<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended February 28, 1999
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to ___________.
Commission file number 1-5441.
MARSHALL INDUSTRIES
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-2048764
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9320 Telstar Avenue, El Monte, California 91731-2895
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (626) 307-6000
Common Stock outstanding by class as of February 28, 1999
Common Stock 16,616,364 shares
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 [ ]
1
<PAGE> 2
MARSHALL INDUSTRIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(000's Omitted)
ASSETS
<TABLE>
<CAPTION>
February 28, May 31,
1999 1998
------------ ----------
(Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,881 $ 4,796
Receivables - net 218,537 212,956
Inventories 345,277 387,655
Deferred income tax benefits 22,873 22,872
Prepaid income taxes 896 8,613
Prepaid expenses 4,426 4,851
--------- ---------
Total Current Assets 594,890 641,743
--------- ---------
Property, Plant and Equipment, net
of accumulated depreciation and
amortization of $61,139 at
February 28, 1999 and $57,099
at May 31, 1998 41,411 45,856
Investments 42,688 43,486
Goodwill - net 118,602 120,744
Other Assets - net 4,202 1,995
--------- ---------
Total Assets $ 801,793 $ 853,824
========= =========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt $ 16,250 $ 7,500
Accounts payable and accrued
expenses 198,345 198,647
--------- ---------
Total Current Liabilities 214,595 206,147
--------- ---------
Long-Term Debt 168,000 245,500
Deferred Income Tax Liabilities 1,738 1,738
Shareholders' Investment 420,282 404,308
Accumulated other comprehensive loss (2,822) (3,869)
--------- ---------
Total Liabilities and
Shareholders' Investment $ 801,793 $ 853,824
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
2
<PAGE> 3
MARSHALL INDUSTRIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(000's Omitted Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 393,164 $ 368,112 $1,289,513 $1,043,747
Cost of sales 333,023 309,431 1,089,113 882,500
---------- ---------- ---------- ----------
Gross profit 60,141 58,681 200,400 161,247
Selling, general and
administrative expenses 48,792 43,032 155,583 112,199
---------- ---------- ---------- ----------
Income from operations 11,349 15,649 44,817 49,048
Interest expense and other--net 5,129 1,902 14,139 3,067
---------- ---------- ---------- ----------
Income before income taxes and
extraordinary gain 6,220 13,747 30,678 45,981
Provision for income taxes 3,515 5,740 14,704 19,295
---------- ---------- ---------- ----------
Income before extraordinary gain 2,705 8,007 15,974 26,686
Extraordinary gain from termination
of joint venture (Net of income
taxes of $10,535) -- -- -- 14,615
---------- ---------- ---------- ----------
Net income $ 2,705 $ 8,007 $ 15,974 $ 41,301
========== ========== ========== ==========
Earnings per share (basic):
Income per share before
extraordinary gain $ .16 $ .48 $ .96 $ 1.61
Extraordinary gain per share -- -- -- .88
---------- ---------- ---------- ----------
Net income per share $ .16 $ .48 $ .96 $ 2.49
========== ========== ========== ==========
Earnings per share (diluted):
Income per share before
extraordinary gain $ .16 $ .48 $ .96 $ 1.59
Extraordinary gain per share -- -- -- .87
---------- ---------- ---------- ----------
Net income per share $ .16 $ .48 $ .96 $ 2.46
========== ========== ========== ==========
Average number of shares outstanding:
Basic 16,616 16,616 16,616 16,616
========== ========== ========== ==========
Diluted 16,684 16,720 16,703 16,767
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
income statements.
3
<PAGE> 4
MARSHALL INDUSTRIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's omitted)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FEBRUARY 28,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 15,974 $ 41,301
Adjustments to reconcile net income
to net cash provided by operating activities:
Extraordinary gain from termination
of joint venture, net of income taxes -- (14,615)
Loss on equity investments 768 --
Depreciation and amortization 9,648 6,521
Net decrease in current assets and liabilities 44,641 15,417
Interest accrued on note receivable -- (172)
Deferred income tax benefit -- (1,186)
Other operating activities 379 199
--------- ---------
Net cash provided by operating activities 71,410 47,465
Cash flows from investing activities:
Cash consideration paid for acquired business -- (174,460)
Net proceeds from termination of joint venture -- 14,615
Capital expenditures (5,233) (10,967)
Capital disposals 1,973 --
Proceeds from sale of Marsh assets 1,826 --
Other investing activities (3,026) --
--------- ---------
Net cash used for investing activities (4,460) (170,812)
Cash flows from financing activities:
Net repayments under bank lines of credit (65,000) 45,251
Net borrowings (repayments) of other long-term debt (3,750) 79,761
Capitalized financing costs -- (1,384)
Other (115) --
--------- ---------
Net cash provided by (used for) financing activities (68,865) 123,628
--------- ---------
Net increase (decrease)in cash and cash equivalents (1,915) 281
Cash at the beginning of the period 4,796 1,687
--------- ---------
Cash and cash equivalents at the end of the period $ 2,881 $ 1,968
========= =========
Cash payments during the nine months for the following:
Interest $ 12,256 $ 1,599
========= =========
Income taxes $ 6,987 $ 35,891
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated cash
flow statements.
4
<PAGE> 5
MARSHALL INDUSTRIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: GENERAL
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. These condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto in
the Company's annual report on Form 10-K for the year ended May 31, 1998.
In the opinion of the Company, the unaudited condensed consolidated financial
statements reflect all adjustments (consisting of normal recurring accruals)
considered necessary to present fairly the Company's financial position as of
February 28, 1999 and the results of its operations for the three and nine month
periods and its cash flows for the nine month periods ended February 28, 1999
and 1998.
Certain prior year amounts have been reclassified to conform with the fiscal
1999 presentation.
NOTE 2: ACCOUNTING POLICIES
Reference is made to Note 1 of Notes to Consolidated Financial Statements in the
Company's annual report on Form 10-K for the summary of significant accounting
policies.
NOTE 3: CASH & CASH EQUIVALENTS
The Company's presentation of cash includes cash equivalents. Cash equivalents
are defined as short-term investments with maturity dates of ninety days or less
at time of purchase. The carrying amount reported in the balance sheet
approximates fair value.
NOTE 4: EARNINGS PER SHARE AND CAPITAL STRUCTURE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128") during fiscal 1998. Under the new standard,
basic earnings per share is computed based on the weighted average number of
common shares outstanding and excludes any potential dilution; diluted earnings
per share reflects potential dilution from the exercise or conversion of
securities into common
5
<PAGE> 6
stock. The number of dilutive securities for the third quarters of fiscal years
1999 and 1998 amounted to 68,000 shares and 104,000 shares, respectively, and
for the nine-month periods ended February 28, 1999 and 1998 amounted to 87,000
shares and 151,000 shares, respectively, related to stock options.
Options to purchase 1,474,545 shares and 1,209,545 shares of common stock at
option prices ranging from $23.375 to $35.875 per share were outstanding as of
February 28, 1999, but were not included in the computation of diluted EPS
because the options' exercise price was greater than the average market price of
the shares for the three months and nine months ended February 28, 1999,
respectively. The options expire on dates ranging from June, 2000 through
November, 2017.
NOTE 5: COMPREHENSIVE INCOME
During fiscal 1999 the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") which requires
disclosure of comprehensive income defined as the aggregate change in
shareholders' equity excluding changes in ownership interests. The Company
recognized comprehensive income, which consisted of net income, unrealized
foreign currency translation loss and unrealized gain on Serial System, Ltd., as
follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C>
Net income $ 2,705 $ 8,007 $ 15,974 $ 41,301
Foreign currency
translation loss (791) 9 (382) (380)
Unrealized gain on
Serial Systems, LTD 1,133 -- 1,429 --
-------- -------- -------- --------
Comprehensive income $ 3,047 $ 8,016 $ 17,021 $ 40,921
======== ======== ======== ========
</TABLE>
NOTE 6: INVESTMENT IN SERIAL SYSTEM, LTD.
The Company's investment in Serial Systems, LTD., the shares of which are traded
on the Stock Exchange of Singapore, is recorded at fair market value. The
investment in Serial of $7.2 million has been reduced by $2.5 million as of
February 28, 1999, which was charged to Shareholders' Investment, due to the
market declines of Serial's common stock and the Singapore dollar to the U.S.
dollar. The net adjustments since June 1, 1998 are included in the net credits
to the comprehensive income described in Note 5. The Company did not record a
tax benefit as a result of these adjustments.
6
<PAGE> 7
NOTE 7: INVESTMENTS
The investments balance includes net goodwill of $29 million associated with the
Company's investment in Eurotronics B.V., which is being amortized over a period
of 30 years to the year 2026.
NOTE 8: INTEREST RATE SWAP AGREEMENTS
In March, 1999, the Company reduced the notional amount of its interest swap
agreements by $50 million. The agreements are accounted for as hedge instruments
and the fees related to this reduction were not material. After this reduction,
the Company has interest swap agreements, aggregating $100 million, with four
banks that expire in January, 2003 where the Company agrees to exchange at
monthly and quarterly intervals the difference between the Company's floating
rate interest obligations with fixed pay rates ranging from 5.670% to 5.775%.
Under the terms of one of the agreements with a notional amount of $25 million,
the bank on January, 2002 can elect not to extend the agreement to its
expiration date of January 2003.
NOTE 9: LITIGATION
In February, 1999, a lawsuit was filed against the Company under the private
citizen enforcement provisions of the California Safe Drinking Water and Toxic
Enforcement Act of 1986 or "Proposition 65," Cal. Health & Safety Code
Sections 25249.5-25249.13, and under the California Unfair Competition
Act, Cal. Bus. & Prof. Code Section 17200. The Plaintiff's complaint alleges
that the Company sells or distributes soldering tools and equipment (e.g.,
soldering irons, pots and tips) and chemicals (e.g., cleaners, adhesives,
fluxes) that expose users to lead and other chemicals known to the State of
California to cause cancer and reproductive toxicity, without first providing
users with a "clear and reasonable warning" as required by Proposition 65. The
complaint seeks civil penalties of up to $2,500 per day for each violation of
Proposition 65's warning requirement, restitution of the purchase price of goods
sold without warnings, injunctive relief and attorneys' fees and costs. While
the Company is the only named defendant, manufacturers, other distributors,
retailers and employers who use or sell the products at issue are sued as
unnamed "Doe" defendants in this lawsuit. Separate lawsuits against individual
manufacturers have also been filed by the Plaintiff. The Company has filed an
answer in which it issued a general denial of the allegations in the complaint
and raised several affirmative defenses. Based on all facts currently available
to it, the Company does not believe that this litigation will have a material
adverse effect on the Company.
7
<PAGE> 8
MARSHALL INDUSTRIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
------------------ ------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 84.7 84.1 84.5 84.6
------ ------ ------ ------
Gross profit 15.3 15.9 15.5 15.4
Selling, general and administrative expenses 12.4 11.6 12.1 10.7
------ ------ ------ ------
Income from operations 2.9 4.3 3.4 4.7
Interest expense and other-net 1.3 .5 1.1 .3
------ ------ ------ ------
Income before provision for
income taxes and extraordinary gain 1.6 3.8 2.3 4.4
Provision for income taxes 0.9 1.6 1.1 1.8
------ ------ ------ ------
Income before extraordinary gain 0.7 2.2 1.2 2.6
Extraordinary gain -- -- -- 1.4
------ ------ ------ ------
Net income 0.7% 2.2% 1.2% 4.0%
====== ====== ====== ======
</TABLE>
8
<PAGE> 9
THREE AND NINE MONTH PERIODS ENDED FEBRUARY 28, 1999 AND 1998
The Company's net sales increased by $25 million or 7% to $393 million and $246
million or 24% to $1,290 million for the three and nine months ended February
28, 1999, respectively, as compared to the same periods of the prior year. The
Company's results included Sterling Electronics Corporation ("Sterling") which
was acquired on January 16, 1998. Sterling accounted for $79 million and $260
million of net sales for the three and nine months ended February 28, 1999,
respectively, as compared to $47 million from the date of acquisition to
February 28, 1998.
Excluding Sterling's net sales, the Company's net sales decreased by $7 million
for the third quarter of fiscal 1999, and increased by $33 million for the nine
months ended February 28, 1999, as compared to the prior year. The Company's net
sales for fiscal 1999 benefited from a substantial increase in the sales of
microprocessors. The sales of such products increased by $20 million and $89
million for the third quarter and first nine months of fiscal 1999,
respectively, as compared to last year. The exceptional sales of microprocessors
were primarily due to the strong demand and increased availability of such
products, and special purchases of some end-of-production products from one of
the Company's major suppliers. There is no assurance that such special purchases
will be available in future periods. Sales of microprocessors accounted for
approximately 11% and 13% of the Company's sales for the three and nine months
ended February 28, 1999, respectively, as compared to approximately 6% and 8%
for the same periods of a year ago.
The increases in microprocessor sales, however, were partially offset by
declines in DRAM sales of $12 million and $59 million for the three and
nine-month periods ended February 28, 1999, respectively, as compared to the
prior year. The decrease in DRAM sales is primarily due to the continuing
declines in the unit pricing of such products. The Company's DRAM sales have
also been impacted by a reduction in the volume of products made available to
the distributor network by some major suppliers due to pricing, profitability
and in recent months, supply considerations. Sales of DRAMs accounted for
approximately 4% of the Company's net sales for both the three and nine-month
periods ended February 28, 1999, as compared to approximately 7% and 10%,
respectively, for the same periods of a year ago.
The Company's third quarter of fiscal 1999 net sales were also affected by the
termination of the Xilinx product line effective December 31, 1998. The
termination of the line accounted for approximately $10 million of the decrease
in the Company's net sales for the third quarter of fiscal 1999, as compared to
fiscal 1998.
In addition to the declines in DRAM and Xilinx sales, the Company experienced
decreases in the sales of many of its major products for the third quarter of
fiscal 1999 due to continuing market pressures on pricing and weaker customer
demand.
9
<PAGE> 10
The operating results for the nine months ended February 28, 1999 benefited from
the shipments of some large value-added orders for a major customer through its
contract manufacturer during the first quarter of fiscal 1999. Partly due to the
timing of product introductions and some seasonal characteristics of the
finished end products, the order levels for this customer were significantly
lower in the second and third quarters of fiscal 1999.
Net margins for the third quarter of fiscal 1999 decreased to 15.3% from 15.9%
for fiscal 1998. Net margins for the nine months ended February 28,1999 remained
relatively unchanged. The net margins for both the three and nine month periods
ended February 28, 1999 were impacted by the continuing market pressures
affecting many of the products that the Company sells and the increase in the
sales volume of microprocessors, which are lower margin products than other
products sold by distributors, as compared to last year. This decrease on net
margins was partially offset by the decline in the sales volume of DRAMS, which
are lower margin products, in fiscal 1999, as compared to fiscal 1998, and the
inclusion of Sterling sales. Due to differences in product and customer mix,
Sterling's margins on sales are higher than those of Marshall.
Selling, general, and administrative expenses ("SG&A") increased by $5.8 million
and $43.4 million for the third quarter and first nine months of fiscal 1999,
respectively, as compared to fiscal 1998. Sterling's SG&A expenses totaled $13.2
million and $42.6 million for the third quarter and first nine months of fiscal
1999, as compared to $7.2 million from the date of acquisition to February 28,
1998. Excluding Sterling expenses, the Company's SG&A expenses were relatively
unchanged for the third quarter of fiscal 1999, but increased by $8.0 million
for the first nine months of fiscal 1999, as compared to the prior year. Salary
adjustments and staffing increases in product management and information
technology resulted in higher salary costs of $3.4 million for the first nine
months of fiscal 1999 as compared to the prior year. In addition, approximately
$0.8 million and $2.3 million in goodwill amortization expense relating to the
Sterling acquisition was incurred in the third quarter and first nine months of
fiscal 1999, respectively as compared to $0.4 million for the same periods in
the prior year. The balance of the increase in the Company's SG&A expenses for
the nine-month period ended February 28, 1999, as compared to last year, was
mainly to service the higher sales volumes. The Sterling expenses for fiscal
1999 included the costs of consolidating the warehousing operations and the
integration of the automated warehousing equipment to the Company's operating
systems. This project was completed during the second quarter of fiscal 1999 and
amounted to $1.9 million.
The increase in net interest expense to $3.7 million and $12.2 million in the
third quarter and first nine months of fiscal 1999, as compared to $1.9 million
and $3.1 million for the same periods in the last fiscal year was primarily due
to bank borrowings incurred for the acquisition of Sterling. Additionally, the
Company had higher levels of borrowings to support increases in inventories and
receivables related to the higher levels of sales volumes during the first
quarter, as compared to the second and third quarters of fiscal 1999. The
10
<PAGE> 11
Company's interest expense would have been higher for the nine months to date in
fiscal 1999 than the amounts recorded except for the significant declines in the
Company's borrowing levels during the last two quarters.
"Interest expense and other-net" includes the amortization of goodwill
associated with the Company's investment in the Sonepar Electronique
International ("SEI") companies, along with the Company's pro-rata share of
SEI's net income or loss. Such amounts were $1.4 million and $1.9 million in net
expenses for the three and nine months ended February 28, 1999, respectively.
The net amortization of goodwill and the Company's share of SEI's net operating
results were not material in fiscal 1998. SEI's operating results for fiscal
1999 have been negatively impacted by the difficult market conditions in Europe.
As described elsewhere herein, the Company's net operating results for the
periods reported included amortization of goodwill from the Sterling acquisition
and SEI investment and the Company's pro-rata share of SEI's net income or loss.
The higher than statutory Federal and state income tax rates used to record the
tax expense in the periods reported is the result of the non-deductibility of
these charges and credits.
The Company's distribution agreement with Xilinx was terminated effective
December 31, 1998. Xilinx, which supplies mostly field programmable logic
products, represented approximately 2% and 4% of the Company's consolidated
sales for the three months and nine months ended February 28, 1999,
respectively, as compared to 5% for the same periods in fiscal 1998. The Company
has a strategy of adding new suppliers to increase and enhance its product
offerings. Since early fiscal 1999, the Company has signed distributor
agreements with three new major suppliers: Berg Electronics, Inc. (FCI/Berg
Electronics, Inc.), Vishay Intertechnology, Inc., and Micron Semicondutor
Products, Inc. In December 1998, the Company signed distributor agreements with
two other major suppliers of semiconductor products, Maxim Integrated Products
and Lucent Technologies, Inc., which is considered a leading supplier of field
programmable logic products. The Company believes that the additional sales from
these new suppliers, once fully launched, will offset most of the sales lost by
the Xilinx termination. During the transition period, however, the Company
expects that quarterly operating results may be adversely impacted.
The Company's sources of liquidity at February 28, 1999 consisted principally of
working capital of $380 million and available borrowings under the Company's
bank credit facility. As of February 28, 1999, there were $184 million in
borrowings outstanding under the Company's $325 million bank credit facility.
Under the terms of the bank facility, quarterly amortization payments are
required beginning in the third quarter of fiscal 1999, which would result in
full payment by the year 2002. The total amortization payment due in fiscal 1999
is $7.5 million, of which $3.75 million was paid in February, 1999. The Company
believes that its working capital, borrowing capabilities and additional funds
generated from operations for the remainder of the year should be sufficient to
finance its anticipated operating requirements.
11
<PAGE> 12
In August, 1998, the Company entered into an agreement, subsequently amended, to
purchase an 8-acre property for $10.4 million in Milpitas, California for the
construction of a new sales, marketing and distribution facility. Due to the
difficult market conditions that the Company and industry are experiencing, the
Company has decided to defer this expansion plan and will cancel this purchase
agreement for the land.
To optimize its working capital and space requirements, the Company has sold
three of its facilities with leaseback provisions of one and five years for two
of the facilities. The cash proceeds of approximately $10 million from these
transactions were received in the fourth quarter of fiscal 1999. The resulting
gains, due to the leaseback of two of these facilities and the receipt of a one
year note on one of the transactions, will not have a material impact on the
Company's fourth quarter operating results.
This Quarterly Report contains forward-looking statements within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. Reference is made in particular to the description of the Company's plans
and objectives for future operations, assumptions underlying such plans and
objectives and other forward-looking statements included in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other portions of this Quarterly Report. Such statements may be identified by
the use of forward-looking terminology such as "may," "will," "expect,"
"believe," "estimate," "anticipate," "continue," or similar terms, variations of
such terms or the negative of such terms. Such statements are based on
management's current expectations and are subject to a number of factors and
uncertainties which could cause actual results to differ materially from those
described in the forward-looking statements. Factors which could cause such
results to differ materially from those described in the forward-looking
statements include changes in industry conditions, the addition or loss of
suppliers, fluctuation in quarterly results, foreign currency translations and
other risks and uncertainties that are detailed in the Company's Annual Report
on Form 10-K and other reports filed by the Company with the Securities and
Exchange Commission.
12
<PAGE> 13
PART II
ITEM 1. LEGAL PROCEEDINGS
DiPirro v. Marshall Industries and Does 1 through 1,000, Case No. H205535-2, was
filed on February 1, 1999, in the Superior Court of California, Alameda County.
Plaintiff brought this suit under the private citizen enforcement provisions of
the California Safe Drinking Water and Toxic Enforcement Act of 1986 or
"Proposition 65," Cal. Health & Safety Code Sections 25249.5-25249.13, and under
the California Unfair Competition Act, Cal. Bus. & Prof. Code Section 17200. The
Plaintiff's complaint alleges that the Company sells or distributes soldering
tools and equipment (e.g., soldering irons, pots and tips) and chemicals (e.g.,
cleaners, adhesives, fluxes) that expose users to lead and other chemicals known
to the State of California to cause cancer and reproductive toxicity, without
first providing users with a "clear and reasonable warning" as required by
Proposition 65. The complaint seeks civil penalties of up to $2,500 per day for
each violation of Proposition 65's warning requirement, restitution of the
purchase price of goods sold without warnings, injunctive relief and attorneys'
fees and costs. While the Company is the only named defendant, manufacturers,
other distributors, retailers and employers who use or sell the products at
issue are sued as unnamed "Doe" defendants in this lawsuit. Separate lawsuits
against individual manufacturers have also been filed by the Plaintiff. The
Company has filed an answer in which it issued a general denial of the
allegations in the complaint and raised several affirmative defenses. Based on
all facts currently available to it, the Company does not believe that this
litigation will have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3: Certificate of Determination of Junior Participating Preferred
Stock. (Incorporated herein by reference to Exhibit 2.2 on Form
8-A12B/A filed on March 18, 1999.)
10: Rights Agreement dated as of February 8, 1999 between Marshall
Industries and First Union National Bank. (Incorporated herein by
reference to Exhibit 2.2 on Form 8-A12B filed on February 17, 1999.)
27: Financial Data Schedule
(b) Form 8-K dated February 17, 1999 regarding the adoption of the
Shareholders' Rights Plan.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARSHALL INDUSTRIES
April 14, 1999 /s/ HENRY W. CHIN
-----------------------------------------
Henry W. Chin
Vice President, Finance and
Chief Financial Officer
(Mr. Chin is the principal financial
officer and is duly authorized to
sign for the Company)
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> FEB-28-1999
<CASH> 2,881
<SECURITIES> 0
<RECEIVABLES> 228,797
<ALLOWANCES> (10,260)
<INVENTORY> 345,277
<CURRENT-ASSETS> 594,890
<PP&E> 102,550
<DEPRECIATION> (61,139)
<TOTAL-ASSETS> 801,793
<CURRENT-LIABILITIES> 214,595
<BONDS> 0
0
0
<COMMON> 16,616
<OTHER-SE> 400,844
<TOTAL-LIABILITY-AND-EQUITY> 801,793
<SALES> 1,289,513
<TOTAL-REVENUES> 1,289,513
<CGS> 1,089,113
<TOTAL-COSTS> 1,244,696
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,606
<INTEREST-EXPENSE> 14,139
<INCOME-PRETAX> 30,678
<INCOME-TAX> 14,704
<INCOME-CONTINUING> 15,974
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,974
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.96
</TABLE>
