<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 JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 1-5374
WYLE ELECTRONICS
- - - -----------------------------------------------------------------------------
(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 July 31, 1996 registrant had 12,648,696 shares of common stock outstanding.
<PAGE>
PART I-FINANCIAL INFORMATION
- - - ----------------------------
ITEM 1. FINANCIAL STATEMENTS
WYLE ELECTRONICS
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- --------------------
1996 1995 1996 1995
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . $306,881 $254,899 $633,387 $504,935
-------- -------- -------- --------
Costs and expenses
Cost of sales. . . . . . . . . 248,429 209,696 517,049 419,395
Selling and administrative
expenses. . . . . . . . . . . 38,108 30,514 75,697 59,669
Interest expense, net. . . . . 1,995 603 3,929 897
Miscellaneous, net . . . . . . (294) (417) (395) (652)
-------- -------- -------- --------
288,238 240,396 596,280 479,309
-------- -------- -------- --------
Income before income taxes . . . 18,643 14,503 37,107 25,626
Income taxes . . . . . . . . . 7,530 5,729 14,991 10,122
-------- -------- -------- --------
Net income . . . . . . . . . . . $ 11,113 $ 8,774 $ 22,116 $ 15,504
======== ======== ======== ========
Net income per share . . . . . . $ .86 $ .70 $ 1.72 $ 1.24
======== ======== ======== ========
Average common and common
equivalent shares . . . . . . . 12,934 12,575 12,890 12,526
======== ======== ======== ========
Dividends per share . . . . . . $ .08 $ .07 $ .16 $ .14
======== ======== ======== ========
</TABLE>
See accompanying notes.
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WYLE ELECTRONICS
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
ASSETS 6/30/96 12/31/95
- - - ------ ----------- ---------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 18,492 $ 15,694
Receivables (less allowances of $7,547 at 6/30/96
and $6,423 at 12/31/95) 177,753 159,829
Inventories 234,722 203,413
Prepaid expenses and deferred tax assets 7,210 7,295
-------- --------
Total current assets 438,177 386,231
-------- --------
Property, plant and equipment 61,021 52,837
Less accumulated depreciation 23,198 18,508
-------- --------
37,823 34,329
-------- --------
Goodwill, net 27,791 241
-------- --------
Other assets and deferred tax assets 24,140 18,543
-------- --------
Total assets $527,931 $439,344
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - - ------------------------------------
Current liabilities
Current maturities of long-term debt $ 3,033 $ 3,000
Accounts payable 105,182 97,697
Accrued expenses 41,208 30,032
-------- --------
Total current liabilities 149,423 130,729
-------- --------
Long-term debt, less current maturities 131,431 87,600
-------- --------
Other liabilities 25,172 25,345
-------- --------
Commitments and contingencies
Shareholders' equity
Common stock 96,731 90,482
Retained earnings 125,229 105,188
Foreign currency translation adjustment (55) --
-------- --------
221,905 195,670
-------- --------
Total liabilities and shareholders' equity $527,931 $439,344
======== ========
</TABLE>
See accompanying notes.
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WYLE ELECTRONICS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
SIX MONTHS
ENDED JUNE 30,
--------------------
1996 1995
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 22,116 $ 15,504
Adjustments to reconcile net income to net cash
(used for) operating activities:
Depreciation and amortization 4,591 2,221
Provision for losses on receivables 1,344 1,623
Provision for deferred income taxes (2,165) (1,888)
(Increase) in receivables (10,175) (31,359)
(Increase) in inventories (28,033) (20,070)
(Increase) decrease in prepaid expenses (347) 686
Increase in accounts payable 3,027 19,818
Increase (decrease) in accrued expenses 8,367 (3,562)
Other, net 608 98
-------- --------
Net cash (used for) operating activities (667) (16,929)
-------- --------
FINANCING ACTIVITIES
Additions to long-term debt 43,047 30,309
Payments of long-term debt (290) --
Exercise of stock options 2,625 2,288
Dividends on common stock (2,014) (1,725)
Purchase of common stock -- (848)
-------- --------
Net cash provided by financing activities 43,368 30,024
-------- --------
INVESTING ACTIVITIES
Cash consideration paid for acquired business,
net of $1,302 cash received (30,188) --
Additions to property, plant and equipment (6,462) (12,217)
Additions to other non-current assets and
liabilities, net (3,198) (561)
-------- --------
Net cash (used for) investing activities (39,848) (12,778)
-------- --------
Foreign currency translation adjustment (55) --
-------- --------
Increase in cash and cash equivalents 2,798 317
Cash and cash equivalents at beginning of period 15,694 9,319
-------- --------
Cash and cash equivalents at end of period $ 18,492 $ 9,636
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 3,389 $ 1,071
Income taxes 17,039 11,272
</TABLE>
See accompanying notes.
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WYLE ELECTRONICS
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 year ended December
31, 1995. 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 year ended December 31, 1995.
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. The results of operations for the six months ended
June 30, 1996 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 second quarter of 1996
ended on June 30, 1996. Last year's second quarter ended on July 2, 1995 (the
Sunday nearest June 30, 1995). For clarity of presentation, the Company uses
calendar month-end dates for financial reporting purposes.
Note 2 -- Acquisition
On January 2, 1996, the Company purchased all the outstanding capital stock (the
"Stock") of Sylvan Ginsbury, Ltd., a New Jersey corporation, and certain
affiliated entities ("Ginsbury"), an international distributor of active,
passive and interconnect electronic products with operations in the United
States and six European countries. The assets represented by the Stock generally
include personal property, inventory, accounts receivable, intellectual
property, assigned contracts, permits and other identifiable intangible assets.
The negotiated purchase price of the Ginsbury stock was approximately $38.8
million consisting of $30.8 million in cash paid on the closing date, $3.0
million of restricted stock issued at closing and up to $5.0 million in cash for
an earnout provision, which is potentially payable based on the future financial
performance of Ginsbury over a five-year period. The acquisition was financed
mainly through borrowings under the Company's revolving credit agreement. The
transaction was accounted for using the purchase method of accounting. Goodwill
recorded as part of the acquisition of Ginsbury is being amortized using the
straight-line method over a 40 year period.
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The results of operations of the Company for the three and six months ended June
30, 1996 include the results of Ginsbury. If the acquisition of Ginsbury had
taken place at the beginning of 1995 rather than on January 2, 1996, pro forma
consolidated net sales, net income and net income per share would approximate
$267,620,000, $9,164,000 and $.72, respectively, for the quarter ended June 30,
1995. For the six months ended June 30, 1995 pro forma consolidated net sales,
net income and net income per share would approximate $530,175,000, $16,024,000
and $1.27, respectively. Such pro forma amounts are not necessarily indicative
of what the actual consolidated results would have been for the full year of
1995.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
- - - ---------------------
Consolidated sales for the three and six months ended June 30, 1996 totaled
$306,881,000 and $633,387,000, respectively. Net income aggregated $11,113,000
for the current year's second quarter and $22,116,000 for the first half of the
year. In comparison to the prior year, sales rose by 20% in the second quarter
and advanced 25% for the year-to-date. Net income grew by 27% in the second
quarter and increased 43% for the first six months versus the previous year.
The higher sales for the second quarter and first six months of 1996, in
comparison to the prior year, resulted from increased shipments of both computer
products and semiconductors. Computer product revenues were at record levels in
the second quarter driven by demand for computer systems and mass storage
products.
The increase in semiconductor sales for both the second quarter and first half
of 1996 is primarily attributable to products sold through the Company's
value-added activities such as design of application specific integrated
circuits (ASICs), and other semiconductor design/programming services. During
the second quarter of this year the Company experienced an increase in order
cancellations and reschedules by customers attempting to reduce excess inventory
levels in anticipation of lower future pricing and shorter lead times driven by
increased capacity. Shipments of lower-margin DRAM products were down from the
corresponding periods a year ago.
The increased net income for the second quarter and 1996 year-to-date, compared
to the previous year, primarily reflects the Company's growth in sales.
Additionally, the Company's aggregate gross margin percentage has increased in
comparison to the prior year periods. Earnings in 1996 reflect a higher level of
interest expense compared to the same periods last year, due to increased
borrowing requirements to finance additional working capital in support of
higher sales levels as well as the cash portion of an acquisition.
On January 2, 1996, the Company purchased all the outstanding capital stock of
Sylvan Ginsbury, Ltd., a New Jersey corporation, and certain affiliated entities
("Ginsbury"), an international distributor of active, passive and interconnect
electronic products with operations in the United States and six European
countries. Accordingly, the results of operations of the Company for 1996
include the results of Ginsbury.
5 of 8
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The Company's business is affected by the cyclical nature of the electronics
industry and the effect of general economic and market conditions, industry
market conditions caused by changes in the supply and demand for semiconductors
and computer products, intense industry competition and other risks. There is
hereby incorporated by reference the information appearing under the caption
"Risk Factors" in Part I of the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
Financial Condition
- - - -------------------
Working capital as of June 30, 1996 totaled $288,754,000, up $33,252,000 from
December 31, 1995. The growth in working capital can be attributed mainly to
higher inventory and receivable levels, offset partially by a rise in accounts
payable and accrued expenses. The current ratio at June 30, 1996 and December
31, 1995 was 2.9 and 3.0, respectively. The ratio of long-term debt to total
capital (long-term debt plus equity) was 37% at June 30, 1996 and 31% at
December 31, 1995. The increased long-term debt to capital ratio resulted from
higher borrowing levels, offset partly by an increase in shareholders' equity
due mainly to additional net income for the six months ended June 30, 1996.
In April 1996, the Company issued $30 million of senior unsecured notes due
2001, which bear interest at 6.98%. The proceeds were used to repay bank
borrowings. At the same time, the Company amended its $140 million three-year
revolving credit agreement by reducing the committed credit line to $110
million.
Capital expenditures for the six months ended June 30, 1996 aggregated
$6,462,000, which are lower than the prior year due to costs incurred in 1995
for the construction of a new warehouse/value-added distribution center.
During the first quarter of 1996, the company paid, before expenses, $30.8
million relating to the cash portion of the purchase price for Ginsbury.
The Company's near-term cash requirements are expected to be financed through a
combination of internally generated cash flow, bank borrowings and other sources
of available capital.
PART II - OTHER INFORMATION
- - - ---------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
(a) The Company's Annual Meeting of Shareholders was held on May 14, 1996.
(b) Not applicable.
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(c) At the Company's 1996 Annual Meeting of Shareholders, shareholders
re-elected the following individuals to the Company's board of directors
with voting results for each director as follows:
<TABLE>
<CAPTION>
SHARES VOTED
------------
DIRECTOR FOR AGAINST
-------- ---------- ---------
<S> <C> <C>
Jack S. Kilby 10,658,649 472,338
Kirk West 10,664,213 466,774
Frank S. Wyle 10,370,149 760,838
</TABLE>
The shareholders approved amendments to the Company's 1995 Stock Incentive
Plan with 10,694,155 shares voting for the plan, 352,100 shares voting
against the plan and 84,732 shares abstaining.
On March 15, 1996, the record date for the determination of shareholders
entitled to notice of and to vote at the 1996 Annual Meeting of
Shareholders, 12,501,964 shares of the Company's Common Stock were
outstanding and entitled to vote.
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.
7 of 8
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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 ELECTRONICS
Date: August 14, 1996 By: R. VAN NESS HOLLAND, JR.
---------------------------------
R. Van Ness Holland, Jr.
Executive Vice President-
Finance and Treasurer,
Chief Financial Officer
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WYLE ELECTRONICS
INDEX TO EXHIBITS FILED WITH FORM 10-Q
For the Quarter Ended June 30, 1996
Exhibits:
- - - ---------
11. Calculation of Income Per Share
27. Financial Data Schedule
<PAGE>
EXHIBIT 11
----------
WYLE ELECTRONICS
CALCULATION OF INCOME PER SHARE
(UNAUDITED)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------- -----------------
1996 1995 1996 1995
------- ------- ------- --------
<S> <C> <C> <C> <C>
Net income . . . . . . . . . . . . . . . $11,113 $ 8,774 $22,116 $15,504
======= ======= ======= =======
PRIMARY
Common and common equivalent shares
Weighted average number of common
shares outstanding. . . . . . . . . . 12,595 12,306 12,566 12,276
Stock options included under the
treasury stock method (1) . . . . . . 339 269 324 250
------- ------- ------- -------
12,934 12,575 12,890 12,526
======= ======= ======= =======
Net income per share . . . . . . . . . . $ .86 $ .70 $ 1.72 $ 1.24
======= ======= ======= =======
FULLY DILUTED (2)
Common and common equivalent shares
Weighted average number of common
shares outstanding. . . . . . . . . . 12,595 12,306 12,566 12,276
Stock options included under the
treasury stock method (1) . . . . . . 340 299 328 316
------- ------- ------- -------
12,935 12,605 12,894 12,592
======= ======= ======= =======
Net income per share . . . . . . . . . . $ .86 $ .70 $ 1.72 $ 1.23
======= ======= ======= =======
</TABLE>
(1) Under the primary computation the assumed repurchase price of option shares
is based on the average market price for the period. Under the fully diluted
computation the repurchase price is based on the higher of the average
market price or the month-end closing price, whichever provides greater
dilution.
(2) Net income per average common and common equivalent share presented on the
face of the consolidated statements of income represents primary earnings
per share. Dual presentation of primary and fully diluted earnings per
share has not been made on the consolidated statements of income because the
differences are insignificant.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 18,492
<SECURITIES> 0
<RECEIVABLES> 185,300
<ALLOWANCES> 7,547
<INVENTORY> 234,722
<CURRENT-ASSETS> 438,177
<PP&E> 61,021
<DEPRECIATION> 23,198
<TOTAL-ASSETS> 527,931
<CURRENT-LIABILITIES> 149,423
<BONDS> 131,431
0
0
<COMMON> 96,731
<OTHER-SE> 125,174
<TOTAL-LIABILITY-AND-EQUITY> 527,931
<SALES> 633,387
<TOTAL-REVENUES> 633,387
<CGS> 517,049
<TOTAL-COSTS> 517,049
<OTHER-EXPENSES> 73,958
<LOSS-PROVISION> 1,344
<INTEREST-EXPENSE> 3,929
<INCOME-PRETAX> 37,107
<INCOME-TAX> 14,991
<INCOME-CONTINUING> 22,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,116
<EPS-PRIMARY> 1.72
<EPS-DILUTED> 0
</TABLE>
