SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended April 2, 1995 Commission file no. 0-10611
MILGRAY ELECTRONICS, INC.
[Exact name of Registrant as specified in its charter]
New York 13-5600636
[State or other jurisdiction of [I.R.S. employer
incorporation or organization] identification no.]
77 Schmitt Boulevard, Farmingdale, N.Y. 11735
[Address of principal executive offices] [Zip code]
Registrant's telephone number, including
area code; [516] 420-9800
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, 3,386,588 shares as of April 30, 1995
<PAGE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information
Condensed Consolidated Balance Sheets -
April 2, 1995 and September 30, 1994 2
Consolidated Statement of Stockholders'
Equity - Six Months Ended
April 2, 1995 3
Condensed Consolidated Statements of
Income - Six Months Ended
April 2, 1995 and April 3, 1994 and
Three Months Ended April 2, 1995 and
April 3, 1994 4
Condensed Consolidated Statements of Cash
Flows - Six Months Ended April 2, 1995
and April 3, 1994 5
Notes to Condensed Consolidated Financial
Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K 9
Signatures 9
Exhibit Index 10
- 1 -
PART I - FINANCIAL INFORMATION
<TABLE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
April 2, September 30,
1995 1994
<S>
ASSETS
Current assets <C> <C>
Cash and cash equivalents $ 1,943,763 $ 2,387,945
Other current assets 838,888 1,163,096
Trade accounts receivable 34,445,577 29,527,495
Inventories 43,961,030 33,676,367
Total current assets 81,189,258 66,754,903
Property, plant and equipment -
at cost less accumulated
depreciation and amortization of
$2,068,311 at April 2, 1995 and
$1,815,986 at September 30, 1994 3,395,433 3,248,045
Other assets 417,758 441,326
$85,002,449 $70,444,274
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S>
Current liabilities <C> <C>
Accounts payable $22,645,730 $15,529,987
Other current liabilities 3,724,052 3,865,814
Total current liabilities 26,369,782 19,395,801
Long-term debt 26,333,333 22,733,333
Deferred income taxes payable 317,247 317,247
Stockholders' equity
Common stock - par value $.25 per share
Authorized 4,000,000 shares; issued
3,430,314 shares at April 2, 1995
3,398,314 at September 30, 1994 857,579 849,579
Capital in excess of par value 835,131 729,801
Retained earnings 30,359,133 26,488,269
32,051,843 28,067,649
Less treasury stock - at cost [43,726
shares at April 2, 1995 and
September 30, 1994] 69,756 69,756
31,982,087 27,997,893
$85,002,449 $70,444,274
<F1>
See notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED APRIL 2, 1995
<CAPTION>
Capital
in Excess
Common Stock of Par Retai
ned Treasury
Shares Amount Value Earnings Stoc
k Total
<S>
Balance, <C> <C> <C> <C> <C> <C>
September 30, 1994 3,398,314 $849,579 $729,801 $26,488,269 $[69,7
56] $27,997,893
Options exercised 32,000 8,000 105,330 113,330
Net Income 3,870,864 3,870,864
Balance,
April 2, 1995 3,430,314 $857,579 $835,131 $30,359,133 $[69,7
56] $31,982,087
<F2>
See notes to condensed consolidated financial statements.
</TABLE>
- 3 -<PAGE>
<TABLE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
April 2, April 3, April 2, April 3,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $111,610,667 $ 87,427,354 $ 60,328,150 $ 44,613,677
Costs and expenses
Cost of sales 86,499,294 66,904,204 47,028,358 34,246,251
Selling, general and
administrative expenses 18,175,992 14,658,631 9,534,017 7,363,763
Interest expense 791,517 505,098 452,368 263,492
105,466,803 82,067,933 57,014,743 41,873,506
Income before income taxes 6,143,864 5,359,421 3,313,407 2,740,171
Income taxes 2,273,000 1,983,000 1,226,000 1,014,000
Net income $ 3,870,864 $ 3,376,421 $ 2,087,407 $ 1,726,171
Earnings per share $ 1.15 $ 1.00 $ .62 $ .51
Weighted average common and common
equivalent shares outstanding 3,365,545 3,374,096 3,376,742 3,377,962
<F3>
See notes to condensed consolidated financial stateme
nts.
</TABLE>
- 4 -
<TABLE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
SIX MONTHS ENDED
April 2, April 3,
1995 1994
<S>
Cash flows from operating activities
Net cash used in <C> <C>
operating activities $[3,564,247] $[2,422,199]
Cash flows from investing activities
Acquisition of property and
equipment [399,716] [249,929]
Net cash used in investing
activities [399,716] [249,929]
Cash flows from financing activities
Increase [decrease] in
Notes payable - bank [193,549] 75,571
Increase in long-term debt,
including current maturities 3,600,000 2,034,400
Other 113,330 428,296
Net cash provided by
financing activities 3,519,781 2,538,267
Net decrease in cash [444,182] [133,861]
Cash at beginning of year 2,387,945 1,869,954
Cash at end of period $1,943,763 $1,736,093
Supplemental cash flow information:
Interest paid $ 798,700 $ 518,000
Income taxes paid 2,000,000 4,428,000
<F4>
See notes to condensed consolidated financial statements.
</TABLE>
- 5 -
<PAGE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED APRIL 2, 1995 AND APRIL 3, 1994
NOTE 1: The accompanying condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q
and do not include all the information and footnote disclosure
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
[consisting of normal recurring accruals] necessary for a fair
presentation have been included. Operating results for the six
months ended April 2, 1995 are not necessarily indicative of the
results that may be expected for the year ending September 30, 1995.
These statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company's
annual report to shareholders on Form 10-K for the year ended
September 30, 1994.
NOTE 2: Inventories consist of electronic components, computer
peripherals and wire products held for resale and components used
in the assembly of connectors and are priced at the lower of cost
or market by the use of an estimated gross profit percentage.
NOTE 3: Earnings per share were calculated by dividing the Company's net
earnings by the weighted average number of common and common
equivalent shares outstanding during each period. Earnings for the
prior year were restated to give effect to a stock split [Note 4].
NOTE 4: On August 9, 1994, the Board of Directors declared a two-for-
one stock split in the form of 100% stock dividend payable on
September 23, 1994 to stockholders of record on August 30, 1994.
Accordingly, the weighted average common shares outstanding for the
three months and six months ended April 3, 1994 were restated to
give effect to this stock split.
- 6 -
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Liquidity and Capital Resources
The Company relies upon cash flow provided from operations and
bank financing to provide the cash flow necessary for its business
operations. On September 29, 1993, the Company entered into an
unsecured revolving credit agreement with two major money center
banks which provides for maximum borrowings of $20,000,000. This
agreement was amended in December 1993 to provide for additional
borrowings of $10,000,000 allowing for maximum borrowings of
$30,000,000. This facility permits the Company to borrow at the
banks' prime rate less a negotiated discount for one of the banks,
or at its option, the banks' Bankers Acceptance Discount Rate plus
negotiated commissions or the banks' Eurodollar rate plus
negotiated commissions. At April 2, 1995, the banks' prime rate
available to the Company after adjustment for a negotiated
discount, was 8.67%, the Bankers Acceptance discount Rate including
the negotiated commissions was 7.07% weighted average interest rate
and the Eurodollar rate including the negotiated commissions was
7.05% weighted average interest rate. Maximum borrowings are based
on the sum of 90% of eligible receivables and the lower of 50% of
eligible inventory or $9,000,000. The agreement as amended expires
on December 31, 1996 and any outstanding balances on such date are
to be repaid.
The Company does not currently have or anticipate material
commitments for capital expenditures. Working capital at April 2,
1995 amounted to $54,800,000 versus $47,400,000 at September 30,
1994. At April 2, 1995, liabilities to net worth ratio [leverage]
was 1.66 times the stockholders' equity.
The Company believes that its cash flow requirements for
fiscal 1995 and future years will be met by its operating results
and the use of bank borrowings.
Six months ended April 2, 1995
Compared to the six months ended
April 3, 1994
Results of Operations
Net sales were $111,611,000 for the first half of fiscal 1995
compared to $87,427,000 in the like period in the preceding year.
This increase in sales volume of approximately 28% resulted
primarily from improved customer demand for most product lines.
Gross profit decreased from 23.5% in 1994 to 22.5% in 1995 as a
result of changes in product mix and increased competition.
Selling, general and administrative expenses amounted to
$18,176,000 [16.3% of sales] in the first half of fiscal 1995
compared to $14,659,000 [16.8% of sales] in the comparable period
in 1994. The increase in selling, general and administrative
expenses of $3,517,000 is primarily due to additional costs
- 7 -
<PAGE>
required to support a higher level of sales, including higher
commission expenses. Interest costs in the first half of 1995
amounted to $792,000 [0.7% of sales] compared to $505,000 [0.6% of
sales] in the previous year as a result of additional borrowings
and higher interest rates in 1995. Income tax expense amounted to
$2,273,000 [37% of pre-tax income] in the fiscal 1995 period
compared to $1,983,000 [37% of pre-tax income] in the comparable
period of the preceding year. The effective tax rate for the
current year is different than the statutory rate of 34% due to the
varying tax rates of the different taxing jurisdictions, including
those of a United States territory whose effective tax rate is
lower than the statutory tax rate.
Net income was $3,871,000 for the six months ended April 2,
1995 as compared to $3,376,000 for the same period in the preceding
year as a result of the above factors.
Three months ended April 2, 1995
Compared to the three months ended
April 3, 1994
Results of Operations
Net sales were $60,328,000 in the second quarter of fiscal
1995 compared to $44,614,000 in the like period in the preceding
year. This increase in sales volume of approximately 35% resulted
primarily from improved customer demand across a broad spectrum of
product lines. Gross profit decreased from 23.2% in the second
fiscal quarter of 1994 to 22% in the same period in 1995 as a
result of changes in product mix and increased competition.
Selling, general and administrative expenses amounted to $9,534,000
[15.8% of sales] in the second quarter of fiscal 1995 compared to
$7,364,000 [16.5% of sales] in the comparable quarter in the 1994
fiscal year. The increase in selling, general and administrative
expenses of $2,170,000 or 29% when compared to the like period in
the preceding year is primarily due to increases in salaries,
commissions and other costs needed to support the higher sales
volume. Interest costs in the current quarter amounted to $452,000
[0.7% of sales] compared to $263,000 [0.6% of sales] in the
previous year as a result of higher levels of borrowing and higher
interest rates. Income taxes amounted to $1,226,000 [37% of pre-
tax income] in the fiscal 1995 period and $1,014,000 [37% of pre-
tax income] in the comparable quarter of the preceding year. The
effective tax rate for the current year is different than the
statutory rate of 34% due to the varying tax rates of the different
tax jurisdictions, including those of a United States territory
whose effective tax rate is lower than the statutory tax rate.
Net income was $2,087,000 for the fiscal quarter ended April
2, 1995 compared to $1,726,000 for the second quarter of fiscal
1994 as a result of the factors previously discussed.
- 8 -
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) The Exhibit Index, which follows the signature page of
this Report on Form 10-Q, is incorporated herein by
reference.
(b) No reports on Form 8-K were filed by registrant during
the quarter for which this Report is filed.
SIGNATURES
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.
Date May 3, 1995 MILGRAY ELECTRONICS, INC.
[Registrant]
By:
John Tortorici, Vice President-Finance
[Authorized officer and principal
financial officer]
- 9 -
<PAGE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
4(xi) Tenth Amendment and Waiver dated as of March 3, 1995 to
the Credit Agreement dated as of September 29, 1993,
as amended
27 Financial Data Schedule
- 10 -
TENTH AMENDMENT and WAIVER dated as of
March 3, 1995 to the CREDIT AGREEMENT
dated as of September 29, 1993 as amended
by the FIRST AMENDMENT dated as of
November 18, 1993, the SECOND AMENDMENT
dated as of December 15, 1993, the THIRD
AMENDMENT dated as of January 10, 1994,
the FOURTH AMENDMENT dated as of March
15, 1994, the FIFTH AMENDMENT dated as of
May 25, 1994, the SIXTH AMENDMENT dated
as of July 11, 1994, the SEVENTH
AMENDMENT dated as of September 1, 1994,
the EIGHTH AMENDMENT dated as of
September 1, 1994 and the NINTH AMENDMENT
dated as of November 22, 1994 (the
"Credit Agreement"), among MILGRAY
ELECTRONICS, INC., a New York corporation
(the "Borrower"), the Guarantors named
therein and signatories thereto (the
"Guarantors"), CHEMICAL BANK, a New York
banking corporation, FLEET BANK, a New
York banking corporation, the other
lenders named in Schedule 2.01 annexed to
the Credit Agreement (collectively, the
"Lenders"), and CHEMICAL BANK, as agent
for the Lenders (in such capacity, the
"Agent").
WHEREAS, the Borrower and the Guarantors have requested and the
Agent and the Lenders have agreed, subject to the terms and
conditions of this TENTH AMENDMENT and WAIVER, to waive and amend
the Credit Agreement with respect to the requests herein set forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
1. Waiver of ARTICLE VI. AFFIRMATIVE COVENANTS. SECTION 6.05.
Financial Statements, Reports, etc. (k)
Compliance with Section 6.05. (k) of the Credit Agreement is
hereby waived to permit the late notification by the Borrower
to the Agent and each of the Lenders of the termination of the
franchise agreement between the Borrower and Sony Electronics
Semiconductor Component and Computer Products Group.
2. Waiver of ARTICLE VII. NEGATIVE COVENANTS. SECTION 7.02.
Indebtedness. (xvii).
Compliance with Section 7.02. (xvii) of the Credit Agreement
is hereby waived with respect to forward foreign exchange
contracts entered into by the Borrower totaling (Canadian)
$3,000,000.
- 2 -
3. Amendment to ARTICLE VI. AFFIRMATIVE COVENANTS. SECTION 6.05.
Financial Statements, Reports, etc. (b).
Section 6.05. (b) of the Credit Agreement is hereby amended by
inserting the following phrase immediately following the word
"equity" in the seventh line thereof:
"(such statement of shareholders' equity shall only be
required to be submitted to the Agent and each of the Lenders
to the extent there is a change in shareholders' equity
from the prior fiscal quarter end arising as a result of any
reason other than the addition of the earnings or subtraction
of the losses of the Borrower and its subsidiaries)".
4. Amendment to ARTICLE VII. NEGATIVE COVENANTS. SECTION 7.02.
Indebtedness. (xv).
Section 7.02. (xv) of the Credit Agreement is hereby amended
by deleting the number "$250,000" contained therein and
substituting therefor the number "$1,000,000".
5. Amendment to ARTICLE VII. NEGATIVE COVENANTS. SECTION 7.02.
Indebtedness (xvii).
Section 7.02. (xvii) of the Credit Agreement is hereby amended
by deleting such section in its entirety and substituting
therefor the following:
"(xvii) Indebtedness of Milgray Electronics, Inc. and/or
Milgray/Toronto, Inc. owing under foreign exchange lines of
credit, provided that the aggregate outstanding amount of such
Indebtedness owing by both Milgray Electronics, Inc. and
Milgray/Toronto, Inc. shall not at any time exceed $2,000,000
in the aggregate and (Canadian) $4,000,000 in the aggregate."
This TENTH AMENDMENT and WAIVER shall be construed and enforced in
accordance with the laws of the State of New York.
All terms used herein shall have the same meaning as in the Credit
Agreement unless specifically defined herein.
Except as expressly waived or amended hereby, the Credit Agreement
shall remain in full force and effect in accordance with the
original terms thereof. The TENTH AMENDMENT and WAIVER herein
contained is limited specifically to the matters set forth above
and does not constitute directly or by implication an amendment or
waiver of any other provisions of the Credit Agreement or any
default which may occur or may have occurred under the Credit
Agreement.
- 3 -
The Borrower and the Guarantors hereby represent and warrant
that, after giving effect to this TENTH AMENDMENT and WAIVER, no
Event of Default or default exists under the Credit Agreement or
any other related document.
Please be advised that should there be a need for further
amendments and waivers with respect to these covenants, those
requests will be evaluated by the Agent and the Lenders when
formally requested in writing by the Borrower and the Guarantors.
This TENTH AMENDMENT and WAIVER may be executed in one or more
counterparts, each of which shall constitute an original, but all
of which, when taken together, shall constitute but one TENTH
AMENDMENT and WAIVER. This TENTH AMENDMENT and WAIVER shall
become effective when duly executed counterparts hereof which,
when taken together, bear the signatures of each of the parties
hereto, shall have been delivered to the Agent.
IN WITNESS WHEREOF, the Borrower, the Guarantors, the Agent and
the Lenders have caused this TENTH AMENDMENT and WAIVER to be
duly executed by their duly authorized officers, all as of the
day and year first above written.
MILGRAY ELECTRONICS, INC.
By: John Tortorici
John Tortorici
Vice President - Finance
MILGRAY/ATLANTA, INC.
BIRNBACH COMPANY, INC.
MILGRAY/CALIFORNIA, INC.
MILGRAY/CHICAGO, INC.
MILGRAY/CLEVELAND, INC.
MILGRAY/COLORADO, INC.
MILGRAY/COMPUTER PRODUCTS, INC.
MILGRAY/CONNECTICUT, INC.
MILGRAY/DALLAS, INC.
MILGRAY/DELAWARE VALLEY, INC.
MILGRAY/FLORIDA, INC.
MILGRAY/HOUSTON, INC.
MILGRAY/HUNTSVILLE, INC.
MILGRAY/INDIANA, INC.
MILGRAY INTERNATIONAL, INC., a New
York corporation
MILGRAY/KANSAS CITY, INC.
MILGRAY LTD.
MILGRAY/NEW ENGLAND, INC.
- 4 -
MILGRAY/NEW JERSEY, INC.
MILGRAY/NEW YORK, INC.
MILGRAY/NORTHERN CALIFORNIA, INC.
MILGRAY/ORANGE COUNTY, INC.
MILGRAY/OREGON, INC.
MILGRAY ELECTRONICS/P.R., INC.
MILGRAY/RALEIGH, INC.
MILGRAY/SAN DIEGO, INC.
MILGRAY/UPSTATE NEW YORK, INC.
U.S. COMPUTER SUPPLY, INC.
MILGRAY/UTAH, INC.
MILGRAY/WASHINGTON, INC.
By: John Tortorici
John Tortorici, as Vice President-
Finance of and on behalf of each of
the foregoing corporations
MILGRAY/TORONTO, INC.
By: John Tortorici
John Tortorici, Secretary
CHEMICAL BANK, as Agent and a Lender
By: Richard E. Grabowski
Name: Richard E. Grabowski
Title: Vice President
FLEET BANK
By: Shari Delouya, V.P.
Name: Shari Delouya
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF
INCOME OF MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> APR-2-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 34,446
<ALLOWANCES> 0
<INVENTORY> 43,961
<CURRENT-ASSETS> 81,189
<PP&E> 3,395
<DEPRECIATION> 2,068
<TOTAL-ASSETS> 85,002
<CURRENT-LIABILITIES> 26,370
<BONDS> 26,333
<COMMON> 858
0
0
<OTHER-SE> 30,359
<TOTAL-LIABILITY-AND-EQUITY> 85,002
<SALES> 111,611
<TOTAL-REVENUES> 111,611
<CGS> 86,499
<TOTAL-COSTS> 86,499
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 792
<INCOME-PRETAX> 6,143
<INCOME-TAX> 2,273
<INCOME-CONTINUING> 6,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,871
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.15
<FN>
<F1>ANSWER IS 0 WHEN THE TAG IS NOT APPLICABLE OR THE TAG DOES NOT CORRESPOND
TO OR IS MORE OR LESS INCLUSIVE THAN THE CAPTION USED IN THE CONDENSED
FINANCIAL STATEMENTS FILED ON FORM 10-Q.
</FN>
</TABLE>
