<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended February 28, 1995
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
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(Exact name of registrant as specified in its charter)
California 95-2048764
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9320 Telstar Avenue, El Monte, California 91731-2895
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 307-6000
Common Stock outstanding by class as of February 28, 1995:
COMMON STOCK 17,268,864 SHARES
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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
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<PAGE>
MARSHALL INDUSTRIES
CONDENSED BALANCE SHEETS
(000's Omitted)
<TABLE>
<CAPTION>
ASSETS
February 28,
1995 May 31,
(Unaudited) 1994
------------ ---------
<S> <C> <C>
Current Assets:
Cash $ 2,349 $ 3,694
Receivables - net 133,662 120,489
Inventories 194,402 180,753
Deferred income tax benefits 8,325 8,325
Prepaid expenses 628 510
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Total Current Assets 339,366 313,771
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Property, Plant and Equipment, net
of accumulated depreciation and
amortization of $44,331 at
February 28, 1995 and $40,482
at May 31, 1994 40,591 43,060
Note Receivable (Note 5) 28,640 --
Other Assets - Net 5,893 6,828
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Total Assets $414,490 $363,659
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--------- ---------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt $ 1,710 $ 1,358
Accounts payable and accrued expenses 88,674 80,530
Income taxes payable 4,914 2,864
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Total Current Liabilities 95,298 84,752
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Long-Term Debt:
Bank lines of credit 18,000 30,000
Term Loan (Note 5) 25,000 --
Mortgages and other debt 3,460 4,742
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Total Long-Term Debt 46,460 34,742
-------- ---------
Deferred Income Tax Liabilities 5,449 5,449
Shareholders' Investment 267,283 238,716
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Total Liabilities and
Shareholders' Investment $414,490 $363,659
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-------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed balance sheets.
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<PAGE>
MARSHALL INDUSTRIES
CONDENSED INCOME STATEMENTS
(Unaudited)
(000's omitted except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
--------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $261,623 197,628 728,551 598,029
Cost of sales 214,604 156,861 591,155 471,622
-------- -------- -------- --------
Gross profit 47,019 40,767 137,396 126,407
Selling, general and
administrative expenses (Note 3) 29,083 27,090 87,318 84,309
-------- -------- -------- --------
Income from operations 17,936 13,677 50,078 42,098
Interest expense - net 594 353 1,561 1,454
-------- -------- -------- --------
Income before income taxes 17,342 13,324 48,517 40,644
Provision for income taxes (Note 4) 7,250 5,505 20,300 16,695
-------- -------- -------- --------
Net income $ 10,092 $ 7,819 $ 28,217 $ 23,949
-------- -------- -------- --------
-------- -------- -------- --------
Net income per share $ .58 $ .45 $ 1.62 $ 1.38
-------- -------- -------- --------
-------- -------- -------- --------
Average number of shares outstanding 17,441 17,429 17,435 17,333
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of these condensed income
statements.
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<PAGE>
MARSHALL INDUSTRIES
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's omitted)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28,
---------------------
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $28,217 $23,949
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 5,531 6,133
Net increase in current assets
and liabilities (16,746) (8,886)
Accrued interest on note receivable (686) --
Other operating activities 18 70
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Net cash provided by operating activities: 16,334 21,266
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Cash flows from investing activities:
Capital expenditures (1,380) (1,119)
Note Receivable (27,954) --
Deferred software costs (696) --
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Net cash used for investing activities (30,030) (1,119)
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Cash flows from financing activities:
Net repayments under
bank lines of credit (12,000) (19,000)
Term loan borrowings 25,000 --
Net repayments of other long-term debt (930) (1,361)
Proceeds from exercise of options 281 1,403
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Net cash (used for) provided by
financing activities 12,351 (18,958)
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Net increase (decrease) in cash (1,345) 1,189
Cash at the beginning of the period 3,694 1,583
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Cash at the end of the period $ 2,349 $ 2,772
------- -------
------- -------
Supplemental disclosure of
cash flow information:
Interest paid during the period $ 1,479 $ 1,552
------- -------
------- -------
Income taxes paid during the period $17,224 $16,529
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these condensed cash flow
statements.
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<PAGE>
MARSHALL INDUSTRIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1: GENERAL
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto in the Company's annual report on Form 10-K for the year ended May
31, 1994.
In the opinion of the Company, the unaudited condensed financial statements
reflect all adjustments (consisting of normal recurring accruals) considered
necessary to present fairly the Company's financial position as of February 28,
1995 and the results of its operations for the three month and nine month
periods and its cash flows for the nine month periods ended February 28, 1995
and 1994. All share and per share data included in these condensed financial
statements have been restated to reflect a two-for-one stock split paid on
February 28, 1994.
NOTE 2: ACCOUNTING POLICIES
Reference is made to Note 1 of Notes to Financial Statements in the Company's
annual report on Form 10-K for the summary of significant accounting policies.
NOTE 3: RESTRUCTURING CHARGE
As a result of a reorganization of the Company's field and corporate support
functions, the Company eliminated approximately 120 positions effective August
31, 1993. To provide for the costs of this reorganization, a pre-tax charge of
$890,000 was recorded in the first quarter of fiscal 1994.
NOTE 4: INCOME TAXES
In August, 1993 the Omnibus Budget Reconciliation Act of 1993 was enacted. As a
result of the Act, a retroactive Federal tax adjustment of $163,000, or $.01 per
share, was charged to the provision for income taxes in the first quarter of
fiscal 1994 for the period of January to May 1993. The tax rate increase did
not have a material impact on the Company's deferred tax assets and liabilities.
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<PAGE>
NOTE 5: INVESTMENT IN SONEPAR ELECTRONIQUE INTERNATIONAL
As described in Note 6 to the Financial Statements in the Company's Annual
Report on Form 10K for the year ended May 31, 1994, the Company entered into an
agreement to invest $151 million French Francs (approximately $28 million U.S.
dollars) in Sonepar Electronique International ("S.E.I."), the third largest
electronic component distributor in Europe. This investment is in the form of
an interest bearing, convertible note guaranteed by a major French bank as to
default. To finance the investment, the Company entered into an agreement with
a major U.S. bank for an unsecured term loan of $25 million, with principal
repayment due on September 30, 1997. The Company's bank lines were the source
for the remaining funds used for this investment. The definitive agreements
with S.E.I. and the U.S. bank were signed in August, 1994 and the investment and
loan transactions were completed in September, 1994.
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<PAGE>
MARSHALL INDUSTRIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATING RESULTS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 82.0 79.4 81.1 78.9
------ ------ ------ ------
Gross profit 18.0 20.6 18.9 21.1
Selling, general and
administrative expenses 11.1 13.7 12.0 14.1
------ ------ ------ ------
Income from operations 6.9 6.9 6.9 7.0
Interest expense - net .2 .2 .2 .2
------ ------ ------ ------
Income before provision
for income taxes 6.7 6.7 6.7 6.8
Provision for
income taxes 2.8 2.8 2.8 2.8
------ ------ ------ ------
Net income 3.9% 3.9% 3.9% 4.0%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
THREE AND NINE MONTH PERIODS ENDED FEBRUARY 28, 1995 AND 1994
The increase in net sales for the third quarter and the first nine months of
fiscal 1995, as compared to fiscal 1994, was primarily due to an increase in the
sales volume of semiconductor products. Sales of semiconductor products
increased by $51,191,000 and $108,967,000 for the three and nine month periods
ended February 28, 1994, respectively, as compared to the same periods of fiscal
1994. The increase in sales of semiconductor products was mainly the result of
continued strong market demand for such products and increased sales of products
from suppliers added in recent years. The sales volume of the Company's other
major products in fiscal 1995 increased modestly from fiscal 1994.
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<PAGE>
Due to the cyclical nature of the electronics industry, the Company has
experienced industry-wide product shortages and excess supplies from time to
time. While the overall demand for its products remains very strong and there
are generally adequate supplies of most products, there has been a tightening of
product availability of some products, such as certain DRAMS and SRAMS, during
the last several months. In addition, one of the Company's major suppliers,
IBM, has recently reduced the availability of memory products to its
distributors. The margins on the IBM memory products, however, are
significantly lower than margins on the Company's other products.
The decrease in net margins as a percent of sales for the third quarter and nine
months to date of fiscal 1995, as compared to fiscal 1994, was due to a decline
in the margins on many of the Company's major products. This decline in margins
resulted from market pressures on the pricing of a number of the Company's
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.
Selling, general, and administrative expenses ("SG&A"), increased in dollars for
the third quarter and the first nine months of fiscal 1995, as compared to
fiscal 1994, largely due to higher compensation expenses from salary
adjustments, offset by a reduction in warehousing and office support personnel.
The balance of the increase in SG&A expenses in fiscal 1995, as compared to
fiscal 1994, was due to the increase in various operating expenses, including
provision for bad debts required to support the higher sales volume. SG&A
expenses for the first nine months of fiscal 1994 included a charge of $890,000
related to the costs of eliminating approximately 120 positions. These
positions were eliminated as of August 31, 1993, as a result of a reorganization
of the Company's field and Corporate Support functions.
The increase in interest expense for the third quarter and first nine months of
fiscal 1995, as compared to fiscal 1994, was due primarily to higher interest
rates in fiscal 1995.
The Company's sources of liquidity at February 28, 1995 consisted principally of
working capital of $244,068,000 and unsecured bank lines of credit of
$70,000,000 of which $18,000,000 was used. The Company believes that its
working capital, borrowing capabilities and additional funds generated from
operations should be sufficient to finance its anticipated operations
requirements.
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<PAGE>
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the shareholders during the quarter for
which this report is filed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter for which this report
is filed.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARSHALL INDUSTRIES
March 31, 1995 /s/ HENRY W. CHIN
----------------------------
Henry W. Chin
Vice President, Finance and
Chief Financial Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARSHALL
INDUSTRIES QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> FEB-28-1995
<CASH> 2,349
<SECURITIES> 0
<RECEIVABLES> 140,866
<ALLOWANCES> (7,204)
<INVENTORY> 194,402
<CURRENT-ASSETS> 339,366
<PP&E> 84,922
<DEPRECIATION> 44,331
<TOTAL-ASSETS> 414,490
<CURRENT-LIABILITIES> 95,298
<BONDS> 46,460
<COMMON> 17,268
0
0
<OTHER-SE> 250,015
<TOTAL-LIABILITY-AND-EQUITY> 414,490
<SALES> 728,551
<TOTAL-REVENUES> 728,551
<CGS> 591,155
<TOTAL-COSTS> 84,918
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,400
<INTEREST-EXPENSE> 1,561
<INCOME-PRETAX> 48,517
<INCOME-TAX> 20,300
<INCOME-CONTINUING> 28,217
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,217
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 0
</TABLE>
