<PAGE>
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1994
/ / 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 1-5441
- - --------------------------------------------------------------------------------
MARSHALL INDUSTRIES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- - --------------------------------------------------------------------------------
<TABLE>
<S> <C>
CALIFORNIA 95-2048764
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
9320 TELSTAR AVENUE 91731-2895
EL MONTE, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
(818) 307-6000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<S> <C>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- - ------------------------------------------------------------------------------------
COMMON STOCK, PAR VALUE NEW YORK STOCK EXCHANGE
$1.00 PER SHARE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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 / /
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. /X/
STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES
OF THE REGISTRANT.
$349,747,464 (COMPUTED ON THE BASIS OF $22.00 PER SHARE, WHICH WAS THE LAST
SALE PRICE ON THE NEW YORK STOCK EXCHANGE ON JULY 29, 1994).
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S
CLASSES OF COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
<TABLE>
<CAPTION>
NUMBER OF OUTSTANDING SHARES
CLASS OF STOCK AS OF JULY 29, 1994
- - ------------------------------------------------------------------------------------
<S> <C>
COMMON STOCK, PAR VALUE $1.00 PER SHARE 17,232,864
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 24,
1994 PART III
<PAGE>
Marshall Industries
FORM 10-K
Year Ended May 31, 1994
PART I
ITEM 1. BUSINESS
GENERAL
Electronics distributors form an integral part of the electronics industry.
Most domestic and foreign manufacturers of electronic components rely on
independent authorized distributors, such as Marshall Industries ("the
Company"), to augment their product marketing operations and provide stocking
and service capabilities. These manufacturers are relying to an increasing
extent on distributors to market their products.
The Company is the fourth largest domestic distributor in sales volume of
industrial electronic components and production supplies. Through its network of
36 sales and distribution facilities and 3 corporate support and distribution
centers in the United States and Canada, the Company supplies and services a
broad range of products, including semiconductors, passive components,
connectors and interconnect products, and computer systems and peripheral
products, as well as production supplies. The distribution of electronic
components accounted for approximately 91% and 94% of total Company sales in
fiscal 1993 and 1994, respectively. The distribution of industrial production
supplies accounted for the balance or 9% and 6%, respectively, of total Company
sales in each of such periods. The Company believes it is the largest domestic
distributor in sales volume of industrial production supplies to customers in
the electronics industry.
ELECTRONIC COMPONENTS DISTRIBUTION
The distribution of semiconductor products accounted for approximately 62%
and 70%, respectively, of total Company sales in fiscal 1993 and 1994. Passive
components, connectors and interconnect products accounted for approximately 16%
and 13%, respectively, of total Company sales for those periods. Sales of
computer systems and peripheral products accounted for approximately 13% and
11%, respectively, of total Company sales in fiscal 1993 and 1994.
Texas Instruments ("TI") is the Company's largest supplier of semiconductor
products. TI's semiconductor products accounted for approximately 14% and 15% of
total Company sales in fiscal 1993 and 1994, respectively. The Company carries
the full range of semiconductor products manufactured by TI and distributes the
products of a number of other leading American manufacturers. The Company is
also the major distributor in sales volume of Japanese semiconductor products in
the United States. Sales of these products accounted for approximately 16% and
19% of total Company sales in fiscal 1993 and 1994, respectively. Additionally,
the Company distributes components manufactured by European suppliers, such as
Siemens Components, Inc. ("Siemens"), Philips Semiconductors, a North American
Philips Company ("Philips"), formerly "Signetics," and SGS-Thomson
Microelectronics Inc. ("SGS-Thomson").
The Company purchases electronic components from over 50 major suppliers in
the following general categories:
SEMICONDUCTOR PRODUCTS: Semiconductor products include memory, logic and
programmable logic devices, microprocessors and microperipheral components. The
Company's principal suppliers are Brooktree Corporation, Cypress Semiconductor
Corp., Fujitsu, Hitachi, Lattice Semiconductor Corporation, Linear Technology,
Philips, NEC, Siemens, SGS-Thomson, TI, Toshiba America, Inc. and Xilinx, Inc.
During late fiscal 1993, Atmel Corp. and IBM Technology Products, a unit of
IBM, awarded the Company franchise agreements to distribute their semiconductor
products.
2
<PAGE>
PASSIVE COMPONENTS: The Company distributes passive components, including
multilayer ceramic, tantalum and foil capacitors as well as resistor networks.
These products are manufactured by such leading suppliers as AVX Corporation, a
subsidiary of Kyocera Corporation and Bourns, Inc.
CONNECTORS AND INTERCONNECT PRODUCTS: Connectors and interconnect products
include surface mount sockets and fiber optic systems, along with printed
circuit board level connectors. The Company's principal suppliers of connectors
and interconnect products are AMP Incorporated and T&B/Ansley Corporation, which
rank among the leading suppliers of these products.
COMPUTER SYSTEMS AND PERIPHERALS: The Company's product offerings include
printers, keyboards, optical, hard and floppy disk drives, monitors, mother
boards for personal computers, power supplies, and other systems components.
Computer Products Inc., Fujitsu, IBM Personal Computer Company, NEC Electronics,
Inc., Sharp Electronics Corporation, Sony Components Products, and Toshiba
America Information Systems, Inc. are the major suppliers of these products to
the Company.
VALUE ADDED SERVICES: In addition to the distribution of component parts,
the Company provides a variety of value added services to its customers. The
Company provides programmable logic array and PROM and EPROM programming, along
with certain types of testing services. The Company also packages electronic
component kits to customers' specifications ("kitting") and provides cable
assembling services. Through the use of third party contractors, the Company
provides contract manufacturing capabilities.
PRODUCTION SUPPLIES DISTRIBUTION
The Company believes that it is the largest domestic distributor in sales
volume of industrial production supplies to customers in the electronics
industry. Such supplies include hand tools, static control products,
instrumentation, solder, soldering irons and work stations. Leading suppliers
include Cooper Tools, a division of Cooper Industries, Kester Solder, a division
of Litton Industries, Tektronix, Inc., and 3M.
MARKETS
The Company currently has a national distribution network in the United
States and Canada consisting of 36 sales and distribution centers and 3
corporate support and distribution centers. The Company believes that it has
sales facilities in all of the major electronic products markets in the United
States, including the Los Angeles/Orange County, San Francisco/Silicon Valley,
Boston, Chicago, Denver, Philadelphia, Portland, Seattle, Connecticut, Florida,
New Jersey, Georgia, Maryland, Minnesota, Ohio and Texas areas. In Canada, the
Company has sales facilities in Toronto and Montreal. As a result of the
Company's marketing strategy and expansion programs, the Company is currently
distributing products manufactured by over 50 major electronic component
suppliers to approximately 30,000 customers.
As described in Note 6 to the financial statements, the Company has entered
into an agreement to make an investment in Sonepar Electronique International,
the third largest electronic component distributor in Europe.
At May 31, 1994, the Company had approximately 1,450 employees,
substantially all of whom were employed full-time.
3
<PAGE>
CUSTOMERS AND MARKETING
Distributors offer electronics customers the convenience of immediate price
and delivery information, backlog status, diverse off-the-shelf inventories in
small and large quantities, rapid deliveries and the financing of their
purchases. The Company's electronics distribution business services
approximately 30,000 customers, the majority of which are small and medium size
original equipment manufacturers ("OEM's") in the fields of computers,
communications, capital and office equipment, industrial control and medical
equipment. In recent years, contract manufacturers have also become major
customers for electronic component distributors, including the Company, as many
OEM's have outsourced their purchasing and manufacturing functions to them. No
single customer accounted for more than 4% of the Company's sales during any of
the last five fiscal years.
The Company's products are sold by both field and inside sales people. Sales
personnel work directly with customers providing price, delivery, backlog and
technical information regarding the products which the Company distributes. Each
sales and distribution center is electronically linked to the Company's central
computer system, which provides fully integrated on-line, real-time data with
respect to the Company's nationwide inventory levels. The Company's computer
system facilitates the control of purchasing and payables, shipping and
receiving, and billing and collections. A salesperson may order shipment of a
product from any distribution center within a matter of minutes. The Company has
made significant investments, particularly during the last several years, to
increase the capabilities of its computerized information systems. In December,
1992, the Company implemented new computer software for its operating and
financial systems. The Company had invested approximately $9 million in the
design, purchase, and implementation of these systems. In the opinion of the
Company, these systems, which were written in a contemporary language and
architecture, have the capabilities to support future changes and enhancements
required to meet market needs and growth. Due to the high volume of transactions
and the cost competitiveness of the electronics components distribution
industry, the Company believes that the expansion and upgrading of its
computerized information systems will be an ongoing requirement. In July, 1994,
the Company introduced an electronic telecommunications service that allows
customers to design, engineer and purchase products via the "Internet". The
Company believes that it is the first major electronic component distributor to
offer this service.
The Company has focused on obtaining franchises with suppliers which are
among the leading manufacturers of the product categories that the Company
distributes. In addition, the Company has established distributor relationships
with suppliers of emerging high technology products, such as Brooktree, Cypress,
Lattice, Linear Technology, and Xilinx. The Company offers a broad line of
products to meet its customers' needs. The Company has also concentrated its
inventory and marketing efforts on the following product categories that it
believes are the greatest growth areas of the distribution business: (1) high
performance memory and programmable logic devices; (2) data conversion products;
(3) microprocessors; (4) computer systems and peripherals; (5) printed circuit
board level connectors; (6) passive components; and (7) industrial production
supplies and instrumentation. Additionally, the Company is focusing on having
its sales force sell a balanced mix of all types of products along with
expanding its customer base.
RELATIONSHIP WITH SUPPLIERS
The majority of the products sold by the Company are purchased pursuant to
distributor agreements. These agreements are typically for terms of one year,
renewable annually, non-exclusive, and authorize the Company to sell through its
sales and distribution centers all or a portion of the products produced by that
manufacturer. These agreements may be cancelled by either party on short notice
and generally provide for a return of the manufacturer's inventory upon
cancellation. The Company's ten largest suppliers accounted for approximately
51% and 54%, respectively, of total Company sales in fiscal 1993 and 1994.
Except for TI, which accounted for 14% and 15% of total Company sales for fiscal
1993 and 1994, no other supplier accounted for more than 10%. Cancellation of an
agreement with, or trade restrictions affecting purchases from, a major supplier
could have a material adverse effect upon the Company's business. The Company
believes that it has a
4
<PAGE>
satisfactory relationship with each of its suppliers. The Company considers its
relationships with its Japanese suppliers to be sound. Nonetheless, because of
uncertainties relating to U.S. trade issues, the possibility exists that
continued access to Japanese products could be affected. In addition, the
Company cannot determine the direction of U.S. trade issues or their ultimate
effect on the competitive environment and the Company's results.
Most manufacturers of electronic components, including foreign
manufacturers, protect authorized distributors, such as the Company, against
potential inventory losses from declining prices and obsolescence. To protect
its distributors from declining market prices, most electronic component
manufacturers allow their distributors pricing adjustments as products are sold
to customers as well as credits on unsold inventory when the manufacturers
reduce prices on their price lists. In addition, under the terms of many such
agreements, the distributor has the right to return to the manufacturer, for
credit, any product classified as obsolete by the manufacturer and a specified
portion of other inventory items purchased within a designated period of time. A
manufacturer who elects to terminate a distribution agreement without cause is
generally required to purchase from the distributor the products of such
manufacturer carried in the distributor's inventory. While such agreements do
not protect the Company totally from inventory losses, such agreements do, in
management's opinion, provide substantial protection from such losses. No
assurance can be given, however, that such price adjustment and return policies
will continue.
To service its kitting and turnkey contract manufacturing customers, as
described on page 3, the Company must buy a certain amount of products from
third parties on a non-franchised basis. Since there are typically no return or
price protection privileges on these purchases, there are significantly greater
inventory risks associated with kitting and turnkey contract manufacturing
orders than with the purchase and stocking of inventory pursuant to its
franchise agreements.
NATURE OF BUSINESS AND COMPETITION
Although the Company's business is not seasonal to any material extent, its
business is affected by the cyclical nature of the electronics industry and
overall trends in the general economy. In addition, the Company has experienced
industry-wide product shortages and excess supplies from time to time. During
the last several years, there have been shortages of and long lead times on some
semiconductor products, particularly surface mount logic and certain memory
devices. In recent months however, the availability and lead times of many
products have returned to normal levels.
Supplying and servicing the electronics industry is a highly competitive
business. The competition is from other large national distributors, numerous
local and regional distributors, as well as some of the Company's suppliers.
Providing service to customers is the major competitive factor of the industry.
In addition to providing basic distribution services such as technical
information, product availability and competitive pricing, prompt delivery and
credit, the Company offers many sophisticated value added services. These
additional services include component testing and assembly; just in time ("JIT")
inventory management and delivery systems; kitting and contract assembly; and
sophisticated computer interface services such as electronic data interchange
("EDI"). The Company considers its emphasis on high-quality customer service,
monitored by statistical process control ("SPC") methods, to be one of its
strengths.
From time to time, the Company has experienced competition from
"unauthorized" U.S. distributors of Japanese semiconductors who purchase these
products in foreign countries at prices below those which the Company may
purchase such products directly from its suppliers. In addition, a limited
number of the Company's customers have moved their manufacturing operations out
of the United States in recent years. Such changes have not had a material
impact on the Company's business.
Information concerning backlog is not material to an understanding of the
Company's business, as the Company's objective is to ship orders on the same day
they are received unless the customer has requested a
5
<PAGE>
specific future delivery date on an order. Additionally, it is common industry
practice for customers, in most cases, to be able to re-schedule or cancel
orders with future delivery dates without penalties. In the electronics
industry, the book-to-bill ratio, which is the ratio of sales orders received to
shipments made, is commonly used as an indicator of business trends. Since late
calendar 1991, the book-to-bill ratios for both the industry and the Company
have been generally positive.
ITEM 2. PROPERTIES
The Company presently has 36 sales and distribution facilities and 3
corporate support and distribution centers. The Company's executive offices and
corporate support and distribution center are located in El Monte, California.
This facility is Company owned, has 258,000 square feet of space and utilizes an
automated inventory handling system. In addition to this facility, the Company
is using one other facility in El Monte for its regional warehousing functions.
It is also Company owned and has approximately 65,500 square feet of warehousing
and general office space.
In addition to the El Monte facilities, a majority of the sales and
distribution facilities located in Marshall's major markets are Company owned.
The three largest facilities range from approximately 58,000 to approximately
65,000 square feet in size and are located in Milpitas, California; Irvine,
California and Boston, Massachusetts. The Company also owns facilities in
Austin, Texas, Endicott, New York, San Diego, California and Wallingford,
Connecticut of approximately 8,000 to 15,000 square feet each.
The Company leases its remaining sales and distribution facilities. They are
located in cities throughout the United States and Canada, vary in size
depending on sales volume and are subject to leases whose initial terms expire
at various dates through fiscal 2000. Substantially all of those leases include
renewal provisions.
In the opinion of the Company, the current facilities are adequate for the
Company's operating requirements.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the quarter
ended May 31, 1994.
6
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol MI. The following table shows, for the periods indicated, the
published closing sale prices per share for the Company's Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1993
First Quarter................................... $18 5/8 $14 5/8
Second Quarter.................................. 21 1/8 17 3/8
Third Quarter................................... 20 1/4 17 3/8
Fourth Quarter.................................. 21 1/8 18 1/4
FISCAL YEAR 1994
First Quarter................................... $23 $21
Second Quarter.................................. 25 22 1/4
Third Quarter................................... 28 22 3/8
Fourth Quarter.................................. 29 3/8 23 7/8
</TABLE>
The above share prices have been adjusted to reflect the two for one stock
split paid on February 28, 1994.
The Company had approximately 6,000 shareholders at May 31, 1994. It has
never paid a cash dividend. Earnings have been retained to provide for the
growth and expansion of the Company's business.
7
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data with respect to the
statements of income of the Company for the five fiscal years ended May 31,
1994, and the balance sheets of the Company at year end for each of those years.
The selected financial data is derived from financial statements for such years
and at such dates as audited by Arthur Andersen & Co., independent public
accountants, including the statements of income for the three years ended May
31, 1994, and the balance sheets at May 31, 1993 and 1994 included elsewhere
herein.
<TABLE>
<CAPTION>
STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT FOR PER SHARE DATA)
YEARS ENDED MAY 31,
-----------------------------------------------------
1990 1991 1992 1993 1994
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 543,690 $ 582,717 $ 575,223 $ 652,899 $ 822,548
Cost of sales..................................... 416,596 449,739 441,709 502,955 652,121
--------- --------- --------- --------- ---------
Gross profit.................................... 127,094 132,978 133,514 149,944 170,427
Selling, general and administrative expenses...... 90,440 99,868 98,917 108,394 112,220
--------- --------- --------- --------- ---------
Income from operations.......................... 36,654 33,110 34,597 41,550 58,207
Interest expense and other -- net (1)............. 3,376 4,391 2,689 2,016 1,931
--------- --------- --------- --------- ---------
Income before provision for income taxes........ 33,278 28,719 31,908 39,534 56,276
Provision for income taxes........................ 13,186 11,450 12,615 15,640 23,105
--------- --------- --------- --------- ---------
Net income........................................ $ 20,092 $ 17,269 $ 19,293 $ 23,894 $ 33,171
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share (2).......................... $ 1.12 $ 1.01 $ 1.13 $ 1.38 $ 1.91
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Cash dividends per share (3)...................... -- -- -- -- --
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average number of shares outstanding..... 17,886 17,040 17,114 17,278 17,357
BALANCE SHEETS -- SUMMARY
(IN THOUSANDS)
<CAPTION>
MAY 31,
-----------------------------------------------------
1990 1991 1992 1993 1994
-----------------------------------------------------
<S> <C> <C> <C> <C> <C>
Working capital................................... $ 136,181 $ 150,726 $ 162,080 $ 206,970 $ 229,019
Total assets...................................... 249,920 254,132 273,429 330,844 363,659
Long-term debt, net of current portion............ 51,520 46,988 36,216 54,468 34,742
Shareholders' investment.......................... 140,541 158,345 178,464 202,791 238,716
<FN>
- - -------------
(1) Amounts are net of capitalized interest during construction of $834,000 in
1990 and a gain of $428,000 from the sale of a facility and a receipt of
$500,000 from the sale of intangible assets in 1991.
(2) Net income per share is computed on the basis of the weighted average
common and common equivalent shares outstanding during each year and
reflects the repurchase of 845,000 shares of common stock in fiscal 1990.
All amounts have been restated to reflect the two for one stock split paid
on February 28, 1994.
(3) The Company has never paid a cash dividend. Earnings have been retained to
provide for the growth and expansion of the Company's business.
</TABLE>
8
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth items in the statements of income as a
percent of net sales for periods shown:
<TABLE>
<CAPTION>
YEARS ENDED MAY 31,
-------------------------------
1992 1993 1994
-------------------------------
<S> <C> <C> <C>
Net sales....................................................................................... 100.0% 100.0% 100.0%
Cost of sales................................................................................... 76.8 77.0 79.3
--------- --------- ---------
Gross profit.................................................................................. 23.2 23.0 20.7
Selling, general and administrative expenses.................................................... 17.2 16.6 13.7
--------- --------- ---------
Income from operations........................................................................ 6.0 6.4 7.0
Interest expense and other--net................................................................. .5 .3 .2
--------- --------- ---------
Income before provision for income taxes...................................................... 5.5 6.1 6.8
Provision for income taxes...................................................................... 2.2 2.4 2.8
--------- --------- ---------
Net income...................................................................................... 3.3% 3.7% 4.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>
As an aid to understanding the results of operations, the following is a
summary of the Company's unaudited quarterly results of operations for fiscal
years 1992, 1993 and 1994 (in thousands except for per share data):
<TABLE>
<S> <C> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH
1992 QUARTER QUARTER QUARTER QUARTER YEAR
- - --------------------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Net sales...................................................... $ 137,520 $ 138,864 $ 142,615 $ 156,224 $ 575,223
Gross profit................................................... 31,783 32,033 32,896 36,802 133,514
Net income..................................................... 4,018 4,118 4,826 6,331 19,293
Net income per share........................................... .24 .24 .28 .37 1.13
1993
- - ---------------------------------------------------------------
Net sales...................................................... $ 151,867 $ 154,680 $ 156,259 $ 190,093 $ 652,899
Gross profit................................................... 36,314 36,740 35,012 41,878 149,944
Net income..................................................... 6,012 6,048 4,667 7,167 23,894
Net income per share........................................... .35 .35 .27 .41 1.38
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
1994
- - --------------------------------------------------
NET SALES......................................... $ 199,807 $ 200,594 $ 197,628 $ 224,519 $ 822,548
GROSS PROFIT...................................... 42,900 42,740 40,767 44,020 170,427
NET INCOME........................................ 7,487 8,643 7,819 9,222 33,171
NET INCOME PER SHARE.............................. .43 .50 .45 .53 1.91
</TABLE>
All per share amounts have been restated to reflect the two for one stock
split paid on February 28, 1994.
9
<PAGE>
FISCAL 1994 COMPARED TO FISCAL 1993
The increase in net sales for fiscal 1994, as compared to fiscal 1993, was
due to an increase in the sales volume of semiconductor products. Sales of
semiconductor products increased by $178,237,000 as a result of the strong
market demand and additional sales of products from new suppliers. The sales
volume of the Company's other major products was relatively unchanged or
decreased modestly from the prior year.
The decrease in net margins for fiscal 1994, as compared to fiscal 1993, was
due to a decline in the margins of most of the Company's major products. This
decline in margins resulted from market pressures on the pricing of many of the
Company's products, including some of the Company's value added products, and an
increase in the sales volume of lower margin products, such as DRAMS. The
Company believes that these conditions affecting margins may continue in the
near term.
The increase in selling, general and administrative ("SG & A") expenses, in
dollars, for fiscal 1994, as compared to fiscal 1993, was primarily due to
higher operating costs to support the significant increase in sales volume. In
addition, the Company is amortizing $463,000 per quarter of deferred computer
software costs associated with its new operating and financial systems that
became operational in December, 1992. Fiscal 1994 expenses also included a
charge of $890,000 that was recorded in the first quarter related to the costs
of the elimination of approximately 120 positions. These positions were
eliminated as of August 31, 1993 by a reorganization of the Company's field and
corporate support functions. The amounts incurred for the last nine months of
fiscal 1994 would have been higher except for the savings from the elimination
of these positions. This reorganization reduced the Company's fiscal 1994
expenses by approximately $1,000,000 per quarter beginning the second quarter.
Primarily due to the savings from the August, 1993 restructuring and the higher
sales volume, SG & A as a percentage of sales declined significantly for fiscal
1994 as compared to fiscal 1993. The SG & A amounts for fiscal 1993 also
included some extraordinary levels of expenses related to the Company's
conversion to its new computer software systems in December, 1992. As reported
previously, the Company estimated that it had incurred approximately $2.4
million to $2.9 million in additional costs, affecting both cost of sales and SG
& A expenses in fiscal 1993 associated with the computer software conversion.
Interest expense for fiscal 1994 remained relatively unchanged from fiscal
1993, as lower borrowing levels were offset by higher interest rates beginning
in late fiscal 1994.
In August, 1993 the Omnibus Budget Reconciliation Act of 1933 was enacted
which essentially increased the Company's Federal tax rate from 34% to 35%.
Additionally, as a result of the Act, a retroactive Federal tax adjustment of
$163,000, or $.02 per share, was charged to income tax expense in the first
quarter of fiscal 1994 for the period of January to May 1993.
FISCAL 1993 COMPARED TO FISCAL 1992
The increase in net sales for fiscal 1993, as compared to fiscal 1992, was
primarily due to an increase in the sales volume of semiconductor products.
Sales of such products increased by $77,859,000. The increase in the sales of
semiconductor products was the result of increased market demand for these
products and the successful execution of the Company's marketing strategies. The
sales volume of the Company's other major products was relatively unchanged.
The decrease in margins for the third and fourth quarters of fiscal 1993, as
compared to fiscal 1992, was largely due to a decline in the margins of
semiconductor and value added products. This decrease was attributable to the
market pressures on the pricing of some of the Company's products. In addition,
the Company's acceptance of some large customer orders at lower than normal
margins contributed to the decline in the Company's margins. There was also an
increase in the volume of the Company's lower margin value added products,
particularly the programming of semiconductors, during the last half of fiscal
1993. Lastly, additional expenses were incurred during the third quarter of
fiscal 1993, due to some problems with the Company's conversion and
implementation of new computer software for its operating and financial systems
in
10
<PAGE>
December, 1992. These expenses contributed to the overall decline in margins for
the third quarter and included some higher than normal levels of overtime for
value added services, missed vendor discounts and credits, and additional
expenses from customer billing problems.
The increase in dollars of SG & A expenses for the third quarter and fiscal
1993, as compared to fiscal 1992, partly relates to short-term expenses incurred
as a result of the conversion to new computer software systems in December,
1992. These expenses consisted of overtime costs, higher than normal delivery
costs to satisfy customer demands, additional computer consultant costs and
other out-of-pocket costs. As described in Note 1 to the financial statements,
expenses during the last half of fiscal 1993 also included the amortization of
$926,000 in deferred computer software costs. In addition, compensation costs
and other operating expenses increased during fiscal 1993, as compared to fiscal
1992, as a result of the significantly higher sales volume and profitability
levels.
The Company estimates that it incurred approximately $1.5 million to $2.0
million in additional costs, affecting both cost of sales and SG & A expenses,
associated with the conversion and implementation of the new computer software
systems in the third quarter of fiscal 1993. These amounts do not include the
amortization of the deferred computer software costs described in the preceding
paragraph. The Company also incurred approximately $900,000 during the fourth
quarter of fiscal 1993 for consulting costs associated with the computer
software implementation and enhancement. These expenses continued, although at a
significantly lower level, into the fiscal year 1994. The software systems have
been largely operating as designed. The Company has not experienced any major
disruptions to its operations from the new computer software system since early
January, 1993.
The decrease in interest expense for fiscal 1993, as compared to fiscal
1992, was due to significantly lower interest rates paid by the Company on its
borrowings. The favorable improvement in interest rates was partially offset by
higher debt levels.
INCOME TAXES
During the fourth quarter of fiscal year 1993, the Company implemented
Statement of Financial Accounting Standards No. 109 covering income tax
accounting. The adoption did not have a material impact on the financial
statements for fiscal year 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been able to fund its working capital requirements for the
past five years through cash flow from operations and bank borrowings.
For the five years ended May 31, 1994, the Company incurred approximately
$26 million in net aggregate capital expenditures. A significant portion of this
amount was incurred for the land, equipment, building improvements and an
automated material handling system for its new executive offices and western
regional support and distribution center. Costs incurred to upgrade and expand
its computer system and the acquisition and construction of several facilities
accounted for substantially the balance of the capital expenditure program for
the last five years. Additionally, the Company incurred approximately $9 million
for the design, purchase and development of new computer software for its
operating and financial systems during fiscal years 1990 to 1993.
The Company's sources of liquidity at May 31, 1994 consisted principally of
working capital of $229,019,000 and unsecured bank credit lines of $70,000,000,
of which $30,000,000 in borrowings were outstanding. The Company believes that
its working capital, borrowing capabilities, and the funds generated from
operations should be sufficient to finance its anticipated operational
requirements.
11
<PAGE>
ITEM 8. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Marshall Industries:
We have audited the accompanying balance sheets of Marshall Industries (a
California corporation) as of May 31, 1993 and 1994, and the related statements
of income, shareholders' investment and cash flows for each of the three years
in the period ended May 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Marshall Industries as of
May 31, 1993 and 1994, and the results of its operations and its cash flows for
each of the three years in the period ended May 31, 1994 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Los Angeles, California
July 20, 1994
12
<PAGE>
Marshall Industries
BALANCE SHEETS
May 31, 1993 and 1994
<TABLE>
<CAPTION>
ASSETS
-----------------------------
CURRENT ASSETS: 1993 1994
-----------------------------
<S> <C> <C>
Cash......................................... $ 1,583,000 $ 3,694,000
Receivables, less reserves of $5,499,000 in
1993 and
$5,860,000 in 1994.......................... 101,120,000 120,489,000
Inventories.................................. 163,280,000 180,753,000
Prepaid expenses............................. 888,000 510,000
Deferred income tax benefits (Note 3)........ 7,681,000 8,325,000
------------- -------------
Total current assets................... 274,552,000 313,771,000
------------- -------------
PROPERTY, PLANT AND EQUIPMENT, at cost (Notes 1
and 2):
Land......................................... 8,812,000 8,863,000
Buildings and improvements................... 33,545,000 34,038,000
Equipment, furniture, fixtures and other..... 21,447,000 21,908,000
Computer equipment........................... 17,862,000 18,716,000
Construction in progress..................... 199,000 17,000
------------- -------------
81,865,000 83,542,000
Accumulated depreciation and amortization.... (34,234,000) (40,482,000)
------------- -------------
47,631,000 43,060,000
OTHER ASSETS -- NET (Note 1)................... 8,661,000 6,828,000
------------- -------------
$ 330,844,000 $ 363,659,000
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current portion of long-term debt (Note 2)... $ 1,763,000 $ 1,358,000
Accounts payable............................. 54,128,000 70,839,000
Accrued salaries and wages................... 3,545,000 3,908,000
Other accrued liabilities.................... 5,796,000 5,783,000
Income taxes payable......................... 2,350,000 2,864,000
------------- -------------
Total current liabilities.............. 67,582,000 84,752,000
------------- -------------
LONG-TERM DEBT, net of current portion (Note
2)........................................... 54,468,000 34,742,000
DEFERRED INCOME TAX LIABILITIES (Note 3)....... 6,003,000 5,449,000
COMMITMENTS AND CONTINGENCIES (Note 4)
SHAREHOLDERS' INVESTMENT (Notes 1 and 5):
Common stock, $1.00 par value
Shares authorized -- 40,000,000
Shares issued and outstanding -- 17,037,864
in 1993 and
17,231,864 in 1994....................... 17,038,000 17,232,000
Additional paid-in capital................... 50,327,000 52,887,000
Retained earnings............................ 135,426,000 168,597,000
------------- -------------
202,791,000 238,716,000
------------- -------------
$ 330,844,000 $ 363,659,000
------------- -------------
------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
13
<PAGE>
Marshall Industries
STATEMENTS OF INCOME
For the Years Ended May 31, 1992, 1993 and 1994
<TABLE>
<CAPTION>
----------------------------------------------------
1992 1993 1994
----------------------------------------------------
<S> <C> <C> <C>
Net sales............................................................ $ 575,223,000 $ 652,899,000 $ 822,548,000
Cost of sales........................................................ 441,709,000 502,955,000 652,121,000
---------------- ---------------- ----------------
Gross profit....................................................... 133,514,000 149,944,000 170,427,000
Selling, general and administrative expenses......................... 98,917,000 108,394,000 112,220,000
---------------- ---------------- ----------------
Income from operations............................................. 34,597,000 41,550,000 58,207,000
Interest expense (Note 1)............................................ 2,689,000 2,016,000 1,931,000
---------------- ---------------- ----------------
Income before provision for income taxes........................... 31,908,000 39,534,000 56,276,000
Provision for income taxes (Notes 1 and 3)........................... 12,615,000 15,640,000 23,105,000
---------------- ---------------- ----------------
NET INCOME........................................................... $ 19,293,000 $ 23,894,000 $ 33,171,000
---------------- ---------------- ----------------
---------------- ---------------- ----------------
NET INCOME PER SHARE (Note 1)........................................ $1.13 $1.38 $1.91
---------------- ---------------- ----------------
---------------- ---------------- ----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
14
<PAGE>
Marshall Industries
STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Years Ended May 31, 1992, 1993 and 1994
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
----------------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
---------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE, MAY 31, 1991......................................... 16,947,864 $ 16,948,000 $ 49,158,000 $ 92,239,000
Compensation expense related to nonqualified stock options
(Note 5)................................................... -- -- 200,000 --
Exercise of stock options................................... 71,500 71,000 415,000 --
Tax benefit from stock options exercised.................... -- -- 140,000 --
Net income.................................................. -- -- -- 19,293,000
------------- -------------- -------------- ----------------
BALANCE, MAY 31, 1992......................................... 17,019,364 17,019,000 49,913,000 111,532,000
Compensation expense related to nonqualified stock options
(Note 5)................................................... -- -- 215,000 --
Exercise of stock options................................... 18,500 19,000 121,000 --
Tax benefit from stock options exercised.................... -- -- 78,000 --
Net income.................................................. -- -- -- 23,894,000
------------- -------------- -------------- ----------------
BALANCE, MAY 31, 1993......................................... 17,037,864 17,038,000 50,327,000 135,426,000
COMPENSATION EXPENSE RELATED TO NONQUALIFIED STOCK OPTIONS
(NOTE 5)................................................... -- -- 103,000 --
EXERCISE OF STOCK OPTIONS................................... 194,000 194,000 1,276,000 --
TAX BENEFIT FROM STOCK OPTIONS EXERCISED.................... -- -- 1,181,000 --
NET INCOME.................................................. -- -- -- 33,171,000
------------- -------------- -------------- ----------------
BALANCE, MAY 31, 1994......................................... 17,231,864 $ 17,232,000 $ 52,887,000 $ 168,597,000
------------- -------------- -------------- ----------------
------------- -------------- -------------- ----------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
15
<PAGE>
Marshall Industries
STATEMENTS OF CASH FLOWS
For the Years Ended May 31, 1992, 1993 and 1994
<TABLE>
<CAPTION>
----------------------------------------------
1992 1993 1994
----------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................... $ 19,293,000 $ 23,894,000 $ 33,171,000
-------------- -------------- --------------
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization............................................ 6,561,000 7,379,000 8,194,000
Compensation expense related to stock options............................ 200,000 215,000 103,000
Provision for bad debts.................................................. 1,082,000 1,284,000 1,704,000
Change in current assets and liabilities:
Increase in receivables................................................ (3,249,000) (20,892,000) (21,073,000)
Increase in inventories................................................ (9,550,000) (39,188,000) (17,473,000)
(Increase) decrease in prepaid expenses................................ 116,000 (206,000) 378,000
Increase in accounts payable........................................... 3,899,000 14,387,000 16,711,000
Increase (decrease) in accrued salaries and wages...................... 324,000 (21,000) 363,000
Increase (decrease) in other accrued
liabilities......................................................... 578,000 1,974,000 (13,000)
Increase (decrease) in income taxes
payable............................................................. 1,441,000 (1,942,000) 514,000
Deferred income taxes provision (benefit), net........................... 1,395,000 (88,000) (1,198,000)
Other.................................................................... 48,000 44,000 (19,000)
-------------- -------------- --------------
Total adjustments...................................................... 2,845,000 (37,054,000) (11,809,000)
-------------- -------------- --------------
Net cash provided by (used in) operating activities.................... 22,138,000 (13,160,000) 21,362,000
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant, and equipment......................... 198,000 60,000 9,000
Capital expenditures......................................................... (6,387,000) (3,186,000) (1,780,000)
Software development costs................................................... (3,985,000) (2,417,000) --
-------------- -------------- --------------
Net cash used in investing activities.................................. (10,174,000) (5,543,000) (1,771,000)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under credit line agreements..................... (8,000,000) 20,000,000 (18,000,000)
Repayments of long-term debt................................................. (4,636,000) (1,741,000) (2,131,000)
Exercise of stock options.................................................... 486,000 140,000 1,470,000
Tax benefit from exercise of stock options................................... 140,000 78,000 1,181,000
-------------- -------------- --------------
Net cash (used in) provided by financing activities.................... (12,010,000) 18,477,000 (17,480,000)
-------------- -------------- --------------
NET INCREASE (DECREASE) IN CASH................................................ (46,000) (226,000) 2,111,000
CASH AT BEGINNING OF YEAR...................................................... 1,855,000 1,809,000 1,583,000
-------------- -------------- --------------
CASH AT END OF YEAR............................................................ $ 1,809,000 $ 1,583,000 $ 3,694,000
-------------- -------------- --------------
-------------- -------------- --------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for the following:
Interest................................................................... $ 2,551,000 $ 2,008,000 $ 2,052,000
-------------- -------------- --------------
-------------- -------------- --------------
Income taxes............................................................... $ 9,639,000 $ 16,439,000 $ 23,132,000
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
16
<PAGE>
Marshall Industries
NOTES TO FINANCIAL STATEMENTS
May 31, 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition: Sales are recognized at the time of product shipment.
Depreciation and Amortization: Depreciation on buildings is computed using
the straight-line method over useful lives of 25 years. Building and leasehold
improvements are amortized on the straight-line method over the shorter of the
lives of the buildings or the remaining terms of the leases or useful lives of
the assets. Depreciation on all other plant and equipment is computed on the
straight-line and declining balance methods over useful lives of two to ten
years. Maintenance and repairs and minor replacements of property are charged to
expense when incurred. Major expenditures for additions and improvements are
capitalized at cost. When assets are retired, or otherwise disposed of, the cost
and related reserves are removed from the accounts, and any resulting gain or
loss is included in income.
Interest Expense: Interest income is netted against interest expense and was
not material for 1992, 1993 and 1994.
Tax Deferred Profit Sharing Plan: Under the provisions of the Marshall
Industries Tax Deferred Profit Sharing Plan (the "Plan"), participating
employees may agree to defer from two to twelve percent, with certain
limitations, of their earnings each payroll period, and such amount is deposited
in a nonforfeitable, fully vested trust account for the employee's benefit. The
Company contributes quarterly an amount equal to 50 percent of the employees'
contributions, limited to 3% of such employee earnings for the quarter, reduced
by employee forfeitures of prior Company contributions. Company contributions
may be limited to the extent of net profits and must be invested in the
Company's common stock. The Plan, however, may not own more than 20 percent of
the Company's outstanding shares. At May 31, 1994, the Plan owned less than 2%
of the Company's outstanding shares. Company contributions and expenses related
to the Plan amounted to $917,000 in 1992, $952,000 in 1993 and $1,125,000 in
1994.
Capitalized Interest: In accordance with the provisions of the Statement of
Financial Accounting Standards No. 34, the Company capitalizes interest in
connection with major construction projects. The Company did not have any major
construction projects requiring the capitalization of interest during 1992, 1993
and 1994.
Income Taxes: As discussed in Note 3, during the fourth quarter of fiscal
1993, the Company adopted Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are computed based on the difference between the financial statement
and income tax bases of assets and liabilities using the enacted tax rates.
Prior to the implementation of SFAS No. 109, the Company accounted for income
taxes using Accounting Principles Board Opinion No. 11.
Cash and Accounts Payable: The Company's banking system provides for the
daily replenishment of its bank accounts for check clearing requirements.
Accordingly, outstanding checks of $7,655,000 and $11,015,000 that had not yet
been paid by the Company's banks at May 31, 1993 and 1994, respectively, are
reflected in cash and accounts payable in the accompanying financial statements.
Inventories: The Company values its inventories at the lower of average cost
or market.
Shareholders' Investment: The Company has authorized 200,000 shares of no
par value preferred stock, of which none was outstanding at May 31, 1993 or
1994.
Capitalized Deferred Software Costs: Deferred software costs are included in
other assets and represent payments to vendors for the design, purchase and
implementation of the computer software for the Company's operating and
financial systems. Such deferred costs aggregating to $9,259,000, are amortized
over five years beginning December, 1992. At May 31, 1993 and 1994, the
accumulated amortization of such costs were $926,000 and $2,778,000,
respectively.
17
<PAGE>
Net Income Per Share: Per share amounts are computed on the basis of
weighted average common and common equivalent shares outstanding (17,114,000 in
1992, 17,278,000 in 1993 and 17,357,000 in 1994). Common equivalent shares
include the dilutive effect of outstanding stock options, if applicable. All
share and per share data included in these financial statements have been
restated to reflect the two-for-one stock split paid on February 28, 1994.
(2) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MAY 31,
------------------------------
1993 1994
------------------------------
<S> <C> <C>
Bank credit lines................................................................. $ 48,000,000 $ 30,000,000
Industrial revenue bonds:
75.8% of prime, due through 1996................................................ 1,553,000 1,025,000
Mortgages:
8 1/10%, due through 1998....................................................... 5,500,000 4,250,000
Variable rate, but limited to a maximum of prime rate, due through 1997......... 1,125,000 825,000
Other............................................................................. 53,000 --
-------------- --------------
56,231,000 36,100,000
Less current portion.............................................................. 1,763,000 1,358,000
-------------- --------------
$ 54,468,000 $ 34,742,000
-------------- --------------
-------------- --------------
</TABLE>
Bank credit lines --
The Company has entered into revolving credit line agreements with two major
banks to borrow up to $70,000,000 in the aggregate. These unsecured credit line
agreements, with borrowing limits of up to $40,000,000 and $30,000,000 each,
mature on December 31, 1995 and 1996, respectively. The interest rates under
these credit lines are determined at the time of borrowing based on a choice of
options as specified in the agreements. In no event would the interest rate
exceed the prime interest rate. At May 31, 1994, the prime rate was 7.25%. A
commitment fee is payable based on 1/4% per annum on the daily average unused
amounts of the lines of credit. In addition, both banks require a facility fee
of 1/8% per annum on the commitment balance. There are no compensating balance
requirements.
The terms of these credit agreements require the Company, among other
things, to maintain a minimum net worth of $170,000,000 which is adjusted upward
quarterly by 70 percent of net income and 70 percent of net proceeds from any
sales of capital stock or subordinated debentures. At May 31, 1994 at least
$202,564,000 of shareholders' investment was required to meet this covenant. The
credit agreements also require the Company to meet certain specified working
capital and financial ratios and not to make capital expenditures or incur lease
liabilities in excess of certain specified amounts. The Company is in compliance
with all conditions and covenants of these agreements.
Industrial revenue bonds --
The industrial revenue bonds are secured by real property with a net book
value of $3,129,000 at
May 31, 1994.
18
<PAGE>
Mortgages --
These notes are secured by real property and related improvements with a net
book value of approximately $20,119,000 at May 31, 1994.
Maturities of long-term debt --
Long-term debt at May 31, 1994 based on current terms is payable in
succeeding fiscal years as follows: 1995 $1,358,000; 1996 $18,710,000; 1997
$14,532,000; 1998 $1,000,000; 1999 $500,000.
The Company's bank credit lines and industrial revenue bonds approximate
fair value as they bear floating interest rates. The mortgages approximate fair
market value.
(3) INCOME TAXES
The Company adopted the provisions of SFAS No. 109 effective the fourth
quarter of fiscal year 1993. The adoption of this Standard, which changed the
Company's method of accounting for income taxes from the deferred method to an
asset and liability approach, did not have a material effect on the financial
statements for fiscal year 1993.
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
-------------------------------------
Current: 1992 1993 1994
-------------------------------------
<S> <C> <C> <C>
Federal...................................... $ 8,272,000 $12,369,000 $19,357,000
State........................................ 2,948,000 3,359,000 4,946,000
----------- ----------- -----------
11,220,000 15,728,000 24,303,000
----------- ----------- -----------
Deferred:
Federal...................................... 1,674,000 (32,000) (1,024,000)
State........................................ (279,000) (56,000) (174,000)
----------- ----------- -----------
1,395,000 (88,000) (1,198,000)
----------- ----------- -----------
Total.................................. $12,615,000 $15,640,000 $23,105,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The difference between the income tax provision at the Federal statutory
rate and the recorded income tax provision is reconciled as follows:
<TABLE>
<CAPTION>
-------------------------------------
Computed Federal income taxes at 1992 1993 1994
-------------------------------------
<S> <C> <C> <C>
the statutory rate........................... $10,849,000 $13,441,000 $19,697,000
State income taxes, net of Federal income tax
benefit...................................... 1,762,000 2,180,000 3,102,000
Other, net..................................... 4,000 19,000 306,000
----------- ----------- -----------
Provision for income taxes..................... $12,615,000 $15,640,000 $23,105,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
19
<PAGE>
As of May 31, 1993 and 1994, deferred tax assets (liabilities) were
comprised of the following:
<TABLE>
<CAPTION>
1993 1994
------------- -------------
<S> <C> <C>
Operating reserves............................................................... $ 4,301,000 $ 4,446,000
Tax depreciation in excess of book amounts....................................... (3,210,000) (3,084,000)
Capitalization of deferred software costs for book purposes...................... (2,793,000) (2,177,000)
Capitalization of inventory costs for income tax purposes........................ 1,447,000 1,615,000
Vacation expense accrued for book purposes....................................... 729,000 825,000
State tax provision.............................................................. 629,000 934,000
Other, net....................................................................... 575,000 317,000
------------- -------------
Total net deferred tax asset............................................. $ 1,678,000 $ 2,876,000
------------- -------------
------------- -------------
</TABLE>
As of May 31, 1994, the Company had total deferred tax assets of $8,325,000
and total deferred tax liabilities of $5,449,000. The Company did not record any
valuation allowances against deferred tax assets at May 31, 1994.
(4) COMMITMENTS AND CONTINGENCIES
Lease Commitments: The Company leases certain facilities and equipment under
operating leases expiring at various dates through fiscal year 2000. The
aggregate rent expense for all operating leases was $2,800,000 in 1992,
$2,618,000 in 1993 and $2,324,000 in 1994.
The future minimum lease payments under all leases are shown below:
<TABLE>
<CAPTION>
OPERATING LEASES
----------------
<S> <C>
Year Ending May 31 --
1995.......................................................................... $ 1,285,000
1996.......................................................................... 581,000
1997.......................................................................... 330,000
1998.......................................................................... 336,000
1999.......................................................................... 95,000
Thereafter.................................................................... 53,000
----------------
$ 2,680,000
----------------
----------------
</TABLE>
Amounts shown above are net of sublease income of $476,000, $491,000,
$503,000, $214,000 and $129,000 from 1995 to 1999, respectively.
Litigation: There are no material pending legal proceedings to which the
Company is a party.
(5) STOCK OPTIONS
The Company has four stock option plans which provide for the granting of
incentive and nonqualified stock options covering 2,040,000 shares of common
stock. The 1992 Stock Option Plan was approved by the shareholders during fiscal
1993 and the 1990 Plan was terminated. No shares were granted under the 1990
Plan prior to its termination. Nonqualified stock options may have an exercise
price which is less than market value at the date of grant; incentive stock
options must have an exercise price equal to market value at the date of grant.
There were 314,000 and 50,000 options granted in fiscal 1992 and 1994,
respectively, at exercise prices ranging from $10.00 to $24.00 per share. No
options were granted during fiscal 1993. At May 31, 1994, 320,500 shares were
available for additional grants.
20
<PAGE>
The following is a summary of changes in outstanding options for the
Company's stock option plans for the year ended May 31, 1994:
<TABLE>
<CAPTION>
UNDER
OPTION OPTION PRICE
---------- -------------------
<S> <C> <C>
Options outstanding at May 31, 1993................................................ 589,500 $ 6.50 - $14.00
Options granted.................................................................... 50,000 24.00
Options exercised.................................................................. (194,000) 6.50 - 9.89
Options expired or canceled........................................................ (1,000) 7.60
----------
Options outstanding at May 31, 1994................................................ 444,500 7.60 - 24.00
---------- -------------------
---------- -------------------
Options exercisable................................................................ 96,000 $ 7.60 - 14.00
---------- -------------------
---------- -------------------
</TABLE>
The difference between the quoted market value of the shares at the date of
grant and the option price for grants made under the nonqualified plans is
charged to income as compensation expense over the vesting periods of the
related options. During 1992, 1993 and 1994, $200,000, $215,000 and $103,000,
respectively, were charged against income and credited to additional paid-in
capital under these plans. Options granted are exercisable over a period of five
to twenty years. The income tax effect of any difference between the market
price at the grant date and the market price at the exercise date is credited to
additional paid-in capital as the options are exercised.
(6) INVESTMENT IN SONEPAR ELECTRONIQUE INTERNATIONAL
In March, 1994, the Company entered into an agreement in principle to invest
$151 million French Francs (approximately $28 million in U.S. dollars based on
July 29, 1994 exchange rates) in Sonepar Electronique International ("SEI"), one
of the three largest electronic component distributors in Europe. This
investment is in the form of an interest bearing, convertible note, guaranteed
by a major French bank as to default. The interest to be charged on the note
will be the same as the Company's borrowing rates under its unsecured term loan,
as described herein. The note plus accrued interest will be converted in 1997
into a minority equity interest of up to 20% in SEI if certain anticipated sales
and pre-tax income goals are met. If these goals are not met, the Company will
have the option to call for the repayment in U.S. dollar equivalent of the
original loan (plus accrued interest) or to convert the loan into a 20% equity
interest in SEI. Following the conversion, SEI will have a 2 year option to
purchase an equivalent amount in U.S. dollars of the Company's stock of up to 5%
of the Company's outstanding shares on a fully diluted basis. The option price
will be based on market prices at the time of conversion. In addition, the
Company will have the option of increasing its equity investment to 49% in SEI.
To finance its investment in SEI, the Company has obtained a commitment from
a bank for an unsecured term loan in the amount of $25,000,000, with principal
repayment due on September 30, 1997. The Company, however, has the option of
repaying the loan, or a portion thereof, prior to the maturity date. The
interest rate on this loan will be based on 90 day LIBOR rates plus 1/2% and the
other major terms and conditions of the loan are comparable to the bank credit
line agreements as disclosed in Note 2.
The Company anticipates that its agreements with SEI and the bank will be
executed by August 31, 1994.
(7) BUSINESS SEGMENT
The Company is engaged in the distribution of industrial electronic
components and production supplies through a nationwide network of sales and
distribution facilities. In the opinion of management, the Company's products
are identifiable to only one industry segment.
The Company's Canadian operations are currently not material to its results
of operations or financial position.
21
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
PART III
Marshall will file with the Securities and Exchange Commission a definitive
Proxy Statement pursuant to Regulation 14A involving the election of directors.
The Proxy Statement for the Annual Meeting of Shareholders to be held on October
24, 1994 is incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS -- The following financial statements of
Marshall Industries are set forth in Item 8 of this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................................................ 12
Financial Statements:
Balance Sheets -- May 31, 1993 and 1994........................................................... 13
Statements for the years ended May 31, 1992, 1993 and 1994 --
Income.......................................................................................... 14
Shareholders' Investment........................................................................ 15
Cash Flows...................................................................................... 16
Notes to Financial Statements..................................................................... 17
</TABLE>
(A) 2. FINANCIAL STATEMENT SCHEDULES -- The following financial statement
schedules supporting the financial statements are included in this Annual Report
on Form 10-K:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants on Financial Statement Schedules........................... 25
Schedules for the years ended May 31, 1992, 1993 and 1994:
V -- Property, Plant and Equipment............................................................ 26
VI -- Accumulated Depreciation and Amortization of Property, Plant and Equipment............... 26
</TABLE>
All other schedules are omitted since they are not applicable, not required,
or the required information is included in the financial statements or notes
thereto.
(A) 3. EXHIBITS -- The following exhibits are attached to this Annual Report
on Form 10-K:
<TABLE>
<S> <C>
Exhibit 3.1: Articles of Incorporation. Incorporated herein by reference to Exhibit 3.2 of the
Company's Registration Statement on Form S-1, Registration No. 2-85466.
Exhibit 3.2: Certificate of Amendment of Articles of Incorporation filed with the California Secretary
of State on June 23, 1986. Incorporated herein by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1986.
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
Exhibit 3.3: Certificate of Amendment of Articles of Incorporation filed with the California Secretary
of State on October 18, 1988. Incorporated herein by reference to Exhibit A to the
Company's Proxy Statement for the annual meeting of shareholders held on October 11, 1988.
Exhibit 3.4: Certificate of Amendment of Articles of Incorporation filed with the California Secretary
of State on February 14, 1994.
Exhibit 3.5: Amended and Restated By-Laws. Incorporated herein by reference to Exhibit (ii) to the
Company's Quarterly Report on Form 10-Q for the quarter ended August 31, 1987.
Exhibit 3.6: Certificate of Amendment to By-Laws of Marshall Industries. Incorporated herein by
reference to Exhibit C to the Company's Proxy Statement for the annual meeting of
shareholders held on October 11, 1988.
Exhibit 4.1: Credit Agreement dated March 1, 1993 between Marshall Industries and Citicorp USA, Inc.
Incorporated by reference to Exhibit (i) to the Company's Quarterly Report on Form 10-Q
for the quarter ended February 28, 1993.
Exhibit 4.2: Credit Agreement dated March 1, 1993 between Marshall Industries and Bank of America
National Trust and Savings Association. Incorporated by reference to Exhibit (ii) to the
Company's Quarterly Report on Form 10-Q for the quarter ended February 28, 1993.
Exhibit 4.3: First Amendment to Credit Agreement dated May 3, 1993 between Marshall Industries and Bank
of America National Trust and Savings Association. Incorporated by reference to Exhibit
4.3 to the Company's Annual Report on Form 10-K for the fiscal year ended May 31, 1993.
Exhibit 4.4: First Amendment to Credit Agreement dated June 1, 1993 between Marshall Industries and
Citicorp USA, Inc. Incorporated by reference to Exhibit 4.4 to the Company's Annual Report
on Form 10-K for the fiscal year ended May 31, 1993.
Exhibit 10.1: Marshall Industries 1981 Nonqualified Stock Option Plan. Incorporated herein by reference
to Exhibit 4.2 to the Company's Registration Statement on Form S-8, No. 2-79412.
Exhibit 10.2: First Amendment to 1981 Nonqualified Stock Option Plan. Incorporated herein by reference
to Exhibit B to the Company's Final Proxy Statement dated September 16, 1983.
Exhibit 10.6: Marshall Industries 1984 Stock Option Plan. Incorporated herein by reference to Exhibit A
to the Company's Final Proxy Statement dated September 17, 1984.
Exhibit 10.7: Marshall Industries 1992 Nonqualified Stock Option Plan. Incorporated herein by reference
to Exhibit A to the Company's Final Proxy Statement dated August 31, 1992.
Exhibit 24: Consent of Independent Public Accountants.
Exhibit 28: Undertakings.
</TABLE>
(B) REPORTS ON FORM 8-K -- Marshall has not filed any reports on Form 8-K during
the quarter ended May 31, 1994
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, Marshall has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MARSHALL INDUSTRIES
<TABLE>
<S> <C>
By: /s/ HENRY W. CHIN
---------------------------------------------
Henry W. Chin August 25, 1994
Vice President, Finance, Chief Financial Officer and
Secretary
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
/s/ GORDON S. MARSHALL August 25, 1994
---------------------------------------------
Gordon S. Marshall
Chairman of the Board and Director
/s/ ROBERT RODIN August 25, 1994
---------------------------------------------
Robert Rodin
President, Chief Executive Officer
and Director (Principal Executive Officer)
/s/ HENRY W. CHIN August 25, 1994
---------------------------------------------
Henry W. Chin
Vice President, Finance, Chief Financial
Officer and Secretary
(Principal Financial and Accounting Officer)
/s/ RICHARD D. BENTLEY August 25, 1994
---------------------------------------------
Richard D. Bentley
Director
/s/ WILLIAM BONE August 25, 1994
---------------------------------------------
William Bone
Director
/s/ RICHARD C. COLYEAR August 25, 1994
---------------------------------------------
Richard C. Colyear
Director
/s/ LATHROP HOFFMAN August 25, 1994
---------------------------------------------
Lathrop Hoffman
Director
/s/ RAYMOND G. RINEHART August 25, 1994
---------------------------------------------
Raymond G. Rinehart
Director
/s/ HOWARD C. WHITE August 25, 1994
---------------------------------------------
Howard C. White
Director
</TABLE>
24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To Marshall Industries:
We have audited in accordance with generally accepted auditing standards,
the financial statements of Marshall Industries (a California corporation)
included in this Form 10-K, and have issued our report thereon dated July 20,
1994. Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed under Item 14.(a)2.
are the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Los Angeles, California
July 20, 1994
25
<PAGE>
Marshall Industries
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
For the Years Ended May 31, 1992, 1993 and 1994
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING SALES, BALANCE AT
OF ADDITIONS RETIREMENTS OR END OF
PERIOD AT COST RECLASSIFICATIONS PERIOD
<S> <C> <C> <C> <C>
-------------------------------------------------------
Year ended May 31, 1992 --
Land............................................ $ 8,303,000 $ -- $ -- $ 8,303,000
Buildings and improvements...................... 31,294,000 1,109,000 44,000 32,447,000
Equipment, furniture, fixtures and other........ 19,134,000 1,638,000 (422,000) 20,350,000
Computer equipment.............................. 14,415,000 3,048,000 (579,000) 16,884,000
Construction in progress........................ 519,000 592,000 (3,000) 1,108,000
----------- ---------- ---------------- -----------
$73,665,000 $6,387,000 $ (960,000) $79,092,000
----------- ---------- ---------------- -----------
----------- ---------- ---------------- -----------
Year ended May 31, 1993 --
Land............................................ $ 8,303,000 $ -- $ 509,000 $ 8,812,000
Buildings and improvements...................... 32,447,000 760,000 338,000 33,545,000
Equipment, furniture, fixtures and other........ 20,350,000 1,161,000 (64,000) 21,447,000
Computer equipment.............................. 16,884,000 1,066,000 (88,000) 17,862,000
Construction in progress........................ 1,108,000 199,000 (1,108,000) 199,000
----------- ---------- ---------------- -----------
$79,092,000 $3,186,000 $ (413,000) $81,865,000
----------- ---------- ---------------- -----------
----------- ---------- ---------------- -----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
YEAR ENDED MAY 31, 1994 --
LAND............................................ $ 8,812,000 $ 51,000 $ -- $ 8,863,000
BUILDINGS AND IMPROVEMENTS...................... 33,545,000 329,000 164,000 34,038,000
EQUIPMENT, FURNITURE, FIXTURES AND OTHER........ 21,447,000 476,000 (15,000) 21,908,000
COMPUTER EQUIPMENT.............................. 17,862,000 865,000 (11,000) 18,716,000
CONSTRUCTION IN PROGRESS........................ 199,000 59,000 (241,000) 17,000
----------- ---------- ---------------- -----------
$81,865,000 $1,780,000 $ (103,000) $83,542,000
----------- ---------- ---------------- -----------
----------- ---------- ---------------- -----------
- - -----------------------------------------------------------------------------------------------------------
</TABLE>
SCHEDULE VI -- ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND
EQUIPMENT
For the Years Ended May 31, 1992, 1993 and 1994
<TABLE>
<S> <C> <C> <C> <C>
Year ended May 31, 1992 --
Buildings and improvements...................... $ 4,950,000 $1,660,000 $ 34,000 $ 6,644,000
Equipment, furniture, fixtures and other........ 8,788,000 1,976,000 (338,000) 10,426,000
Computer equipment.............................. 8,597,000 2,925,000 (458,000) 11,064,000
----------- ---------- ---------------- -----------
$22,335,000 $6,561,000 $ (762,000) $28,134,000
----------- ---------- ---------------- -----------
----------- ---------- ---------------- -----------
Year ended May 31, 1993 --
Buildings and improvements...................... $ 6,644,000 $1,790,000 $ (89,000) $ 8,345,000
Equipment, furniture, fixtures and other........ 10,426,000 1,946,000 (188,000) 12,184,000
Computer equipment.............................. 11,064,000 2,717,000 (76,000) 13,705,000
----------- ---------- ---------------- -----------
$28,134,000 $6,453,000 $ (353,000) $34,234,000
----------- ---------- ---------------- -----------
----------- ---------- ---------------- -----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
YEAR ENDED MAY 31, 1994 --
BUILDINGS AND IMPROVEMENTS...................... $ 8,345,000 $1,798,000 $ (4,000) $10,139,000
EQUIPMENT, FURNITURE, FIXTURES AND OTHER........ 12,184,000 1,858,000 (83,000) 13,959,000
COMPUTER EQUIPMENT.............................. 13,705,000 2,686,000 (7,000) 16,384,000
----------- ---------- ---------------- -----------
$34,234,000 $6,342,000 $ (94,000) $40,482,000
----------- ---------- ---------------- -----------
----------- ---------- ---------------- -----------
</TABLE>
26
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE NO.
- - ----------- ---------
<C> <S> <C>
3.4 Certificate of Amendment of Articles of Incorporation filed
with the California Secretary of State on February 14, 1994.
24 Consent of Independent Public Accountants................... 28
28 Undertakings................................................ 29
</TABLE>
27
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Robert Rodin and Henry W. Chin certify that:
1. They are the President and Secretary, respectively, of Marshall Industries,
a California corporation.
2. Article FOURTH of the articles of incorporation of this corporation is
amended to read as follows:
"FOURTH: This corporation is authorized to issue two classes of
shares which shall be designated 'Common Stock' and 'Preferred Stock'.
The total number of said shares shall be forty million two hundred
thousand (40,200,000) shares; the aggregate par value of all shares that
are to have par value shall be Forty Million Dollars ($40,000,000); the
total number of Common shares shall be forty million (40,000,000), and
the par value of each Common share shall be One Dollar ($1.00); the total
number of Preferred shares shall be two hundred thousand (200,000); all
of said Preferred shares shall be without par value.
The shares of Preferred Stock may be issued from time to time in one
or more series. The Board of Directors hereby is authorized to fix or
alter the dividend rights, dividend rate, conversion rights, voting
rights, the rights and terms of redemption (including sinking fund
provision), redemption price or prices, or the liquidation preferences of
any wholly unissued series of Preferred Stock, or the number of shares
constituting any unissued series of Preferred Stock and the designation
of such series, or all or any of them; or to increase or to decrease (but
not below the number of shares of such series then outstanding) the
number of shares constituting any outstanding series the number of shares
of which was fixed by the Directors. In case the number of shares of any
series shall be so decreased, the shares constituting such decrease shall
resume the status they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
Upon the amendment of this Article Fourth to read as hereinabove set
forth, each share of Common Stock issued and outstanding at the close of
business on February 14, 1994, is divided into two shares of Common
Stock."
3. The foregoing Amendment of Articles of Incorporation has been duly approved
by the Board of Directors.
4. The foregoing Amendment to the Articles of Incorporation was one which may
be adopted with approval by the Board of Directors alone, pursuant to
Section 902(c) of the California General Corporation Law, because one class
of shares of the Corporation is outstanding.
______________________________________
Robert Rodin, President
______________________________________
Henry W. Chin, Secretary
28
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into Marshall Industries' previously
filed Registration Statements on Form S-8, File Numbers 2-79412, 33-1587 and
33-82510.
ARTHUR ANDERSEN & CO.
Los Angeles, California
August 25, 1994
29
<PAGE>
EXHIBIT 28
TO BE INCORPORATED BY REFERENCE INTO FORM S-8 REGISTRATION STATEMENTS
NUMBERS 2-79412, 33-1587 AND 33-82510.
UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in such prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represents a fundamental change in the information set forth in the
Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
PROVIDED, HOWEVER, that paragraphs (a)(l)(i) and (a)(l)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(f) EMPLOYEE PLANS ON FORM S-8.
(1) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus to each employee to whom the prospectus is sent or
given a copy of the registrant's annual report to stockholders for its last
fiscal year, unless such employee otherwise has received a copy of such report,
in which case the Registrant shall state in the prospectus that it will promptly
furnish, without charge, a copy of such report on written request of the
employee. If the last fiscal year of the Registrant has ended with 120 days
prior to the use of the prospectus, the annual report of the Registrant for the
preceding fiscal year may be so delivered, but within such 120 day period the
annual report for the last fiscal year will be furnished to each such employee.
(2) The undersigned Registrant hereby undertakes to transmit or cause to be
transmitted to all employees participating in the Plan who do not otherwise
receive such material as stockholders of the registrant, at the time and in the
manner such material is sent to its stockholders, copies of all reports, proxy
statements and other communications distributed to its stockholders generally.
(i) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
30
