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 July 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 July 31, 1995
<PAGE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information
Condensed Consolidated Balance Sheets -
July 2, 1995 and September 30, 1994 2
Consolidated Statement of Stockholders'
Equity - Nine Months Ended
July 2, 1995 3
Condensed Consolidated Statements of
Income - Nine Months Ended
July 2, 1995 and July 3, 1994 and
Three Months Ended July 2, 1995 and
July 3, 1994 4
Condensed Consolidated Statements of Cash
Flows - Nine Months Ended July 2, 1995
and July 3, 1994 5
Notes to Condensed Consolidated Financial
Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures 10
Exhibit Index 11
- 1 -
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
July 2, September 30,
1995 1994
ASSETS
<S>
<S>
Current assets <C> <C>
Cash and cash equivalents $ 1,809,794 $ 2,387,945
Other current assets 736,266 1,163,096
Trade accounts receivable 36,173,223 29,527,495
Inventories 50,037,930 33,676,367
Total current assets 88,757,213 66,754,903
Property, plant and equipment -
at cost less accumulated
depreciation and amortization of
$2,201,091 at July 2, 1995 and
$1,815,986 at September 30, 1994 3,352,298 3,248,045
Other assets 387,686 441,326
$92,497,197 $70,444,274
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S>
<S>
Current liabilities <C> <C>
Accounts payable $25,134,666 $15,529,987
Other current liabilities 4,292,783 3,865,814
Total current liabilities 29,427,449 19,395,801
Long-term debt 28,120,833 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 July 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 33,008,714 26,488,269
34,701,424 28,067,649
Less treasury stock - at cost [43,726
shares at July 2, 1995 and
September 30, 1994] 69,756 69,756
34,631,668 27,997,893
$92,497,197 $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
NINE MONTHS ENDED JULY 2, 1995
<CAPTION>
Capital
in Excess
Common Stock of Par
Retained Treasury
Shares Amount Value Earnings
Stock Total
<S>
Balance, <C> <C> <C> <C> <C> <C>
September 30, 1994 3,398,314 $849,579 $729,801 $26,488,269
$[69,756] $27,997,893
Options exercised 32,000 8,000 105,330 113,330
Net Income 6,520,445 6,520,445
Balance
July 2, 1995 3,430,314 $857,579 $835,131 $33,008,714
$[69,756] $34,631,668
<F2>
See notes to condensed consolidated financial statements
.
</TABLE>
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<PAGE>
<TABLE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $175,078,318 $133,099,636 $ 63,467,651 $ 45,672,282
Costs and expenses
Cost of sales 134,938,362 102,396,947 48,439,068 35,492,743
Selling, general and admini-
strative expenses 28,441,860 22,608,601 10,265,868 7,949,970
Interest expense 1,280,651 784,609 489,134 279,511
164,660,873 125,790,157 59,194,070 43,722,224
Income before income taxes 10,417,445 7,309,479 4,273,581 1,950,058
Income taxes 3,897,000 2,631,000 1,624,000 648,000
Net income $ 6,520,445 $ 4,678,479 $ 2,649,581 $ 1,302,058
Earnings per share $ 1.93 $ 1.40 $ .78 $ .39
Weighted average common and common
equivalent shares outstanding 3,372,508 3,345,406 3,386,588 3,354,588
<F3>
See notes to condensed consolidated financial statements
.
</TABLE>
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<PAGE>
<TABLE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
NINE MONTHS ENDED
July 2, July 3,
1995 1994
<S>
Cash flows from operating activities
Net cash used in <C> <C>
operating activities $[5,405,220] $[3,881,125]
Cash flows from investing activities
Acquisition of property and
equipment [489,362] [819,217]
Net cash used in investing
activities [489,362] [819,217]
Cash flows from financing activities
Decrease in
Notes payable - bank [184,398] [45,950]
Increase in long-term debt,
including current maturities 5,387,500 4,371,900
Other 113,330 456,046
Net cash provided by
financing activities 5,316,432 4,781,996
Net increase [decrease] in cash [578,150] 81,654
Cash at beginning of year 2,387,944 1,869,954
Cash at end of period $ 1,809,794 $ 1,951,608
Supplemental cash flow information:
Interest paid $ 1,285,000 $ 795,000
Income taxes paid 3,183,000 5,092,000
<F4>
See notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JULY 2, 1995 AND JULY 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 nine months ended July 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 nine months ended July 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.
The Company presently has an unsecured revolving credit agreement with
two major money center banks which provides 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 July 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 6.99% 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.
On August 1, 1995, the Company received a commitment with respect to
proposed financing of up to $50,000,000 on an unsecured revolving credit
basis from its principal lender, subject to acceptance by two other
participating banks and subject to execution by the parties of a
contemplated credit agreement and compliance with the conditions therein.
The contemplated facility will generally permit the Company to borrow at
the banks' prime rate, or at its option, the banks' Bankers Acceptance
Discount Rate plus negotiated commissions or the banks' Eurodollar rate
plus negotiated commissions. These commissions range from a low of 75
basis points to a high of 125 basis points and are subject to the
Company's achievement of certain financial ratios. If the Company had
been subject to the contemplated agreement at July 2, 1995, its
negotiated commissions would have been 75 basis points. Maximum
borrowings under the contemplated agreement will be based on the sum of
90% of eligible receivables and the lower of 50% of eligible inventory or
$20,000,000. The contemplated agreement will be for a period of three
years from the closing date and any outstanding balances on such closing
date are to be repaid.
The Company does not currently have or anticipate material
commitments for capital expenditures. Working capital at July 2, 1995
amounted to $59,300,000 versus $47,400,000 at September 30, 1994. At
July 2, 1995, liabilities to net worth ratio [leverage] was 1.67 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.
- 7 -
<PAGE>
Nine months ended July 2, 1995
Compared to the nine months ended
July 3, 1994
Results of Operations
Net sales were $175,078,000 for the first nine months of fiscal 1995
compared to $133,100,000 in the like period in the preceding year. This
increase in sales volume of approximately 32% resulted primarily from
improved customer demand for most product lines. Gross profit decreased
from 23.1% in 1994 to 22.9% in 1995 as a result of changes in product mix
and increased competition. Selling, general and administrative expenses
amounted to $28,442,000 [16.2% of sales] in the first nine months of
fiscal 1995 compared to $22,609,000 [17.0% of sales] in the comparable
period in 1994. The increase in selling, general and administrative
expenses of $5,833,000 is primarily due to additional costs required to
support a higher level of sales, including higher commission expenses.
Interest costs in the first half of 1995 amounted to $1,281,000 [0.7% of
sales] compared to $785,000 [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 $3,897,000 [37% of pre-tax income] in the
fiscal 1995 period compared to $2,631,000 [36% 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 $6,520,000 for the nine months ended July 2, 1995 as
compared to $4,678,000 for the same period in the preceding year as a
result of the above factors.
Three months ended July 2, 1995
Compared to the three months ended
July 3, 1994
Results of Operations
Net sales were $63,468,000 in the third quarter of fiscal 1995
compared to $45,672,000 in the like period in the preceding year. This
increase in sales volume of approximately 39% resulted primarily from
improved customer demand across a broad spectrum of product lines. Gross
profit increased from 22.3% in the third fiscal quarter of 1994 to 23.7%
in the same period in 1995 as a result of improving market conditions and
changes in product mix. Selling, general and administrative expenses
amounted to $10,266,000 [16.2% of sales] in the third quarter of fiscal
1995 compared to $7,950,000 [17.4% of sales] in the comparable quarter in
the 1994 fiscal year. The increase in selling, general and administrative
expenses of $2,316,000 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.
- 8 -
<PAGE>
Interest costs in the current quarter amounted to $489,000 [0.8% of
sales] compared to $280,000 [0.6% of sales] in the previous year as a
result of higher levels of borrowing and higher interest rates. Income
taxes amounted to $1,624,000 [38% of pre-tax income] in the fiscal 1995
period and $648,000 [33% 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 $2,650,000 for the fiscal quarter ended July 2, 1995
compared to $1,302,000 for the third quarter of fiscal 1994 as a result
of the factors previously discussed.
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<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 August 8, 1995 MILGRAY ELECTRONICS, INC.
[Registrant]
By: John Tortorici
John Tortorici, Vice President-Finance
[Authorized officer and principal
financial officer]
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<PAGE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
27 Financial Data Schedule
- 11 -
<PAGE>
<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> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUL-02-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 36,173
<ALLOWANCES> 0
<INVENTORY> 50,038
<CURRENT-ASSETS> 88,757
<PP&E> 3,352
<DEPRECIATION> 2,201
<TOTAL-ASSETS> 92,497
<CURRENT-LIABILITIES> 29,427
<BONDS> 28,121
<COMMON> 858
0
0
<OTHER-SE> 33,009
<TOTAL-LIABILITY-AND-EQUITY> 92,497
<SALES> 175,078
<TOTAL-REVENUES> 175,078
<CGS> 134,938
<TOTAL-COSTS> 134,938
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,281
<INCOME-PRETAX> 10,417
<INCOME-TAX> 3,897
<INCOME-CONTINUING> 10,417
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,520
<EPS-PRIMARY> 1.93
<EPS-DILUTED> 1.93
<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>
