<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 March 31, 1997
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
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(Exact name of registrant as specified in its charter)
California 95-1779998
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15370 Barranca Parkway
Irvine, California 92718
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 753-9953
-----------------------------
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(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 April 30, 1997 registrant had 12,185,604 shares of common stock outstanding.
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
WYLE ELECTRONICS
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------------
1997 1996
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<S> <C> <C>
Net sales $322,140 $326,506
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Costs and expenses
Cost of sales 270,129 268,620
Selling and administrative expenses 37,890 37,589
Interest expense, net 1,901 1,934
Miscellaneous, net (499) (101)
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309,421 308,042
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Income before income taxes 12,719 18,464
Income taxes 4,922 7,461
-------- --------
Net income $ 7,797 $ 11,003
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Net income per share $ .61 $ .86
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Average common and common
equivalent shares 12,853 12,841
======== ========
Dividends per share $ .08 $ .08
======== ========
</TABLE>
See accompanying notes.
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WYLE ELECTRONICS
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(Unaudited)
ASSETS 3/31/97 12/31/96
- ------ ----------- ---------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 12,036 $ 13,857
Receivables (less allowances of $8,650 at
3/31/97 and $8,487 at 12/31/96) 196,124 174,530
Inventories 256,478 216,544
Prepaid expenses and deferred tax assets 9,325 8,563
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Total current assets 473,963 413,494
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Property, plant and equipment 69,130 65,163
Less accumulated depreciation 29,480 27,324
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39,650 37,839
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Goodwill, net of amortization 28,049 28,236
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Other assets and deferred tax assets 27,600 26,683
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Total assets $569,262 $ 506,252
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LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Current maturities of long-term debt $ 208 $ 575
Accounts payable 140,752 93,111
Accrued expenses 46,232 39,465
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Total current liabilities 187,192 133,151
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Long-term debt, less current maturities 130,144 111,845
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Other liabilities 24,986 25,111
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Commitments and contingencies
Shareholders' equity
Common stock 95,052 97,091
Retained earnings 132,034 139,006
Foreign currency translation adjustment (146) 48
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226,940 236,145
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Total liabilities and shareholders' equity $569,262 $ 506,252
======== =========
</TABLE>
See accompanying notes.
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WYLE ELECTRONICS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 7,797 $ 11,003
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,586 2,384
Provision for losses on receivables 712 865
Provision for deferred income taxes (1,450) (811)
(Increase) decrease in receivables (22,306) 381
(Increase) decrease in inventories (39,934) 5,972
Decrease in prepaid expenses 165 403
Increase in accounts payable 47,641 2,522
Increase in accrued expenses 6,767 10,209
Other, net 293 285
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Net cash provided by operating activities 2,271 33,213
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FINANCING ACTIVITIES
Additions to long-term debt 17,932 6,218
Payments of long-term debt - (209)
Exercise of stock options 1,761 33
Dividends on common stock (1,012) (1,004)
Purchase of common stock (17,851) -
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Net cash provided by financing activities 830 5,038
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INVESTING ACTIVITIES
Cash consideration paid for acquired business,
net of $1,302 cash received - (29,553)
Additions to property, plant and equipment (4,113) (3,995)
Additions to other non-current assets and liabilities, net (616) (2,535)
-------- --------
Net cash (used for) investing activities (4,729) (36,083)
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Foreign currency translation adjustment (193) (22)
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Increase (decrease) in cash and cash equivalents (1,821) 2,146
Cash and cash equivalents at beginning of period 13,857 15,694
-------- --------
Cash and cash equivalents at end of period $ 12,036 $ 17,840
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 874 $ 1,978
Income taxes 566 1,269
</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, 1996. 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, 1996.
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 three months
ended March 31, 1997 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 first quarter of 1997
ended on March 30, 1997 (the Sunday nearest March 31, 1997). Last year's first
quarter ended on March 31, 1996. For clarity of presentation, the Company uses
calendar month-end dates for financial reporting purposes.
Note 2 - Income per Share
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128")
and Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure" ("SFAS No. 129"). SFAS No. 128 revises the
computation for earnings per share and requires certain additional disclosures.
SFAS No. 129 requires additional disclosures regarding the Company's capital
structure. Both standards will be adopted by the Company for both interim and
annual periods ending after December 15, 1997. The Company does not expect the
adoption of these standards to have a material effect on its results of
operations or financial position.
4 of 7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
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Consolidated sales and net income for the first quarter ended March 31, 1997
were $322,140,000 and $7,797,000, respectively. In comparison to the same
quarter in the prior year, sales declined by 1% while earnings were down by
29%. The decrease in revenues from the first three months of last year can be
attributed mainly to a 16% reduction in semiconductor shipments, offset in part
by a 40% increase in computer products sales primarily reflecting strong
customer demand for computer systems and mass storage devices.
Semiconductor sales in the first quarter of 1997 were negatively impacted by a
product line transition. In October of 1996, Advanced Micro Devices (AMD) and
Philips Semiconductor both elected to conclude their distribution agreements
with the Company. Sales of AMD and Philips products, which in total represented
approximately 10% of the Company's consolidated sales for the quarter ended
March 31, 1996, were not significant in the first quarter of 1997. In August of
1996, the Company entered into distribution agreements with National
Semiconductor and Fairchild Semiconductor. While the Company continues to ramp
up shipments of National and Fairchild products, sales from these two new lines
in the first quarter of 1997 were well below sales generated by AMD and Philips
during the first quarter of 1996. In addition, the first quarter of 1997 had two
less shipping days compared to the first quarter a year ago.
The decline in net income for the first quarter, compared to the first three
months of the prior year, can be attributed primarily to a reduction in the
Company's aggregate gross margin percentage caused mainly by a change in sales
mix towards selling a greater proportion of computer products, particularly mass
storage devices, which tend to have lower margins. Also contributing to the
lower earnings in the current year compared to last year was a slightly higher
level of selling and administrative expenses as a percentage of sales reflecting
in part an increase in the number of employees during this year's first quarter
as the Company invests in additional sales, marketing, value-added and materials
management personnel. Earnings for the first three months of 1997 benefited from
a lower overall effective income tax rate compared to the prior year.
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, 1996.
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Financial Condition
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The Company's working capital as of March 31, 1997 totaled $286,771,000 up
$6,428,000 from December 31, 1996. The growth in working capital can be
attributed mainly to higher inventory and receivable levels, offset partially by
a rise in accounts payable. The current ratio at March 31, 1997 and December 31,
1996 was 2.5 and 3.1, respectively. The ratio of long-term debt to total capital
(long-term debt plus equity) was 36% at March 31, 1997 and 32% at December 31,
1996. The rise in the ratio of long-term debt to total capital reflects
primarily an increase in credit line borrowings along with a reduction in
shareholders' equity due to the repurchase of the Company's common stock, offset
partly by the addition of net income to shareholder's equity.
In October 1996, the Company's Board of Directors authorized a plan to purchase
from time to time up to 1,000,000 shares of Wyle Electronics' common stock in
the open market or through negotiated purchases, and revoked prior repurchase
authorizations. Since inception of the new plan, the Company has purchased
622,700 shares of its common stock, of which 530,700 shares were acquired in the
first quarter of 1997.
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
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Item 6. Exhibits and Reports on Form 8-K
--------------------------------
10. Fourth Amendment to the Limited Liability Company
Agreement of Accord Contract Services LLC between Wyle
Electronics and Marshall Industries
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.
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SIGNATURE
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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: May 13, 1997 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 March 31, 1997
Exhibits:
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10. Fourth Amendment to the Limited Liability Company Agreement of
Accord Contract Services LLC between Wyle Electronics and Marshall
Industries
11. Calculation of Income Per Share
27. Financial Data Schedule
<PAGE>
EXHIBIT 10
AMENDMENT NO. 4
This Amendment No. 4 ("Amendment No. 4") to the Limited Liability
Company Agreement of Accord Contract Services LLC dated August 8, 1996 (the
"Agreement") is made and entered into and effective as of March 31, 1997 (the
"Amendment No. 4 Effective Date") by and between Wyle Electronics, a California
corporation ("WYLE") and Marshall Industries, a California corporation
("MARSHALL").
WHEREAS, WYLE AND MARSHALL wish to amend the terms of the Agreement.
NOW THEREFORE, the parties agree as follows:
1. WYLE and MARSHALL hereby agree that the "Associated Agreement
Negotiation Period" (as defined in Section 2.5 of the Agreement) has been
extended indefinitely unless fixed by mutual agreement of the parties with
respect to the agreements previously referred to in the Agreement as: (i) the
Systems License; and (ii) the Sublease Agreement; provided, however, that either
party may unilaterally set the expiration date of the "Associated Agreement
Negotiation Period" which expiration date shall be no less than 120 days from
such party's written notice to the other party.
2. Except as expressly set forth in Amendment No. 4 all other terms
of the Agreement shall remain in full force and effect.
3. This Amendment No. 4 may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
4. This Amendment No. 4 may be executed and delivered by facsimile
and, upon such execution and delivery, shall have the same force and effect as
an originally executed instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No.
4 to be executed and delivered by their duly authorized representatives as of
the date first above written.
MARSHALL INDUSTRIES, WYLE ELECTRONICS,
a California corporation a California corporation
By: /s/ HENRY W. CHIN By: /s/ R. VAN NESS HOLLAND, JR.
----------------------- ----------------------------
Henry W. Chin R. Van Ness Holland, Jr.
Vice President and Executive Vice President -
Chief Financial Officer Finance and Treasurer,
Chief Financial Officer
<PAGE>
EXHIBIT 11
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WYLE ELECTRONICS
CALCULATION OF INCOME PER SHARE
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
------------------
1997 1996
------- --------
<S> <C> <C>
Net income............................ $ 7,797 $11,003
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PRIMARY
Common and common equivalent shares
Weighted average number of common
shares outstanding................ 12,593 12,536
Stock options included under the
treasury stock method (1)......... 260 305
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12,853 12,841
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Net income per share.................. $ .61 $ .86
======= =======
FULLY DILUTED (2)
Common and common equivalent shares
Weighted average number of common
shares outstanding................ 12,593 12,536
Stock options included under the
treasury stock method (1)......... 260 331
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12,853 12,867
======= =======
Net income per share.................. $ .61 $ .86
======= =======
</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> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 12,036
<SECURITIES> 0
<RECEIVABLES> 204,774
<ALLOWANCES> 8,650
<INVENTORY> 256,478
<CURRENT-ASSETS> 473,963
<PP&E> 69,130
<DEPRECIATION> 29,480
<TOTAL-ASSETS> 569,262
<CURRENT-LIABILITIES> 187,192
<BONDS> 130,144
0
0
<COMMON> 95,052
<OTHER-SE> 131,888
<TOTAL-LIABILITY-AND-EQUITY> 569,262
<SALES> 322,140
<TOTAL-REVENUES> 322,140
<CGS> 270,129
<TOTAL-COSTS> 270,129
<OTHER-EXPENSES> 36,679
<LOSS-PROVISION> 712
<INTEREST-EXPENSE> 1,901
<INCOME-PRETAX> 12,719
<INCOME-TAX> 4,922
<INCOME-CONTINUING> 7,797
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,797
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0
</TABLE>
