution.
The growth in sales from continuing operations for the third quarter and nine
months ended September 30, 1994, in comparison to the prior year, resulted
mainly from increased demand for semiconductor products, particularly those
offered through the company's value-added activities such as kitting, turnkey
manufacturing, autoreplenishment, design of application specific integrated
circuits (ASICs) and other design/programming services. The company also
registered higher shipments of lower margin commodity products, primarily
microprocessors, and increased computer product revenues. The continued
ramp-up in shipments from the company's new expansion divisions also
contributed to the current year's sales growth.
The improved income from continuing operations, before special charge, for the
third quarter and first nine months compared to the previous year, primarily
reflects the reduction in operating losses associated with the company's major
expansion program coupled with increased sales levels of the non-expansion
divisions. The positive effect of higher shipments was offset in part by the
impact of a decline in the aggregate gross margin percentage compared to last
year due mainly to a change in product mix, as a higher percentage of
revenues was generated from lower margin commodity products and high-volume
customer engagements. Earnings for the current year also reflected a higher
level of interest expense due to an increased level of credit line
borrowings. An interest rate swap agreement previously entered into by the
company had an immaterial effect on overall interest expense for the periods
presented.
The electronics distribution industry is highly sensitive to fluctuating market
conditions primarily caused by changes in the supply and demand for
semiconductors and computer products. The company's financial results have in
the past reflected variations from period-to-period due to these factors.
The Scientific Services & Systems Group, classified as discontinued operations,
reported a loss before income taxes of $389,000 for the third quarter and
income before income taxes of $2,454,000 for the nine months ended September
30, 1994. Income levels for both periods were substantially below those
reported in the prior year, which can be attributed primarily to a decline
in sales. The group's operating loss for the third quarter reflects costs
and expenses totaling $650,000 associated with resolving a certain contract
dispute.
8 of 10<PAGE>
Financial Condition
- - - - -------------------
Working capital as of September 30, 1994 totaled $155,592,000, up $12,160,000
from December 31, 1993. The growth in working capital can be attributed
primarily to higher trade receivables and inventories due to higher sales
levels, offset partially by lower cash and cash equivalents and increases in
accounts payable. The current ratio at September 30, 1994 and December 31,
1993 was 2.5 and 2.8, respectively.
The assets and liabilities of the Scientific Services & Systems Group as of
September 30, 1994, which are expected to be sold, have been netted together
and, along with reserves established as part of recording the estimated loss on
sale, classified as "Net assets of discontinued operations" in current assets.
The ratio of long-term debt to total capital (long-term debt plus equity) was
11% at September 30, 1994 and 4% at December 31, 1993. The higher ratio
primarily reflects an increase in long-term credit line borrowings as well as
lower shareholders' equity due to recording the loss on sale of discontinued
operations.
The company's cash requirements for 1994 are expected to be higher than normal
due to funds required to finance start-up costs and working capital associated
with its expansion program. In addition, significant capital outlays are
expected to be made during 1994 and 1995 for the construction of a new
warehouse/value-added distribution center. Also, the company has reactivated
a plan to purchase from time to time up to 1,500,000 shares of the
corporation's common stock in the open market, or through negotiated
purchases. The company's near-term cash requirements are expected to be
financed through a combination of internally generated cash flow, bank
borrowings, and anticipated proceeds from the sale of discontinued operations.
PART II - OTHER INFORMATION
- - - - ---------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
11. Calculation of Income Per Share
27. Financial Data Schedule
(b) Reports on Form 8-K:
None.
No responses are given to any other items of Part II because the answers are
either negative or not applicable.
9 of 10<PAGE>
SIGNATURE
---------
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.
WYLE LABORATORIES
Date: November 16, 1994 By: R. VAN NESS HOLLAND, JR.
------------------------
R. Van Ness Holland, Jr.
Executive Vice President-
Finance and Treasurer,
Chief Financial Officer
10 of 10<PAGE>
WYLE LABORATORIES
INDEX TO EXHIBITS FILED WITH FORM 10-Q
For the Quarter Ended September 30, 1994
Exhibits:
- - - - --------
11. Calculation of Income Per Share
27. Financial Data Schedule
<PAGE>
EXHIBIT 11
----------
WYLE LABORATORIES
CALCULATION OF INCOME PER SHARE
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
----------------------------------------
Sept. 30, Oct. 31, Sept. 30, Oct. 31,
1994 1993 1994 1993
------------------ ------------------
Income (loss) applicable to common shares:
Income from continuing operations . $ 3,125 $ 1,971 $ 8,560 $ 7,718
Discontinued operations
Income (loss) from operations,
net of taxes. . . . . . . . . . (250) 839 1,418 2,429
Loss on sale, net of taxes. . . . (13,442) - (13,442) -
Cumulative effect of accounting
change for postretirement
benefits other than pension . . . - - - (3,193)
_______ _______ _______ _______
Net income (loss) . . . . . . . . . $(10,567) $ 2,810 $ (3,464) $ 6,954
======= ======= ======= =======
Common and common equivalent shares -
Weighted average number of
common shares outstanding 12,259 12,192 12,253 12,179
Stock options included under
the treasury stock method (1) 168 168 179 169
------- ------- ------- -------
12,427 12,360 12,432 12,348
======= ======= ======= =======
Income (loss) per share -
Income from continuing operations. $ .25 $ .16 $ .69 $ .63
======= ======= ======= =======
Discontinued operations
Income (loss) from operations,
net of taxes . . . . . . . . . . $ (.02) $ .07 $ .11 $ .20
======= ======= ======= =======
Loss on sale, net of taxes . . . . $ (1.08) $ - $ (1.08) $ -
======= ======= ======= =======
Cumulative effect of accounting
change for postretirement
benefits other than pensions . . . $ - $ - $ - $ (.26)
======= ======= ======= =======
Net income (loss) per
common share . . . . . . . . . . $ (.85) $ .23 $ (.28) $ .56
======= ======= ======= =======
(1) The assumed repurchase price of option shares is based on the average
market price for the period.<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 11,132
<SECURITIES> 0
<RECEIVABLES> 109,300
<ALLOWANCES> 4,916
<INVENTORY> 130,556
<CURRENT-ASSETS> 260,389
<PP&E> 30,164
<DEPRECIATION> 16,156
<TOTAL-ASSETS> 285,472
<CURRENT-LIABILITIES> 104,797
<BONDS> 19,001
<COMMON> 86,980
0
0
<OTHER-SE> 71,887
<TOTAL-LIABILITY-AND-EQUITY> 285,472
<SALES> 567,831
<TOTAL-REVENUES> 567,831
<CGS> 474,588
<TOTAL-COSTS> 474,588
<OTHER-EXPENSES> 77,046<F1>
<LOSS-PROVISION> 1,521
<INTEREST-EXPENSE> 758
<INCOME-PRETAX> 13,918
<INCOME-TAX> 5,358
<INCOME-CONTINUING> 8,560
<DISCONTINUED> (12,024)<F2>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,464)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> 0
<FN>
<F1> Includes a $1.9 million provision for anticipated legal expenses
associated with a certain litigation matter and costs related to changes
in the company's organizational structure following the sale of
discontinued operations.
<F2> On October 6, 1994, the company entered into a definitive agreement to
sell its Scientific Services & Systems Group. The company recorded a
loss on sale of discontinued operations of $13,442,000, net of taxes.
</FN>
</TABLE>
