<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 1995
Commission File Number: 0-9788
RICHEY ELECTRONICS, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0594451
---------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7441 Lincoln Way, Garden Grove, California 92641
------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
(714) 898-8288
----------------------------------------------------
(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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of August 9, 1995, 9,054,335 shares of the registrant's Common Stock,
$0.001 par value, were issued and outstanding.
<PAGE>
RICHEY ELECTRONICS, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,022,000 $ 9,000
Trade receivables 13,103,000 11,167,000
Inventories 16,634,000 14,913,000
Deferred income taxes 1,427,000 1,427,000
Other current assets 330,000 435,000
----------- -----------
Total current assets $34,516,000 $27,951,000
----------- -----------
LEASEHOLD IMPROVEMENTS, EQUIPMENT
FURNITURE AND FIXTURES, net $ 1,233,000 $ 1,017,000
----------- -----------
OTHER ASSETS AND INTANGIBLES
Deferred income taxes $ 2,430,000 $ 2,430,000
Intangibles, less accumulated amortization
of $1,640,000 and $1,439,000, respectively 2,303,000 3,261,000
Deposits and other 328,000 354,000
----------- -----------
5,061,000 6,045,000
----------- -----------
$40,810,000 $35,013,000
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of subordinated notes payable $ 0 $ 1,600,000
Notes payable, revolving line of credit 3,212,000 8,843,000
Accounts payable 10,326,000 10,457,000
Accrued expenses 1,150,000 1,734,000
----------- -----------
Total current liabilities $14,688,000 $22,634,000
----------- -----------
SUBORDINATED NOTES PAYABLE $ 0 $ 3,594,000
----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock, $0.001 par value, authorized
10,000 shares, issued none $ 0 $ 0
Common Stock, $0.001 par value, authorized
30,000,000 shares, issued and outstanding
9,054,000 shares 9,000 6,000
Additional paid-in-capital 20,985,000 5,240,000
Retained earnings 5,128,000 3,539,000
----------- -----------
Total stockholders' equity $26,122,000 $ 8,785,000
----------- -----------
$40,810,000 $35,013,000
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
2
<PAGE>
RICHEY ELECTRONICS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
------------------------ -------------------------
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales: $28,305,000 $23,105,000 $54,901,000 $43,352,000
Cost of Goods Sold: 21,645,000 17,543,000 41,728,000 32,935,000
----------- ----------- ----------- -----------
Gross Profit: $ 6,660,000 $ 5,562,000 $13,173,000 $10,417,000
----------- ----------- ----------- -----------
Operating expenses:
Selling, warehouse, general, and
administrative $ 4,859,000 $ 4,158,000 $ 9,701,000 $ 7,884,000
Amortization of intangibles 97,000 143,000 210,000 299,000
----------- ----------- ----------- -----------
$ 4,956,000 $ 4,301,000 $ 9,911,000 $ 8,183,000
----------- ----------- ----------- -----------
Operating income $ 1,704,000 $ 1,261,000 $ 3,262,000 $ 2,234,000
Interest Expense 185,000 373,000 607,000 749,000
----------- ----------- ----------- -----------
Income before income taxes $ 1,519,000 $ 888,000 $ 2,655,000 $ 1,485,000
Federal and state income taxes 610,000 356,000 1,066,000 598,000
----------- ----------- ----------- -----------
Net income $ 909,000 $ 532,000 $ 1,589,000 $ 887,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per Share $0.11 $0.09 $0.23 $0.15
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted Average number of shares
outstanding 8,101,000 5,889,000 7,001,000 5,889,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
3
<PAGE>
RICHEY ELECTRONICS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
---------------------------
June 30, July 1,
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,589,000 $ 887,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 392,000 380,000
Deferred income taxes 757,000 596,000
Changes in operating assets and liabilities:
(Increase) in trade receivables (1,936,000) (476,000)
(Increase) decrease in inventories (1,721,000) 401,000
(Increase) decrease in other assets 131,000 (54,000)
(Decrease) in accounts payable
and accrued expenses (667,000) (67,000)
----------- -----------
Net cash provided by (used in) operating activities (1,455,000) 1,667,000
----------- -----------
CASH FLOWS (USED IN) INVESTING ACTIVITIES
Purchase of leasehold improvements and equipment (413,000) (201,000)
Business acquisitions (42,000) (2,244,000)
----------- -----------
Net cash (used in) investing activities (455,000) (2,445,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net advances on revolving line of credit (5,631,000) 3,736,000
Principal payments on subordinated debt (5,194,000) (2,957,000)
Proceeds from issuance of common stock, net of
offering expenses of $437,000 15,748,000 --
----------- -----------
Net cash provided by financing activities 4,923,000 779,000
----------- -----------
Increase in cash and cash equivalents 3,013,000 1,000
CASH AND CASH EQUIVALENTS
Beginning 9,000 7,000
----------- -----------
Ending 3,022,000 8,000
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash Payments For:
Interest 834,000 1,011,000
----------- -----------
----------- -----------
Income taxes 203,000 48,000
----------- -----------
----------- -----------
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
4
<PAGE>
RICHEY ELECTRONICS, INC.
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock
-------------------------------------
Additional
Preferred Shares paid-in Retained
Stock Outstanding Par Value Capital Earnings Total
--------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 -- 5,889,000 $6,000 $ 5,240,000 $3,539,000 $ 8,785,000
Issuance of common stock,
net of offering expenses of
$437,000 -- 3,165,000 3,000 15,745,000 -- 15,748,000
Net income -- -- -- -- 1,589,000 1,589,000
--------- ----------- --------- ----------- ----------- -----------
Balance, June 30, 1995 -- 9,054,000 $9,000 $20,985,000 $5,128,000 $26,122,000
--------- ----------- --------- ----------- ----------- -----------
--------- ----------- --------- ----------- ----------- -----------
</TABLE>
SEE NOTES TO CONDENSED FINANCIAL STATEMENTS
5
<PAGE>
RICHEY ELECTRONICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Richey Electronics, Inc. (which conducts business under the name
RicheyCypress Electronics), is a multi-regional, specialty distributor of
electronic components and a provider of value-added assembly services. The
Company distributes connectors, switches, cable and other interconnect,
electromechanical and passive components used in the assembly and manufacturing
of electronic equipment. Richey Electronics also provides a wide variety of
value-added assembly services. These value-added assembly services consist of
(i) component assembly, which is the assembly of components to manufacturer
specifications and (ii) contract assembly, which is the assembly of cable
assemblies, battery packs and mechanical assemblies to customer specifications.
The Company's customers are primarily small- and medium-sized original equipment
manufacturers. Approximately 80% of the Company's inventory is located at its
centralized distribution facility in Los Angeles, and the remaining inventory is
located in regional warehouses in Boston, San Diego and San Jose.
SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for the complete financial
statements. In management's opinion, the accompanying financial statements
reflect all material adjustments, consisting of only normal and recurring
adjustments, necessary for a fair statement of the results for the interim
periods presented. The results for the interim periods ended June 30, 1995 and
July 1, 1994 are not necessarily indicative of the results which will be
reported for the entire year.
Income tax expense in these interim financial statements is recorded based
upon the Company's expected annual effective income tax rate. The benefit from
the previously unrecognized net operating loss carryforwards acquired in the
merger of RicheyImpact Electronics, Inc. and Brajdas Corporation (the "Richey-
Brajdas Merger") is used to reduce the carrying value of intangibles.
Amortization expense of the reduced intangibles is adjusted prospectively on a
monthly basis.
For further information, refer to the audited financial statements of the
Company and notes thereto for the year ended December 31, 1994, included in the
Company's Annual Report on Form 10-K.
6
<PAGE>
RICHEY ELECTRONICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
CASH AND CASH EQUIVALENTS. The Company considers all highly liquid debt
instruments purchased with an original maturity of 3 months or less to be cash
equivalents.
NOTE 2. BUSINESS COMBINATIONS
IN-STOCK
On April 4, 1994, the Company completed the purchase of the assets and
business of the In-Stock Products Division of Anchor Group, Inc. ("In-Stock"),
a Boston, Massachusetts area distributor of electronic components, for
approximately $1,841,000 in cash, including acquisition costs (the "In-Stock
Acquisition"). The In-Stock Acquisition was accounted for as a purchase. The
fair value of assets acquired was $2,787,000 and the liabilities assumed totaled
$946,000. Goodwill of $274,000 is included in other assets and is being
amortized over 15 years. The results of operations of In-Stock subsequent to
the date of the In-Stock Acquisition are included in the Company's financial
statements.
The following pro forma results of continuing operations assume the In-
Stock Acquisition (which occurred on April 4, 1994) had occurred as of the
beginning of 1994 after giving effect to certain adjustments, including
amortization of acquired intangibles, reduction in interest expense and related
tax effects.
<TABLE>
<CAPTION>
Six Months
Ended
July 1, 1994
(Unaudited)
------------
<S> <C>
Net sales $46,050,000
Net income 1,002,000
Net income per share .17
</TABLE>
The pro forma financial information does not purport to be indicative of
the results of operations that would have occurred had the transactions actually
taken place at the beginning of the periods presented.
7
<PAGE>
RICHEY ELECTRONICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
INLAND EMPIRE INTERCONNECTS
On July 24, 1995, the Company announced that it had signed a Letter of
Intent to purchase substantially all of the assets of Inland Empire
Interconnects, Ontario, CA, a cable assembly company specializing in molded
interconnect products with approximately $5,000,000 in annual sales. The
Company currently expects the transaction to close in mid-August 1995.
NOTE 3. PUBLIC OFFERING AND NET OPERATING LOSS CARRYFORWARDS
PUBLIC OFFERING
On April 27, 1995 and May 24, 1995, the Company sold 3,000,000 and 165,000
shares of common stock, respectively, through an underwritten public offering.
Proceeds to the Company were $15.7 million, net of underwriting discounts and
expenses associated with the offering. The proceeds were used to repay
approximately $3.6 million in senior and junior subordinated debt, and the
balance was used to reduce the Company's revolving line of credit with its asset
based lender by $12.1 million. The Company has, as a result of the offering,
entered into negotiations with its asset based lender to revise the terms and
conditions of its loan agreement.
NET OPERATING LOSS CARRYFORWARDS
As of December 31, 1994, the Company had net operating loss carryforwards
("NOLs") with the following expiration dates:
<TABLE>
<CAPTION>
Expiration Date Federal California
--------------- ----------- ----------
<S> <C> <C>
1997 . . . . . . . . . . . . . . . . . . . . . $ -- $3,599,000
1998 . . . . . . . . . . . . . . . . . . . . . 3,450,000 953,000
1999 . . . . . . . . . . . . . . . . . . . . . 2,935,000 270,000
2000 . . . . . . . . . . . . . . . . . . . . . 490,000 --
2005 . . . . . . . . . . . . . . . . . . . . . 2,000,000 --
2006 . . . . . . . . . . . . . . . . . . . . . 2,053,000 --
2007 . . . . . . . . . . . . . . . . . . . . . 9,700,000 --
2008 . . . . . . . . . . . . . . . . . . . . . 2,500,000 --
2009 . . . . . . . . . . . . . . . . . . . . . 771,000 --
----------- ----------
$23,899,000 $4,822,000
----------- ----------
----------- ----------
</TABLE>
8
<PAGE>
RICHEY ELECTRONICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Section 382 of the Internal Revenue Code of 1986, as amended
("Section 382") and the related regulations impose certain limitations on a
corporation's ability to use NOLs if more than a 50% ownership change occurs.
California law conforms to the provisions of Section 382. The
Richey-Brajdas Merger did not result in a more than 50% ownership change.
However, as a result of the public offering in April 1995, the Company
effectuated a "change of ownership" as understood by Section 382. This
"change of ownership" will restrict the Company's use of the NOLs to
$2.1 million per year.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
GENERAL
Richey Electronics is a multi-regional, specialty distributor of electronic
components and a provider of value-added assembly services. The Company
distributes connectors, switches, cable and other interconnect,
electromechanical and passive components used in the assembly and manufacturing
of electronic equipment. Richey Electronics also provides a wide variety of
value-added assembly services, which typically generate higher gross margins
than traditional component distribution. These value-added assembly services
consist of (i) component assembly, which is the assembly of components to
manufacturer specifications and (ii) contract assembly, which is the assembly of
cable assemblies, battery packs and mechanical assemblies to customer
specifications. The Company's customers are primarily small- and medium-sized
original equipment manufacturers. Approximately 80% of the Company's inventory
is located at its centralized distribution facility in Los Angeles, and the
remaining inventory is located in regional warehouses in Boston, San Diego and
San Jose.
The Company completed the acquisition (the "In-Stock Acquisition") of the
In-Stock Division of Anchor Group, Inc. ("In-Stock") in April 1994 for $1.9
million in cash funded by the revolving line of credit. The Company has devoted
significant efforts to improving the performance of those operations. The
Company's financial statements exclude the financial results of In-Stock prior
to the In-Stock Acquisition.
According to the April 17, 1995 edition of ELECTRONIC BUYERS' NEWS, the
Company ranked as the 26th largest electronics distributor in the United States
in 1994.
10
<PAGE>
RESULTS OF OPERATIONS
RICHEY ELECTRONICS, INC.
SUMMARY OF SELECTED DATA
(UNAUDITED)
The following table sets forth certain items in the statements of income as
a percent of net sales for periods shown and additional items of a statistical
nature.
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
----------------------- ------------------------
June 30, July 1, June 30, July 1,
1995 1994 1995 1994
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Statements of Operations Data:
------------------------------
Net Sales . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold. . . . . . . . . 76.5 75.9 76.0 76.0
----------- --------- ---------- ----------
Gross Profit. . . . . . . . . . . . 23.5 24.1 24.0 24.0
----------- --------- ---------- ----------
Selling, warehouse and general &
administrative . . . . . . . . . . 17.2 18.0 17.7 18.2
Amortization of intangibles . . . . 0.3 0.6 0.4 0.7
----------- --------- ---------- ----------
Operating Income. . . . . . . . . . 6.0 5.4 5.9 5.1
Interest Expense. . . . . . . . . . 0.7 1.6 1.1 1.7
----------- --------- ---------- ----------
Income before income taxes. . . . . 5.4 3.8 4.8 3.4
Federal and state income taxes. . . 2.2 1.5 1.9 1.4
----------- --------- ---------- ----------
Net Income. . . . . . . . . . . . . 3.2% 2.3% 2.9% 2.0%
----------- --------- ---------- ----------
----------- --------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
June 30, Mar 31, Dec 31, Sept 30, July 1, April 1, Dec. 31,
1995 1995 1994 1994 1994 1994 1993
-------- -------- ------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
-------------------
Total assets (000) . . . . . . . . . $40,810 $38,083 $35,013 $34,434 $33,090 $30,834 $30,918
Working capital (000). . . . . . . . $19,828 $ 6,471 $ 5,317 $ 5,908 $ 5,235 $ 4,573 $ 6,888
Ratio of current asset to
current liabilities . . . . . . . . 2.3 1.3 1.2 1.3 1.3 1.2 1.4
Line of credit (000) . . . . . . . . $ 3,212 $13,864 $ 8,843 $10,714 $10,731 $10,714 $ 6,995
Subordinated notes payable (000) . . $ 0 $ 3,594 $ 5,194 $ 5,194 $ 5,194 $ 5,194 $ 8,151
Inventory turnover . . . . . . . . . 5.2 5.0 4.9 4.9 5.4 5.2 4.4
Days sales outstanding in
accounts receivable . . . . . . . . 42.1 45.4 42.3 44.0 41.5 41.2 43.0
Stockholders' equity . . . . . . . . $26,122 $ 9,465 $ 8,785 $ 8,250 $ 7,779 $ 7,247 $ 6,898
Return on stockholders' equity . . . 18.2% 29.8% 24.1% 26.2% 25.7% 21.0% 21.2%
</TABLE>
11
<PAGE>
Net sales for the quarter ended June 30, 1995 increased to $28,305,000 from
$23,105,000 for the corresponding period of 1994, an increase of 22.5%. Net
sales of electronic components increased to $20,363,000 in the second quarter of
1995 from $17,423,000 in the second quarter of 1994, an increase of 17%. Net
sales of value-added assembly services increased to $7,942,000 for the quarter
ended June 30, 1995 from $5,682,000 for the corresponding period of 1994, an
increase of 40%. Net sales for the first six months of 1995 were $54,901,000
compared to net sales of $43,352,000 for the same period in 1994. Net sales of
electronic components increased to $39,556,000 for the six months ended June 30,
1995 from $33,810,000 for the corresponding six months of 1994, an increase of
17%. Component sales increased (i) primarily as a result of the general
strength in the electronic marketplace, as exhibited by an increased demand for
all types of component products, and (ii) because of an increase in product
offerings due to new franchises and expanded geographic coverage of existing
franchises. Net sales of value-added assembly services increased to $15,345,000
for the six months ended June 30, 1995 from $9,542,000 for the corresponding six
months of 1994, an increase of 60%. Value-added sales increased to 28% of total
net sales for the first half of 1995 from 22% for the same period in 1994, in
part, as a result of the In-Stock Acquisition in April 1994. Management
estimates that approximately one-sixth of the increase in value-added assembly
service revenues is due to the In-Stock Acquisition and the balance of the
increase is due primarily to the continued trend toward outsourcing of cable and
other types of assemblies by original equipment manufacturers.
The Company believes that order backlog (confirmed orders from customers for
shipment within the next 12 months) generally averages two to three months'
sales in the electronics distribution industry. Order backlog at June 30, 1995
was $26,500,000, up 36% from $19,450,000 at July 1, 1994.
Gross profit for the six months ended June 30, 1995 was 24% and remained
unchanged from gross profit for the six months ended July 1, 1994. Gross profit
as a percentage of net sales was 23.5% for the second quarter of 1995 compared
to 24.1% for the second quarter of 1994, a decline of 0.6%. Component gross
profit for the second quarter decreased slightly, which management attributes to
increased competitive pressure on incremental sales of these products and a
decision by management to take additional business at a lower gross margin.
Gross profit on value-added services decreased in the second quarter of 1995 as
compared to the second quarter of 1994, as a result of rescheduling of assembly
work and shipments to comply with several larger customer requests. The
decreased volume due to these customer delays resulted in the Company absorbing
less assembly expenses, primarily labor costs.
Operating expenses for the quarter ended June 30, 1995 increased to
$4,956,000 from $4,301,000 for the corresponding period in 1994, an increase of
15%, but, as a percentage of net sales, decreased 1.1% for the quarter ended
June 30, 1995 compared to the same period in 1994. For the six months ended
June 30, 1995, operating expenses were $9,911,000 compared to operating expenses
of $8,183,000 for the corresponding period in 1994, an increase of 21%.
However, as a percentage of net sales for the six month period, operating
expenses decreased to 18.1% from 18.9%. The Company's primary operating
12
<PAGE>
expenses include salaries and benefits, warehouse and corporate facilities costs
and telecommunications which do not increase proportionally with increases in
sales; therefore the Company continues to achieve operating leverage (reduced
operating expenses as a percentage of net sales). Management expects to see
continued benefits from economies of scale and increased operating leverage as
revenues increase. As a result of the Company's revenue growth and the
operating leverage from such growth, operating income increased 46% from
$2,234,000 for the six months ended July 1, 1994 to $3,262,000 for the six
months ended June 30, 1995.
Interest expense for the second quarter of 1995 was $185,000 as compared
with $373,000 for the second quarter of 1994. The decrease in interest expense
for the second quarter of 1995 was due to the Company repaying, in late April
1995, all of its senior and junior subordinated notes and most of its revolving
line of credit, using the proceeds from the public offering. The Company
expects interest expense to be minimal for the balance of 1995. See Note 3 of
Notes to Condensed Financial Statements.
Federal and state income tax expense increased to $610,000 (40% effective
rate) for the quarter ended June 30, 1995 from $356,000 (40% effective rate) for
the corresponding period of 1994. This increase was proportional to the
increase in pre-tax earnings for the quarter. See Note 3 of Notes to Condensed
Financial Statements for further discussion of income tax matters.
LIQUIDITY AND CAPITAL RESOURCES
During April and May of 1995, the Company sold 3,165,000 shares of common
stock, raising $15,748,000. The proceeds were used to completely pay down the
senior and junior subordinated notes and most of the Company's revolving line of
credit. As a result of the public offering, working capital increased to
$19,828,000 on June 30, 1995 from $5,317,000 on December 31, 1994, an increase
of $14,511,000. During the first six months of 1995, the Company generated
$3,654,000 of earnings before interest, income taxes, depreciation and
amortization ("EBITDA") as compared to EBITDA of $2,614,000 for the first six
months of 1994, an increase of 40%. During the same period, the Company used
$1,455,000 in operating activities, consisting primarily of $1,936,000 in
increased accounts receivable, $1,721,000 in increased inventories and a
$667,000 decrease in accounts payable and accrued expenses. The increase in
inventory and accounts receivable was a result of the 26.6% increase in sales
for the six months ended June 30, 1995. Including $455,000 of net cash used in
investing activities, primarily for capital expenditures, the net use of funds
of $1,910,000 was financed partly by borrowing against the Company's revolving
line of credit and partly from the proceeds from the Company's issuance of
common stock.
For the quarter ended June 30, 1995, inventory turnover increased to 5.2x
compared to 5.0x for the quarter ended March 31, 1995 and 4.9x for the quarter
ended December 31, 1994. The improvement in inventory turnover is both a result
of the enhanced inventory control and supplier product return programs
instituted by the Company and the general improvement in business activity
experienced in the first half of 1995.
13
<PAGE>
Days sales outstanding of 42 days at June 30, 1995 was unchanged compared to
42 days at December 31, 1994, but is a 3-day improvement over the first quarter
of 1995. This is the result of improved collections during the second quarter
of 1995.
The Company currently maintains, with its asset based lender, a revolving
line of credit of $15,000,000 based upon eligible accounts receivable and
inventory, with an interest rate of 1.5% over prime. The revolving line of
credit restricts payment of cash dividends on the Company's common stock,
without prior approval of the lender. As a result of the terms of the loan with
its lender, the Company maintains outstanding borrowings of approximately
$3,000,000 to meet the minimum interest requirements. The Company invests this
money in short-term investment instruments with maturities of approximately 30
days. The Company is currently negotiating with its lender to increase its
available line of credit and improve the terms and conditions of its loan
agreement. The Company believes that its current line of credit will be
adequate to meet its anticipated funding commitments for the remainder of 1995.
The Company does not anticipate that the adoption of any of the recently
issued FASB statements will have a material impact on the Company's financial
statements.
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting of stockholders on May 17,
1995. C. Don Alverson, Thomas W. Blumenthal, William C. Cacciatore,
Edward L. Gelbach, Greg A. Rosenbaum, Norbert W. St. John and
Donald I. Zimmerman were each reelected to serve as directors until
the next annual meeting of stockholders. Each director (except
Mr. Blumenthal) received 5,288,991 votes in favor of his election and
352 votes were withheld from such director's election. Mr. Blumenthal
received 5,288,990 votes in favor of his election and 353 votes were
withheld from his election.
Stockholders also voted to ratify the appointment of McGladrey &
Pullen, LLP as the Company's independent auditors for 1995. 5,278,437
votes were cast for, 887 votes were cast against and 10,020 votes
abstained from ratifying the appointment of McGladrey & Pullen, LLP as
the Company's independent auditors.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required by Item 601 of Regulation S-K.
None.
(b) Reports on Form 8-K.
None.
15
<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 the
undersigned thereunto duly authorized.
RICHEY ELECTRONICS, INC.
(Registrant)
By /s/ Richard N. Berger
-------------------------
Richard N. Berger
Vice President,
Chief Financial Officer
and Secretary
August 11, 1995
16
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