<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 November 30, 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
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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 November 30, 1994:
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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Total Number of Pages: 10
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MARSHALL INDUSTRIES
CONDENSED BALANCE SHEETS
(000's Omitted)
ASSETS
<TABLE>
<CAPTION>
November 30,
1994 May 31,
(Unaudited) 1994
------------- --------
<S> <C> <C>
Current Assets:
Cash $ 1,801 $ 3,694
Receivables - net 126,960 120,489
Inventories 193,049 180,753
Deferred income tax benefits 8,325 8,325
Prepaid expenses 683 510
-------- --------
Total Current Assets 330,818 313,771
-------- --------
Property, Plant and Equipment, net
of accumulated depreciation and
amortization of $43,046 at
November 30, 1994 and $40,482
at May 31, 1994 41,672 43,060
Note Receivable (Note 5) 28,235 --
Other Assets - Net 6,339 6,828
-------- --------
Total Assets $407,064 $363,659
-------- --------
-------- --------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<S> <C> <C>
Current Liabilities:
Current portion of long-term debt $ 1,710 $ 1,358
Accounts payable and accrued expenses 90,028 80,530
Income taxes payable 175 2,864
-------- --------
Total Current Liabilities 91,913 84,752
-------- --------
Long-Term Debt:
Bank lines of credit 24,000 30,000
Term Loan (Note 5) 25,000 --
Mortgages and other debt 3,535 4,742
-------- --------
Total Long-Term Debt 52,535 34,742
-------- --------
Deferred Income Tax Liabilities 5,449 5,449
Shareholders' Investment 257,167 238,716
-------- --------
Total Liabilities and
Shareholders' Investment $407,064 $363,659
-------- --------
-------- --------
</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 SIX MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
-------------------- ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $243,827 $200,594 $466,928 $400,401
Cost of sales 197,562 157,854 376,551 314,761
-------- -------- -------- --------
Gross profit 46,265 42,740 90,377 85,640
Selling, general and
administrative expenses (Note 3) 29,648 27,782 58,235 57,219
-------- -------- -------- --------
Income from operations 16,617 14,958 32,142 28,421
Interest expense - Net 428 490 967 1,101
-------- -------- -------- --------
Income before income taxes 16,189 14,468 31,175 27,320
Provision for income taxes (Note 4) 6,800 5,825 13,050 11,190
-------- -------- -------- --------
Net income $ 9,389 $ 8,643 $ 18,125 $ 16,130
-------- -------- -------- --------
-------- -------- -------- --------
Net income per share $ .54 $ .50 $ 1.04 $ .93
-------- -------- -------- --------
-------- -------- -------- --------
Average number of shares outstanding 17,449 17,356 17,432 17,300
-------- -------- -------- --------
-------- -------- -------- --------
</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>
SIX MONTHS ENDED
NOVEMBER 30,
---------------------
1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Net income $18,125 $16,130
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,654 4,110
Net increase in current assets
and liabilities (12,131) (3,999)
Other operating activities (26) 36
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Net cash provided by operating activities: 9,622 16,277
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Cash flows from investing activities:
Capital expenditures (1,176) (583)
Note Receivable (28,235) --
Deferred software costs (529) --
------- -------
Net cash used for investing activities (29,940) (583)
------- -------
Cash flows from financing activities:
Net repayments under
bank lines of credit (6,000) (16,000)
Term loan borrowings 25,000 --
Net repayments of other long-term debt (855) (1,254)
Proceeds from exercise of options 280 1,310
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Net cash (used for) provided by
financing activities 18,425 (15,944)
------- -------
Net decrease in cash (1,893) (250)
Cash at the beginning of the period 3,694 1,583
------- -------
Cash at the end of the period $ 1,801 $ 1,333
------- -------
------- -------
Supplemental disclosure of
cash flow information:
Interest paid during the year $ 928 $ 1,225
------- -------
------- -------
Income taxes paid during the year $15,739 $11,186
------- -------
------- -------
</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 November 30,
1994 and the results of its operations for the three month and six month periods
and its cash flows for the six month periods ended November 30, 1994 and 1993.
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 Six Months Ended
November 30, November 30,
------------------ ------------------
1994 1993 1994 1993
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 81.0 78.7 80.6 78.6
------ ------ ------ ------
Gross profit 19.0 21.3 19.4 21.4
Selling, general and
administrative expenses 12.2 13.8 12.5 14.3
------ ------ ------ ------
Income from operations 6.8 7.5 6.9 7.1
Interest expense - net .2 .3 .2 .3
------ ------ ------ ------
Income before provision
for income taxes 6.6 7.2 6.7 6.8
Provision for
income taxes 2.8 2.9 2.8 2.8
------ ------ ------ ------
Net income 3.8% 4.3% 3.9% 4.0%
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
THREE AND SIX MONTH PERIODS ENDED NOVEMBER 30, 1994 AND 1993
The increase in net sales for the second quarter and the first six 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 $33,860,000 and $57,775,000 for the three and six month periods
ended November 30, 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.
The decrease in net margins as a percent of sales for the second quarter and six
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 product categories. 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
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<PAGE>
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 second quarter and the first six months of fiscal 1995, as compared to
fiscal 1994, largely due to higher salary expenses from an increase in the
Company's sales force, offset by a reduction in warehousing and office support
personnel, and merit and performance salary adjustments. 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 required to support the higher sales
volume. SG&A expenses for the first six 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 decrease in interest expense for the second quarter and first six months of
fiscal 1995, as compared to fiscal 1994, was due to lower borrowing levels
offset by higher interest rates in fiscal 1995.
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<PAGE>
PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Marshall Industries was held on
October 24, 1994.
The following matters were acted upon at the meeting:
1. ELECTION OF DIRECTORS.
All of the incumbent Directors of the Company were re-elected to serve as
Directors until the next Annual Meeting of Shareholders and until their
successors are elected and have qualified. Additionally, pursuant to its
agreement to invest in Sonepar Electronique International ("S.E.I."), two
representatives of S.E.I. were elected to the Board of Directors increasing the
size of the Board from eight to ten members. The vote was as follows:
<TABLE>
<CAPTION>
Votes Abstentions/
Directors Votes For Against Broker Non-Votes
- --------- --------- ------- ----------------
<S> <C> <C> <C>
Gordon S. Marshall 15,377,431 0 1,855,433
Richard D. Bentley 15,382,087 0 1,850,777
William Bone 15,379,231 0 1,853,633
Richard C. Colyear 15,379,231 0 1,853,633
Lathrop Hoffman 15,382,343 0 1,850,521
Raymond G. Rinehart 15,384,287 0 1,848,577
Robert Rodin 15,382,987 0 1,849,877
Howard C. White 15,383,826 0 1,849,038
Jose Menendez 15,382,887 0 1,849,977
Jean Fribourg 15,383,370 0 1,849,494
</TABLE>
2. RATIFICATION OF APPOINTMENT OF AUDITORS.
The appointment of Arthur Andersen LLP as auditors for the fiscal year ending
May 31, 1995 was ratified by the following vote:
For: 15,443,812 Against: 3,932
Abstentions/Broker Non-Votes: 1,785,120
3. AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE COMPANY.
The Amendment to the Articles of Incorporation to provide that the number of
directors shall be no less than seven (7) and no more than thirteen (13) was
approved by the following vote:
For: 15,228,825 Against: 25,188
Abstentions/Broker Non-Votes: 1,978,851
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
January 5, 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
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1994
<PERIOD-START> SEP-01-1994
<PERIOD-END> NOV-30-1994
<EXCHANGE-RATE> 1
<CASH> 1,801
<SECURITIES> 0
<RECEIVABLES> 133,617
<ALLOWANCES> (6,657)
<INVENTORY> 193,049
<CURRENT-ASSETS> 330,818
<PP&E> 84,718
<DEPRECIATION> (43,046)
<TOTAL-ASSETS> 407,064
<CURRENT-LIABILITIES> 91,913
<BONDS> 52,535
<COMMON> 17,268
0
0
<OTHER-SE> 239,899
<TOTAL-LIABILITY-AND-EQUITY> 407,064
<SALES> 466,928
<TOTAL-REVENUES> 466,928
<CGS> 376,551
<TOTAL-COSTS> 27,074
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,513
<INTEREST-EXPENSE> 539
<INCOME-PRETAX> 31,175
<INCOME-TAX> 13,050
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,125
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 0
</TABLE>
