<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1997
/ / 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
----------------------------------------------------------------
FORM 10-K MARSHALL INDUSTRIES
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------------------------------------------------------
CALIFORNIA 95-2048764
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NO.)
ORGANIZATION)
9320 TELSTAR AVENUE (REGISTRANT'S TELEPHONE
EL MONTE, CALIFORNIA NUMBER,
91731-2895 INCLUDING AREA CODE) (626)
(ADDRESS OF PRINCIPAL 307-6000
EXECUTIVE OFFICES)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, PAR VALUE $1.00 NEW YORK STOCK EXCHANGE
PER SHARE
(TITLE OF EACH CLASS) (NAME OF EACH EXCHANGE ON
WHICH REGISTERED)
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. / /
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant.
$659,824,103 (computed on the basis of $40.5625 per share, which
was the last sale price on the New York Stock Exchange on July
31, 1997).
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the latest
practicable date.
<TABLE>
<S> <C> <C>
(CLASS OF STOCK) NUMBER OF OUTSTANDING SHARES AS OF JULY
COMMON STOCK, PAR VALUE $1.00 PER SHARE 31, 1997
16,616,364
DOCUMENTS Proxy Statement for Annual Meeting of Shareholders to be held October 21,
INCORPORATED 1997: PART III
BY REFERENCE
------------------------------------------------------------------------------------
</TABLE>
--------
1
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1997
- --------------------------------------------------------------------------------
PART I
ITEM 1. BUSINESS
GENERAL
Marshall Industries ("Marshall" or the "Company") is among the
largest domestic distributors of industrial electronic
components and production supplies. The Company also provides
its customers with a variety of value-added services, such as
inventory management, kitting, programming of programmable logic
devices, and testing services.
The Company distributes approximately 125,000 different
products manufactured by over 50 major suppliers to more than
30,000 customers, including a wide range of original equipment
manufacturers, contract manufacturers, and value-added
resellers. The Company emphasizes responsive customer service
through its network of 38 sales and distribution facilities and
3 corporate support and distribution centers in the United
States and Canada. This local customer service is supported by
advanced on-line management information systems, 24-hour sales
and technical support service and an automated distribution
facility.
The Company has a 16% equity interest in the electronics
distribution companies of Sonepar Electronique International
("SEI"), one of the largest electronic components distributors
in Europe.
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 94% of total
Company sales in each of fiscal 1996 and 1997. The distribution
of industrial production supplies accounted for the balance, or
6% 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.
Distributors have become an increasingly important marketing
channel for electronics products, permitting manufacturers to
market their products economically to a broad range of
end-users. Most manufacturers are unable to serve their entire
customer base directly and rely on distributors, such as the
Company, to extend their marketing operations. Distributors not
only provide product, but also provide technical service support
to customers. In addition, distributors relieve manufacturers
from a portion of the costs associated with selling their
products, including large investments in inventories, accounts
receivable and personnel. At the same time, distributors offer
customers the convenience of diverse inventory, rapid
deliveries, credit and a wide range of value-added services.
Marshall is a customer-oriented company which uses automation
and information technology to enhance customer service and
intimacy. The Company has invested substantial resources to
improve its inventory management and information systems,
thereby assisting its customers in controlling costs, reducing
cycle times and keeping pace with changes in technology. These
investments have also increased the Company's efficiency and
improved its cost competitiveness. Marshall's extensive
line-card provides customers with the opportunity to purchase
their electronic component requirements from a single source,
thus improving their materials resource planning and
facilitating their inventory procurement needs. The Company
provides additional support to its customers through field
application engineers, electronic data interchange and other
value-added services. Marshall also utilizes the Internet to
allow customers to access a
- ---------
2
<PAGE>
- --------------------------------------------------------------------------------
GENERAL
(CONTINUED)
variety of services, including obtaining product availability
information, prices and technical specifications. In 1997, the
Company introduced OrderAgent, which is an on-line ordering
system available via the Internet.
- --------------------------------------------------------------------------------
PRODUCTS AND
SUPPLIERS
The distribution of semiconductor products accounted for
approximately 76% and 72%, respectively, of total Company sales
in fiscal 1996 and 1997. Passive components, connectors and
interconnect products accounted for approximately 11% of total
Company sales for each of those periods. Sales of computer
systems and peripheral products accounted for approximately 7%
and 11%, respectively, of total Company sales in fiscal 1996 and
1997. Distribution of industrial production supplies accounted
for approximately 6% of total Company sales in each of fiscal
1996 and 1997.
SEMICONDUCTOR PRODUCTS
Texas Instruments ("TI") is the Company's largest supplier of
products. TI's semiconductor products accounted for 15% and 14%
of total Company sales in fiscal 1996 and 1997, respectively.
The Company carries the full range of semiconductor products
manufactured by TI and distributes the products of a number of
other leading American semiconductor 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 23% and 17% of total
Company sales in fiscal 1996 and 1997, respectively.
Additionally, the Company distributes components manufactured by
European suppliers, such as Siemens Components, Inc. ("Siemens")
and Philips Semiconductors, a North American Philips Company
("Philips").
Semiconductor products include memory, logic and programmable
logic devices, microprocessors and microperipheral components.
The Company's principal suppliers are Advanced Micro Devices,
Inc. ("AMD"), Atmel Corporation, Cypress Semiconductor
Corporation, Fujitsu, Hitachi, IBM Technology Products, a unit
of IBM, Lattice Semiconductor Corporation, Linear Technology,
NEC Electronics, Inc., Philips, Siemens, Sony Electronics, Inc.,
Sharp Electronics Corporation, TI, Toshiba America, Inc., and
Xilinx, Inc.
PASSIVE COMPONENTS, CONNECTORS AND INTERCONNECT PRODUCTS
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 and Bourns, Inc.
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 liquid crystal
displays, optical, hard and floppy disk drives, power supplies,
monitors, motherboards for personal computers, and other systems
components. Computer Products Inc., Fujitsu, IBM Systems Storage
Division, NEC Electronics,
--------
3
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1997
- --------------------------------------------------------------------------------
PRODUCTS AND
SUPPLIERS
(CONTINUED)
Inc., Quantum Corporation, Sharp Electronics Corporation, Sony
Components Products, and Toshiba America Information Systems,
Inc. are the major suppliers of these products to the Company.
INDUSTRIAL PRODUCTION SUPPLIES
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, test equipment, soldering
supplies and equipment and work stations. Leading suppliers
include Cooper Tools, a division of Cooper Industries, Kester
Solder, a division of Litton Industries, Fluke Corporation,
Tektronix, Inc., Loctite Corporation and 3M. Although the
distribution of industrial production supplies may be distinct
from distribution of electronic components, the Company believes
that there are certain synergies and strategic benefits from
being the leading distributor of industrial production supplies.
VALUE-ADDED SERVICES
In addition to the distribution of products, the Company
provides a variety of value-added services to its customers. The
Company provides component testing and assembly, just-in-time
("JIT") inventory management and delivery systems, programmable
logic array and PROM and EPROM programming and certain types of
testing services. In recent years, the Company has introduced a
number of sophisticated automated inventory procurement and
management services for its customers through its electronic
data interchange ("EDI") and auto-replenishment programs. The
Company also packages electronic components in production-ready
kits to customers' specifications ("kitting"). Completed kits
are typically shipped directly to the customer's production line
on a JIT basis. Turnkey manufacturing solutions are offered to
meet customer requirements or through arrangements with
independent contract manufacturers as an extension of the
Company's JIT/kitting business. Under such arrangements, the
Company supplies components directly to contract manufacturers
who perform assembly and testing to produce a completed product
to customer specifications. Also, in fiscal 1996, the Company
introduced 24-hour sales and technical support services for its
customers.
Marshall and Wyle Electronics ("Wyle") formed a value-added
services joint venture called Accord Contract Services LLC
("Accord") in August, 1996. The joint venture is designed to
provide material management services such as component kitting,
turnkey manufacturing solutions and auto-replenishment systems.
Subsequent to May 31, 1997, Wyle was acquired by Raab Karcher
AG, an indirect wholly owned subsidiary of VEBA AG. The Company
is currently evaluating the impact of this change in control of
Wyle on Accord.
- --------------------------------------------------------------------------------
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 locations all or a portion of the products
produced by that manufacturer. These agreements may be canceled
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 60%
and 58% of total Company sales in fiscal 1996 and 1997,
respectively. Except for TI, which accounted for 15% and 14% of
total Company sales for fiscal 1996 and 1997, respectively, no
other supplier
- ---------
4
<PAGE>
- --------------------------------------------------------------------------------
RELATIONSHIP WITH
SUPPLIERS
(CONTINUED)
accounted for more than 10% of total Company sales in such
periods. 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 satisfactory relationships with its
suppliers. 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 policy or its
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 their 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. In the event of a
termination of a distributor agreement, the manufacturer is
generally required to purchase from the distributor the products
of such manufacturer carried in the distributor's inventory. In
some cases, the repurchase of the inventory requires a
restocking charge. Such agreements provide important but not
complete protection from inventory 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, 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 provisions applicable to
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 normal distributor agreements.
- --------------------------------------------------------------------------------
SALES 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 companies in the following industries:
computers, communications, capital and office equipment,
industrial control and medical equipment and systems
integration. In recent years, contract manufacturers have also
become major customers for electronic component distributors,
including the Company, as many original equipment manufacturers
have outsourced their purchasing and manufacturing functions to
them. No single customer accounted for more than 6% 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. Approximately 45% of the
Company's employees were involved in sales at May 31, 1997.
Most of the Company's branches are also staffed by field
application engineers who provide technical assistance to
customers in their design of new products. Through this process,
Marshall has the opportunity to develop a preferred or exclusive
supply relationship with respect to components incorporated into
the resulting products. The Company believes that field
application engineers play an important role in its marketing
efforts.
--------
5
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1997
- --------------------------------------------------------------------------------
SALES AND
MARKETING
(CONTINUED)
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
in its computerized information systems which management
believes have the capabilities to support future changes and
enhancements required to meet market needs and growth. These
systems have also allowed the Company to
increase its EDI capabilities with its suppliers and customers.
In addition, the Company has an electronic telecommunications
service that allows customers to design, engineer and purchase
products via the Internet. To increase their customer service
and productivity capabilities, the outside field sales staff has
been equipped with laptop computers. Due to the high volume of
transactions and the cost competitiveness of the electronic
components distribution industry, the Company believes that the
expansion and upgrading of its information technology
capabilities will be an ongoing requirement.
The Company currently has a national distribution network in
the United States and Canada consisting of 38 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, Nevada and Texas areas. In Canada the
Company has sales facilities in Toronto, Montreal and Vancouver.
As described in Note 6 to the consolidated financial
statements, the Company has made an investment in SEI, one of
the largest electronic component distributors in Europe.
Subsequent to May 31, 1997 the Company converted its note
receivable plus accrued interest into an equity interest of 16%
in SEI's electronics distribution companies.
At May 31, 1997, the Company had approximately 1,400
employees, substantially all of whom were employed full-time.
- --------------------------------------------------------------------------------
BACKLOG
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 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 for standard products with future delivery dates
without significant 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. A book-to-bill ratio greater than 1.00 reflects bookings
in excess of billings and thus increasing sales trends. For most
of calendar 1996, this book-to-bill ratio experienced declining
trends and was generally below 1.00 for both the industry and
the Company. This indicator has improved since the latter part
of calendar 1996 and is currently above 1.00 for the industry
and the Company.
- --------------------------------------------------------------------------------
CERTAIN
CONSIDERATIONS
CYCLICAL NATURE OF ELECTRONICS INDUSTRY; FLUCTUATIONS IN
QUARTERLY OPERATING RESULTS
The Company's business is affected by the cyclical nature of
the electronics industry and overall trends in the general
economy. The electronics distribution industry is very sensitive
to fluctuating market conditions, primarily caused by changes in
the supply and demand for electronic products, which impact
product availability and prices. As a result, the Company's
financial results may reflect significant variations from period
to period due to these factors. Other factors which affect
operating results include but are not limited to availability of
products
- ---------
6
<PAGE>
- --------------------------------------------------------------------------------
CERTAIN
CONSIDERATIONS
(CONTINUED)
from suppliers, the product mix sold by the Company, price
competition for products sold by the Company, price decreases or
obsolescence on inventory that is not price protected or
returnable to suppliers, and the ability of the Company's
customers to pay their obligations.
NATURE OF DISTRIBUTOR AGREEMENTS
The Company's distributor agreements with its suppliers are
non-exclusive. Consequently, the Company competes with numerous
other distributors who sell the same or similar products, as
well as with its suppliers, which tend to sell directly to their
larger customers. The distributors' customers are generally
smaller and less credit worthy than the principal customers of
the suppliers. The Company's distributor agreements are also
terminable on short notice. Suppliers have from time to time
terminated such agreements with the Company and there can be no
assurance that such terminations will not occur in the future.
The Company's ten largest suppliers accounted for approximately
60% and 58% of the Company's total sales in fiscal 1996 and
1997, respectively. The loss of a key supplier could have a
material adverse effect upon the Company and its future results
of operations.
PRODUCT SUPPLIES AND PRICING
From time to time, the industry has experienced product
shortages and excess supplies. The prices and margins on the
Company's products are often materially impacted by these
product shortages and excess supplies. Since late calendar 1995,
there has been an increase in the availability of electronic
component products, particularly memory devices. Since that
time, memory devices have experienced significant market pricing
and margin pressures.
COMPETITION
Supplying and servicing the electronics industry is a highly
competitive business. The Company competes with other large
national distributors, numerous local and regional distributors,
as well as some of the Company's suppliers. The Company believes
that competition is based primarily on customer service, product
lines, product availability, competitive pricing and technical
information, as well as value-added services.
From time to time, the Company has experienced competition
from "unauthorized" U.S. distributors and brokers of electronic
components who purchase these products from various sources,
including sources outside the United States, 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.
DEPENDENCE UPON KEY PERSONNEL
The Company's success depends to a significant extent upon the
continued contributions of its management and key employees. The
loss of these key employees could adversely impact the Company.
The Company's future success will also depend in part upon its
ability to attract and retain highly qualified personnel.
- --------------------------------------------------------------------------------
ITEM 2. PROPERTIES
The Company presently has 38 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. The Company owns an
additional 65,500 square foot warehouse and office facility in
El Monte.
--------
7
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1997
- --------------------------------------------------------------------------------
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 2002. 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, 1997.
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>
<S> <C> <C>
- --------------------------------------------------------
High Low
- --------------------------------------------------------
FISCAL YEAR 1996
First Quarter $ 35 $ 26 1/4
Second Quarter 37 3/4 32
Third Quarter 35 1/8 29 3/4
Fourth Quarter 32 1/4 29 1/2
- --------------------------------------------------------
FISCAL YEAR 1997
First Quarter $ 30 7/8 $ 26 1/4
Second Quarter 32 1/8 27 3/4
Third Quarter 33 1/8 28 3/4
Fourth Quarter 36 3/8 30 1/2
- --------------------------------------------------------
</TABLE>
The Company had approximately 5,000 shareholders at July 31,
1997. It has never paid a cash dividend. Earnings have been
retained to provide for the growth and expansion of the
Company's business. The Board of Directors periodically
considers whether or not to pay dividends. At this time, the
Company does not plan to pay dividends.
- ---------
8
<PAGE>
- --------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data with
respect to the consolidated statements of income of the Company
for the five fiscal years ended May 31, 1997, and the
consolidated balance sheets of the Company at year end for each
of those years. The selected financial data is derived from
consolidated financial statements for such years and at such
dates as audited by Arthur Andersen LLP, independent public
accountants, including the consolidated statements of income for
the three years ended May 31, 1997, and the consolidated balance
sheets at May 31, 1996 and 1997 included elsewhere herein.
- --------------------------------------------------------------------------------
CONSOLIDATED
STATEMENTS OF
INCOME
<TABLE>
<CAPTION>
Years Ended May 31, 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
(In thousands except for per share data)
Net sales $652,899 $822,548 $1,009,315 $1,164,812 $1,184,604
Cost of sales 502,955 652,121 820,571 955,331 988,371
- --------------------------------------------------------------------------------------------------------
Gross profit 149,944 170,427 188,744 209,481 196,233
Selling, general and administrative expenses 108,394 112,220 117,287 123,188 128,927
- --------------------------------------------------------------------------------------------------------
Income from operations 41,550 58,207 71,457 86,293 67,306
Interest expense (income) -- net(1) 2,016 1,931 1,916 989 (1,197)
- --------------------------------------------------------------------------------------------------------
Income before provision for income taxes 39,534 56,276 69,541 85,304 68,503
Provision for income taxes 15,640 23,105 29,130 35,250 28,850
- --------------------------------------------------------------------------------------------------------
Net income $ 23,894 $ 33,171 $ 40,411 $ 50,054 $ 39,653
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Net income per share(2) $ 1.38 $ 1.91 $ 2.32 $ 2.86 $ 2.32
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Cash dividends per share(3) -- -- -- -- --
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Weighted average number of shares outstanding 17,278 17,357 17,439 17,507 17,070
</TABLE>
- --------------------------------------------------------------------------------
CONSOLIDATED
BALANCE SHEETS --
SUMMARY
<TABLE>
<CAPTION>
May 31, 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
(In thousands)
Working capital $206,970 $229,019 $254,394 $ 284,508 $ 330,962
Total assets 330,844 363,659 423,307 472,611 539,673
Long-term debt, net of current portion 54,468 34,742 45,205 25,000 50,000
Shareholders' investment 202,791 238,716 279,752 329,994 348,942
</TABLE>
- --------------------------------------------------------------------------------
(1) AMOUNTS ARE NET OF INTEREST INCOME OF $1.2 MILLION, $1.7
MILLION AND $2.6 MILLION IN 1995, 1996 AND 1997,
RESPECTIVELY.
(2) NET INCOME PER SHARE IS COMPUTED ON THE BASIS OF THE
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING DURING EACH YEAR. ALL AMOUNTS HAVE BEEN
RESTATED TO REFLECT THE TWO FOR ONE STOCK SPLIT 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.
--------
9
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1997
- --------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONSOLIDATED
RESULTS OF
OPERATIONS
The following table sets forth items in the consolidated
statements of income as a percent of net sales for periods
shown:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
Years Ended May 31, 1995 1996 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 81.3 82.0 83.4
- -------------------------------------------------------------
Gross profit 18.7 18.0 16.6
Selling, general and administrative
expenses 11.6 10.6 10.9
- -------------------------------------------------------------
Income from operations 7.1 7.4 5.7
Interest expense (income)--net .2 .1 (.1)
- -------------------------------------------------------------
Income before provision for
income taxes 6.9 7.3 5.8
Provision for income taxes 2.9 3.0 2.4
- -------------------------------------------------------------
Net income 4.0% 4.3% 3.4%
- -------------------------------------------------------------
- -------------------------------------------------------------
</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 1995, 1996 and 1997 (in
thousands except for per share data):
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
First Second Third Fourth
1995 Quarter Quarter Quarter Quarter Year
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 223,101 $ 243,827 $ 261,623 $ 280,764 $1,009,315
Gross profit 44,112 46,265 47,019 51,348 188,744
Net income 8,736 9,389 10,092 12,194 40,411
Net income per share .50 .54 .58 .70 2.32
1996
- -------------------------------------------------------------------------------------
Net sales $ 275,870 $ 295,532 $ 288,008 $ 305,402 $1,164,812
Gross profit 50,945 53,692 52,220 52,624 209,481
Net income 12,199 13,639 12,250 11,966 50,054
Net income per share .70 .78 .70 .68 2.86
1997
- -------------------------------------------------------------------------------------
NET SALES $ 269,290 $ 286,346 $ 304,007 $ 324,961 $1,184,604
GROSS PROFIT 46,862 47,820 48,274 53,277 196,233
NET INCOME 8,783 9,350 9,799 11,721 39,653
NET INCOME PER SHARE .51 .55 .58 .70 2.32
- -------------------------------------------------------------------------------------
</TABLE>
- ---------
10
<PAGE>
- --------------------------------------------------------------------------------
FISCAL 1997
COMPARED TO FISCAL
1996
The increase in net sales for fiscal 1997, as compared to
fiscal 1996, was due primarily to an increase in the sales
volume of mass storage, microprocessor and liquid crystal
display ("LCD") products. Sales of these products increased by
$80,747,000 in fiscal 1997, as compared to fiscal 1996. The
addition of new suppliers during the last two fiscal years
contributed to most of the increase in the sales of such
products. This increase was partially offset by a decrease in
the sales of memory products, "DRAM's" and "SRAM's". Sales of
these products decreased $77,830,000 in fiscal 1997, as compared
to fiscal 1996. While there was an increase in the unit volume
sold of memory products in fiscal 1997 from fiscal 1996, the
substantial market decline in unit pricing during the period
reported accounted for the significant decrease in sales dollars
of such products. The sales volume of the Company's other major
products increased modestly from the prior year.
Beginning in late calendar year 1995, the industry experienced
a marked increase in the availability of a number of electronic
components, particularly memory products, and a moderation in
customer demand. These conditions have had a material impact on
the Company's net sales and margins. The industry continues to
experience pressures on pricing and margins.
The decrease in gross profit as a percent of sales for fiscal
1997, from fiscal 1996, was primarily due to a shift in the mix
of products sold with an increase in the sales of mass storage
products and microprocessors, which are lower margin products.
The decline in the margins on some of the Company's products,
particularly DRAM's, also contributed to the decrease in margins
in fiscal 1997, as compared to fiscal 1996.
The increase in selling, general, and administrative expenses
("SG&A") for fiscal 1997 from fiscal 1996 was largely from
higher salary and related expenses. The increase of $4,541,000
in these expenses was due to salary adjustments and higher
staffing levels during the year. The increase in expenses to
enhance and expand the Company's sales automation and other
information technology capabilities in fiscal 1997 from fiscal
1996, was partially offset by a decrease in bad debt expense.
Interest expense-net decreased in fiscal 1997 from fiscal 1996
mainly from the lower levels of borrowings during the year and
an increase in interest income recorded on its note receivable
due from SEI, as described in Note 6 to the consolidated
financial statements. The Company converted the note receivable
plus accrued interest into a 16% equity interest in SEI's
electronics distribution companies subsequent to May 31, 1997.
This will result in a reduction of interest income in future
periods.
- --------------------------------------------------------------------------------
FISCAL 1996
COMPARED TO FISCAL
1995
The increase in net sales for fiscal 1996, as compared to
fiscal 1995, was almost entirely due to an increase in the sales
volume of semiconductor products. Sales of such products
increased by $152,911,000, as compared to fiscal 1995. The
increase in the sales of semiconductor products was mainly the
result of continuing strong market demand for these products.
The sales volume of most of the Company's other major products
remained relatively unchanged, as compared to fiscal 1995.
The decrease in gross profit as a percent of sales for fiscal
1996, as compared to fiscal 1995, was due to a decline in the
margins on many of the Company's major products. This decline in
margins mainly resulted from market pressures on the pricing of
a number of the Company's products.
--------
11
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1997
- --------------------------------------------------------------------------------
FISCAL 1996
COMPARED TO FISCAL
1995
(CONTINUED)
The increase in SG&A expenses, in dollars for fiscal 1996, as
compared to fiscal 1995, was mainly due to the addition of
approximately 50 salespeople and several senior managers, partly
offset by a reduction in warehouse and accounting clerical
headcount. Salary adjustments and increases in incentive
payments from the Company's higher profitability levels also
contributed to the increase in SG&A expenses in fiscal 1996, as
compared to fiscal 1995. In addition, there were increases in
expenses from information systems enhancement projects, and
higher delivery and advertising costs. Primarily due to the
increase in sales volume with lower levels of increase in
operating costs to meet this volume, SG&A as a percentage of
sales declined to 10.6% for fiscal 1996 as compared to 11.6% for
fiscal 1995.
Interest expense, net of interest income, decreased in fiscal
1996 due primarily to overall lower levels of borrowings.
- --------------------------------------------------------------------------------
LIQUIDITY AND
CAPITAL
RESOURCES
The Company has been able to fund its working capital
requirements for the past three years through cash flow from
operations and bank borrowings.
At May 31, 1997, the Company's working capital increased by
$46,454,000 to $330,962,000, as compared to the prior year. This
increase was primarily attributable to increases in the
Company's accounts receivables and inventories, which were
needed to support the higher sales volume in the fourth quarter
of fiscal 1997 and certain customer requirements. These
increases in accounts receivables and inventories were partially
offset by an increase in accounts payable.
The increases that accounted for the change in working
capital, as described above, also contributed to the net cash
used for operating activities in fiscal 1997.
During fiscal 1997 the Company incurred $2,706,000 in capital
expenditures.
The purchase of 725,000 shares of the Company's common stock
for $21,819,000 and repayment of $25,000,000 of the Company's
term loan accounted for substantially all of the net cash used
in financing activities in fiscal 1997, which was partially
offset by borrowings of $50,000,000 under the Company's bank
credit lines.
Working capital increased by $30,114,000 and $25,375,000 for
fiscal 1996 and 1995, respectively, as compared to the prior
years.
Net cash provided by operating activities was $24,478,000 and
$21,410,000 in fiscal 1996 and 1995, respectively. The Company's
net income and depreciation exceeded the net increases in
accounts receivables and inventories, offset by the increase in
accounts payable, for these periods. The increase in inventories
and receivables, offset by an increase in accounts payable, was
to support the continuing growth in the Company's sales during
these periods.
The Company incurred capital expenditures of $5,269,000 and
$2,861,000 in fiscal 1996 and 1995, respectively.
During fiscal 1996 and 1995, the Company repaid $20,615,000
and $15,485,000, respectively, in bank credit line borrowings.
In fiscal 1995, the Company invested $27,954,000 in a
convertible note from SEI which was mostly financed by a
$25,000,000 term loan, as described in Note 6 to the
consolidated financial statements.
The Company's sources of liquidity at May 31, 1997 consisted
principally of working capital of $330,962,000 and unsecured
bank credit lines of $70,000,000, of which there were
$50,000,000 of borrowings outstanding as of May 31, 1997. The
Company believes that its working capital, borrowing
capabilities, and the funds generated from operations should be
sufficient to finance its anticipated operational requirements.
- --------
12
<PAGE>
- --------------------------------------------------------------------------------
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE
SHAREHOLDERS AND
BOARD OF DIRECTORS
OF MARSHALL
INDUSTRIES:
We have audited the accompanying consolidated balance sheets
of Marshall Industries (a California corporation) and
subsidiaries as of May 31, 1996 and 1997, and the related
consolidated statements of income, shareholders' investment and
cash flows for each of the three years in the period ended May
31, 1997. 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 consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Marshall Industries as of May 31, 1996 and 1997, and
the results of its operations and its cash flows for each of the
three years in the period ended May 31, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
July 18, 1997
--------
13
<PAGE>
CONSOLIDATED BALANCE SHEETS
Marshall Industries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS May 31, 1996 1997
------------------------------------------------------------------------------------------
(Dollars in
thousands)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash $ 2,208 $ 1,687
Receivables, less reserves of $8,405 in 1996 and
$8,003 in 1997 140,785 167,769
Inventories 240,882 284,419
Prepaid expenses 759 904
Deferred income tax benefits (Note 3) 13,845 14,272
------------------------------------------------------------------------------------------
Total current assets 398,479 469,051
------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, at cost (Note 1):
Land 8,863 8,863
Buildings and improvements 34,552 35,304
Equipment, furniture, fixtures and other 23,181 23,204
Computer equipment 12,179 13,849
------------------------------------------------------------------------------------------
78,775 81,220
Accumulated depreciation and amortization (38,610) (44,988)
------------------------------------------------------------------------------------------
40,165 36,232
NOTE RECEIVABLE (Note 6) 30,689 33,110
OTHER ASSETS -- NET (Note 1) 3,278 1,280
------------------------------------------------------------------------------------------
$ 472,611 $ 539,673
------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS'
INVESTMENT CURRENT LIABILITIES:
Accounts payable $ 98,686 $ 120,149
Other accrued liabilities including salaries and wages 14,171 16,500
Income taxes payable 1,114 1,440
------------------------------------------------------------------------------------------
Total current liabilities 113,971 138,089
------------------------------------------------------------------------------------------
LONG-TERM DEBT (Note 2) 25,000 50,000
DEFERRED INCOME TAX LIABILITIES (Note 3) 3,646 2,642
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 -- 17,278,864 in 1996 and
16,616,364 in 1997 17,279 16,616
Additional paid-in capital 53,653 33,611
Retained earnings 259,062 298,715
------------------------------------------------------------------------------------------
329,994 348,942
------------------------------------------------------------------------------------------
$ 472,611 $ 539,673
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
</TABLE>
- ---------
14
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Marshall Industries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended May 31, 1995 1996 1997
---------------------------------------------------------------------------------------------
(In thousands except per share data)
<S> <C> <C> <C> <C>
Net sales $ 1,009,315 $ 1,164,812 $ 1,184,604
Cost of sales 820,571 955,331 988,371
---------------------------------------------------------------------------------------------
Gross profit 188,744 209,481 196,233
Selling, general and administrative expenses 117,287 123,188 128,927
---------------------------------------------------------------------------------------------
Income from operations 71,457 86,293 67,306
Interest expense (income), net (Note 1) 1,916 989 (1,197)
---------------------------------------------------------------------------------------------
Income before provision for income taxes 69,541 85,304 68,503
Provision for income taxes (Notes 1 and 3) 29,130 35,250 28,850
---------------------------------------------------------------------------------------------
NET INCOME $ 40,411 $ 50,054 $ 39,653
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
NET INCOME PER SHARE (Note 1) $2.32 $2.86 $2.32
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
--------
15
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
Marshall Industries
For the Years Ended May 31, 1995, 1996 and 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid-in Retained
Shares Amount Capital Earnings
--------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE, MAY 31, 1994 17,231,864 $ 17,232 $ 52,887 $ 168,597
Compensation expense related to nonqualified stock
options (Note 5) -- -- 92 --
Exercise of stock options 37,000 37 252 --
Tax benefit from stock options exercised -- -- 244 --
Net income -- -- -- 40,411
------------------------------------------------------------------------------------
BALANCE, MAY 31, 1995 17,268,864 17,269 53,475 209,008
Compensation expense related to nonqualified stock
options (Note 5) -- -- 30 --
Exercise of stock options 10,000 10 79 --
Tax benefit from stock options exercised -- -- 69 --
Net income -- -- -- 50,054
------------------------------------------------------------------------------------
BALANCE, MAY 31, 1996 17,278,864 17,279 53,653 259,062
Purchase of Company stock (725,000) (725) (21,094) --
Exercise of stock options 62,500 62 531 --
Tax benefit from stock options exercised -- -- 521 --
Net Income -- -- -- 39,653
------------------------------------------------------------------------------------
BALANCE, MAY 31, 1997 16,616,364 $ 16,616 $ 33,611 $ 298,715
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
- ---------
16
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Marshall Industries
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Years Ended May 31, 1995 1996 1997
------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
CASH FLOWS FROM Net income $ 40,411 $ 50,054 $ 39,653
Adjustments to reconcile net income to net cash
OPERATING
provided by (used for) operating activities:
ACTIVITIES:
Depreciation and amortization 7,566 7,877 8,756
Provision for bad debts 3,339 2,964 2,370
Interest on note receivable (1,096) (1,639) (2,421)
Change in current assets and liabilities:
Increase in receivables (20,742) (5,857) (29,354)
Increase in inventories (15,344) (44,785) (43,537)
Increase in accounts payable 9,216 18,631 21,463
Increase in other accrued liabilities, including salaries
and wages 870 3,610 2,329
Increase (decrease) in income taxes payable (64) (1,686) 326
Deferred income tax benefit, net (2,816) (4,507) (1,431)
Other 70 (184) (140)
------------------------------------------------------------------------------------
Total adjustments (19,001) (25,576) (41,639)
------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities 21,410 24,478 (1,986)
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM Note receivable (27,954) -- --
INVESTING Capital expenditures, net (2,861) (5,269) (2,706)
ACTIVITIES: Deferred software costs (829) (52) (124)
------------------------------------------------------------------------------------
Net cash used in investing activities (31,644) (5,321) (2,830)
- -------------------------------------------------------------------------------------------------------
CASH FLOWS FROM Net borrowings (repayments) under bank credit lines (10,000) (20,000) 50,000
FINANCING Repayments of long-term debt (5,485) (615) --
ACTIVITIES: Term loan borrowings (repayments) 25,000 -- (25,000)
Purchase of common stock -- -- (21,819)
Exercise of stock options 533 158 1,114
------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 10,048 (20,457) 4,295
------------------------------------------------------------------------------------
Net decrease in cash (186) (1,300) (521)
Cash at beginning of year 3,694 3,508 2,208
------------------------------------------------------------------------------------
Cash at end of year $ 3,508 $ 2,208 $ 1,687
------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
SUPPLEMENTAL Cash paid during the year for the following:
DISCLOSURES OF
CASH FLOW
INFORMATION:
Interest $ 2,691 $ 2,399 $ 1,237
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Income taxes $ 31,435 $ 41,253 $ 29,558
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
</TABLE>
--------
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marshall Industries
May 31, 1997
- --------------------------------------------------------------------------------
NOTE 1.
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
NATURE OF OPERATIONS:
Through a network of 38 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.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
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 of $1,180,000, $1,711,000 and $2,569,000 is
netted against interest expense in fiscal 1995, 1996 and 1997,
respectively.
TAX DEFERRED PROFIT SHARING PLAN:
Under the provisions of the Marshall Industries Tax Deferred
Profit Sharing Plan (the "Plan"), participating employees may
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
employees' 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, 1997, the Plan owned less than 2%
of the Company's outstanding shares. Company contributions to
the Plan amounted to $1,141,000 in 1995, $1,538,000 in 1996 and
$1,230,000 in 1997.
INCOME TAXES:
The Company accounts for its income taxes in accordance with
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.
- ---------
18
<PAGE>
- --------------------------------------------------------------------------------
NOTE 1.
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
(CONTINUED)
CASH AND ACCOUNTS PAYABLE:
The Company's banking arrangements provide for the daily
replenishment of its bank accounts for check clearing
requirements. Accordingly, outstanding checks of $16,354,000 and
$22,904,000 that had not yet been paid by the Company's banks at
May 31, 1996 and 1997, respectively, are reflected in cash and
accounts payable in the accompanying consolidated financial
statements.
INVENTORIES:
The Company values its inventories at the lower of weighted
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, 1996
or 1997.
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 $10,264,000, are amortized over periods not to
exceed five years. At May 31, 1996 and 1997, the accumulated
amortization of such costs were $7,196,000 and $9,313,000,
respectively.
NET INCOME PER SHARE:
Per share amounts are computed on the basis of weighted
average common and common equivalent shares outstanding
(17,439,000 in 1995, 17,507,000 in 1996 and 17,070,000 in 1997).
Common equivalent shares include the dilutive effect of
outstanding stock options, if applicable. In February 1997, the
Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share". The statement revises the computation for
earnings per share. The Company will adopt this standard, which
also includes certain additional disclosures, in the third
quarter of fiscal 1998. The adoption of the standard is not
expected to have a material effect on the Company's earnings per
share.
USE OF ESTIMATES:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Management believes that these estimates and assumptions provide
a reasonable basis for the fair presentation of the consolidated
financial statements.
CONCENTRATION OF CREDIT RISK:
The Company places its cash in what it believes to be
credit-worthy financial institutions. However, cash balances
exceed FDIC insured levels at various institutions. In addition,
the Company has significant receivable balances from certain
customers.
--------
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marshall Industries
May 31, 1997
- --------------------------------------------------------------------------------
NOTE 1.
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
(CONTINUED)
WHOLLY OWNED SUBSIDIARIES:
During fiscal 1997, the Company established the following
wholly owned subsidiaries: Marshall Industries Technology
Products to conduct U.S. sales activities, GS Marshall-Canada
Inc. to conduct Canadian sales activities, and At Once, Inc. to
conduct certain catalogue and telemarketing sales activities.
The Company is engaged in one business, the sales and
distribution of electronic components, computer products and
production supplies.
- --------------------------------------------------------------------------------
NOTE 2.
LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
May 31,
1996 1997
<S> <C> <C>
- --------------------------------------------------------------------
Bank credit lines $ -- $50,000
Term loan (Note 6) 25,000 --
- --------------------------------------------------------------------
25,000 50,000
Less current portion -- --
- --------------------------------------------------------------------
$25,000 $50,000
- --------------------------------------------------------------------
- --------------------------------------------------------------------
</TABLE>
BANK CREDIT LINES
The Company has 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
$25,000,000 and $45,000,000 each, mature on September 30, 1998.
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. The options range from floating rates of
LIBOR, IBOR, certificate of deposit, offshore, or banker's
acceptance plus 1/2%, up to prime rate. At May 31, 1997, the
prime rate was 8.50%. 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
$230,000,000 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, 1997, at
least $288,453,000 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.
TERM LOAN
In August 1994, the Company obtained an unsecured term loan in
the amount of $25,000,000 with principal repayment due on
September 30, 1997. The interest rate on the loan was based on
the 90 day LIBOR rate plus 1/2%. The loan was paid in full
during fiscal 1997.
MATURITIES OF LONG-TERM DEBT
Long-term debt at May 31, 1997 is payable in fiscal 1999.
FAIR VALUE
The Company's bank credit lines and term loan approximate fair
value as they bear floating interest rates.
- ---------
20
<PAGE>
- --------------------------------------------------------------------------------
NOTE 3.
INCOME TAXES
The provision for income taxes consists of the following (in
thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Current: 1995 1996 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $ 25,675 $ 31,458 $ 23,386
State 6,271 8,299 6,895
- ----------------------------------------------------------------------------------
31,946 39,757 30,281
- ----------------------------------------------------------------------------------
Deferred:
Federal (2,435) (3,615) (1,144)
State (381) (892) (287)
- ----------------------------------------------------------------------------------
(2,816) (4,507) (1,431)
- ----------------------------------------------------------------------------------
Total $ 29,130 $ 35,250 $ 28,850
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
The difference between the income tax provision at the Federal
statutory rate and the recorded income tax provision is
reconciled as follows (in thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1995 1996 1997
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed Federal income taxes at
the statutory rate $ 24,339 $ 29,856 $ 23,976
State income taxes, net of Federal income tax
benefit 3,829 4,814 4,295
Other, net 962 580 579
- ----------------------------------------------------------------------------------
Provision for income taxes $ 29,130 $ 35,250 $ 28,850
- ----------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------
</TABLE>
As of May 31, 1996 and 1997, deferred tax assets (liabilities)
were comprised of the following (in thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1996 1997
- -----------------------------------------------------------------------------------
<S> <C> <C>
Operating reserves $ 8,157 $ 8,657
Tax depreciation in excess of book amounts (2,824) (2,345)
Capitalization of deferred software costs for book purposes (927) (310)
Capitalization of inventory costs for income tax purposes 790 633
State tax provision 1,522 1,223
Vacation expense accrued for book purposes 986 1,054
Other, net 2,495 2,718
- -----------------------------------------------------------------------------------
Total net deferred tax asset $ 10,199 $ 11,630
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
As of May 31, 1997, the Company had total deferred tax assets
of $14,272,000 and total deferred tax liabilities of $2,642,000.
The Company did not record any valuation allowances against
deferred tax assets at May 31, 1997.
--------
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marshall Industries
May 31, 1997
- --------------------------------------------------------------------------------
NOTE 4.
COMMITMENTS AND
CONTINGENCIES
LEASE COMMITMENTS:
The Company leases certain facilities and equipment under
operating leases expiring at various dates through fiscal year
2002. The aggregate rent expense for all operating leases was
$2,665,000 in 1995, $2,323,000 in 1996 and $2,551,000 in 1997.
The future minimum lease payments under all leases are shown
below (in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Operating Leases
- ------------------------------------------------------------------------------------
Year Ending May 31,
<S> <C>
1998 $ 1,511
1999 916
2000 239
2001 17
2002 95
- ------------------------------------------------------------------------------------
$ 2,778
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
Amounts shown above are net of sublease income of $443,000,
$339,000, $327,000 and $218,000 for 1998, 1999, 2000, and 2001,
respectively.
STOCK BUY-BACK:
In May, 1996, the Company announced that its Board of
Directors authorized the purchase of up to 1 million shares of
the Company's common stock. Shares may be purchased from time to
time in the open market or otherwise at prevailing prices. The
Company purchased 725,000 shares during fiscal 1997.
LITIGATION:
There are no material pending legal proceedings to which the
Company is a party.
INCOME TAXES:
During fiscal 1997, the Internal Revenue Service ("IRS")
completed its examination of the Company's Federal income tax
returns for taxable years 1991 through 1994 which resulted in
the issuance of deficiency notices seeking additional taxes.
These assessments are currently under administrative appeal.
Based upon consultation with its tax advisors, the Company
believes that it has meritorious defenses to the deficiencies
asserted by the IRS and that the final outcome of these
examinations will not have a material impact on its financial
position or results of operations.
- ---------
22
<PAGE>
- --------------------------------------------------------------------------------
NOTE 5.
STOCK OPTIONS
The Company has one active stock option plan which provides
for the granting of incentive and nonqualified stock options
covering 600,000 shares of common stock. There were two other
plans, which are inactive with respect to the granting of new
options, during the periods reported. 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
40,000, 50,000 and 35,000 options granted in fiscal 1995, 1996
and 1997, respectively, at exercise prices ranging from $25.25
to $35.875 per share. At May 31, 1997, 190,000 shares were
available for additional grants.
As permitted by Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"), effective for fiscal 1997, the Company continues to
account for stock compensation costs in accordance with the
provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". Had compensation
costs for the Company's stock plans been determined in
accordance with SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the following pro
forma amounts (in thousands except per share data):
<TABLE>
<CAPTION>
- --------------------------------------------------------
1996 1997
- --------------------------------------------------------
<S> <C> <C> <C>
Net income As reported $ 50,054 $ 39,653
Pro forma $ 49,982 $ 39,490
Net income per share As reported $ 2.86 $ 2.32
Pro forma $ 2.86 $ 2.31
- --------------------------------------------------------
- --------------------------------------------------------
</TABLE>
Because the SFAS No. 123 method of accounting has not been
applied to options granted prior to May 31, 1995, the resulting
pro forma compensation costs may not be representative of that
to be expected in future years.
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for options granted
in fiscal 1996 and 1997: risk-free interest rate of
approximately 6% and 7%, respectively; expected dividend yields
of 0%; expected volatility of approximately 29%; expected life
of 7 years.
--------
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Marshall Industries
May 31, 1997
- --------------------------------------------------------------------------------
NOTE 5.
STOCK OPTIONS
(CONTINUED)
The following is a summary of changes in outstanding options
for the Company's stock option plans for the three years ended
May 31, 1997:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Weighted-Average
Shares Exercise Price
- ------------------------------------------------------------------------------------
<S> <C> <C>
OPTIONS OUTSTANDING AT MAY 31, 1994 444,500 $13.547
Options granted 40,000 26.563
Options exercised (37,000) 7.629
Options expired or canceled (4,000) 7.600
---------
OPTIONS OUTSTANDING AT MAY 31, 1995 443,500 15.268
Options granted 50,000 35.875
Options exercised (10,000) 8.900
---------
OPTIONS OUTSTANDING AT MAY 31, 1996 483,500 17.531
Options granted 35,000 30.089
Options exercised (62,500) 9.494
Options expired or canceled (5,000) 30.000
---------
OPTIONS OUTSTANDING AT MAY 31, 1997 451,000 19.481
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Options exercisable at May 31, 1995 108,500 $11.571
Options exercisable at May 31, 1996 138,500 13.904
Options exercisable at May 31, 1997 111,000 21.138
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
</TABLE>
The following table outlines the detail of options outstanding
at May 31, 1997:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Weighted-Average Exercisable Weighted-Average
Number Weighted-Average Remaining at Exercise Price of
of Options Option Price Exercise Price Contractual Life May 31, 1997 Exercisable Shares
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
260,000 $14.00 $14.00 13.9 20,000 $ 14.00
170,000 24.00 - 35.875 29.17 8.0 70,000 26.85
21,000 8.675 - 8.90 8.89 3.7 21,000 8.89
- ---------------------------------------------------------------------------------------------
451,000 $8.675 - $35.875 $19.48 11.2 111,000 $ 21.14
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</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
fiscal 1995 and 1996, $92,000 and $30,000, respectively, were
charged against income and credited to additional paid-in
capital under these plans. No amounts were charged in fiscal
1997. Options granted vest over periods from four to ten years
and are exercisable over periods from ten 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.
- ---------
24
<PAGE>
- --------------------------------------------------------------------------------
NOTE 6.
INVESTMENT IN
SONEPAR
ELECTRONIQUE
INTERNATIONAL
In August, 1994, the Company invested 151 million French
Francs ($28 million in U.S. dollars) in Sonepar Electronique
International ("SEI"), among the 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 on the note is the same as the
Company's borrowing rates under its unsecured term loan, as
described in Note 2. The note plus accrued interest will be
converted in fiscal 1998 into a minority equity interest of up
to 20% in Eurotronics S.A.S. if certain anticipated sales and
pre-tax income goals are met by SEI. 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
Eurotronics S.A.S. At conversion, the companies making up SEI
will be transferred to Eurotronics S.A.S. 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 Eurotronics
S.A.S. To finance its investment in SEI, the Company obtained an
unsecured term loan in the amount of $25,000,000 (Note 2).
Subsequent to May 31, 1997, the Company converted the note
receivable plus accrued interest from Eurotronics S.A.S., into a
minority equity interest of 16% in SEI's electronics
distribution companies. As described herein, the Company will
grant a stock option to SEI for a period of two years to
purchase 874,545 shares of the Company's stock at a price of
$34.5685 per share which is based on the average trading price
of the Company's stock for the 90 days preceding the conversion
date.
- --------------------------------------------------------------------------------
NOTE 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.
- --------------------------------------------------------------------------------
NOTE 8.
ACCORD CONTRACT
SERVICES JOINT
VENTURE
In August, 1996, the Company formed a joint venture with Wyle
Electronics ("Wyle"), another distributor of semiconductors and
computer products. The venture, known as Accord Contract
Services LLC ("Accord"), is 50% owned by each of the Company and
Wyle (the "members"). Accord provides value-added services to
each of its members including component kitting, turnkey
manufacturing solutions, and auto-replenishment systems. The
venture is subject to termination under various circumstances,
including the election of either member upon a change in control
of either of the members. In the event of a termination of
Accord following such a change in control, the member subject to
the change in control would then be required under the Accord
Limited Liability Company Agreement ("Agreement") to pay the
other member certain fees as compensation for the termination of
the venture. Such fees are based, among other things, on the
value of the venture at the time of termination considering its
sales volume and other factors, but in no event are to be less
than $25 million.
On or about August 6, 1997 Raab Karcher AG, an indirect
wholly-owned subsidiary of VEBA AG, consummated a tender offer
for all or substantially all of the common stock of Wyle. Under
the terms of the Agreement, such a change in the ownership of
Wyle entitles the Company, at its option, to initiate the
dissolution of Accord. In such event, the Agreement provides
that the Company is entitled to receive termination fees in the
aggregate amount of approximately $25 million from Wyle. The
Company is currently evaluating the impact of this change in
control of Wyle on Accord.
- --------------------------------------------------------------------------------
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
NONE
--------
25
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1997
- --------------------------------------------------------------------------------
PART III
Marshall will file with the Securities and Exchange Commission
a definitive Proxy Statement pursuant to Regulation 14A. The
material under the following captions of the Proxy Statement for
the Annual Meeting of Shareholders to be held on October 21,
1997 is incorporated herein by this reference: Election of
Directors, Executive Officers, Executive Compensation, Employee
Agreements, Principal Shareholders, Certain Relationships and
Related Transactions.
- --------------------------------------------------------------------------------
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(A) 1. CONSOLIDATED FINANCIAL STATEMENTS -- The following
consolidated 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 21
Consolidated Financial Statements:
Balance Sheets -- May 31, 1996 and 1997 22
Statements for the years ended May 31, 1995, 1996 and 1997 --
Income 23
Shareholders' Investment 24
Cash Flows 25
Notes to Consolidated Financial Statements 26
</TABLE>
(A) 2. FINANCIAL STATEMENT SCHEDULES -- All schedules are
omitted since they are not applicable, not required, or the
required information is included in the consolidated 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, as amended. (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, 1996.)
Exhibit 3.2: 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 3.3: 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 10.1: Credit Agreement dated March 1, 1993 between Marshall
Industries and Bank of America National Trust and Savings
Association. (Incorporated herein by reference to Exhibit (ii)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended February 28, 1993.)
Exhibit 10.2: First Amendment to Credit Agreement dated May 3, 1993 between
Marshall Industries and Bank of America National Trust and
Savings Association. (Incorporated herein 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 10.3: Second Amendment to Credit Agreement dated March 25, 1994
between Marshall Industries and Bank of America National Trust
and Savings Association. (Incorporated herein by reference to
Exhibit 10.3 to the Company's Annual Report on Form 10-K for
the fiscal year ended
May 31, 1996.)
</TABLE>
- ---------
26
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Exhibit 10.4: Third Amendment to Credit Agreement dated June 1, 1995 between
Marshall Industries and Bank of America National Trust and
Savings Association. (Incorporated herein by reference to
Exhibit (ii) to the Company's Quarterly Report on Form 10-Q for
the quarter ended August 31, 1995.)
Exhibit 10.5: Fourth Amendment to Credit Agreement dated August 12, 1996
between Marshall Industries and Bank of America National Trust
and Savings Association. (Incorporated herein by reference to
Exhibit 10.5 to the Company's Annual Report on Form 10-K for
the fiscal year ended
May 31, 1996.)
Exhibit 10.6: Term Loan Agreement dated August 26, 1994 between Marshall
Industries and First Union National Bank of North Carolina.
(Incorporated herein by reference to Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the fiscal year ended
May 31, 1996.)
Exhibit 10.7: Revolving Credit Loan Agreement dated October 2, 1995 between
Marshall Industries and First Union National Bank of North
Carolina. (Incorporated herein by reference to Exhibit (i) to
the Company's Quarterly Report on Form 10-Q for the quarter
ended August 31, 1995.)
Exhibit 10.8*: 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 10.9*: 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 10.10*: Change in Control Agreement dated February 6, 1996 between
Marshall Industries and Gordon S. Marshall. (Incorporated
herein by reference to Exhibit 99.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended February 29, 1996.)
Exhibit 10.11*: Change in Control Agreement dated February 7, 1996 between
Marshall Industries and Robert Rodin. (Incorporated herein by
reference to Exhibit 99.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended February 29, 1996.)
Exhibit 10.12*: Change in Control Agreement dated January 10, 1997 between
Marshall Industries and Richard D. Bentley. (Incorporated
herein by reference to Exhibit 10.12 to the Company's Quarterly
report on Form 10-Q for the quarter ended November 30, 1996.)
</TABLE>
--------
27
<PAGE>
FORM 10-K
Marshall Industries
Year Ended May 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Exhibit 10.13*: Form of Indemnification Agreement with certain officers and
directors. (Incorporated herein by reference to Exhibit 10.13
to the Company's Quarterly report on Form 10-Q for the quarter
ended November 30, 1996.)
Exhibit 10.14*: Schedule of Omitted Indemnification Agreements. (Incorporated
herein by reference to Exhibit 10.14 to the Company's Quarterly
report on Form 10-Q for the quarter ended November 30, 1996.)
Exhibit 10.15: Limited Liability Company Agreement dated as of August 8, 1996
between Marshall Industries and Wyle Electronics. (Incorporated
herein by reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 31, 1996.)
Exhibit 10.16: Warrant Agreement dated as of August 8, 1996 between Marshall
Industries and Wyle Electronics. (Incorporated herein by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended
August 31, 1996.)
Exhibit 10.17: Standstill Agreement dated as of August 8, 1996 between
Marshall Industries, and Wyle Electronics. (Incorporated herein
by reference to Exhibit 10.3 to the Company's Quarterly Report
on Form 10-Q for the quarter ended
August 31, 1996.)
Exhibit 10.18: Registration Rights Agreement dated as of August 8, 1996
between Marshall Industries and Wyle Elecronics. (Incorporated
herein by reference to Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August 31, 1996.)
Exhibit 10.19: Marshall Warrant Rescission Agreement dated February 28, 1997
between Marshall Industries and Wyle Electronics. (Incorporated
herein by reference to Exhibit 10.15 to the Company's Quarterly
report on Form 10-Q for the quarter ended February 28, 1997.)
Exhibit 10.20: Amendment No. 3 to Limited Liability Company Agreement of
Accord Contract Services LLC, dated February 28, 1997 between
Marshall Industries and Wyle Electronics. (Incorporated herein
by reference to Exhibit 10.16 to the Company's Quarterly report
on Form 10-Q for the quarter ended February 28, 1997.)
Exhibit 10.21*: Change in Control Agreement dated August 26, 1997 between
Marshall Industries and Henry W. Chin.
Exhibit 10.22: Form of Shareholders Agreement with Sonepar Electronique
International.
Exhibit 10.23: Form of Marshall Industries Nonqualified Stock Option Grant.
Exhibit 10.24: Registration Rights Agreement dated as of September 15, 1994 by
and between Marshall Industries and Sonepar Electronique
International.
Exhibit 23: Consent of Independent Public Accountants.
Exhibit 27: Financial Data Schedule.
</TABLE>
(B) REPORTS ON FORM 8-K -- Marshall has not filed any reports
on Form 8-K during the quarter ended May 31, 1997
* MANAGEMENT CONTRACT, COMPENSATORY PLAN OR ARRANGEMENT.
- ---------
28
<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
By: HENRY W. CHIN August 26, 1997
--------------------------------------------
Henry W. Chin
VICE PRESIDENT, FINANCE, CHIEF FINANCIAL OFFICER
AND SECRETARY
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.
GORDON S. MARSHALL August 26, 1997
---------------------------------------------
Gordon S. Marshall
CHAIRMAN OF THE BOARD AND DIRECTOR
ROBERT RODIN August 26, 1997
---------------------------------------------
Robert Rodin
PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
(PRINCIPAL EXECUTIVE OFFICER)
HENRY W. CHIN August 26, 1997
---------------------------------------------
Henry W. Chin
VICE PRESIDENT, FINANCE, CHIEF FINANCIAL OFFICER
AND SECRETARY
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
RICHARD D. BENTLEY August 26, 1997
---------------------------------------------
Richard D. Bentley
DIRECTOR
RICHARD C. COLYEAR August 26, 1997
---------------------------------------------
Richard C. Colyear
DIRECTOR
JEAN FRIBOURG August 26, 1997
---------------------------------------------
Jean Fribourg
DIRECTOR
LATHROP HOFFMAN August 26, 1997
---------------------------------------------
Lathrop Hoffman
DIRECTOR
JOSE MENENDEZ August 26, 1997
---------------------------------------------
Jose Menendez
DIRECTOR
RAYMOND G. RINEHART August 26, 1997
---------------------------------------------
Raymond G. Rinehart
DIRECTOR
HOWARD C. WHITE August 26, 1997
---------------------------------------------
Howard C. White
DIRECTOR
--------
29
<PAGE>
CHANGE IN CONTROL AGREEMENT
AGREEMENT by and between MARSHALL INDUSTRIES, a California corporation,
(the "Company") and HENRY W. CHIN (the "Executive"), dated as of this 26th
day of August, 1997.
WHEREAS, the Executive currently serves as Vice President, Finance and
Chief Financial Officer of the Company;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its
shareholders to assure that the Company will have the continued dedication of
the Executive, notwithstanding the possibility of a change in control of the
Company;
WHEREAS, the Board wishes to diminish the distraction of the Executive by
virtue of any pending or threatened change in control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending change in control; and
WHEREAS, the Board wishes to provide the Executive with compensation
arrangements upon a change in control which satisfy the expectations of the
Executive and which are competitive with those of other corporations.
1
<PAGE>
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. TERM OF AGREEMENT.
(a) The term of this Agreement shall commence on the date of its
execution and shall terminate on September 30, 1998. Subject
to Subsection (b), on October 1, 1998, and on each October 1
thereafter, the term of this Agreement shall automatically be
extended for one additional year, unless not later than the
preceding April 1 both parties shall have agreed in writing
not to extend the term of this Agreement.
(b) If a Change in Control occurs during the original term of this
Agreement or any extension thereof under Subsection (a), the
term of this Agreement shall be automatically extended for a
24-month period commencing with the Change in Control Date.
At the end of such 24-month period, this Agreement shall
terminate.
(c) Notwithstanding anything to the contrary in this Section 1, this
Agreement shall terminate --
(1) on the date of the termination of the Executive's employment
with the Company for any reason before the Change in Control
Date, or
2
<PAGE>
(2) on the Executive's Date of Termination on or after the Change
in Control Date if the Executive's employment with the
Company is terminated (A) by the Company for Cause or by
reason of Disability, (B) by reason of the Executive's death,
or (C) by the Executive without Good Reason.
2. CERTAIN DEFINITIONS. The following words and phrases, when used in
this Agreement, shall have the following meanings, unless otherwise
clearly required by the context.
(a) "AGREEMENT" shall mean this Change in Control Agreement.
(b) "BOARD" shall mean the Board of Directors of the Company.
(c) "CAUSE" shall mean:
(1) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or
its affiliates (for reasons other than the Executive's
Disability), after written notification is delivered to
the Executive specifying the manner in which the Chief
Executive Officer or the Board believes that the
Executive has not substantially performed the Executive's
duties, if
3
<PAGE>
the Executive does not cure such failure within 90 days of
receiving such written notification; or
(2) the willful engaging by the Executive in criminal conduct or
gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this Subsection (c), no act or failure to act,
on the part of the Executive, shall be considered "willful"
unless it is done, or not done, by the Executive in bad faith
or without reasonable belief that the Executive's action or
failure to act was in the best interests of the Company. Any
act, or failure to act, pursuant to a resolution duly adopted
by the Board or upon the instructions of the Chairman of the
Board or the Chief Executive Officer or based upon the advice
of counsel for the Company shall be conclusively presumed to
be done, or not to be done, by the Executive in good faith and
in the best interests of the Company. The termination of
employment of the Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to the
Executive a copy of a resolution, duly adopted by the
affirmative vote of not less than three-fourths of the group
consisting of the outside directors of the Company and the
Chairman of the Board, at a meeting of the Board called and
held for such purpose (after reasonable notice is provided to
the Executive and the Executive is given an opportunity,
together with his counsel, to be heard before the Board),
4
<PAGE>
finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct or misconduct described in
Paragraph (1) or (2), and specifying the particulars thereof in
detail.
(d) "CHANGE IN CONTROL" shall mean:
(1) the acquisition by any individual, entity, or group (within
the meaning of Section 13(d) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of 30 percent
or more of either:
(A) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock"), or
(B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company
Voting Securities");
provided, however, that any of the preceding events shall not
constitute a Change in Control unless the conditions of
Paragraph (2) shall also be satisfied within six months of
any of the preceding
5
<PAGE>
events; and provided, further, that for purposes of this
Paragraph (1), the following acquisitions shall not
constitute a Change in Control:
(C) any acquisition directly from the Company (including,
without limitation, a secondary offering of securities
by the Company);
(D) any acquisition by the Company (including, without
limitation, a repurchase or redemption of Company
securities by the Company);
(E) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or
(F) any acquisition by any corporation pursuant to a
transaction which complies with Subparagraphs (A),
(B), and (C) of Paragraph (3) of this Subsection (d);
(2) the failure of individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a member of the Board
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders,
6
<PAGE>
has been approved by a vote of at least a majority of the
members then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of members or other actual
or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board;
(3) approval by the shareholders of the Company of a
reorganization, merger, consolidation, or sale or other
disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless,
following such Business Combination --
(A) all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly,
more than 70 percent of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors,
as
7
<PAGE>
the case may be, of the corporation resulting from
such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially
all of the Company's assets either directly or
through one or more subsidiaries) in substantially
the same proportions as their ownership, immediately
prior to such Business Combination, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be;
(B) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation
resulting from such Business Combination)
beneficially owns, directly or indirectly, 30 percent
or more of, respectively, the then outstanding shares
of common stock of the corporation resulting from such
Business Combination or the combined voting power of
the then outstanding voting securities of such
corporation except to the extent that such ownership
existed prior to the Business Combination; and
(C) at least a majority of the members of the board of
directors of the corporation resulting from such
Business Combination were members of the Incumbent
Board at the time of the execution of
8
<PAGE>
the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(4) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(e) "CHANGE IN CONTROL DATE" shall mean the first date on which a
Change in Control occurs. Notwithstanding any provision in
this Agreement to the contrary, if a Change in Control occurs
and if the Executive's employment with the Company terminates
prior to the date on which the Change in Control actually
occurs, and if it is reasonably demonstrated by the Executive
that such termination --
(1) was at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control, or
(2) otherwise arose in connection with or anticipation of a
Change in Control,
for all purposes of this Agreement the Change in Control Date
shall mean the date immediately before the date of such
termination of employment.
9
<PAGE>
(f) "CHANGE IN CONTROL PERIOD" shall mean the 24-month period
beginning on the Change in Control Date.
(g) "CODE" shall mean the Internal Revenue Code of 1986, as amended,
and all regulatory guidance promulgated thereunder.
(h) "COMPANY" shall mean Marshall Industries.
(i) "DATE OF TERMINATION" shall mean:
(1) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date
of receipt of a written notice of termination, or any
later date specified therein;
(2) if the Executive's employment is terminated by the Company
other than for Cause or by reason of Disability, the date
on which the Company notifies the Executive of such
termination; or
(3) if the Executive's employment is terminated by reason of
death or Disability, the date of death or 15 days after
the date of determination by the Company (under
Subsection (j)) of Disability.
10
<PAGE>
(j) "DISABILITY" shall mean an incapacity, due to physical injury or
illness or mental illness, rendering the Executive unable to
perform his duties with the Company on a full-time basis for a
period of at least six consecutive calendar months. In the
case of a dispute between the Executive and the Company, the
determination of Disability shall be made by a doctor
acceptable to both the Executive and the Company. Nothing in
this Agreement shall prevent or limit the Executive from any
benefits to which the Executive is, or may become, entitled
under any short- or long-term disability program sponsored by
the Company or any of its affiliates.
(k) "EXECUTIVE" shall mean Henry W. Chin.
(l) "GOOD REASON" shall mean:
(1) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including
status, offices, titles, and reporting requirements),
authority, duties, or responsibilities as of the date of
this Agreement, or any other action by the Company which
results in a diminution in such position, authority,
duties, or responsibilities, excluding for this purpose
an isolated, insubstantial, or inadvertent action not
taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive;
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(2) the Company's requiring the Executive to be based at any
office or location more than 30 miles from the Company's
corporate headquarters as of the day before the Change in
Control Date or the Company's requiring the Executive to
travel on Company business to a substantially greater
extent than required immediately prior to the Change in
Control Date;
(3) any material reduction in the Executive's total annual cash
compensation from the Company and its affiliates
(including, without limitation, base salary, bonus, and
incentive plan payments) without the consent of the
Executive;
(4) any material shift in the composition of the Executive's
total annual compensation from the Company and its
affiliates, from base salary to bonus or incentive plan
payments or from cash to non-cash compensation, without
the consent of the Executive;
(5) any purported termination by the Company of the Executive's
employment other than as expressly permitted by this
Agreement; or
(6) any failure by the Company to comply with and satisfy
Section 12(c) of this Agreement.
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3. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) OTHER THAN FOR CAUSE OR DISABILITY. If, during the Change in
Control Period, the Company terminates the Executive's
employment other than for Cause or Disability, the Company
shall be obligated to pay the Executive the salary substitute
and the bonus equivalent amounts under Subsections (a) and (b)
of Section 4 and to provide the benefits described in Section 5.
(b) GOOD REASON. If, during the Change in Control Period, the
Executive terminates employment with the Company for Good
Reason, the Company shall be obligated to pay the Executive
the salary substitute and the bonus equivalent amounts under
Subsections (a) and (b) of Section 4 and to provide the
benefits described in Section 5.
(c) DEATH. If, during the Change in Control Period, the Executive's
employment is terminated by reason of the Executive's death,
this Agreement shall terminate without further obligation to
the Executive's legal representatives under this Agreement.
(d) BY THE COMPANY FOR CAUSE OR BECAUSE OF DISABILITY, OR BY THE
EXECUTIVE WITHOUT GOOD REASON. If, during the Change in Control
Period, the
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Company terminates the Executive's employment for Cause or
because of Disability, or if, during the Change in Control
Period, the Executive terminates employment without Good
Reason, this Agreement shall terminate without further
obligation to the Executive.
4. COMPENSATION EQUIVALENCIES. The following amounts shall be paid by
the Company to the Executive to the extent required under, and in
accordance with, the provisions of Sections 3, 7, 8, and 9.
(a) SALARY SUBSTITUTE. The Executive shall receive a cash payment
equal to the product of 24 times the highest monthly base
salary paid or payable (including without limitation any base
salary which has been earned but deferred under any deferred
compensation or retirement plan or arrangement) to the
Executive by the Company and its affiliates during the
12-month period immediately preceding the month in which the
Executive's employment with the Company terminates.
(b) BONUS EQUIVALENT. The Executive shall receive a cash payment
equal to the product of two times the average of the
Executive's annual bonus under the Company's Annual Incentive
Plan, and any and all comparable bonuses under any predecessor
or successor plans, for each of the last two full fiscal years
ending immediately before or on the Change in Control Date.
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(c) TIMING OF PAYMENTS. The amounts determined above shall be payable
as soon as practicable after the Executive's Date of Termination,
in a single lump-sum cash payment.
5. BENEFITS. The following benefits shall be provided by the Company for
the Executive and (to the extent applicable) his immediate family, to
the extent required, and in accordance with, the provisions of
Sections 3, 7, 8, and 9.
(a) For two years after the Executive's Date of Termination, or such
longer period as may be provided under the terms of the
appropriate plan, program, practice, or policy, the Company
shall continue benefits to the Executive and/or the
Executive's immediate family at a level at least equal to that
which would have been provided for him and/or them in
accordance with the plans, programs, practices, and policies
described in Subsection (b) if the Executive's employment had
not terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliates and their
families. Notwithstanding the foregoing, if the Executive
becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another
employer-provided plan, or if the Executive breaches any of
the covenants listed in Section 8, the benefits provided under
this Subsection (a) shall be immediately terminated.
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(b) The benefits described herein shall be all benefits under any
welfare benefit plans provided by the Company and its
affiliates (including, without limitation, medical,
prescription drugs, dental, disability, employee life, group
life, accidental death, and travel accident insurance plans
and programs) to the extent applicable generally to other peer
executives of the Company and its affiliates, other than
severance benefits, to the extent not triggered by the
Executive's termination of employment with the Company.
6. ACCELERATION OF STOCK OPTION VESTING. Upon a Change in Control, the
Company shall cause the vesting of any stock options with regard to
stock of the Company or its affiliates held by the Executive to be
accelerated to the Change in Control Date. The Executive shall be
entitled to give notice of exercise of all such options for 30 days
after the Change in Control Date or such longer period permitted under
the original documents granting such options.
7. CONTINGENT LIMITATION ON AMOUNTS.
(a) Notwithstanding any other provisions of this Agreement or any
other agreement, plan, or arrangement (except as provided in
the following paragraph of this Subsection (a)), if any
payment or benefit received or to be received by the Executive
(under the terms of this Agreement, or any other plan,
arrangement, or agreement with the Company, or any other plan,
arrangement, or agreement with any person whose actions result
in a
16
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Change in Control or any person affiliated with the Company or
any such person) (all such payments and benefits being
hereinafter called "Total Payments") would be subject (in
whole or in part) to taxes imposed by Code Section 4999, the
portion of the Total Payments payable under this Agreement
shall be reduced as herein provided.
The Total Payments payable under this Agreement shall be reduced
to the extent necessary so that no portion of the Total
Payments shall be subject to the parachute excise tax (the
"Excise Tax") imposed by Code Section 4999 (after taking into
account any reduction in the Total Payments provided by reason
of Code Section 280G in any other plan, arrangement, or
agreement) but only if the amount determined under Paragraph
(1) is greater than the amount determined under Paragraph (2).
(1) The amount determined hereunder shall be the net amount of
such Total Payments, as so reduced (and after deduction
of the net amount of Federal, state, and local income
taxes on such reduced Total Payments computed at the
Executive's highest marginal tax rate).
(2) The amount determined hereunder shall be the excess of --
(A) the net amount of such Total Payments, without
reduction (but after deduction of the net amount of
Federal, state, and local
17
<PAGE>
income taxes on such Total Payments computed at the
Executive's highest marginal tax rate), over
(B) the amount of Excise Tax to which the Executive would
be subject in respect of such Total Payments.
Any reduction of the Total Payments shall be made under one of
the two alternative methods described in Subsection (b). For
purposes of this Section 7 and the calculations hereunder,
Total Payments shall not include any amounts considered a
"parachute payment" under Code Section 280G in the opinion of
Arthur Andersen LLP (or suitable experts selected by the
Board).
(b) If the Total Payments all become payable at approximately the same
time,
(1) the payments under Section 4(b) shall first be reduced (if
necessary, to zero);
(2) the payments under Section 4(a) shall next be reduced (if
necessary, to zero);
(3) the other portions of the Total Payments shall next be
reduced (if necessary, to zero); and
18
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(4) the acceleration of vesting of awards under stock options
shall be reduced as necessary.
If the Total Payments do not become due and payable at
approximately the same time, the respective Total Payments
shall be paid in full in the order in which they become
payable until any portion thereof would not be deductible, and
such portion (and any subsequent portions) of the Total
Payments shall be reduced to zero. In such case, the Company
shall make every reasonable effort to make such payments in
the order that results in the most favorable tax treatment and
financial results for the Executive.
(c) For purposes of determining whether and the extent to which the
Total Payments would be subject to the Excise Tax,
(1) no portion of the Total Payments the receipt or enjoyment of
which the Executive shall have effectively waived in
writing prior to the date of termination shall be taken
into account;
(2) no portion of the Total Payments shall be taken into account
which in the opinion of Arthur Andersen LLP (or suitable
experts selected by the Board) does not constitute a
"parachute payment" within the
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meaning of Code Section 280G(b)(2), including by reason of
Code Section 280G(b)(4)(A);
(3) in calculating the Excise Tax, the payments shall be reduced
only to the extent necessary so that the Total Payments
in their entirety constitute reasonable compensation for
services actually rendered within the meaning of Code
Section 280G(b)(4) or are otherwise not subject to
disallowance as deductions because of Code Section 280G,
in the opinion of Arthur Andersen LLP (or suitable
experts selected by the Board); and
(4) the value of any non-cash benefit or any deferred payment
or benefit included in the Total Payments shall be
determined by Arthur Andersen LLP (or suitable experts
selected by the Board) in accordance with the principles
of Code Section 280G(d)(3) and (4).
The Company shall provide the Executive with the calculation of the
foregoing amounts and any supporting materials as are reasonably
necessary for the Executive to evaluate the calculations. All
calculations hereunder shall be performed by Arthur Andersen LLP
(or suitable experts selected by the Board).
20
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8. RESTRICTIVE COVENANTS.
(a) The Executive shall devote his full time, attention, and energies
to the business of the Company. The Executive shall not,
during the term of this Agreement, be engaged in any other
activity which interferes with the performance of his duties.
(b) During the term of this Agreement and the two-year period
beginning on the Executive's Date of Termination, the
Executive shall not engage directly or indirectly, either as
an owner, principal, shareholder, agent, proprietor, director,
officer, employee, or adviser of (inclusive of the direct or
indirect holdings of his spouse, child, or parent), or
participate in the ownership, management, operation, or
control of, or have any other significant financial interest
in, any of the following businesses, their affiliates, or any
part thereof, or any successors or assigns (in whole or in
part) thereto:
(1) Arrow Electronics, Inc.;
(2) Avnet, Inc.;
(3) Bell Industries, Inc.;
(4) Wyle Electronics; or
(5) Pioneer-Standard Electronics, Inc.
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<PAGE>
(c) As part of the consideration for this Agreement, the Executive
shall not, at any time during the term of this Agreement or
thereafter, divulge to another person trade secrets or
confidential information of the Company and its affiliates
including, but not limited to, the Company's unique business
methods, processes, operating techniques, and "know-how" (all
of which have been developed by the Company or its affiliates
through substantial effort and investment), profit and loss
results, market and supplier strategies, customer identity and
needs, information pertaining to employee effectiveness and
compensation, inventory strategy, product costs, gross
margins, or any other information relating to the affairs of
the Company and its affiliates that he may acquire during his
employment with the Company.
(d) The Executive shall not, at any time during the term of this
Agreement or the two-year period beginning on the Executive's
Date of Termination, solicit or induce any of the employees
of the Company or its affiliates to terminate their employment
with their employer.
9. REMEDIES.
(a) The Executive agrees that the provisions of Section 8 are
necessary for the protection of the Company and that any
breach thereof will cause the Company irreparable damage for
which there is no adequate remedy at
22
<PAGE>
law. The Executive consents to the issuance of an injunction in
favor of the Company as a matter of right, enjoining the
breach of any of the aforesaid covenants by any court of
competent jurisdiction.
(b) Upon a breach by the Executive of any of the covenants listed in
Section 8, the Company's obligation to make any payments or
provide any benefits under Section 3 which have not yet been
paid or provided, or to allow the Executive to exercise any
options the vesting of which were accelerated under Section 6
but which remain unexercised, shall cease and this Agreement
shall cease without further obligations to the Executive.
(c) Upon a breach by the Executive of any of the covenants listed in
Section 8, to the extent the Company shall have paid any of
the compensation equivalencies described in Section 4, the
Executive shall pay to the Company, within 15 days of receipt
of written demand by the Company, the difference between the
amounts determined under Paragraphs (1) and (2).
(1) The amount determined under this Paragraph shall be
100 percent of the amount the Executive received as a cash
payment under Sections 3 and 4.
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(2) The amount determined under this Paragraph shall be the
product of 100 percent of the amount the Executive
received as a cash payment under Sections 3 and 4, and a
fraction. The numerator of this fraction shall be 730
less the number of days that have elapsed from the
Executive's Date of Termination through the first date of
the breach by the Executive of one or more of the
covenants listed in Section 8. The denominator of the
fraction shall be 730.
(d) This Section 9 shall survive the termination of this Agreement.
The remedies described herein, including the Company's right
to an injunction, shall be cumulative and in addition to
whatever other remedies the Company may have under this
Agreement or otherwise.
10. RIGHTS NOT EXCLUSIVE. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan,
program, policy, or practice provided by the Company or any of its
affiliates for which the Executive may otherwise qualify. Subject to
Section 14(f), nothing herein shall limit or otherwise affect such
rights as the Executive may have under any contract or agreement with
the Company or any of its affiliates. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under
any plan, policy, practice, or program of, or any contract or
agreement with, the Company or any of its affiliates at or subsequent
to the Date of Termination shall be payable
24
<PAGE>
in accordance with such plan, policy, practice, program, contract, or
agreement except as explicitly modified by this Agreement.
11. FULL SETTLEMENT; LEGAL FEES. The Company's obligation to make any
payments required under this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense, or other claim, right, or action
which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable or
benefits provided to the Executive under any of the provisions of this
Agreement; and, except as specifically provided in Sections 5, 7, 8,
and 9, such amounts or benefits shall not be reduced whether or not
the Executive obtains other employment.
12. SUCCESSORS.
(a) This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the
Executive, other than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and
be enforceable by the Executive's legal representatives.
Notwithstanding the foregoing, the rights transferable,
assignable, or enforceable pursuant to this Subsection shall
only relate to benefits accrued and actually payable to the
Executive before his death. The
25
<PAGE>
provisions of this Subsection shall not be deemed to create any
additional rights or benefits.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to
all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
13. ARBITRATION. Except for the Company's right to seek equitable relief
as provided herein, any controversy arising out of or relating to this
Agreement, or any written modification or extension thereof, including
any claim for damages, whether based on contract, tort, or any theory
of law, shall be settled by arbitration. Such arbitration shall take
place in Los Angeles, California, in accordance with the commercial
rules then applicable of the American Arbitration Association. The
arbitrator or arbitrators sitting in any such controversy shall
26
<PAGE>
have no power to alter or modify any express provisions of
this Agreement or any written instrument modifying or
extending this Agreement, or to render any award which by
its terms effects any such alteration or modification. The
parties consent to the jurisdiction of the Superior Court
of the State of California and of the U.S. District Court for
the Central District of California for all purposes in connection
with arbitration, including the entry of judgment on any
award. The parties consent that any process or notice of
motion or other application to any of said courts, and any
paper in connection with arbitration, may be served by
certified mail return receipt requested or by personal
service or in such other manner as may be permissible under
the rules of the applicable court or arbitration tribunal,
provided a reasonable time for appearance is allowed. The parties
further agree that arbitration proceedings shall be instituted
within one year after the claimed breach shall have occurred, and
that any failure to institute arbitration proceedings within such
period shall constitute an absolute bar to the institution of any
administrative, court, or arbitration proceedings and a waiver of all
claims. The Company shall pay all of the Executive's reasonable legal
expenses and other reasonable costs in presenting the matter and all
reasonable costs of the arbitrator.
14. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of California, without reference to
principles of conflict of
27
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laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive: Henry W. Chin
Vice President and Chief Financial Officer
Marshall Industries
9320 Telstar Avenue
El Monte, CA 91731
If to the Company: Robert Rodin
President and Chief Executive Officer
Marshall Industries
9320 Telstar Avenue
El Monte, CA 91731
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notices and
communications shall be effective when actually received by the
addressee.
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(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(b) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local, and foreign taxes as
shall be required to be withheld pursuant to any applicable
law or regulation.
(c) The Executive's or the Company's failure to insist upon compliance
with any provision of this Agreement or the failure to assert
any right that the Executive or the Company may have
hereunder, including without limitation the right of the
Executive to terminate employment for Good Reason and the
right of the Company to any remedy under Section 9, shall not
be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(d) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement
between the Executive and the Company, the employment of the
Executive by the Company is "at will." Prior to the Change in
Control Date, the Executive's employment may be terminated by
either the Executive or the Company at any time, in which case
the Executive shall have no further rights under this
Agreement. From and after the Change in Control Date, this
Agreement
29
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shall supersede any other agreement between the parties with
respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has
caused this Agreement to be executed in its name on its behalf, all as
of the day and year first above written.
/s/ HENRY W. CHIN
----------------------------------------
HENRY W. CHIN
MARSHALL INDUSTRIES
By /s/ ROBERT RODIN
-------------------------------------
ROBERT RODIN
President and Chief Executive Officer
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SHAREHOLDERS AGREEMENT
BETWEEN:
- - SONEPAR ELECTRONIQUE INTERNATIONAL (SEI), a French limited liability
company with its registered office at 2, rue de la Tour des Dames (75009)
FRANCE, represented by , in this duly authorized by,
and
- - SEI INVESTMENTS BV, a Dutch company having its registered office at 2,
Takkebisters BREDA (THE NETHERLANDS), represented by , in this duly
authorized by,
and
- - MARSHALL INDUSTRIES (MI or MARSHALL), a California corporation having its
registered office at 9320 Telstar Avenue, El Monte, California 91731,
U.S.A., represented by , in this duly authorized by,
and
- - [MARSHALL INDUSTRIES SUBSIDIARY] (Marshall Subsidiary), a Dutch company
having its registered office .... (The Netherlands), represented
by ........ , in this duly authorized by ........... .
Whereas
- SEI holds the entire issued capital of SEI Management BV which company
in its turn holds the entire issued share capital of SEI Investments
BV, both companies being private companies with limited liability,
established under the laws of the Netherlands.
- EUROTRONICS BV, a private company with limited liability, established
under the laws of the Netherlands (hereinafter "the Company") with
several subsidiaries as described per Appendix 1 is a wholly
controlled subsidiary of SEI Investments BV.
- SEI. SEI Management BV, SEI Investments BV, the Company and the
Company's subsidiaries form a group of companies ("group") as
defined in article 2:24(b) of the Dutch Civil Code (aforementioned
companies as such individually "Sonepar Group-company" and
collectively "Sonepar Group-companies).
- MI holds the entire issued capital of Marshall Subsidiary.
- In 1994, SEI and MI, hereafter referred to as "the Parties" agreed
to form a strategic alliance between them with the purpose to improve
operation of their electronic distribution businesses respectively
located for MI in the USA and for SEI in Europe and in particular to
serve the fast and strong globalization process in this industry.
<PAGE>
- In the meantime the parties have strengthened their links throughout:
a EDP common task forces and investigations
b Franchise mutual support
c I.T. development especially on Internet
d Inventory management skill exchanges
e Mutual participation at their Boards
f Regular meetings between their CEO's
g Joint Executive video-conference
- In the past three years each Party has led its own development in full
agreement and understanding of the other, such as further strategic
alliances with WYLE for MARSHALL or with JAKOB HATTELAND ELECTRONIC
for SEI.
- The Parties have agreed to achieve a capital association to be
implemented through the Company as their joint venture company, where
MARSHALL will hold a minority stake.
- The Parties hereto have accordingly resolved to enter into this
agreement (hereinafter : "this/the Agreement") on the terms
hereinafter set forth to establish further specific rules and rights
under which they want to bind their capital association, in complement
to the articles of association of the Company.
It is hereby agreed as follows:
Article 1 - EUROTRONICS B.V.
1.1 SEI, as the ultimate beneficiary of the Company, commits itself to cause
its group company SEI INVESTMENTS B.V.;
(a) to enter into an agreement with MARSHALL regarding the contribution to
be made by MARSHALL Subsidiary of its 99.5% shareholding in EUROTRONICS SAS,
a limited liability company established under the laws of France, having its
registered seat at 2, rue de la Tour des Dames (75009) PARIS (considered
after conversion by MARSHALL INDUSTRIES of its loan in EUROTRONICS SAS) in
the capital of the Company (the "Contribution") in consideration of the
BV-shares as defined hereunder issued to MARSHALL Subsidiary. The terms and
conditions of the Contribution shall be integrated in the deed of share issue
as referred to in Article 2 below.
(b) to adopt in its capacity of sole shareholder of the Company a
resolution:
(i) to issue 28,800 common shares with a par value of NLG 1,000 (in words
one thousand Dutch Guilders) each in the capital of the Company ("BV-Shares")
to MARSHALL Subsidiary, with the exclusion of any pre-emptive rights of SEI
INVESTMENTS BV or any other SONEPAR Group-company or third party:
(ii) to appoint Mr. Robert RODIN and Mr. Gordon MARSHALL to the Supervisory
Board of the Company as per the Completion Date (as defined in article 2 of
this Agreement), such appointment being made to give effect to the provisions
of article 3.1 of this Agreement.
1.2 A copy of the articles of association of the Company as presently in
force, the draft of the aforementioned shareholders resolution and the draft
of the notarial deed of share issue as referred to in article 2 below are
attached as Appendixes 2, 3 and 4 respectively.
<PAGE>
Article 2 - SHARE ISSUE EUROTRONICS BV
As soon as practicable after the formation of MARSHALL Subsidiary, or any
other date to be agreed to by MARSHALL, SEI and the Company (the "Completion
Date"), Marshall Subsidiary and the Company will appear before the Civil Law
Notary Frank E. ROOS, practising in Rotterdam, or his substitute to execute a
notarial deed whereby the Company shall issue new BV-shares to MARSHALL
Subsidiary (The Completion"). The BV-shares shall represent 16% of the total
issued share capital of the Company.
Article 3 - MANAGEMENT OF THE COMPANY
3.1 The management of the business and affairs of the Company will be
supervised by a Board of Supervisory Directors (Raad van Commissarissen)
("Supervisory Board") that the shareholders shall cause to be composed of a
minimum of five Supervisory Directors. Notwithstanding paragraph 7 of
Article 14 of the Articles of the Company during the term of this Agreement
the shareholders shall cause the Supervisory Board to be constituted as
follows:
a) two members of the Supervisory Board shall be appointed, dismissed and
suspended by the General Meeting upon binding nomination for appointment,
dismissal, or suspension by MARSHALL Subsidiary. The first two members to be
so nominated by MARSHALL Subsidiary will be Robert Rodin and Gordon Marshall.
b) all rights and provisions for members of the Supervisory Board granted to
existing members, excluding the Chairman of the Supervisory Board, shall
apply to the members nominated by Marshall Subsidiary.
c) each Party shall ensure that the General Meeting shall vote in favour of
the appointment of the candidates nominated in accordance with this clause as
members of the Supervisory Board.
d) each vacancy in the Supervisory Board by a member appointed pursuant to
paragraph (a) above shall upon request of either the Supervisory Board or the
General Meeting be filled by appointment by the General Meeting of a
candidate, nominated by MARSHALL Subsidiary.
3.2 The Shareholders will, in accordance with the articles, appoint the
single Managing Board member who will be entrusted as the Chief Executive
Officer of the Company with all powers to run the business subject to the
restricted operations requiring either Supervisory Board or Shareholders
prior consent.
Article 4 - VETO RIGHT
SEI and MI intend to give the representatives of MARSHALL Subsidiary
participating in the Supervisory Board of the Company a veto right with
regard to certain matters. Therefore, it has been provided in article 14,
paragraph 4 juncto paragraph 7 of the articles of association of the Company
that the unanimous approval of the Supervisory Board - of which pursuant to
the provisions of this agreement the nominees of MARSHALL Subsidiary are
members -will be required for resolutions relating to those matters set forth
in such Article 14. Thus, all matters described in paragraph 4 of article 14
of the Articles of Association of the Company that require the prior approval
of the Board of Supervisory Directors shall only be passed if such approval
is granted by the Board of Supervisory Board by a unanimous vote with the two
MARSHALL Subsidiary appointees to the Board voting in favour of such action.
<PAGE>
Article 5 - BASIC FINANCIAL INFORMATION
SEI or SEI Investments shall, or shall cause the Company, to provide to
MARSHALL reports on and copies of the audited yearly financial statements of
all the SEI Group companies and of both the quarterly and yearly combined non
audited statements by country.
Article 6 - RIGHT OF 1ST REFUSAL
6.1 The articles of the Company contain a right of first refusal provision
which states the Dutch corporate law procedures in this matter. However, the
parties' will goes beyond the Dutch corporate law constraints as far as right
of first refusal is concerned, as set forth in this Article 8.
6.2 The parties agree that if a shareholder wishes to transfer any or all
of its shares in the Company to a third party (where none of the conditions
set forth in paragraph 16 of Article 12 of the Articles of the Company apply
to such shareholder), that shareholder wishing to transfer its shares shall
waive its right under paragraph 8 of Article 12 of the Articles of the
Company to require that the price of the allotted shares be determined by the
experts and accordingly, the price of the allotted shares shall be the price
mentioned in paragraph 2 of Article 12 of the Articles of the Company.
6.3 The parties agree that if there are purchasers for shares being
offered, the parties shall cause the Board of Managing Directors to make the
allotment pursuant to paragraph 5 of Article 12 of the Articles of the
Company within seven days after all of the shareholders who have the right to
purchase have notified the Board of Managing Directors whether they exercise
their right of purchase rather than within seven days of the expiry of the
allotment term.
6.4 The parties agree that the transfer of shares to purchasers and
simultaneous payment of the purchase price as provided in paragraph 13 of
Article 12 of the Articles of the Company shall be made within seven days of
the expiry of the term within which the transferor could withdraw his offer
rather than within thirty days of such date. If any of the events set forth
in Paragraph 16 of Article 12 of the Articles of the Company occurs with
respect to any direct or indirect parent company of a shareholder, the
provisions of Article 12 of the Articles of the Company shall apply fully as
though such event occurred with respect to such shareholder, thereby giving
the other shareholders the right of first refusal described in such Article
12.
6.5 Where the application term of 180 days is reduced to 60 days if less
than a fourth of the nominal issued capital is offered as provided in
paragraph 4 of Article 12 of the Articles of the Company, there shall be a
minimum term of six months between each enforcement of such provision.
6.6 Where shares become available after initial allotment because a
shareholder fails to exercise its right of purchase pursuant to paragraph 11
of Article 12 of the Articles of the Company, and as a result, paragraphs 3
up to and including 7 of Article 12 of the Articles of the Company apply
mutatis mutandis with respect to the shares that have become available, a
determination of the price shall not take place again and the initial
application term period in which to respond with respect to such additional
shares that have become available shall be 30 days rather than 180 days.
6.7 Notwithstanding the right of first refusal provisions set forth in the
Articles of the Company, SEI Investments BV and MARSHALL Subsidiary shall be
entitled to sell and transfer its shares in the Company to any other company
or entity wholly controlled by it and the other party shall in applying the
preemptive right contained in the articles of association of the Company
fully cooperate in effecting such sale and transfer.
<PAGE>
Such sale and transfer would be on the conditions precedent that:
- - the transferee shall purchase and accept all shares held by the transferor.
- - the transferee accedes to this agreement, assumes from the transferor any
and all obligations arising in connection with this agreement; and
- - the transferor fully guarantees the timely complete and correct performance by
the transferee of any and all obligations arising in connection with this
agreement.
6.8 If the Company desires to sell any of its shares in the SEI-Group
companies listed in appendix 1 or any additional companies acquired in the
electronic business in Europe, it shall give written notice to MARSHALL of
its intention as described in article 12 of the articles of association of
the Company and Marshall shall have such right of first refusal as described
in said article except for the application term mentioned in Article 12.4
which will be reduced to 45 days in both cases.
6.9 No transfers of shares of intermediate holding companies of the
Company may be made by either party which circumvent the rights of first
refusal set forth in the Articles of the Company and this Shareholders
Agreement. In furtherance thereof: (a) at all times during which any company
or entity controlled by SEI is the owner of shares of the Company (including
but not limited to SEI Investments BV), one hundred percent (100%) of the
equity interest of such company or entity shall be owned by SEI or its direct
or indirect wholly-owned subsidiaries: and (b) at all times during which a
company or entity controlled by MI (including but not limited to MARSHALL
Subsidiary) is the owner of shares of the Company, one hundred percent (100%)
of the equity interest of such company or entity shall be owned by MARSHALL
or its direct or indirect wholly-owned subsidiaries.
Article 7 - BUYOUT PROPOSAL
At any time after two (2) years from the Completion Date, MARSHALL shall have
the option of making an offer to purchase the remaining shares of the Company
that it does not own from SEI INVESTMENTS BV or any SEI-Group company to
which such shares may have been transferred according to this Agreement. SEI
shall have up to six (6) months from the date of this offer to either accept
or reject the offer for and on behalf of such entity or entities. If the
offer is not accepted by SEI, then SEI must purchase the Company's shares
owned by MARSHALL Subsidiary or any of its affiliates to which such shares
may have been transferred according to this Agreement, at the price offered
by MARSHALL or cause such purchase to be made by the appropriate SEI-Group
company.
Article 8 - MARSHALL STOCK OPTION
Concurrently with Completion Date: (a) MARSHALL will grant SEI INVESTMENTS
B.V. an option to purchase MARSHALL common stock in the form evidenced in
Exhibit 5; and (b) SEI shall assign and transfer all of its right, title and
interest in and to the Registration Rights Agreement dated as of September
15, 1994 between MI and SEI to SEI INVESTMENTS BV and MI will execute all
necessary documents to affect the option under a Registration Rights
Agreement. Such Registration Rights Agreement shall not be assignable or
transferable by SEI Investments BV.
<PAGE>
Article 9 - GOOD FAITH
The parties hereto agree that they shall use their best efforts and take all
such steps as may reasonably be within their power, so as to cause the
Company to comply with and act in a manner specified by the provisions of
this Agreement: and so as to implement the provisions of this Agreement to
the full extent permitted by laws and shall cause its respective nominees as
members of the Supervisory Board of the Company to act accordingly. In
entering into this Agreement, the parties hereto recognise that it is
impracticable to make provisions for every contingency that may arise in the
course of performance hereof. Accordingly, the parties hereby declare it to
be their intention that this Agreement shall operate between them with
fairness and without detriment to the interests of either of them, and if in
the course of the performance of this Agreement unfairness to either party is
disclosed or anticipated then the parties hereto shall use their best efforts
to agree upon such action as may be necessary and equitable to remove the
cause or causes of the same.
Article 10 - EXCLUSIVITY / NON COMPETITION
Except through the Company, MARSHALL agrees that it shall not own or
establish a company or business based in Europe that competes with SEI-Group
companies in the electronics distribution business: provided however, that
MARSHALL may own or establish businesses to provide service, product and/or
logistical support in Europe due to customer or vendor requirements that SEI
cannot provide.
SEI agrees that it shall not own, invest in, conduct or otherwise be
associated with any electronics distribution business in Europe other than
through the Company. Except through MARSHALL, SEI agrees that it shall not
own or establish a company or business based in North America that competes
with MARSHALL in the electronics distribution business; provided however,
that SEI may own or establish business to provide service, product and/or
logistical support in North America due to customer or vendor requirements
that MARSHALL cannot provide.
Article 11 - TERMINATION OF AGREEMENT
This Agreement shall be terminated upon the occurrence of one of the
following events:
(i) a written agreement of MARSHALL and SEI
(ii) at such times as:
a. none of MARSHALL or any of its wholly-owned subsidiaries is a
shareholder of the Company or,
b. none of SEI or any of its wholly-owned subsidiaries is a shareholder of
the Company.
Article 12 - NOTICES
Any notice or other communication required or permitted to be given under
this Agreement shall be in writing and signed by or on behalf of the party
giving notice and shall be given either personally, by overnight courier
service, by facsimile transmission or by registered or certified mail, return
receipt requested, first-class postage prepaid, or by other means of written
communication, addressed to such other party at the address appearing below.
A notice to a party delivered other than by mail shall be deemed to have been
given at the time it is actually received by the part to whom notice is given.
All notices are to be sent as follows:
if to MARSHALL or MARSHALL Subsidiary: to the attention of Mr. Robert RODIN
c/o MARSHALL INDUSTRIES (MI), 9320 Telstar Avenue, El Monte, California
91731, U.S.A.
<PAGE>
With a copy to : D. Stephen Antion, O'Melveny & Myers, 400 South Hope Street,
Los Angeles, California 90071, U.S.A.,
If to SEI : to the attention of Monsieur Jose MENENDEZ c/o SONEPAR
ELECTRONIQUE INTERNATIONAL (SEI), 2. rue de la Tour des Dames (75009) FRANCE.
If to SEI INVESTMENTS BV : to the attention of Mr Jean FRIBOURG c/o SEI
INVESTMENTS BV, 2. Takkebisters BREDA (THE NETHERLANDS).
With a copy to : Mr Gerard PEN, Coopers & Lybrand, Marten Meesweg 25, PO Box
8800, 3009 AV Rotterdam, THE NETHERLANDS.
Article 13 - FURTHER ASSURANCES
The parties hereto shall execute any additional documents or amendments to
documents and shall take any further actions that may be necessary to carry
out the terms of this Agreement. If there is any conflict between any
provision of this Agreement and any such document, including those attached
in Exhibits hereto, the provisions of this Agreement shall prevail.
Article 14 - COUNTERPARTS
This Agreement may be executed in one or more counterparts, and when executed
by each of the parties signatory hereto, said counterparts shall constitute a
single valid agreement through each of the signatory parties may have
executed separate counterpart hereof.
Article 15 - SUCCESSORS
This Agreement is binding upon and shall insure to the benefit of the parties
hereto and to their respective successors, assigns, personal representatives,
heirs and legatees.
Article 16 - GOVERNING LAW
This agreement is made under and shall be construed pursuant to the laws of
the Netherlands.
Article 17 - INTEGRATION
17.1 This Agreement together with all appendixes as enunciated along the
above articles sets forth the entire understandings of the parties with
respect to the subject matter hereof and supersedes all prior or
contemporaneous agreements of the parties whether oral or written with
respect to the subject matter hereof.
The parties understand and agree that the subject matter hereof does not
relate to prior agreements solely between MARSHALL and SEI which relate to
matters other than corporate governance and action by shareholders of
Eurotronics BV.
17.2 In the event of any discrepancy, between the provisions of this
agreement and those of the articles of association of the Company, the former
shall prevail.
Article 18 - EUROTRONICS S.A.S.
Without MARSHALL's prior written consent, SEI will not, and will not permit
any of its affiliates, to liquidate or otherwise dispose of the shares of
EUROTRONICS SAS or any of the assets of EUROTRONICS SAS for at least 10 years
from the Completion Date, except that EUROTRONICS SAS may dispose of shares
of Bloomers Electronics Ltd. and/or SEI Electronics Purchasing GmbH.
<PAGE>
Article 19 - SUBSEQUENT SHAREHOLDERS AGREEMENT
If either shareholder offers its shares to the other shareholder pursuant to
any of the right of first refusal provisions of the Articles of Association
of the Company, as amended by this Shareholders Agreement, and the
shareholder(s) having the right of first refusal elects not to exercise their
right of first refusal, the transfer of the shares by the offering
shareholder to the third party (the "Transferee") shall be on the condition
precedent that the Transferee shall enter into an agreement (the "Subsequent
Shareholders Agreement" ) with the remaining shareholders(s) whereby the
Transferee agrees:
(a) to become a party to and be bound by Sections 6.2, 6.3, 6.4, 6.5, 6.7,
6.8, 6.9 and 6.10 of Article 6 of this Shareholders Agreement and Article 18
of this Shareholders Agreement, mutatis mutandis;
(b) that so long as MARSHALL subsidiary or any of its affiliates is a
shareholder of the Company, the transferee shall be bound by the provisions
of Section 3.1 of Article 3 of this Shareholders Agreement;
(c) to be bound by the provisions of Article 10 of this Shareholders
Agreement; provided, however that the part of the second sentence of the
second paragraph that reads "Except for its ownership in MARSHALL" shall be
deleted if it is SEI or its affiliate that is transferring the shares; and
(d) that any subsequent transferee to whom the Transferee transfers its
shares in accordance with the Articles of the Company and the Subsequent
Shareholders Agreement shall be bound by the Subsequent Shareholders
Agreement.
Article 20 - INVALID PARTS
If part of this Agreement or any right pursuant to this Agreement is invalid
or unenforceable, this shall not in any way affect the remaining terms or
rights. Parties shall replace the invalid or unenforceable part with valid
provisions containing the same purpose and goal as the replaced part.
<PAGE>
LIST OF APPENDIXES
1. List of the direct subsidiaries of EUROTRONICS BV
2. Articles of Association of EUROTRONICS BV
3. Shareholders Resolution
4. Notarial Deed of Share Issue
5. SONEPAR ELECTRONIQUE INTERNATIONAL's option on
MARSHALL INDUSTRIES' shares
<PAGE>
MARSHALL INDUSTRIES
NONQUALIFIED STOCK OPTION GRANT
1. IDENTIFICATION
This Nonqualified Stock Option Grant (this "Option Grant") is made by and
between Marshall Industries, a California corporation ("Marshall"), and SEI
Investments BV, a Dutch limited liability company ("SEI"), as of ________,
1997.
2. GRANT OF OPTION
Subject to the terms and conditions of this Option Grant, Marshall hereby
grants to SEI an option (the "Option") to purchase 874,545 shares of
Marshall's authorized and unissued Common Stock. The number of shares
covered by the Option shall not exceed five percent (5%) of the issued and
outstanding common stock of Marshall giving effect to the exercise of the
Option. If the number of shares covered by the Option at any time exceeds
five percent (5%), the total number of shares shall be reduced accordingly.
The Option is a nonqualified stock option.
3. TERM; EXERCISE
3.1. TERM
Subject to the terms and conditions of this Option Grant, the Option is
immediately exercisable. Unless previously exercised pursuant to this
Article 3, the Option shall terminate at 5:00 p.m. Pacific time on, and shall
not be exercisable after __________, 1999. (1)
3.2. NOTICE OF EXERCISE
SEI shall exercise the Option by (i) notifying in writing the Secretary of
Marshall of SEI's election to exercise the Option and stating the number of
shares to be purchased and (ii) paying in full the purchase price as provided
in Section 3.3.
3.3. PAYMENT OF PURCHASE PRICE
The purchase price for any shares of Common Stock with respect to which SEI
exercises this Option shall be $34.5685 per share and shall be paid in full
promptly after SEI gives notice of exercise as provided in Section 3.2. The
purchase price shall be paid in cash or by wire transfer in United States
Dollars to an account designated by Marshall.
- -----------------------
(1) date to be two (2) years after the Grant Date.
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<PAGE>
4. ISSUANCE OF SHARES
Promptly after Marshall's receipt of notification of exercise provided for in
Section 3.2 and SEI's payment in full of the purchase price, Marshall shall
deliver, or cause to be delivered, to SEI a certificate for the whole number
of shares with respect to which the Option is being exercised by SEI. Shares
issued upon exercise of the Option shall be registered in the name of SEI.
If any law or regulation of the Securities and Exchange Commission or of any
other federal or state governmental body having jurisdiction shall require
Marshall or SEI to take any action prior to the issuance to SEI of the shares
of Common Stock of Marshall specified in the written notice of election to
exercise the Option, the date for the delivery of such shares shall be
postponed until the completion of such action.
5. ASSIGNMENT OR TRANSFER
This Option is not assignable or transferable.
6. NO RIGHTS AS SHAREHOLDER
SEI shall have no rights as a shareholder with respect to shares of the
Common Stock covered by this Option until the date of the issuance of a stock
certificate or stock certificates evidencing issuance of such shares upon
SEI's exercise of the Option. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate or stock certificates are issued, except as provided
in Article 7.
7. MODIFICATION AND TERMINATION
7.1. If the number of issued and outstanding shares of Common Stock changes
as a result of a stock split, reverse stock split, stock dividend
recapitalization, or any other change in the capital structure of Marshall,
the number of shares subject to the Option and the price per share of the
Option (but not the total price thereof) shall be adjusted so that upon
exercise of the Option, SEI will receive the same number of shares it would
have received had it been the holder of all shares subject to its outstanding
Option immediately before the effective date of the change in the number of
issued shares of Common Stock. The adjustment shall not result in the
issuance of fractional shares.
7.2. If Marshall liquidates, merges, reorganizes, or consolidates with any
other corporation in which Marshall is not the surviving corporation or
Marshall becomes a wholly-owned subsidiary of another corporation, any part
of the Option that has not yet been exercised shall be deemed cancelled
unless the surviving corporation in any such merger, reorganization or
consolidation elects to assume the Option or to issue substitute options in
place thereof. If the Option is to be cancelled in accordance with the
foregoing, SEI shall have the right, exercisable during the thirty (30)-day
period ending
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<PAGE>
on the thirtieth (30th) day prior to such liquidation, merger or
consolidation, to exercise SEI's Option, in whole or in part.
7.3. The grant of the Option shall not affect in any way the right or power
of Marshall to make adjustments, reclassifications, reorganizations, or
changes in its capital structure, to merge, consolidate or dissolve; to
change its business structure; or to liquidate, sell or transfer all or any
part of the business or assets.
8. COMPLIANCE WITH SECURITIES LAWS
SEI acknowledges that the shares to be delivered upon exercise of the Option
have not been registered under the Securities Act of 1933, as amended (the
"Act") nor does Marshall have any obligation to so register such shares.
Therefore, such shares are what is known as "lettered" or "restricted"
securities under the Act, and as a consequence, the shares cannot be
transferred in any manner without full compliance with all provisions of the
Act. At the time this Option is exercised, Marshall may require SEI to
execute any documents or take any action which may be then necessary to
comply with the Act and the rules and regulations adopted thereunder, or any
other applicable federal or state laws, including the request for, and
enforcement of, letters of investment intent and/or legal opinions from SEI's
United States counsel that such transfer complies with the Act, such
requirements to be determined by Marshall in its judgment as necessary to
assure compliance with such laws. Marshall shall not be obligated to issue
any shares upon the exercise of this Option unless the issuance, in the
judgment of Marshall's Board of Directors, is in full compliance with all
applicable laws, governmental rules and regulations, any undertaking of
Marshall made under the Act, any state securities laws, and stock exchange
agreements of Marshall.
9. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws
of the State of California.
10. INTEGRATION
This Option Grant constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes all prior agreements
and understandings of the parties in connection therewith, except for that
certain Registration Rights Agreement dated as of September 15, 1994 by and
between Marshall and Sonepar Electronique International ("Sonepar") which is
being transferred from Sonepar to SEI concurrently with the execution of this
Option Grant.
11. AMENDMENTS; WAIVERS
This Option Grant may be amended only by agreement in writing of the parties
hereto. No waiver of any provision nor consent to any exception to the terms
of this Stock
3
<PAGE>
Option shall be effective unless in writing and signed by the party to be
bound and then only to the specific purpose, extent and instance so provided.
[Remainder of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, this Nonqualified Stock Option Grant is executed by the
parties on the date below.
Executed on ________, 1997
Marshall Industries SEI Investments BV
By: By:
------------------------ -------------------------
Name: Name:
Title: Title:
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT ("Agreement"), dated as of September 15, 1994
("Agreement"), by and between Marshall Industries ("Marshall") and Sonepar
Electronique International ("SEI").
RECITALS
Pursuant to that certain Nonqualified Stock Option Grant dated July 29,
1994 (the "Option Agreement") Marshall granted SEI an option to purchase shares
of Marshall Industries common stock (the "Shares"), the exact number to be
determined by formula in accordance with the Option Agreement. All capitalized
terms used but not defined herein shall have the meaning ascribed to them in the
Option Agreement.
AGREEMENTS
In consideration of the mutual covenants herein contained and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement:
"Person" shall mean an individual, a corporation, a partnership, a trust,
an unincorporated organization or a governmental organization or any agency or
political subdivision thereof.
"Prospectus" shall mean any prospectus which is a part of a Registration
Statement, together with all amendments or supplements thereto.
"Registrable Stock" shall mean the Shares owned by SEI which are acquired
by SEI upon exercise of the Option; provided, however, that Registrable Stock
shall not be deemed to include any Shares after such Shares have been registered
under the Securities Act and sold pursuant to such registration or any Shares
sold, or eligible for sale, without registration under the Securities Act in
compliance with Rule 144, or pursuant to any other exemption from registration
under the Securities Act to a Person who is free to resell such shares without
registration or restriction under the Securities Act.
"Registration Statement" shall mean any registration statement filed with
the Securities and Exchange Commission in accordance with the Securities Act,
together with all amendments or supplements thereto.
<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
federal statute or statutes which shall be enacted to take the place of such
Act, together with all rules and regulations promulgated thereunder.
"Securities and Exchange Commission" shall mean the United States
Securities and Exchange Commission or any successor to the functions of such
agency.
"Securities Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any federal statute or statutes which shall be enacted to take
the place of such Act, together with all rules and regulations promulgated
thereunder.
2. REQUIRED REGISTRATION.
a. Subject to Section 2.b. below, upon the written request of SEI (made
at any time after the Option becomes exercisable) to register the Shares which
are acquired upon exercise of the Option, Marshall will use its best efforts to
effect the registration of Registrable Stock under the Securities Act and the
registration or qualification thereof under all applicable state securities or
blue sky laws, but only to the extent provided for in the following provisions
of this Agreement. A request pursuant to this Section 2.a. shall state the
intended method of disposition of the Registrable Stock sought to be registered.
b. The foregoing registration rights of SEI shall be deemed satisfied by
Marshall when one Registration Statement respecting the Registrable Stock shall
have been filed by Marshall with and made effective by the Securities and
Exchange Commission under the Securities Act pursuant to a request made pursuant
to Section 2.a. and the offerings pursuant to each such Registration Statement
shall have been completed.
3. REGISTRATION PROCEDURES.
Whenever Marshall is required by this Agreement to use its best efforts to
effect the registration of any Registrable Stock under the Securities Act,
Marshall will:
a. As expeditiously as possible and in any event not more than ninety
(90) days after the written request for registration is given by SEI to
Marshall, prepare and file with the Securities and Exchange Commission a
Registration Statement with respect to such Registrable Stock and use its best
efforts to cause such Registration Statement to become and remain effective for
a period of not more than nine months, provided that before filing a
Registration Statement or Prospectus or any amendments or supplements thereto,
Marshall will furnish to counsel for SEI copies of all such documents proposed
to be filed, which documents will be subject to the review of such counsel;
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<PAGE>
b. As expeditiously as possible, prepare and file with the Securities and
Exchange Commission such amendments and supplements to such Registration
Statement and the Prospectus used in connection therewith as may be necessary to
keep such Registration Statement effective for a period of not more than nine
(9) months and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all Registrable Securities covered by such
Registration Statement during such period in accordance with the intended method
or methods of disposition by SEI as set forth in such Registration Statement;
c. Furnish to SEI such number of copies of such Registration Statement,
each amendment and supplement thereto, the Prospectus included in the
Registration Statement (including each preliminary Prospectus), and such other
documents, as SEI may reasonably request in order to facilitate the public sale
or other disposition of the Registrable Securities owned by SEI;
d. Use reasonable efforts to register or qualify the Registrable
Securities covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions as SEI shall reasonably request, and do any
and all other acts and things which may be necessary under such securities or
blue sky laws to enable SEI to consummate the public sale or other disposition
in such jurisdiction of the Registrable Securities owned by SEI covered by such
Registration Statement; provided, however, that Marshall shall not be required
to (i) qualify to do business as a foreign corporation in any jurisdiction
wherein it would not otherwise be required to qualify but for this subparagraph,
(ii) subject itself to taxation in any such jurisdiction, or (iii) consent to
general service of process in any such jurisdiction;
e. Notify SEI at any time when a Prospectus relating to the Registrable
Securities of SEI covered by such Registration Statement is required to be
delivered under the Securities Act, of the happening of any event as a result of
which the Prospectus included in such Registration Statement contains an untrue
statement of a material fact or omits any fact necessary to make the statements
therein not misleading, and at the request of SEI, prepare a supplement or
amendment to such Prospectus so that, as thereafter delivered to the purchasers
of the Registrable Securities covered by such Registration Statement,
such Prospectus will not contain an untrue statement, of a material fact or
omit to state any fact necessary to make the statements therein not misleading;
f. Otherwise use its best efforts to comply with all applicable rules and
regulations of the Securities and Exchange Commission, and furnish to SEI at
least five (5) business days prior to the filing thereof a copy of such
Registration Statement or any Prospectus and any amendment or supplement to such
Registration Statement or Prospectus, and not file any thereof to
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<PAGE>
which SEI shall have reasonably objected on the grounds that such document does
not comply in all material respects with the requirements of the Securities Act
or of the rules or regulations thereunder; and
g. Cause all such Registrable Securities covered by such Registration
Statement to be listed on the principal securities exchange on which Marshall's
common stock is then listed.
4. EXPENSES.
To the fullest extent allowable under applicable state securities and blue
sky laws, the following expenses incurred in effecting the registrations
provided for in Section 2(a) shall be borne and paid by Marshall: all
registration and filing fees, printing expenses, fees and disbursements of
counsel for Marshall, expenses of any audits incident to or required by any such
registration and expenses of complying with the securities or blue sky laws of
any jurisdictions pursuant to Subsection (d).
5. PREPARATION; REASONABLE INVESTIGATION.
In connection with the preparation and filing of the Registration Statement
under the Securities Act pursuant to this Agreement, Marshall will give SEI,
their underwriters, if any, and their respective counsel and accountants, the
opportunity to participate in the preparation of such Registration Statement,
each Prospectus included therein or filed with the Securities and Exchange
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of Marshall with its officers and the independent public
accountants who have certified its financial statements as shall be reasonably
necessary, in the opinion of SEI's and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
6. INDEMNIFICATION.
a. In the event of any registration of any of its Securities under the
Securities Act pursuant to this Agreement, Marshall, to the extent permitted by
law, shall indemnify and hold harmless SEI, each underwriter (as defined in the
Securities Act), each other Person who participates in the offering of such
Securities, and each other Person, if any, who controls (within the meaning of
the Securities Act) SEI, such underwriter or participating Person, against any
losses, claims, damages or liabilities, joint or several, to which SEI, such
underwriter, participating Person or controlling Person may become subject under
the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (1) any alleged untrue statement of any material
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<PAGE>
fact contained, on the effective date thereof, in any Registration Statement
under which such Securities were registered under the Securities Act, any
preliminary Prospectus or final Prospectus contained therein, or any summary
Prospectus issued in connection with any Securities being registered, or any
amendment or supplement thereto, or (2) any alleged omission to state in any
such document a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse SEI, or any
such underwriter, participating Person or controlling Person for any legal or
other expenses reasonably incurred by SEI, such underwriter, participating
Person or controlling Person in connection with investigating or defending
any such loss, damage, liability or action; provided, however, that Marshall
shall not be liable to SEI, or any such underwriter, participating Person, or
controlling Person in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any alleged untrue
statement or alleged omission made in such Registration Statement,
preliminary Prospectus, summary Prospectus, Prospectus, or amendment or
supplement thereto in reliance upon and in conformity with written
information furnished to Marshall by SEI specifically for use therein.
b. SEI indemnifies and holds harmless Marshall, its directors and
officers, each underwriter (as defined in the Securities Act), and each other
Person, if any, who controls (within the meaning of the Securities Act),
Marshall or any underwriter against any losses, claims, damages, or liabilities,
joint or several, to which Marshall, any such director or officer, any such
underwriter, or any such Person may become subject under the Securities Act or
any other statute or at common law, in so far as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (1)
any alleged untrue statement of any material fact contained, on the effective
date thereof, in any Registration Statement under which Registrable Stock is
registered under the Securities Act at the request of SEI, any preliminary
Prospectus or final Prospectus contained therein, or any summary Prospectus
issued in connection with any such Securities being registered, or any amendment
or supplement thereto, or (2) any alleged omission to state in any such document
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in either case to the extent, and only to the
extent, that such alleged untrue statement or alleged omission was made in such
Registration Statement, preliminary Prospectus, summary Prospectus, Prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to Marshall by SEI specifically for use therein.
c. Any Person which proposes to assert the right to be indemnified under
subsections a. or b. of this Section 6 shall, promptly after receipt of notice
of commencement of any action, suit or proceeding against such Person in respect
of which a claim
5
<PAGE>
is to be made against an indemnifying Person under such subsections a. or b.,
notify each such indemnifying Person of the commencement of such action, suit or
proceeding, enclosing a copy of all papers served. The indemnifying Person shall
have the right to investigate and defend any such loss, claim, damage, liability
or action and to employ separate counsel in any such action and to control the
defense thereof. The Person claiming indemnification shall have the right to
employ separate counsel in any such action and to control the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
Person against whom indemnification is sought.
d. The indemnification provided for under this Section 6 will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of Registrable Securities.
7. MARKET STAND-OFF.
SEI agrees not to make a demand for registration under Section 2. of this
Agreement during the one hundred and eighty (180) day period following the
effective date of a registration statement of Marshall filed under the
Securities Act in connection with a public offering of Marshall's Common Stock,
if so requested by Marshall. Marshall will be required to make said request to
SEI within thirty (30) days after the filing of the Registration Statement in
connection with the public offering of Marshall's Common Stock, failing which
SEI will not be subject to the foregoing restrictions with respect to that
public offering. Marshall may impose stop-transfer restrictions with respect to
such Securities, subject to the foregoing restrictions to the end of such
period.
8. ASSIGNABILITY OF REGISTRATION RIGHTS.
The registration rights set forth in this Agreement shall not be
assignable.
9. SEVERABILITY.
Whenever possible, each provision of this Agreement will be interpreted in
such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of the Agreement.
6
<PAGE>
10. COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which shall together constitute one and
the same document.
11. ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement by and among the parties
hereto with respect to SEI's registration rights with respect to the Shares
acquired upon exercise of the Option.
12. AMENDMENTS AND GOVERNING LAW.
This Agreement may be amended, modified or supplemented only by a written
instrument executed by Marshall and SEI. This Agreement shall be governed by and
construed in accordance with the laws of the State of California applicable to
contracts made and to be performed in that state.
IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the day and year first written above.
MARSHALL INDUSTRIES
By: /s/ Robert Rodin
------------------------------------
Robert Rodin, President
SONEPAR ELECTRONIQUE INTERNATIONAL
By: /s/ Jose Menendez
------------------------------------
Its: Jose Menendez Pdt Directoire
--------------------------------
7
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into Marshall Industries' previously
filed Registration Statements on Form S-8, File Numbers 33-1587 and 33-82510.
ARTHUR ANDERSEN LLP
Los Angeles, California
August 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARSHALL INDUSTRIES ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 1,687
<SECURITIES> 0
<RECEIVABLES> 175,772
<ALLOWANCES> (8,003)
<INVENTORY> 284,419
<CURRENT-ASSETS> 469,051
<PP&E> 81,220
<DEPRECIATION> (44,988)
<TOTAL-ASSETS> 539,673
<CURRENT-LIABILITIES> 138,089
<BONDS> 0
0
0
<COMMON> 16,616
<OTHER-SE> 332,326
<TOTAL-LIABILITY-AND-EQUITY> 539,673
<SALES> 1,184,604
<TOTAL-REVENUES> 1,184,604
<CGS> 988,371
<TOTAL-COSTS> 988,371
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,370
<INTEREST-EXPENSE> (1,197)
<INCOME-PRETAX> 68,503
<INCOME-TAX> 28,850
<INCOME-CONTINUING> 39,653
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,653
<EPS-PRIMARY> 2.32
<EPS-DILUTED> 0
</TABLE>
