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 June 30, 1996 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, 6,773,176 shares as of July 25, 1996
<PAGE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information
Condensed Consolidated Balance Sheets -
June 30, 1996 and September 30, 1995 2
Condensed Consolidated Statements of Income -
Nine Months Ended June 30, 1996 and
July 2, 1995 and Three Months Ended
June 30, 1996 and July 2, 1995 3
Condensed Consolidated Statements of Cash
Flows - Nine Months Ended June 30, 1996
and July 2, 1995 4
Notes to Condensed Consolidated Financial
Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K 8
Signatures 8
Exhibit Index 9
- 1 -
<TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
[dollars in thousands]
<CAPTION>
June 30, September 30,
1996 1995
ASSETS
<S> <C> <C>
Current assets
Cash and other current assets $ 2,870 $ 2,986
Trade accounts receivable 42,322 39,105
Inventories 56,241 48,525
Total current assets 101,433 90,616
Property, plant and equipment - at cost
less accumulated depreciation and
amortization of $2,646 at June 30,
1996 and $2,246 at September 30, 1995 3,798 3,347
Other assets 398 383
$105,629 $ 94,346
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable $ 23,281 $ 19,280
Other current liabilities 2,806 5,676
Total current liabilities 26,087 24,956
Long-term debt 35,142 31,633
Deferred income taxes payable 330 330
Stockholders' equity
Common stock - par value $.25 per share;
authorized 60,000,000 shares; issued
6,816,902 shares at June 30, 1996
and September 30, 1995 1,704 1,704
Retained earnings 42,436 35,793
44,140 37,497
Less treasury stock - at cost [43,726
shares at June 30, 1996 and
September 30, 1995] 70 70
44,070 37,427
$105,629 $ 94,346
<F1>
See notes to condensed consolidated financial statements.
</TABLE>
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<TABLE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
[in thousands, except per share data]
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
June 30, July 2, June 30,
July 2,
1996 1995 1996
1995
<S> <C> <C> <C>
<C>
Net Sales $ 212,990 $ 175,078 $ 73,790
$ 63,468
Costs and expenses
Cost of sales 167,914 134,938 57,3
07 48,439
Selling, general and administrative
expenses 32,241 28,442 11,6
28 10,266
Interest expense 1,945 1,281 6
56 489
202,100 164,661 69,5
91
59,194
Income before income taxes 10,890 10,417 4,1
99 4,274
Income taxes 4,247 3,897 1,6
37 1,624
Net income $ 6,643 $ 6,520 $ 2,5
62 $ 2,650
Earnings per share $ .98 $ .97 $
.38 $ .39
Weighted average common and common
equivalent shares outstanding 6,773,176 6,745,016 6,773,1
76 6,773,176
<F2>
See notes to condensed consolidated financial stateme
nts.
</TABLE>
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<TABLE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[in thousands]
<CAPTION>
NINE MONTHS ENDED
June 30, July 2,
1996 1995
<S>
Cash flows from operating activities
Net cash used in <C> <C>
operating activities $[2,733] $[5,405]
Cash flows from investing activities
Acquisition of property and equipment [850] [489]
Net cash used in investing
activities [850] [489]
Cash flows from financing activities
Notes payable - bank [27] [184]
Increase in long-term debt
including current maturities 3,505 5,387
Other - 113
Net cash provided by financing
activities 3,478 5,316
Net decrease in cash [105] [578]
Cash at beginning of year 1,909 2,388
Cash at end of period $ 1,804 $ 1,810
Supplemental cash flow information
Interest paid $1,941 $1,285
Income taxes paid 5,007 3,183
<F3>
See notes to condensed consolidated financial statements.
</TABLE>
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MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 1996 AND JULY 2, 1995
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 disclosures 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 three months and nine months ended
June 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending September 30, 1996. 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, 1995.
NOTE 2: Inventories principally 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 shares outstanding
during each period. Earnings per share for the prior year were restated
to give effect to a stock split [Note 4].
NOTE 4: On July 19, 1995, the Board of Directors declared a two-for-one
stock split in the form of a 100% stock dividend payable on October 19,
1995 to stockholders of record on September 28, 1995. Accordingly, the
weighted average common shares outstanding for the three months and nine
months ended July 2, 1995 were restated to give effect to this stock
split.
NOTE 5: Certain amounts in the 1995 financial statements were
reclassified to conform to the 1996 presentation.
- 5 -
<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 net earnings and bank
financing to provide the cash flow necessary for its business operations. On
November 7, 1995, the Company entered into an unsecured revolving credit
agreement with three banks which provides for maximum borrowings of
$50,000,000. Maximum borrowings are based on the sum of 90% of eligible
receivables and the lower of 50% of eligible inventory or $20,000,000. The
agreement as amended expires on December 31, 1998 and any outstanding
balances are to be repaid. During June 1996, the Company received a
commitment from three banks which will allow it to borrow up to $70,000,000.
The contemplated agreement will expire five years from the date of closing.
Maximum borrowings will be based on the sum of 90% of eligible receivables
and the lower of 50% of eligible inventory or $30,000,000.
The Company does not currently have or anticipate having material
commitments for capital expenditures. Working capital at June 30, 1996
amounted to $75,300,000 versus $65,700,000 at September 30, 1995. At June
30, 1996, liabilities to net worth ratio [leverage] was 1.41 times the
Company's tangible net worth compared to 1.53 times at September 30, 1995.
The Company believes that its cash flow requirements for fiscal 1996 will
be met by its operating results and the use of its existing bank credit
facility.
Nine months ended June 30, 1996
Compared to the nine months ended
July 2, 1995
Results of Operations
Net sales were $212,990,000 for the nine months ended June 30, 1996
compared to $175,078,000 in the like period in the preceding year. This
increase in sales volume of approximately 22% resulted primarily from
improved customer demand for most product lines. Gross profit decreased from
22.9% in 1995 to 21.2% in 1996 as a result of changes in product mix,
increased competition and declining prices of D-RAMs and other associated
products. Selling, general and administrative expenses amounted to
$32,241,000 [15.1% of sales] in 1996 compared to $28,442,000 [16.2% of sales]
in the comparable period in 1995. The increase in selling, general and
administrative expenses of $3,799,000 is primarily due to additional costs
required to support a higher level of sales, including higher commission
expenses. Interest costs in 1996 amounted to $1,945,000 [0.9% of sales]
compared to $1,281,000 [0.7% of sales] in the previous year as a result of
additional borrowings and higher interest rates in 1996. Income tax expense
amounted to $4,247,000 [39% of pre-tax income] in the fiscal 1996 period
compared to $3,897,000 [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 additional taxes resulting from
state, local and foreign jurisdictions, including those of a United States
territory.
Net income was $6,643,000 for the nine months ended June 30, 1996 as
compared to $6,520,000 for the same period in the preceding year as a result
of the above factors.
- 6 -<PAGE>
Three months ended June 30, 1996
Compared to the three months ended
July 2, 1995
Results of Operations
Net sales were $73,790,000 in the third quarter of fiscal 1996 compared
to $63,468,000 in the like period in the preceding year. This increase in
sales volume of approximately 16% resulted primarily from improved customer
demand across a broad spectrum of product lines. Gross profit decreased from
23.7% in the third fiscal quarter of 1995 to 22.3% in the same period in 1996
as a result of changes in product mix, increased competition and declining
selling prices in D-RAMs and associated products. Selling, general and
administrative expenses amounted to $11,628,000 [15.8% of sales] in the third
quarter of fiscal 1996 compared to $10,266,000 [16.2% of sales] in the
comparable quarter in the 1995 fiscal year. The increase in selling, general
and administrative expenses of $1,362,000 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 $656,000 [0.9% of sales] compared to $489,000
[0.8% of sales] in the previous year as a result of higher levels of
borrowing and higher interest rates. Income taxes amounted to $1,637,000
[39% of pre-tax income] in the fiscal 1996 period and $1,624,000 [38% 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 additional taxes resulting from state, local and foreign
jurisdictions, including those of a United States territory.
Net income was $2,562,000 for the fiscal quarter ended June 30, 1996
compared to $2,650,000 for the third quarter of fiscal 1995 as a result of
the factors previously discussed.
- 7 -<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 July 25, 1996 MILGRAY ELECTRONICS, INC.
[Registrant]
By: John Tortorici
John Tortorici, Vice President-Finance
[Authorized officer and principal
financial officer]
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MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
27 Financial Data Schedule
- 9 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATD 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-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 42,322
<ALLOWANCES> 0
<INVENTORY> 56,241
<CURRENT-ASSETS> 101,433
<PP&E> 3,798
<DEPRECIATION> 0
<TOTAL-ASSETS> 105,629
<CURRENT-LIABILITIES> 26,087
<BONDS> 35,142
0
0
<COMMON> 1,704
<OTHER-SE> 42,436
<TOTAL-LIABILITY-AND-EQUITY> 105,629
<SALES> 212,990
<TOTAL-REVENUES> 212,990
<CGS> 167,914
<TOTAL-COSTS> 167,914
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,945
<INCOME-PRETAX> 10,890
<INCOME-TAX> 4,247
<INCOME-CONTINUING> 6,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,643
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
</TABLE>
