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 29, 1996
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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 No. 0-4466
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COMPUTER PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA
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(State or other jurisdiction of incorporation or organization)
59-1205269
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(I.R.S. Employer Identification No.)
7900 Glades Road, Suite 500, Boca Raton, Florida 33434
- ------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 451-1000
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NOT APPLICABLE
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Former name, address and 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
--- ----
The number of shares of Common Stock, $.01 par value, of the Registrant issued
and outstanding as of April 25, 1996 was 23,231,772 shares.
<PAGE>
COMPUTER PRODUCTS, INC.
INDEX TO FORM 10-Q
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements:
Statements of Operations - For the Thirteen
Weeks Ended March 29, 1996 and
March 31, 1995 3
Statements of Financial Condition - March 29, 1996
and December 29, 1995 4
Statements of Cash Flows - For the
Thirteen Weeks Ended March 29, 1996 and
March 31, 1995 5
Notes to Condensed Consolidated Financial
Statements 6-8
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition 9-11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Exhibit No. 11
Exhibit No. 27
SIGNATURE
<PAGE>
PART I. FINANCIAL INFORMATION
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
MARCH 29, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
SALES $50,435 $44,297
COST OF SALES 32,057 28,145
--------- ---------
GROSS PROFIT 18,378 16,152
--------- ---------
EXPENSES
Selling, general & administrative 8,560 8,672
Research & development 3,969 3,784
--------- ---------
12,529 12,456
--------- ---------
OPERATING INCOME 5,849 3,696
--------- ---------
OTHER INCOME (EXPENSE)
Interest expense (709) (976)
Interest income 217 249
--------- ---------
(492) (727)
--------- ---------
INCOME BEFORE INCOME TAXES 5,357 2,969
PROVISION FOR INCOME TAXES 1,446 950
--------- ---------
NET INCOME $ 3,911 $ 2,019
========= =========
EARNINGS PER SHARE $ 0.16 $ 0.09
========= =========
Common and common equivalent shares
outstanding 24,456 21,934
</TABLE>
[FN]
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollars in Thousands)
<TABLE>
<CAPTION> MARCH 29, DECEMBER 29,
1996 1995
(UNAUDITED) (AUDITED)
----------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 24,402 $ 26,650
Accounts receivable, net 27,964 29,933
Inventories, net 32,659 31,236
Prepaid expenses 3,510 2,575
Deferred income taxes, net 394 517
-------- --------
TOTAL CURRENT ASSETS 88,929 90,911
-------- --------
PROPERTY, PLANT & EQUIPMENT, NET 28,831 27,715
-------- --------
OTHER ASSETS
Goodwill, net 12,749 13,532
Deferred income taxes, net 2,901 2,521
Other assets 1,864 1,812
-------- --------
TOTAL OTHER ASSETS 17,514 17,865
-------- --------
$135,274 $136,491
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,641 $ 2,719
Accounts payable and accrued liabilities 32,924 36,200
-------- --------
TOTAL CURRENT LIABILITIES 35,565 38,919
LONG-TERM DEBT 29,649 29,849
LEASE LIABILITIES 6,151 6,201
-------- --------
TOTAL LIABILITIES 71,365 74,969
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock, par value $.01; 1,000,000
shares authorized; none issued
Common stock, par value $.01; 80,000,000
shares authorized; 23,087,567 issued and
outstanding in 1996 (23,052,781 shares in 1995) 231 231
Additional paid-in capital 41,382 40,633
Retained earnings 23,118 20,886
Foreign currency translation adjustment (822) (228)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 63,909 61,522
-------- --------
$135,274 $136,491
========= =========
</TABLE>
[FN]
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
MARCH 29, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,911 $ 2,019
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,492 1,257
Other non-cash charges 403 753
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 1,779 (1,618)
Increase in inventories and prepaid expenses (3,198) (994)
Increase (decrease) in accounts payable and
accrued liabilities (2,582) 2,493
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,805 3,910
-------- --------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (2,362) (1,028)
(Increase) decrease in other assets (38) 58
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (2,400) (970)
-------- --------
FINANCING ACTIVITIES
Principal payments on debt and capital leases (237) (286)
Proceeds from exercises of stock options 713 694
Repurchase of common stock (2,032)
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NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (1,556) 408
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EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
EQUIVALENTS (97) (66)
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INCREASE (DECREASE) IN CASH AND EQUIVALENTS (2,248) 3,282
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 26,650 20,211
--------- ---------
CASH AND EQUIVALENTS, END OF PERIOD $24,402 $23,493
========= =========
</TABLE>
[FN]
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 29, 1996
1. BASIS OF PRESENTATION
The accompanying unaudited Condensed Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Certain information and footnote disclosures required by
generally accepted accounting principles for complete financial statements have
been condensed or omitted.
In the opinion of management, the accompanying financial statements include all
adjustments (consisting of normal recurring accruals) considered necessary to
present fairly the financial position, results of operations and cash flows of
Computer Products, Inc. (`the Company''). The results of operations for the
thirteen weeks ended March 29, 1996 are not necessarily indicative of the
results that may be expected for fiscal year 1996. For further information,
these Condensed Consolidated Financial Statements should be read in conjunction
with the financial statements and notes thereto included in the Company's 1995
Annual Report to Shareholders.
2. INVENTORIES, NET
The components of inventory, net of allowances for slow-moving and obsolete
inventory, are ($000s):
March 29, December 29,
1996 1995
--------- ---------
Raw materials $18,755 $15,350
Work in process 3,851 4,215
Finished goods 10,053 11,671
--------- --------
$32,659 $31,236
========= ========
3. PROPERTY PLANT & EQUIPMENT, NET
Related accumulated depreciation was $26,592,000 and $25,720,000 at March 29,
1996 and December 29, 1995, respectively.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The components of accounts payable and accrued liabilities are ($000s):
March 29, December 29,
1996 1995
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Accounts payable $14,730 $17,041
Accrued liabilities:
Compensation and benefits 6,433 8,948
Income taxes payable 2,864 2,272
Other 8,897 7,939
-------- --------
$32,924 $36,200
========= =========
5. INCOME TAXES
The provision for income taxes reflects federal, state, and foreign taxes
currently payable. The effective income tax rate on pretax earnings differs from
that computed at the United States federal statutory rate for the following
reasons:
Thirteen Weeks Ended
March 29, March 31,
1996 1995
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Provision computed at United
States federal statutory rate 35.0% 34.0%
Amortization of goodwill 0.2 0.5
Change in the valuation allowance (8.7) (12.0)
Foreign tax effects (4.3) 3.2
Effect of state income taxes 4.7 5.9
Other 0.1 0.4
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Effective tax rate 27.0% 32.0%
====== =======
6. STOCK REPURCHASES
During the thirteen weeks ended March 29, 1996, the Company repurchased and
retired a total of 197,000 shares of its common stock pursuant to a share buy-
back plan announced in May 1995. According to the plan, the Company intends to
repurchase from time to time up to an aggregate of 2,000,000 shares through open
market transactions. To date, the Company has repurchased and retired a total
of 1,335,000 shares of its common stock. The excess of the cost of shares
repurchased over par value was allocated to additional paid-in capital based on
the pro-rata share amount of additional paid-in capital for all shares issued
with the difference charged to retained earnings.
<PAGE>
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
GENERAL
The Company recorded a 94% increase in earnings for the thirteen weeks ended
March 29, 1996 versus the comparable period ended March 31, 1995 reflecting
continued growth in sales and the progress made in cost reduction efforts. Gross
profit margin of 36.4% was approximately equivalent to the 36.5% reported for
the same period a year ago. Operating income increased 57% to $5.8 million in
the first quarter of 1996 versus $3.7 million in the prior year as a result of
higher sales volume. Selling, general and administrative expenses declined to
17% of sales from 20% a year ago while research and development spending
increased by 5% compared to the first quarter of 1995.
RESULTS OF OPERATIONS
The following table displays revenue by product category for the thirteen weeks
ended March 29, 1996 and March 31, 1995:
(DOLLARS IN THOUSANDS)
MARCH 29, MARCH 31,
1996 1995
--------- --------
Power Conversion $43,918 $35,149
87.1% 79.3%
Computer Systems 3,447 4,731
6.8% 10.7%
Industrial Automation 3,070 4,417
6.1% 10.0%
------- -------
Total $50,435 $44,297
======= =======
For the thirteen weeks ended March 29, 1996, sales increased by $6.1 million
(14%) over the comparable prior year period reflecting strong performance in the
Company's Power Conversion division. Power Conversion sales improved 25% on
increased worldwide demand primarily in the communications marketplace as the
Company continued to gain a significant share of new OEM contract awards in the
networking and telecommunications market sectors. Computer Systems sales were
27% lower than the first quarter of 1995 due to slower than expected new product
sales. Industrial Automation sales were down 31% from the comparable period in
fiscal 1995 due to lower demand from utility customers.
Although gross profit for the current quarter increased by $2.2 million over the
first quarter of 1995, gross margin of 36.4% was approximately equivalent to the
36.5% reported for the same period a year ago. The Company's continued focus on
cost reduction and process improvement and the favorable effect of the higher
volumes on fixed cost per unit were sufficient to overcome price increases paid
for certain components and the higher level of sales to OEM customers at lower
overall margins. In general, prices for certain materials are expected to
continue to rise through the end of the fiscal year.
Selling, general and administrative (SG&A) expenses decreased as a percentage of
sales to 17% from 20% in the first quarter of 1995 due to the Company's
continued focus on cost control and the effect of higher sales volume.
Research and development spending increased 5% compared to the first quarter of
1995 as a result of the Company's continued investment in product development in
each of its product categories. The Company expects to continue its current
level of investment in research and development.
Operating expenses as a percentage of sales declined to 25% for the first
quarter of 1996 versus 28% for the same quarter a year ago primarily due to the
continued focus on cost reduction.
The provision for income taxes as a percentage of pretax income for the first
quarter of 1996 decreased to 27% from 32% and 28% for the comparable prior year
period and prior fiscal year, respectively. The effective tax rate for 1996
decreased primarily due to a favorable change in the pattern of earnings between
domestic and overseas operations. See Note 5 to the Condensed Consolidated
Financial Statements for the Company's effective tax rate reconciliation.
LIQUIDITY AND CAPITAL RESOURCES
Cash and equivalents decreased to $24.4 million at March 29, 1996 from $26.7
million at December 29, 1995 due mainly to the repurchase of 197,000 shares of
the Company's common stock for $2.0 million and to purchases of plant and
equipment for $2.3 million partially offset by proceeds of $713,000 from
exercises of stock options.
Inventories, net increased $1.4 million (4.6%) from December 29, 1995 primarily
in the Power Conversion division in support of higher sales and to protect
against certain component price increases being experienced in the electronics
marketplace.
Cash provided by operations decreased to $1.8 million for the thirteen weeks
ended March 29, 1996 from $3.9 million for the thirteen weeks ended March 31,
1995 primarily as a result of a decrease in accounts payable and accrued
liabilities.
Net cash used in investing activities increased to $2.4 million for the thirteen
weeks ended March 29, 1996 from $1.0 million for the thirteen weeks ended March
31, 1995 due to additional equipment purchases. The continued strong growth in
the Power Conversion business has required expansion of production capabilities
and, to address this requirement, the Company has been increasing its
manufacturing presence in China by contracting additional workforce and
investing in plant and equipment.
Net cash used in financing activities for the thirteen weeks ended March 29,
1996 of $1.6 million reflects mainly the repurchase of 197,000 shares of the
Company's common stock for $2.0 million partially offset by proceeds from the
exercise of options.
As of March 29, 1996, no amounts have been drawn on the Company's $20 million
revolving line of credit. The Company believes its available credit line, its
cash flow from operations, and other financing activities are adequate to fund
its working capital requirements for the remainder of the fiscal year.
<PAGE>
PART II. OTHER INFORMATION
ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Exhibit No. 11 -- Computation of earnings per common and common equivalent share
for the thirteen weeks ended March 29, 1996 and March 31, 1995.
Exhibit No. 27 -- Financial Data Schedule.
(B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the thirteen week period
ended March 29, 1996.
<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.
COMPUTER PRODUCTS, INC.
-----------------------
(Registrant)
DATE: April 25, 1996 BY: Richard J. Thompson
-------------------
Richard J. Thompson
Vice President Finance
Chief Financial Officer
EXHIBIT NO. 11
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE-PRIMARY
(In Thousands)
THIRTEEN WEEKS ENDED
MARCH 29, MARCH 31,
1996 1995
--------- ---------
Weighted average shares outstanding 22,977 20,416
Net effect of dilutive stock
options--based on the treasury stock
method using average market price 1,479 1,518
-------- --------
Common and common equivalent
shares outstanding 24,456 21,934
======== ========
<PAGE>
EXHIBIT NO. 11
COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE-FULLY DILUTED
(In Thousands Except Per Share Data)
THIRTEEN WEEKS ENDED
MARCH 29, MARCH 31,
1996 1995
--------- ---------
Shares outstanding 23,088 20,622
Net effect of dilutive stock options -
based on the treasury stock method
using the greater of month-end market
price or average market price 1,563 1,710
Assumed conversion of convertible
subordinated debentures 7,218
--------- --------
Totals 24,650 29,550
======== ========
* * * * *
Net income $3,911 $2,019
Add convertible debentures interest
and amortization, net of applicable
income taxes 576
--------- --------
$3,911 $2,595
======== ========
Per share amounts $ 0.16 $ 0.09
======== ========
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-END> MAR-29-1996
<CASH> 24,402
<SECURITIES> 0
<RECEIVABLES> 29,472
<ALLOWANCES> 1,508
<INVENTORY> 32,659
<CURRENT-ASSETS> 88,929
<PP&E> 55,423
<DEPRECIATION> 26,592
<TOTAL-ASSETS> 135,274
<CURRENT-LIABILITIES> 35,565
<BONDS> 29,649
0
0
<COMMON> 41,613
<OTHER-SE> 22,296
<TOTAL-LIABILITY-AND-EQUITY> 135,274
<SALES> 50,435
<TOTAL-REVENUES> 50,435
<CGS> 32,057
<TOTAL-COSTS> 32,057
<OTHER-EXPENSES> 12,529
<LOSS-PROVISION> 36
<INTEREST-EXPENSE> 709
<INCOME-PRETAX> 5,357
<INCOME-TAX> 1,446
<INCOME-CONTINUING> 3,911
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,911
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
