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 March 31, 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 April 24, 1996
<PAGE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information
Condensed Consolidated Balance Sheets -
March 31, 1996 and September 30, 1995 2
Condensed Consolidated Statements of
Income - Six Months Ended
March 31, 1996 and April 2, 1995 and
Three Months Ended March 31, 1996 and
April 2, 1995 3
Condensed Consolidated Statements of Cash
Flows - Six Months Ended March 31, 1996
and April 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 -
<PAGE>
PART I - FINANCIAL INFORMATION
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
[dollars in thousands]
March 31, September 30,
1996 1995
ASSETS
Current assets
Cash and other current assets $ 2,775 $ 2,986
Trade accounts receivable 43,910 39,105
Inventories 57,435 48,525
Total current assets 104,120 90,616
Property, plant and equipment - at cost
less accumulated depreciation and
amortization of $2,512 at March 31,
1996 and $2,246 at September 30, 1995 3,780 3,347
Other assets 429 383
$108,329 $ 94,346
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 22,048 $ 19,280
Other current liabilities 3,068 5,676
Total current liabilities 25,116 24,956
Long-term debt 41,375 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 March 31, 1996
and September 30, 1995 1,704 1,704
Retained earnings 39,874 35,793
41,578 37,497
Less treasury stock - at cost [43,726
shares at March 31, 1996 and
September 30, 1995] 70 70
41,508 37,427
$108,329 $ 94,346
See notes to condensed consolidated financial statements.
- 2 -<PAGE>
MILGR
AY ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
[in thousands, except per share data]
SIX MONTHS ENDED
THREE MONTHS ENDED
March 31, April 2, March
31, April 2,
1996 1995 19
96 1995
Net sales $ 139,200 $ 111,611 $ 71
,141 $ 60,328
Costs and expenses
Cost of sales 110,607 86,499 56
,773 47,028
Selling, general and administrative
expenses 20,613 18,176 10
,253 9,534
Interest expense 1,289 792
685 453
132,509 105,467 67
,711 57,015
Income before income taxes 6,691 6,144 3
,430 3,313
Income taxes 2,610 2,273 1
,338 1,226
Net income $ 4,081 $ 3,871 $ 2
,092 $ 2,087
Earnings per share $ .60 $ .58 $
.31 $ .31
Weighted average common and common
equivalent shares outstanding 6,773,176 6,731,090 6,773,
176 6,753,484
See notes to condensed consolidated financial stateme
nts.
- 3 -
<PAGE>
MILGRAY ELECTRONIC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
[in thousands]
SIX MONTHS ENDED
March 31, April 2,
1996 1995
Cash flows from operating activities
Net cash used in
operating activities $ [9,241] $ [3,564]
Cash flows from investing activities
Acquisition of property and equipment [700] [400]
Net cash used in investing
activities [700] [400]
Cash flows from financing activities
Notes payable - bank [27] [193]
Increase in long-term debt
including current maturities 9,751 3,600
Other - 113
Net cash provided by financing
activities 9,724 3,520
Net decrease in cash [217] [444]
Cash at beginning of year 1,909 2,388
Cash at end of period $ 1,692 $ 1,944
Supplemental cash flow information
Interest paid $ 1,285 $ 799
Income taxes paid 3,034 2,000
See notes to condensed consolidated financial statements.
- 4 -
<PAGE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1996 AND APRIL 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 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 three months and six months ended March 31, 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 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 six
months ended April 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.
The Company does not currently have or anticipate having material
commitments for capital expenditures. Working capital at March 31, 1996
amounted to $79,000,000 versus $65,700,000 at September 30, 1995. At
December 31, 1995, liabilities to net worth ratio [leverage] was 1.62 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 bank credit facility.
Six months ended March 31, 1996
Compared to the six months ended
April 2, 1995
Results of Operations
Net sales were $139,200,000 for the first half of fiscal 1996 compared to
$111,611,000 in the like period in the preceding year. This increase in
sales volume of approximately 25% resulted primarily from improved customer
demand for most product lines. Gross profit decreased from 22.5% in 1995 to
20.5% in 1996 as a result of changes in product mix and increased
competition. Selling, general and administrative expenses amounted to
$20,613,000 [14.8% of sales] in the first half of fiscal 1996 compared to
$18,176,000 [16.3% of sales] in the comparable period in 1995. The increase
in selling, general and administrative expenses of $2,437,000 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
1996 amounted to $1,289,000 [0.9% of sales] compared to $792,000 [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 $2,610,000 [39% of
pre-tax income] in the fiscal 1996 period compared to $2,273,000 [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 $4,081,000 for the six months ended March 31, 1996 as
compared to $3,871,000 for the same period in the preceding year as a result
of the above factors.
- 6 -
<PAGE>
Three months ended March 31, 1996
Compared to the three months ended
April 2, 1995
Results of Operations
Net sales were $71,141,000 in the second quarter of fiscal 1996 compared
to $60,328,000 in the like period in the preceding year. This increase in
sales volume of approximately 18% resulted primarily from improved customer
demand across a broad spectrum of product lines. Gross profit decreased from
22% in the second fiscal quarter of 1995 to 20.2% in the same period in 1996
as a result of changes in product mix and increased competition. Selling,
general and administrative expenses amounted to $10,253,000 [14.4% of sales]
in the second quarter of fiscal 1996 compared to $9,534,000 [15.8% of sales]
in the comparable quarter in the 1995 fiscal year. The increase in selling,
general and administrative expenses of $719,000 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 $685,000 [0.9% of sales]
compared to $453,000 [0.7% of sales] in the previous year as a result of
higher levels of borrowing and higher interest rates. Income taxes amounted
to $1,338,000 [39% of pre-tax income] in the fiscal 1996 period and
$1,226,000 [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 $2,092,000 for the fiscal quarter ended March 31, 1996
compared to $2,087,000 for the second 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 May 1, 1996 MILGRAY ELECTRONICS, INC.
[Registrant]
By: John Tortorici
John Tortorici, Vice President-Finance
[Authorized officer and principal
financial officer]
- 8 -
<PAGE>
MILGRAY ELECTRONICS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
4(ii) First Amendment and Waiver dated as of December 26, 1995 to
the Credit Agreement
27 Financial Data Schedule
- 9 -
<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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 43,910
<ALLOWANCES> 0
<INVENTORY> 57,435
<CURRENT-ASSETS> 104,120
<PP&E> 3,780
<DEPRECIATION> 0
<TOTAL-ASSETS> 108,329
<CURRENT-LIABILITIES> 25,116
<BONDS> 41,375
0
0
<COMMON> 1,704
<OTHER-SE> 39,874
<TOTAL-LIABILITY-AND-EQUITY> 108,329
<SALES> 139,200
<TOTAL-REVENUES> 139,200
<CGS> 110,607
<TOTAL-COSTS> 110,607
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,289
<INCOME-PRETAX> 6,691
<INCOME-TAX> 2,610
<INCOME-CONTINUING> 4,081
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,081
<EPS-PRIMARY> .60
<EPS-DILUTED> .60<F1>
<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>
FIRST AMENDMENT and WAIVER dated as of
December 26, 1995 to the AMENDED AND
RESTATED CREDIT AGREEMENT dated as of
November 7, 1995 (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, FIRST
UNION NATIONAL BANK OF NORTH CAROLINA,
a North Carolina 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 FIRST 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 6.03. Insurance.
(b).
Compliance with Section 6.03 (b) of the Credit Agreement is hereby
waived for all periods prior to November 7, 1995 and thereafter
through and ending on December 26, 1995 to permit the Credit Parties
to have maintained insurance covering their respective property
against all risk of physical damage in an amount less than 100% of
the replacement value of such property provided, however, such
insurance coverage maintained by the Credit Parties was not less
than 80% of the replacement value of such property at all times.
2. Amendment to Article VI. AFFIRMATIVE COVENANTS. SECTION 6.03.
Insurance. (b).
Section 6.03 (b) of the Credit Agreement is hereby amended by
inserting the phrase "eighty (80%) percent of the" immediately
preceding the phrase "replacement value" contained therein.
This FIRST 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.
<PAGE>
- 2 -
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 FIRST 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.
The Borrower and the Guarantors hereby represent and warrant that,
after giving effect to this FIRST 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 FIRST 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 FIRST AMENDMENT
and WAIVER. This FIRST 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 FIRST 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.
- 3 -
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.
VIEWTEK, 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: Diane E. Vaccarelli
Name: Diane E. Vaccarelli
Title: Vice President
FLEET BANK
By: Shari Delouya
Name: Shari Delouya
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: Jane W. Workman
Name: Jane W. Workman
Title: Senior Vice President
<PAGE>
