<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 033-61385
PROSPECTUS
[KENT LOGO] 2,000,000 SHARES [K*TEC LOGO]
KENT ELECTRONICS CORPORATION
COMMON STOCK
------------------
All 2,000,000 shares of common stock, no par value (the "Common Stock"),
offered hereby are being offered by Kent Electronics Corporation (the
"Company"). The Common Stock is traded on the New York Stock Exchange under the
symbol "KNT." The last reported sale price of the Common Stock on the New York
Stock Exchange on September 21, 1995 was $44.75 per share. See "Price Range of
Common Stock."
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
===============================================================================================
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $44.25 $2.08 $42.17
-----------------------------------------------------------------------------------------------
Total(3) $88,500,000 $4,160,000 $84,340,000
===============================================================================================
</TABLE>
(1) For information regarding indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses estimated at $400,000, payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover
over-allotments, if any. See "Underwriting." If such option is exercised
in full, the total Price to Public, Underwriting Discounts and
Commissions, and Proceeds to Company will be $101,775,000, $4,784,000 and
$96,991,000, respectively.
------------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
September 27, 1995 at the office of Smith Barney Inc., 388 Greenwich Street, New
York, New York 10013.
------------------
SMITH BARNEY INC. MERRILL LYNCH & CO.
September 22, 1995
<PAGE> 2
K*TEC--
CUSTOM ELECTRONICS MANUFACTURING
[PHOTO]
K*TEC contract manufacturing facility.
<TABLE>
<S> <C> <C>
[PHOTO] [PHOTO] [PHOTO]
Assorted electronic Automated, high technology Specially fabricated
interconnect assemblies. manufacturing equipment electronic product.
</TABLE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements, including the notes thereto, included elsewhere or incorporated by
reference in this Prospectus. The Company's fiscal year ends on the Saturday
closest to the end of March of each year resulting in either a 52- or 53-week
year. References to fiscal years by date refer to the fiscal year ending in that
calendar year; for example, "fiscal 1996" ends March 30, 1996.
THE COMPANY
Kent Electronics Corporation is a leading national specialty distributor of
electronic products and a manufacturer of custom-made electronic assemblies. The
Company, through its Kent Components Distribution division, distributes
electronic connectors, electronic wire and cable, and other passive and
electromechanical products and interconnect assemblies used in assembling and
manufacturing electronic products. The Company, through its wholly owned
subsidiary K*TEC Electronics Corporation ("K*TEC"), also manufactures
custom-made electronic interconnect assemblies, battery power packs and other
sub-assemblies that are built to customers' specifications. Through Kent
Datacomm ("Datacomm"), the Company distributes a broad range of premise wiring
products, such as fiber optic cables, patch panels and enclosures, and local
area network ("LAN") and wide area network ("WAN") equipment, such as modems,
hubs, bridges and routers, directly to commercial end-users and professionals
who install and service voice and data communications networks.
The Company has concentrated its efforts on certain market niches and has
not attempted to be a broad-line distributor. Moreover, it has followed a
strategy of distributing the products of a selected group of leading suppliers.
The Company believes that these factors provide its marketing personnel with the
advantage of greater familiarity with the products they sell. The Company is
increasingly focused on providing materials management services, such as bar
coded auto replenishment, in-plant stores, and electronic data interchange
("EDI") capabilities, that reduce its customers' total acquisition costs. In
response to customer needs and market opportunities, the Company regularly
reviews the possibility of adding other products and services to its
distribution network to provide customers with an entire materials management
solution. K*TEC concentrates on developing long-term relationships with a select
group of original equipment manufacturers ("OEMs") desiring to lower their total
production cost through outsourcing.
The Company's customers are primarily industrial users and OEMs involved in
a wide range of industries, including the data communication/collection,
computer, industrial/capital goods and medical industries.
The Company maintains its primary distribution facility in Houston, Texas,
with sales offices in 17 states, some of which maintain a limited amount of
local inventory and provide selected services to support specific customer
needs. The Company operates manufacturing facilities in Houston and Dallas,
Texas and the San Jose, California area. The Company's principal executive
offices are located at 7433 Harwin Drive, Houston, Texas 77036; telephone number
(713) 780-7770.
3
<PAGE> 4
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................. 2,000,000 shares(1)
Common Stock to be Outstanding after the Offering... 11,828,420 shares(1)(2)
Use of Proceeds..................................... To finance the construction of new
facilities, and for working capital
requirements and general corporate
purposes. See "Use of Proceeds."
New York Stock Exchange Symbol...................... KNT
</TABLE>
---------------
(1) Assumes that the Underwriters' over-allotment option is not exercised.
(2) As of July 27, 1995, does not include 1,186,020 shares reserved for issuance
upon the exercise of outstanding stock options.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THIRTEEN
FISCAL YEAR ENDED WEEKS ENDED
------------------------------------------------------ -----------------
MARCH 30, MARCH 28, APRIL 3, APRIL 2, APRIL 1, JULY 2, JULY 1,
1991 1992 1993 1994 1995 1994 1995
--------- --------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Net sales................. $71,013 $94,695 $154,677 $192,887 $253,484 $56,527 $77,585
Gross profit.............. 20,493 26,489 42,270 50,648 64,877 14,524 19,973
Selling, general and
administrative
expenses............... 14,790 18,563 30,806 36,012 43,917 10,070 12,675
Earnings before income
taxes.................. 6,026 9,166 12,162 15,379 22,075 4,604 7,798
Net earnings.............. 3,776 5,769 7,723 9,535 13,386 2,831 4,679
Earnings per share........ $ .63 $ .69 $ .80 $ .96 $ 1.32 $ .28 $ .45
Weighted average shares... 6,002 8,420 9,675 9,881 10,138 10,013 10,306
</TABLE>
<TABLE>
<CAPTION>
JULY 1, 1995
---------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Total assets..................................................... $142,383 $226,323
Long-term debt, less current maturities.......................... -- --
Stockholders' equity............................................. 113,809 197,749
</TABLE>
---------------
(1) As adjusted to give effect to the sale of 2,000,000 shares of Common Stock
offered by the Company hereby and the application of the estimated net
proceeds thereof.
4
<PAGE> 5
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Common Stock offered
hereby are estimated to be $83,940,000 ($96,591,000 if the Underwriters'
over-allotment option is exercised in full), after deducting underwriting
discounts and commissions and estimated expenses of the offering payable by the
Company.
The net proceeds will be used primarily for the construction of new
facilities and development and implementation of new information systems. The
remainder of the net proceeds will be used to fund increases in working capital
and for general corporate purposes. The Company is currently constructing the
first phase of a new manufacturing facility, scheduled for completion in Fall
1995, and plans to commence construction of the second phase of the
manufacturing facility and a new distribution facility within the next twelve
months. The currently estimated aggregate cost of construction of such
facilities is $45 million. See "Business -- New Facilities." In addition, within
the next two years, the Company plans to complete the implementation of new
information systems at an estimated aggregate cost of $13 million for hardware,
software and consulting expenses.
The Company believes that it receives a competitive advantage from and its
success depends on, among other things, substantial financial strength and
flexibility. In addition, the Company from time to time considers acquisitions
of complementary businesses or assets. Although there are no current agreements
or understandings with respect to any such acquisitions, the Company desires to
be able to respond to opportunities as they arise. Until the net proceeds of the
offering are utilized, they will be invested in short-term instruments.
5
<PAGE> 6
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is listed on the New York Stock Exchange and
trades under the symbol "KNT." The following table presents the high and low
closing prices for the Common Stock for each of the last two calendar years and
for a portion of the current year, as reported by the New York Stock Exchange
and as adjusted to reflect a three-for-two stock split to shareholders of record
on February 15, 1995 effected on March 1, 1995 as a 50% stock dividend.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1993
First Quarter............................................ $18.25 $16.00
Second Quarter........................................... 18.17 13.92
Third Quarter............................................ 17.25 13.67
Fourth Quarter........................................... 19.09 17.17
1994
First Quarter............................................ $21.17 $17.83
Second Quarter........................................... 21.33 17.83
Third Quarter............................................ 24.33 20.33
Fourth Quarter........................................... 26.67 22.83
1995
First Quarter............................................ $30.75 $25.84
Second Quarter........................................... 37.75 28.13
Third Quarter (through September 21)..................... 44.75 37.50
</TABLE>
As of July 1, 1995, the Common Stock was held by 1,106 holders of record.
The number of record holders may not be representative of the number of
beneficial holders because many shares are held by depositaries, brokers, or
other nominees.
DIVIDEND POLICY
Historically, the Company has reinvested earnings available to Common Stock
in its business and, accordingly, has not paid any cash dividends on its Common
Stock. Although the Company intends to continue to invest future earnings in its
business, it may determine at some future date that payment of cash dividends on
Common Stock would be desirable. The payment of any such dividends would depend,
among other things, upon the earnings and financial condition of the Company.
6
<PAGE> 7
CAPITALIZATION
The following table sets forth the capitalization of the Company as of July
1, 1995 and as adjusted to reflect the sale by the Company of the 2,000,000
shares of Common Stock offered hereby and the application of the estimated net
proceeds thereof.
<TABLE>
<CAPTION>
JULY 1, 1995
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current maturities....................... $ -- $ --
Stockholders' equity
Preferred stock, $1.00 par value, 2,000,000 shares
authorized, none issued.................................. -- --
Common stock, no par value, 30,000,000 shares authorized,
9,812,818 shares issued and outstanding (11,812,818
shares as adjusted)...................................... 34,836 34,856
Additional paid-in capital.................................... 25,451 109,371
Retained earnings............................................. 53,522 53,522
-------- --------
Total stockholders' equity............................... 113,809 197,749
-------- --------
Total capitalization.......................................... $113,809 $197,749
======== ========
</TABLE>
7
<PAGE> 8
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes selected consolidated financial data of the
Company for each year of the five-year period ended April 1, 1995, and the
unaudited consolidated financial data for the thirteen weeks ended July 2, 1994
and July 1, 1995, and should be read in conjunction with the "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------------------------ -------------------------
MARCH 30, MARCH 28, APRIL 3, APRIL 2, APRIL 1, JULY 2, JULY 1,
1991 1992 1993 1994 1995 1994 1995
--------- --------- -------- -------- -------- -------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Net sales............................ $71,013 $94,695 $154,677 $192,887 $253,484 $ 56,527 $ 77,585
Gross profit......................... 20,493 26,489 42,270 50,648 64,877 14,524 19,973
Selling, general and administrative
expenses........................... 14,790 18,563 30,806 36,012 43,917 10,070 12,675
Earnings before income taxes......... 6,026 9,166 12,162 15,379 22,075 4,604 7,798
Income taxes......................... 2,250 3,397 4,439 5,844 8,689 1,773 3,119
Net earnings......................... 3,776 5,769 7,723 9,535 13,386 2,831 4,679
Earnings per share................... $ .63 $ .69 $ .80 $ .96 $ 1.32 $ .28 $ .45
Weighted average shares.............. 6,002 8,420 9,675 9,881 10,138 10,013 10,306
</TABLE>
<TABLE>
<CAPTION>
JULY 1, 1995
-------------------------
MARCH 30, MARCH 28, APRIL 3, APRIL 2, APRIL 1, AS
1991 1992 1993 1994 1995 ACTUAL ADJUSTED(1)
--------- --------- -------- -------- -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets......................... $35,868 $84,581 $ 98,390 $114,507 $133,890 $142,383 $226,323
Long-term debt, less current
maturities......................... 733 -- -- -- -- -- --
Stockholders' equity................. 28,106 71,592 81,695 92,519 108,800 113,809 197,749
</TABLE>
---------------
(1) As adjusted to give effect to the sale of 2,000,000 shares of Common Stock
offered by the Company hereby and the application of the estimated net
proceeds thereof.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CORPORATE OVERVIEW
The Company's net sales have increased rapidly as a result of increased
demand and the expansion of the electronic components industry. In addition, as
suppliers of electronic components have reduced their sales to lower-volume
customers, more customers have increasingly relied on distributors. K*TEC has
benefitted from a growing trend by many OEMs toward focusing on their core
competencies and outsourcing the manufacturing of certain assemblies and
subassemblies. The growth in sales, coupled with the Company's continued focus
on cost containment, has contributed to the significant increase in
profitability. To take advantage of these trends, the Company is expanding its
manufacturing and distribution capacity by the addition of its new facilities in
Sugar Land, Texas. See "Use of Proceeds" and "Business -- New Facilities."
RESULTS OF OPERATIONS
The following table presents, as a percentage of sales, certain selected
consolidated financial data for each of the periods indicated.
<TABLE>
<CAPTION>
THIRTEEN WEEKS
FISCAL YEAR ENDED ENDED
---------------------------------- -------------------
APRIL 3, APRIL 2, APRIL 1, JULY 2, JULY 1,
1993 1994 1995 1994 1995
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Manufacturing.................................... 33.2% 34.4% 38.0% 37.9% 40.3%
Distribution..................................... 66.8 65.6 62.0 62.1 59.7
----- ----- ----- ----- -----
Net sales........................................ 100.0 100.0 100.0 100.0 100.0
Cost of sales.................................... 72.7 73.7 74.4 74.3 74.3
----- ----- ----- ----- -----
Gross profit..................................... 27.3 26.3 25.6 25.7 25.7
Selling, general and administrative expenses..... 19.9 18.7 17.3 17.8 16.3
----- ----- ----- ----- -----
Operating profit................................. 7.4 7.6 8.3 7.9 9.4
Other income (expense)
Interest expense............................... -- -- -- -- --
Other -- net (principally interest and dividend
income)..................................... 0.5 0.4 0.4 0.2 0.7
----- ----- ----- ----- -----
Earnings before income taxes..................... 7.9 8.0 8.7 8.1 10.1
Income taxes..................................... 2.9 3.0 3.4 3.1 4.0
----- ----- ----- ----- -----
Net earnings..................................... 5.0% 5.0% 5.3% 5.0% 6.1%
===== ===== ===== ===== =====
</TABLE>
COMPARISON OF THIRTEEN WEEKS ENDED JULY 1, 1995 AND JULY 2, 1994
Net sales for the thirteen weeks ended July 1, 1995 increased $21,058,000,
or 37.3%, when compared to the same period of the prior year. The sales increase
was attributable to increased demand from existing customers and an expanding
customer base.
Gross profit increased $5,449,000, or 37.5%, compared to the corresponding
period a year ago. Gross profit as a percentage of sales for the period was
25.7%, remaining the same as the corresponding period of the previous year.
Although gross margins have stabilized, highly competitive conditions continue
in the electronics and personal computer industries. The increase in gross
profit was primarily due to increased sales.
Selling, general and administrative ("SG&A") expenses increased $2,605,000,
or 25.9%, compared to the same period last year. However, as a percentage of
sales, such expenses declined to 16.3% from 17.8% in the prior year period. The
decline as a percentage of sales reflects the Company's continued focus on cost
containment to reduce such expenses as a percentage of sales. The increase in
SG&A expenses was primarily due to the expenses necessary to support the growth
in the Company's existing operations.
9
<PAGE> 10
Other-net consists principally of interest and dividend income generated by
cash, cash equivalents and trading securities. The increase in interest and
dividend income is due primarily to higher interest rates and a reduction of
unrealized losses on trading securities.
Net earnings increased $1,848,000, or 65.3%, compared to the corresponding
period a year ago. The additional profit from the increased sales and the
Company's continued focus on cost containment were the primary reasons for the
improved profitability.
COMPARISON OF FISCAL YEAR 1995 WITH FISCAL YEAR 1994
Net sales for the fiscal year ended April 1, 1995 increased $60,596,687, or
31.4%, compared to the prior year. The sales increase reflected internal growth,
primarily from increased demand from existing customers and an expanded customer
base.
Gross profit increased $14,229,197, or 28.1%, when compared to the prior
year. Gross profit as a percentage of sales decreased to 25.6% from 26.3% in the
previous year. The decline in the gross profit percentage was primarily due to
the highly competitive conditions in the electronics and personal computer
industries, creating downward pressure on margins. The increase in gross profit
was primarily due to increased sales, partially offset by a slight decline in
the gross profit percentage.
SG&A expenses increased $7,904,923, or 22.0%, when compared to the
preceding year. As a percentage of sales, such expenses decreased to 17.3% from
18.7% in the previous year. The decline as a percentage of sales reflected the
Company's continued focus on cost containment to reduce such expenses as a
percentage of sales. The increase in SG&A expenses was primarily due to the
expenses necessary to support the growth of the Company's existing operations.
Other-net consists principally of interest and dividend income generated by
cash, cash equivalents and trading securities. The increase in interest and
dividend income was due to the Company shifting a portion of available funds
into a higher yielding taxable investment vehicle from a tax-exempt municipal
money market fund and higher interest rates.
The Company's effective tax rate increased due to an increase in operating
income and taxable interest and dividend income. The increase in operating
income, along with the increase in taxable interest and dividend income,
subjected the Company to a higher graduated federal income tax rate.
Net earnings increased $3,851,048, or 40.4%, when compared to the prior
year. The improved profitability was primarily due to the incremental profit
associated with the increase in sales volume.
COMPARISON OF FISCAL YEAR 1994 WITH FISCAL YEAR 1993
Net sales for the fiscal year ended April 2, 1994 increased $38,210,145, or
24.7%, when compared to the prior year. The sales increase was attributable to
increased demand from existing customers and an expanding customer base.
Gross profit increased $8,377,901, or 19.8%, compared to the preceding
year. Gross profit as a percentage of sales decreased to 26.3% from 27.3% in the
previous year. The decline in gross profit percentage was primarily due to the
highly competitive conditions in the electronics and personal computer
industries, creating a downward pressure on margins. The increase in gross
profit was primarily due to increased sales, partially offset by a slight
decline in the gross profit percentage.
SG&A expenses increased $5,206,121, or 16.9%, when compared to the prior
fiscal year. However, as a percentage of sales, such expenses declined to 18.7%
from 19.9% in the preceding year. The decline as a percentage of sales reflected
the Company's continued focus on cost containment. The increase in SG&A expenses
was primarily due to the expenses necessary to support the growth in the
Company's existing operations.
Other-net consisted principally of interest and dividend income generated
by cash, cash equivalents and short-term investments. The increase in interest
and dividend income was primarily due to the Company
10
<PAGE> 11
shifting a greater portion of its available funds from a tax-exempt to a taxable
investment vehicle which provided an increased yield. The increase in interest
and dividend income was also due to an increase in funds available for
investing.
The Company's effective tax rate increased in fiscal year 1994 due to an
increase in federal income tax rates and a decline in the amount of tax-free
interest and dividend income. The decrease in tax-free interest and dividend
income made a greater portion of the Company's income subject to income taxes.
Net earnings increased $1,811,871, or 23.5%, when compared to the prior
year. The additional profit from the increased sales was the primary factor for
the improved profitability.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at July 1, 1995 was $69,475,000, an increase of $3,156,000
from April 1, 1995. Included in the Company's working capital at July 1, 1995
are investments of $27,712,000. The Company's investment strategy is low-risk
and short-term, keeping the funds readily available to meet capital requirements
as they arise in the normal course of business. The Company's primary investment
vehicle is a managed fund consisting primarily of taxable, high quality
corporate debt instruments, and is compatible with the Company's stated
investment strategy.
The Company intends to apply its capital resources to expand its business
by establishing or acquiring similar distribution and manufacturing operations
in geographic areas that are attractive to the Company, by acquiring new
facilities and by enlarging or improving existing facilities. In addition to the
capital required to purchase existing businesses or to fund start-up operations,
the expansion of the Company's operations at both new and existing locations
will require greater levels of capital to finance the purchase of additional
equipment, increased levels of inventory and greater accounts receivable.
The Company is currently expanding its manufacturing capacity by building a
new facility on a recently purchased 66-acre parcel of land in Sugar Land,
Texas. Facility construction and equipment will require capital expenditures in
this fiscal year, currently estimated at $14 million, of which approximately $2
million has been spent, with the remainder of the project to be completed in
this fiscal year. Management believes that current resources, along with funds
generated from operations, should be sufficient to meet its current capital
requirements and those anticipated this fiscal year. With this offering,
management believes that the Company will have adequate capital to construct
additional new manufacturing and distribution facilities and implement new
information systems. See "Use of Proceeds" and "Business -- New Facilities."
11
<PAGE> 12
BUSINESS
GENERAL
The Company is a leading national specialty distributor of electronic
products and a manufacturer of custom-made electronic assemblies. The Company,
through its Components division, distributes electronic connectors, electronic
wire and cable, and other passive and electromechanical products and
interconnect assemblies used in assembling and manufacturing electronic
products. The Company, through its wholly owned subsidiary K*TEC, also
manufactures custom-made electronic interconnect assemblies, battery power
packs and other subassemblies that are built to customers' specifications.
Through Datacomm, the Company distributes a broad range of premise wiring
products, such as fiber optic cables, patch panels and enclosures, and LAN and
WAN equipment, such as modems, hubs, bridges and routers, directly to
commercial end-users and professionals who install and service voice and data
communications networks.
The Company has concentrated its efforts on certain market niches and has
not attempted to be a broad-line distributor. Moreover, it has followed a
strategy of distributing the products of a selected group of leading suppliers.
The Company believes that these factors provide its marketing personnel with the
advantage of greater familiarity with the products they sell. The Company is
increasingly focused on providing materials management services, such as bar
coded auto replenishment, in-plant stores, and EDI capabilities, that reduce its
customers' total acquisition costs. In response to customer needs and market
opportunities, the Company regularly reviews the possibility of adding other
products and services to its distribution network to provide customers with an
entire materials management solution. K*TEC concentrates on developing long-term
relationships with a select group of OEMs desiring to lower their total
production cost through outsourcing.
The Company's customers are primarily industrial users and OEMs involved in
a wide range of industries, including the data communication/collection,
computer, industrial/capital goods and medical industries.
The Company maintains its primary distribution facility in Houston, Texas,
with sales offices in 17 states, some of which maintain a limited amount of
local inventory and provide selected services to support specific customer
needs. The Company operates manufacturing facilities in Houston and Dallas,
Texas and the San Jose, California area.
DISTRIBUTION
GENERAL. The principal focus of the Company's distribution business,
conducted through its Components division, is to provide its industrial and OEM
customers with rapid and reliable deliveries of specialty wiring and connector
products and other passive and electromechanical products and assembled parts as
well as a wide variety of materials management services. The Company utilizes a
computerized inventory control system to assist in the marketing of its products
and coordinate purchases from suppliers with sales to customers. The Company's
computer system provides detailed on-line information regarding the availability
of the Company's entire stock of inventory located at its stocking facilities as
well as on-line access to the inventories of most of the Company's major
suppliers. Through the Company's integrated real-time information system,
customers' orders can readily be tracked through the entire process of entering
the order, reserving products to fill the order, ordering components from
suppliers, if necessary, and shipping products to customers on scheduled dates.
The Company is thus able to provide the type of distributor service required by
its OEM customers that have adopted the "just-in-time" method of inventory
procurement. The "just-in-time" method is utilized in an effort to operate more
efficiently and profitably by relying on scheduled deliveries of such components
at the time they are needed in the production process and thereby reducing
inventories of components.
The principal products the Company distributes consist of connectors,
receptacles and sockets, which collectively accounted for approximately 19%, 20%
and 20% of the Company's total sales in its fiscal years ended in 1995, 1994 and
1993, respectively, and other electronic connecting components, such as cable
and wiring products, which accounted for approximately 8%, 8% and 9% of the
Company's total sales in such years. In addition, the Company distributes
capacitors, resistors and electromechanical parts.
12
<PAGE> 13
As is customary in the electronic distribution industry, the Company
primarily operates under short-term contracts with its suppliers. In the
Company's past experience, such contracts have typically been renewed from year
to year. In the year ended April 1, 1995, the Company's purchases from AMP
Incorporated represented approximately 24% of its total purchases. Although the
Company believes that it may be able to obtain competitive products of
comparable quality from other suppliers, the loss of such supplier could have an
adverse impact on the Company's operations.
AFTERMARKET OPERATIONS. Datacomm serves the voice and data communications
after-market. Through a focused sales effort, Datacomm offers a broad range of
premise wiring products and LAN and WAN equipment to commercial end-users and
professionals who install or service voice and data communications networks.
Through such a marketing approach, the Company believes it is able to
participate directly in the large and rapidly growing market for connection
devices, reflecting the increasing use of microcomputers in LANs and WANs and
the continued growth in networking and cabling needs of minicomputer and
mainframe users. Datacomm can provide customers with immediate off-the-shelf
delivery of voice and data communications wiring products. The Company, through
Datacomm, is an authorized distributor of AMP, AT&T, Belden, Cabletron and other
LAN and WAN products. Datacomm serves numerous industries, including financial,
government, airline, medical, media, food, manufacturing and aerospace.
MANUFACTURING
K*TEC manufactures a wide variety of wiring harnesses, cable assemblies,
other subassemblies and custom battery power packs, all of which are built to
the specifications of individual customers. The Company has developed innovative
material requirements planning (MRP) relationships with a select group of OEMs
in the data processing, telecommunications, medical instrumentation and energy
industries. These relationships are supported by sophisticated in-house product
design and technical support capabilities. K*TEC support teams work closely with
K*TEC's customers through all stages of product planning and production to apply
the latest design and production technology. K*TEC's computer systems have a
computer aided design capability that allows its engineers to be on-line with an
OEM's engineer when developing and changing product designs.
K*TEC's quality control standards provide another means of serving the
needs of the Company's just-in-time customers, since an important aspect of the
just-in-time method is that OEMs rely on suppliers to assure quality control for
subassemblies rather than providing such quality control themselves. The Company
believes that K*TEC's adherence to strict quality control standards and
investment in state-of-the-art production facilities and equipment have
attracted and retained important customers who have established extremely rigid
product quality standards.
Substantially all of the Company's manufacturing business is contract
manufacturing. The contract manufacturing business is generally characterized by
close working relationships with a select group of customers. Sales of K*TEC's
products represented approximately 38%, 34% and 33% of the Company's total sales
for the fiscal years ended in 1995, 1994 and 1993, respectively. The Company
believes that its profit margins from sales of manufactured products is
generally greater than its profit margin on sales of distributed products.
MARKETING
The Company's sales representatives undergo continuous training and attend
classes in order to enhance both their technical expertise and sales techniques.
Sales associates are compensated primarily on a commission basis. The Company
uses direct mailings of brochures and catalogs as well as advertising in trade
journals in the marketing of its products.
The Company has concentrated its efforts in certain market niches in which
it only distributes the products of a select group of leading suppliers. In
addition, because sales personnel specialize within related product groupings,
they are able to develop a high degree of technical expertise.
13
<PAGE> 14
COMPETITION
The Company faces substantial competition from a large number of
distributors, suppliers and manufacturers, some of which are larger, have
greater financial resources, broader name recognition, and may, in some
instances, have lower costs than the Company.
The Company's manufacturing operations encounter competition from both
domestically manufactured products and products manufactured outside the United
States. Such foreign-manufactured products are often sold at prices below the
Company's prices for comparable products. The Company's products are not
protected from competition by virtue of any proprietary rights such as trade
secrets or patents. The Company competes by providing its customers with
reliable, rapid delivery of products that are priced at competitive levels and
meet strict quality control standards.
EMPLOYEES
At July 1, 1995, the Company employed 1,036 persons, all on a full time
basis. The Company's employees are not subject to any collective bargaining
agreement. In addition to its employees, the Company uses other workers on a
contract basis, as its needs require.
TRADEMARKS
The Company has registered a number of trademarks and service marks
relating to the operation of its business. These have been of value to the
Company in the past and are expected to be of value in the future. The loss of a
single trademark or service mark other than "KE Kent Electronics" or "K*TEC
Electronics," in the opinion of management, would not have a material adverse
effect on the conduct of its business.
PROPERTIES
The Company's headquarters are located in a 66,000 square foot office
facility in Houston, Texas, of which approximately 56,000 square feet are
presently used by the Company. The Company also owns a 2.7 acre tract of vacant
land adjacent to the office facility. In nearby facilities, the Company uses
approximately 15,000 square feet of space for office purposes and approximately
156,000 square feet for distribution and manufacturing operations. The Company
owns a 10.8 acre tract of vacant land adjoining these Houston facilities. The
Company maintains distribution and manufacturing facilities and sales offices in
21 other cities under leases expiring at various times through the year 2000.
Most of the leases are subject to renewal at the option of the Company for a
term at least equal to the initial term, but at a newly determined rental rate.
NEW FACILITIES
In March 1995, the Company purchased a 66-acre parcel of land and acquired
a four-year option to purchase an adjacent 30 acres in Sugar Land, Texas.
Currently, the Company is constructing in two phases a K*TEC manufacturing,
warehouse and administrative facility at its Sugar Land location. The Company
estimates the first phase of this project, consisting of approximately 250,000
square feet, will be completed during Fall 1995. Construction of the second
phase of this project, also consisting of approximately 250,000 square feet, is
planned to begin within the next 12 months and is anticipated to take 6 months
to complete. In addition to the K*TEC manufacturing facility, the Company is
currently designing a new distribution facility of approximately 263,000 square
feet that will also be located at its Sugar Land location. Construction is
planned to begin within this fiscal year, and the Company estimates the
distribution facility will be complete 18 to 24 months after construction
begins.
LEGAL PROCEEDINGS
The Company is engaged in litigation occurring in the normal course of
business. In the opinion of management, based upon advice of counsel, the
ultimate outcome of these lawsuits will not have a material impact on the
Company's consolidated financial statements.
14
<PAGE> 15
MANAGEMENT
The following table sets forth certain information regarding the directors
and executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Morrie K. Abramson............... 60 Chairman of the Board, Chief
Executive Officer and President
Randy J. Corporron............... 38 Executive Vice President
Larry D. Olson................... 38 Executive Vice President
Mark A. Zerbe.................... 34 Executive Vice President
Stephen J. Chapko................ 41 Vice President, Treasurer and
Secretary
Barbara Alberto.................. 49 Vice President
Keith K. Ayers................... 57 Vice President
Rodney J. Corporron.............. 38 Vice President
Cathy L. Felts................... 43 Vice President
William H. Fountain.............. 39 Vice President
Max S. Levit..................... 60 Director
David Siegel..................... 69 Director
Richard C. Webb.................. 62 Director
Alvin L. Zimmerman............... 52 Director
</TABLE>
Mr. Abramson, a co-founder of the Company, has served as Chief Executive
Officer and a director since 1973 and Chairman of the Board since 1977. He has
been in the electronics distribution business since 1956. Mr. Abramson has also
been Chairman of the Board of K*TEC, the Company's wholly owned manufacturing
subsidiary, since its incorporation in 1983.
Mr. Randy Corporron has been Executive Vice President of Manufacturing
Services since January 1994, and was previously Vice President of the Company
since August 1987. Since July 1989, he has served as President of K*TEC. He
joined the Company in 1982 as General Manager of K*TEC.
Mr. Olson became Executive Vice President of Sales -- Distribution in
January 1994, and was previously Vice President since January 1992 after the
Company's acquisition of Shelley-Ragon, Inc. Since February 1991, he had been
President of Shelley-Ragon, Inc. Prior to that time he held various positions
with Shelley-Ragon since joining in June 1979.
Mr. Zerbe joined the Company as a sales representative in 1985. In May
1988, he was appointed Vice President of the Company and in January 1994 he
became Executive Vice President of Operations -- Distribution.
Mr. Chapko has been Vice President and Treasurer since July 1989 and
Secretary since June 1993. He joined the Company as Assistant Treasurer in April
1987.
Ms. Alberto joined the Company's credit department in 1978. In August 1987,
she was appointed Vice President and she oversees credit administration.
Mr. Ayers joined the Company in 1976 as a purchasing agent. Since then, he
has served in various capacities, including manager of the management
information systems. Mr. Ayers currently serves as Vice President and has
responsibilities for training, special projects and administrative matters.
Mr. Rodney Corporron directs and coordinates the multi-plant manufacturing
operations and was appointed Vice President of the Company and General Manager
of K*TEC in July 1989. Prior to such time, he served the Company in a number of
capacities since 1974.
Ms. Felts became a Vice President of the Company in June 1993. She joined
the Company in 1986 as a purchasing manager for K*TEC.
15
<PAGE> 16
Mr. Fountain has been Vice President since August 1987 and is responsible
for product management in the distribution operations. He joined the Company in
1980 as a purchasing agent.
Mr. Levit, President of Grocers Supply Company, Inc. since January 1992,
has served as a director of the Company since April 1995. Mr. Levit also serves
on the Board of M.D. Anderson Hospital and The University of Texas -- Houston
Health Science Center.
Mr. Siegel has served as a director of the Company since September 1990,
and has been in the electronics distribution business since 1954. Mr. Siegel is
Vice President, director and the founder of Great American Electronics, a
distribution company serving industrial distributors. He is also a director of
Nu Horizon Electronics, Micronetics and Surge Components.
Mr. Webb, a founder of Harris Webb & Garrison, a Houston-based investment
banking and brokerage firm, has served as a director of the Company since June
1986. He has been involved in the investment banking business since 1960, and
was a founder of Lovett Underwood Neuhaus & Webb, Inc., a subsidiary of Kemper
Securities.
Mr. Zimmerman has served as a director of the Company since June 1986. As a
judge he presided over the 309th Family District Court and the 269th Civil
District Court of Harris County, Texas from 1980 to 1984. Since 1984, he has
been a shareholder, officer and director in the law firm of Zimmerman, Flaum,
Axelrad, Meyer & Wise, P.C. and its predecessor firms.
16
<PAGE> 17
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue 30,000,000 shares of Common Stock,
without par value. Holders of Common Stock are entitled to one vote per share on
all matters on which they are entitled to vote. Because holders of Common Stock
do not have cumulative voting rights, holders of a majority of the shares voting
for the election of directors can elect all of the members of the Board of
Directors. Except as required by Texas law for certain extraordinary
transactions and as set forth below under "Charter and Bylaw Provisions," a
majority vote is also sufficient for other actions that require the vote or
concurrence of shareholders. The Common Stock is not redeemable and has no
conversion or preemptive rights. All of the outstanding shares of Common Stock
are, and all of the shares offered hereby will be, when issued and paid for,
fully paid and nonassessable. In the event of the liquidation or dissolution of
the Company, subject to the rights of the holders of any outstanding shares of
the Company Preferred Stock, the holders of Common Stock are entitled to share
pro rata in any balance of the corporate assets available for distribution to
them. The Company may pay dividends when and as declared by the Board of
Directors from funds legally available therefor. See "Dividend Policy."
PREFERRED STOCK
The Board of Directors is authorized to issue up to 2,000,000 shares of
Preferred Stock, par value $1.00 per share. No shares of Preferred Stock are
currently outstanding. The Company's Board of Directors is authorized to divide
the Preferred Stock into series and, with respect to each series, to determine
the dividend rights, dividend rate, conversion rights, voting rights, redemption
rights and terms, liquidation preferences, sinking fund provisions, the number
of shares constituting the series and the designation of such series. The Board
of Directors could, without shareholder approval, issue Preferred Stock with
voting rights and other rights that could adversely affect the voting power of
holders of Common Stock and could be used to prevent a hostile takeover of the
Company. The Board has set the terms and conditions of a series of Preferred
Stock consisting of 200,000 shares designated as Series A Preferred Stock in
connection with the adoption of a stockholder rights plan. See "Description of
Capital Stock -- Stockholder Rights Plan." Except in connection with the
possible triggering of such plan, the Company has no present plans to issue any
shares of Preferred Stock.
CHARTER AND BYLAW PROVISIONS
The Company's charter has a "fair price" provision relating to certain
business combinations, including certain mergers, consolidations, asset and
stock conveyances, liquidations and reclassifications. The "fair price"
provision provides that, except in certain circumstances, any such business
combination between the Company and an interested shareholder (defined generally
as a person or entity that owns or has owned within the past two years, directly
or indirectly, 10% or more of the Company's outstanding voting stock) must be
approved by the affirmative vote of the holders of 80% of the outstanding voting
stock of the Company, unless certain pricing and procedural requirements
regarding the business combination are satisfied. For instance, one such
requirement is that the aggregate consideration to be paid for each share of
Common Stock must be at least equal to the highest per share price paid by the
interested shareholder to acquire any share of Common Stock during a specified
period. Additionally, the higher voting requirements do not apply to
transactions approved by a majority of the "continuing directors." Generally, a
director is deemed to be a continuing director if he was a director on May 15,
1987, or was appointed by a majority of other continuing directors or elected by
the shareholders after having been recommended by a majority of the other
continuing directors. The "fair price" provision could make it more difficult
for a third party to acquire control of the Company.
The Board of Directors of the Company is classified into three classes of
directors who serve staggered three-year terms. Newly created directorships or
vacancies on the Board may only be filled by a majority vote of directors then
in office and directors may be removed during their term only for cause and only
by the affirmative vote of two-thirds of all shares of voting stock. The Bylaws
also require that the provisions described above may not be further amended,
altered, changed or appealed, nor may the number of directors
17
<PAGE> 18
be increased, without either the affirmative vote of 80% of the shares of
capital stock of the Company entitled to vote generally in the election of
directors or the approval of a majority of directors in office. These provisions
may have the effect of discouraging hostile or unsolicited takeover attempts or
proxy contests or, alternatively, may encourage persons considering such actions
to negotiate with the existing Board.
STOCKHOLDER RIGHTS PLAN
The Board of Directors has created certain rights (the "Rights") and
authorized the issuance of one Right for each outstanding share of Common Stock
to stockholders of record at the close of business on May 24, 1990 (the "Record
Date"). In addition, the related Rights Agreement provides for the issuance of
one Right for each share of Common Stock issued after adoption of the Rights
Agreement. Each Right entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series A Preferred Stock, $1.00 par
value per share, of the Company (the "Preferred Stock") at a price of $26.67 per
one one-hundredth of a share (subject to adjustment), payable in cash. The
description and terms of the Rights are set forth in a Rights Agreement between
the Company and Ameritrust Company National Association, as Rights Agent.
Although the Rights are not intended to prevent a takeover of the Company
at a full and fair price, they have certain anti-takeover effects. They may
deter an attempt to acquire the Company in a manner which seeks to deprive the
Company's shareholders of the full and fair value of their investment and may
deter attempts by significant shareholders to take advantage of the Company and
its shareholders through certain self-dealing transactions. The Rights may cause
substantial dilution to a person or group that acquires or attempts to acquire
the Company without the Rights being redeemed. Accordingly, the Rights should
encourage any potential acquiror to seek to negotiate with the Board of
Directors. Unless the approval is first obtained from the Board of Directors,
or, in limited circumstances, the shareholders of the Company, the Rights may
deter transactions, including tender offers, which the majority of shareholders
may believe are beneficial to them. Under the Rights Agreement, one Right will
also be issued with each share of Common Stock offered hereby.
18
<PAGE> 19
UNDERWRITING
Upon the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof, each of the underwriters named below (the
"Underwriters"), has severally agreed to purchase, and the Company has agreed to
sell to such Underwriter, the number of shares of Common Stock set forth
opposite the name of such Underwriter.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Smith Barney Inc. .......................... 630,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.............................. 630,000
Bear, Stearns & Co. Inc. ................... 46,000
J.C. Bradford & Co. ........................ 36,000
Alex. Brown & Sons Incorporated............. 46,000
CS First Boston Corporation................. 46,000
Cowen & Company............................. 36,000
Donaldson, Lufkin & Jenrette
Securities Corporation.................... 46,000
Goldman, Sachs & Co......................... 46,000
Harris Webb & Garrison, Inc. ............... 26,000
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Lara, Millard & Associates, Ltd. ........... 26,000
McDonald & Company Securities, Inc. ........ 36,000
Morgan Stanley & Co. Incorporated........... 46,000
The Ohio Company............................ 26,000
Oppenheimer & Co., Inc. .................... 46,000
Principal Financial Securities, Inc. ....... 36,000
Rauscher Pierce Refsnes, Inc. .............. 36,000
Sands Brothers & Co., Ltd. ................. 26,000
Southwest Securities, Inc. ................. 26,000
Stephens Inc. .............................. 46,000
Wheat, First Securities, Inc. .............. 36,000
Williams MacKay Jordan & Co., Inc. ......... 26,000
---------
Total............................... 2,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by counsel and to certain other conditions.
The Underwriters are obligated to take and pay for all shares of Common Stock
offered hereby (other than those covered by the over-allotment option described
below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated are acting as Representatives, propose to offer part
of the shares directly to the public at the public offering price set forth on
the cover page of this Prospectus and part of the shares to certain dealers at a
price which represents a concession not in excess of $1.24 per share under the
public offering price. The Underwriters may allow, and such dealers may reallow,
a concession not in excess of $0.10 per share to certain other dealers.
The Company and each of its executive officers and directors have agreed
that, for a period of 90 days from the date of this Prospectus, they will not,
without the prior written consent of Smith Barney Inc., offer, sell, contract to
sell, or otherwise dispose of any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, Common Stock, except in
the case of the Company, pursuant to the exercise of outstanding options to
purchase Common Stock.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 300,000 additional
shares of Common Stock at the price to the public set forth on the cover page of
this Prospectus minus the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the offering of the shares offered
hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act").
19
<PAGE> 20
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Liddell, Sapp, Zivley, Hill & LaBoon,
L.L.P., Houston, Texas. Certain legal matters will be passed upon for the
Underwriters by Baker & Botts, L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the year ended April 1, 1995 have been
audited by Grant Thornton LLP, independent certified public accountants, as
indicated in its report thereto and are included herein in reliance upon the
authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports and other information with the Securities and Exchange
Commission ("SEC"). The reports and other information filed by the Company with
the SEC can be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the SEC: 14th Floor, Seven World
Trade Center, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material may be obtained from the SEC
upon payment of the charges prescribed by the SEC. In addition, such reports and
other information may be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the SEC a registration statement on Form S-3
(the "Registration Statement") under the Securities Act with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement and the exhibits
and schedules filed as a part thereof. Statements made in this Prospectus as to
the contents of any contract or any other document referred to are not
necessarily complete, and, in each instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference. The
Registration Statement, including exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the SEC's Regional Offices at 14th Floor, Seven World Trade Center,
New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60621. Copies of the Registration Statement and the exhibits and
schedules thereto may be obtained from the SEC at such offices upon payment of
the charges prescribed by the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the SEC under the
Exchange Act, are incorporated in this Prospectus by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
April 1, 1995;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
July 1, 1995;
(c) The description of the Company's Common Stock contained in a
registration statement on Form 8-A filed on May 20, 1986 under
Section 12 of the Exchange Act; and
(d) The description of the Rights contained in a registration
statement on Form 8-A filed on June 18, 1990 under Section 12 of
the Exchange Act.
20
<PAGE> 21
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the shares offered hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits to such documents which are not specifically incorporated by reference
in such documents). Written requests for such copies should be directed to Mr.
Stephen J. Chapko, Secretary, 7433 Harwin Drive, Houston, Texas 77036, telephone
number (713) 780-7770.
21
<PAGE> 22
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Report of Independent Certified Public Accountants..................................... F-2
Consolidated Balance Sheets -- April 2, 1994, April 1, 1995 and July 1, 1995........... F-3
Consolidated Statements of Earnings for the Fiscal Years Ended April 3, 1993, April 2,
1994 and April 1, 1995 and for the Thirteen Weeks Ended July 2, 1994 and July 1,
1995................................................................................. F-4
Consolidated Statement of Stockholders' Equity for the Fiscal Years Ended April 3,
1993, April 2, 1994 and April 1, 1995 and for the Thirteen Weeks Ended July 1,
1995................................................................................. F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended April 3, 1993, April
2, 1994 and April 1, 1995 and for the Thirteen Weeks Ended July 2, 1994 and July 1,
1995................................................................................. F-6
Notes to Consolidated Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE> 23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Kent Electronics Corporation
We have audited the consolidated balance sheets of Kent Electronics
Corporation and Subsidiaries as of April 2, 1994 and April 1, 1995, and the
related consolidated statements of earnings, cash flows and stockholders' equity
for each of the three years in the period ended April 1, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Kent
Electronics Corporation and Subsidiaries as of April 2, 1994 and April 1, 1995,
and the consolidated results of their operations and cash flows for each of the
three years in the period ended April 1, 1995, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Houston, Texas
May 8, 1995
F-2
<PAGE> 24
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 2, APRIL 1, JULY 1,
1994 1995 1995
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (including temporary investments of
$9,826,122 at April 2, 1994, $6,395,425 at April 1, 1995
and $10,804,648 at July 1, 1995)........................... $ 11,382,179 $ 4,434,457 $ 5,429,428
Trading securities, net...................................... -- 16,832,467 16,906,865
Short-term investments, net.................................. 15,184,179 -- --
Accounts receivable, net..................................... 26,038,081 33,963,810 34,712,572
Inventories
Materials and purchased products........................... 19,985,035 30,080,372 34,660,776
Work in process............................................ 3,214,825 3,039,140 3,277,516
------------ ------------ ------------
23,199,860 33,119,512 37,938,292
Prepaid expenses and other................................... 2,070,197 2,778,348 2,533,379
------------ ------------ ------------
Total current assets.................................. 77,874,496 91,128,594 97,520,536
PROPERTY AND EQUIPMENT
Land......................................................... 2,558,983 7,089,838 7,110,629
Buildings.................................................... 6,558,289 6,697,207 8,668,736
Equipment, furniture and fixtures............................ 21,053,980 26,205,888 27,073,053
Leasehold improvements....................................... 1,254,485 1,362,806 1,458,602
------------ ------------ ------------
31,425,737 41,355,739 44,311,020
Less accumulated depreciation and amortization............. (10,284,224) (13,620,455) (14,402,310)
------------ ------------ ------------
21,141,513 27,735,284 29,908,710
DEFERRED INCOME TAXES.......................................... 1,270,000 838,000 813,000
OTHER ASSETS................................................... 689,339 1,022,244 1,063,986
COST IN EXCESS OF NET ASSETS ACQUIRED, less accumulated
amortization of $1,264,634 at April 2, 1994, $1,629,122 at
April 1, 1995 and $1,720,373 at July 1, 1995................. 13,531,347 13,166,859 13,075,608
------------ ------------ ------------
$114,506,695 $133,890,981 $142,381,840
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................................. $ 16,389,611 $ 15,479,278 $ 17,160,067
Accrued compensation......................................... 2,521,902 4,579,595 3,660,694
Other accrued liabilities.................................... 2,020,416 3,057,149 4,010,017
Income taxes................................................. 1,055,758 1,694,148 3,214,218
------------ ------------ ------------
Total current liabilities............................. 21,987,687 24,810,170 28,044,996
LONG-TERM LIABILITIES.......................................... -- 281,205 528,274
COMMITMENTS.................................................... -- -- --
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value; authorized 2,000,000 shares;
none issued................................................ -- -- --
Common stock, no par value; authorized 30,000,000 shares;
issued and outstanding 9,687,559 shares at April 2, 1994,
9,804,743 shares at April 1, 1995 and 9,812,818 shares at
July 1, 1995............................................... 32,702,560 34,742,597 34,835,485
Additional paid-in capital................................... 24,359,507 25,213,946 25,450,884
Retained earnings............................................ 35,456,941 48,843,063 53,522,201
------------ ------------ ------------
92,519,008 108,799,606 113,808,570
------------ ------------ ------------
$114,506,695 $133,890,981 $142,381,840
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 25
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
------------------------------------------ -------------------------
APRIL 3, APRIL 2, APRIL 1, JULY 2, JULY 1,
1993 1994 1995 1994 1995
------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................... $154,676,910 $192,887,055 $253,483,742 $56,527,264 $77,585,215
Cost of sales................ 112,406,481 142,238,725 188,606,215 42,003,520 57,611,607
------------ ------------ ------------ ----------- -----------
Gross profit....... 42,270,429 50,648,330 64,877,527 14,523,744 19,973,608
Selling, general and
administrative expenses.... 30,806,047 36,012,168 43,917,091 10,070,281 12,675,117
------------ ------------ ------------ ----------- -----------
Operating profit... 11,464,382 14,636,162 20,960,436 4,453,463 7,298,491
Other income (expense)
Interest expense........... (15,000) (15,000) (18,000) (4,500) (4,667)
Other-net (principally
interest and dividend
income)................. 712,821 757,912 1,132,686 154,965 504,714
------------ ------------ ------------ ----------- -----------
Earnings before
income taxes..... 12,162,203 15,379,074 22,075,122 4,603,928 7,798,538
Income taxes................. 4,439,000 5,844,000 8,689,000 1,773,000 3,119,400
------------ ------------ ------------ ----------- -----------
Net earnings....... $ 7,723,203 $ 9,535,074 $ 13,386,122 $ 2,830,928 $ 4,679,138
============ ============ ============ =========== ===========
Earnings per share........... $ .80 $ .96 $ 1.32 $ 0.28 $ 0.45
============ ============ ============ =========== ===========
Weighted average shares...... 9,675,300 9,881,000 10,137,500 10,013,400 10,306,200
============ ============ ============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 26
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at March 28, 1992............... 9,414,583 $30,180,661 $23,212,580 $18,198,664
Common stock issued upon exercise of
employee stock options, including
tax effect............................ 209,601 1,855,008 -- --
Amortization of unearned compensation
related to stock option plans......... -- -- 524,473 --
Net earnings for the year............... -- -- -- 7,723,203
--------- ----------- ----------- -----------
Balance at April 3, 1993................ 9,624,184 32,035,669 23,737,053 25,921,867
Common stock issued upon exercise of
employee stock options, including tax
effect................................ 63,375 666,891 -- --
Amortization of unearned compensation
related to stock option plans......... -- -- 622,454 --
Net earnings for the year............... -- -- -- 9,535,074
--------- ----------- ----------- -----------
Balance at April 2, 1994................ 9,687,559 32,702,560 24,359,507 35,456,941
Common stock issued upon exercise of
employee stock options, including tax
effect................................ 117,601 2,040,037 -- --
Common stock split fractional shares.... (417) -- (16,325) --
Amortization of unearned compensation
related to stock option plans......... -- -- 870,764 --
Net earnings for the year............... -- -- -- 13,386,122
--------- ----------- ----------- -----------
Balance at April 1, 1995................ 9,804,743 34,742,597 25,213,946 48,843,063
Common stock issued upon exercise of
employee stock options (unaudited).... 8,075 92,888 -- --
Amortization of unearned compensation
related to stock option plans
(unaudited)........................... -- -- 236,938 --
Net earnings for the period
(unaudited)........................... -- -- -- 4,679,138
--------- ----------- ----------- -----------
Balance at July 1, 1995 (unaudited)..... 9,812,818 $34,835,485 $25,450,884 $53,522,201
========= =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 27
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THIRTEEN WEEKS ENDED
---------------------------------------- -------------------------
APRIL 3, APRIL 2, APRIL 1, JULY 2, JULY 1,
1993 1994 1995 1994 1995
----------- ------------ ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net earnings..................................... $ 7,723,203 $ 9,535,074 $13,386,122 $ 2,830,928 $ 4,679,138
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization.................. 2,833,955 3,202,761 3,806,652 911,432 907,301
Provision for losses on accounts receivable.... 224,165 334,691 163,171 50,001 73,031
(Gain) loss on sale of property, plant and
equipment.................................... 74 6,688 (268) -- 2,781
Stock option expense........................... 524,473 622,454 870,764 200,199 236,938
Provision for unrealized losses (gains) on
trading securities........................... -- -- 224,684 -- (74,398)
Provision for unrealized losses on short-term
investments.................................. -- 77,300 -- 135,406 --
Net purchases of trading securities............ -- -- (1,872,972) -- --
Change in assets and liabilities
(Increase) decrease in accounts receivable... (4,846,791) (4,212,860) (8,088,900) 1,673,124 (821,793)
Increase in inventories...................... (3,407,722) (5,819,343) (9,919,652) (5,412,327) (4,818,780)
(Increase) decrease in prepaid expenses and
other..................................... (251,743) (375,091) (708,151) 212,425 244,969
(Increase) decrease in other assets.......... 25,935 3,942 (421,951) (18,040) (54,669)
Decrease in deferred income taxes............ 488,228 812,000 432,000 25,000 25,000
Increase (decrease) in accounts payable...... 3,241,812 4,514,425 (910,333) (1,457,286) 1,680,789
Increase (decrease) in accrued
compensation.............................. (348,604) 288,398 2,057,693 (143,417) (918,901)
Increase (decrease) in other accrued
liabilities............................... (121,368) 399,723 1,036,733 553,400 952,868
Increase in income taxes..................... 682,122 89,495 638,390 1,100,024 1,520,070
Increase in long-term liabilities............ -- -- 281,205 -- 247,069
----------- ------------ ----------- ----------- -----------
Net cash provided by operating
activities.............................. 6,767,739 9,479,657 975,187 660,869 3,881,413
Cash flows from investing activities
Capital expenditures............................. (9,191,249) (5,751,781) (9,960,471) (1,138,566) (2,986,458)
Net (purchases) sales of short-term
investments.................................... -- (15,261,479) -- 124,552 --
Proceeds from sale of property and equipment..... 890 16,223 13,850 -- 7,128
Additional Shelley-Ragon acquisition costs....... (98,038) -- -- -- --
----------- ------------ ----------- ----------- -----------
Net cash used by investing activities..... (9,288,397) (20,997,037) (9,946,621) (1,014,014) (2,979,330)
Cash flows from financing activities
Issuance of common stock......................... 1,112,132 365,167 1,526,037 136,056 92,888
Payment for fractional shares.................... -- -- (16,325) -- --
Tax effect of common stock issued upon exercise
of employee stock options...................... 742,876 301,724 514,000 -- --
----------- ------------ ----------- ----------- -----------
Net cash provided by financing
activities.............................. 1,855,008 666,891 2,023,712 136,056 92,888
----------- ------------ ----------- ----------- -----------
Net (decrease) increase in cash.................... (665,650) (10,850,489) (6,947,722) (217,089) 994,971
Cash and cash equivalents at beginning of period... 22,898,318 22,232,668 11,382,179 11,382,179 4,434,457
----------- ------------ ----------- ----------- -----------
Cash and cash equivalents at end of period......... $22,232,668 $ 11,382,179 $ 4,434,457 $11,165,090 $ 5,429,428
=========== ============ =========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.................................. $ 15,000 $ 15,000 $ 18,000 $ -- $ --
Income taxes.............................. $ 1,062,118 $ 4,813,667 $ 7,713,610 $ 647,976 $ 1,574,329
</TABLE>
In 1993, additional Shelley-Ragon acquisition costs of $98,038 were paid and
non-cash adjustments of $286,131, $155,404, $81,635 and $31,110 were made to
income taxes payable, inventory, property and equipment, and accrued
liabilities, respectively.
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 28
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies:
Principles of Consolidation
Kent Electronics Corporation consolidates its accounts with those of its
wholly-owned subsidiaries. All material intercompany transactions have been
eliminated.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to the end of March.
The fiscal year ended April 3, 1993 consisted of 53 weeks. The fiscal years
ended April 2, 1994 and April 1, 1995 both consisted of 52 weeks.
Cash and Cash Equivalents
The Company's presentation of cash includes cash equivalents. Cash
equivalents are defined as short-term investments with maturity dates at
purchase of ninety days or less.
Cash equivalents at April 2, 1994, April 1, 1995 and July 1, 1995 include
approximately $3,874,000, $1,118,000 and $1,380,000, respectively, invested in
an institutional money market fund managed by a company holding approximately 4%
of the Company's common stock.
Securities purchased under agreements to resell (reverse repurchase
agreements) result from transactions that are collateralized by negotiable
securities and are carried at the amounts at which the securities will
subsequently be resold. It is the policy of the Company not to take possession
of securities purchased under agreements to resell. At April 2, 1994, agreements
to resell securities in the amount of $3,552,000 with a four-day maturity were
outstanding.
Trading Securities and Short-Term Investments
In 1995, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities. This statement established standards of financial accounting and
reporting for investments in equity securities that have a readily determinable
fair value and for all investments in debt securities. The Company has
classified all investment securities as trading securities which are measured at
fair value in the financial statements with unrealized gains and losses included
in earnings. Net unrealized holding losses on trading securities of $224,700 for
the fiscal year ended April 1, 1995 and net unrealized holding gains of $74,400
for the thirteen weeks ended July 1, 1995 are included in net earnings as
indicated in the following table:
<TABLE>
<S> <C>
Net unrealized loss on trading securities at April 2, 1994................ $ 77,300
Increase in unrealized loss included in earnings during year.............. 224,700
--------
Net unrealized loss on trading securities at April 1, 1995................ 302,000
Decrease in unrealized loss included in earnings during quarter........... (74,400)
--------
Net unrealized loss on trading securities at July 1, 1995................. $227,600
========
</TABLE>
In 1994, under the Company's previous policy, short-term investments were
carried at the lower of their aggregate cost or market.
F-7
<PAGE> 29
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
Trading securities include an investment in an institutional mutual fund
managed by a company holding approximately 4% of the Company's common stock and
U.S. Treasury Notes maturing in December 1996.
Accounts Receivable
The Company's allowance for doubtful accounts was $955,000 at April 2,
1994, $979,000 at April 1, 1995 and $1,052,000 at July 1, 1995.
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or
market.
Property and Equipment
Property and equipment are stated at cost.
Depreciation and amortization are provided using the straight-line method
over the estimated useful lives of the related assets.
Leasehold improvements are amortized over the life of the lease or the
service life of the improvements, whichever is shorter.
Costs in Excess of Net Assets Acquired
Costs in excess of net assets acquired represents the excess of the
purchase price over the value of net assets acquired for previous acquisitions,
and is being amortized on a straight-line basis over 40 years. On an ongoing
basis, management reviews the valuation and amortization of the cost in excess
of net assets. As part of this review, the Company considers the current and
future levels of net income generated by the related acquisition to determine
that no impairment has occurred.
Reclassifications
Certain accounts in the fiscal 1993 and 1994 financial statements have been
reclassified to conform with the fiscal 1995 presentation.
Interim Financial Information
Financial information as of July 1, 1995 and for the thirteen weeks ended
July 2, 1994 and July 1, 1995, included herein, is unaudited. Such information
includes all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair statement of the
financial information for the interim periods. The results of operations for the
thirteen weeks ended July 1, 1995 are not necessarily indicative of the results
for the full fiscal year.
2. INCOME TAXES
The Company accounts for income taxes using the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which will be in effect when
these differences reverse. Deferred tax expense is the result of changes in
deferred tax assets and liabilities.
F-8
<PAGE> 30
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FISCAL YEARS ENDED -----------------------
------------------------------------ JULY 2, JULY 1,
1993 1994 1995 1994 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Currently payable............ $2,115,000 $4,978,000 $8,308,000 $1,748,000 $3,094,000
Tax reduction for exercise of
stock options credited to
stockholders' equity....... 743,000 302,000 514,000 -- --
Deferred..................... 1,581,000 564,000 (133,000) 25,000 25,000
---------- ---------- ---------- ---------- ----------
Total.............. $4,439,000 $5,844,000 $8,689,000 $1,773,000 $3,119,000
========== ========== ========== ========== ==========
</TABLE>
A reconciliation of income taxes computed at the statutory Federal income
tax rate and income taxes reported in the consolidated statements of earnings
follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
FISCAL YEARS ENDED -----------------------
------------------------------------ JULY 2, JULY 1,
1993 1994 1995 1994 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Tax at statutory rate........ $4,135,000 $5,229,000 $7,726,000 $1,565,000 $2,729,000
Increases (reductions)
State income taxes, net of
Federal tax effect...... 374,000 482,000 742,000 150,000 254,000
Tax free income............ (206,000) (119,000) (47,000) (9,000) (4,000)
Other -- net............... 136,000 252,000 268,000 67,000 140,000
---------- ---------- ---------- ---------- ----------
Income taxes as
reported......... $4,439,000 $5,844,000 $8,689,000 $1,773,000 $3,119,000
========== ========== ========== ========== ==========
</TABLE>
F-9
<PAGE> 31
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
Deferred tax assets and liabilities at April 2, 1994 and April 1, 1995
consist of the following:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
CURRENT DEFERRED ASSET
Allowance for doubtful accounts........................... $ 347,000 $ 392,000
Capitalization of additional inventory costs.............. 347,000 672,000
Accrued expenses not currently deductible, net of
reversals.............................................. 179,000 320,000
Net operating losses...................................... 330,000 330,000
Other..................................................... 59,000 157,000
----------- -----------
$ 1,262,000 $ 1,871,000
=========== ===========
LONG-TERM DEFERRED ASSET
Depreciation.............................................. $(1,264,000) $(1,763,000)
Fixed asset bases difference.............................. 670,000 697,000
Deductible acquisition costs.............................. (50,000) (48,000)
Stock compensation........................................ 494,000 861,000
Net operating losses...................................... 1,420,000 1,091,000
----------- -----------
$ 1,270,000 $ 838,000
=========== ===========
</TABLE>
Acquired net operating losses were approximately $4,058,000 at April 1,
1995, expire in various amounts through 2003, and are subject to annual usage
limitations.
3. COMMITMENTS
The Company conducts a portion of its operations in leased office,
warehouse, and manufacturing facilities and leases transportation equipment.
Rent expense for 1993, 1994 and 1995 was approximately $1,565,000, $1,472,000
and $1,695,000, respectively. For the thirteen weeks ended July 2, 1994 and July
1, 1995, rent expense was approximately $409,000 and $402,000, respectively.
The following is a schedule by years of minimum future rentals as of April
1, 1995:
<TABLE>
<CAPTION>
FISCAL YEARS
ENDING IN AMOUNT
------------- ----------
<S> <C>
1996........................................................... $1,543,000
1997........................................................... 1,231,000
1998........................................................... 936,000
1999........................................................... 476,000
2000........................................................... 184,000
Thereafter....................................................... 3,000
----------
Total minimum future rentals..................................... $4,373,000
==========
</TABLE>
The Company has instituted a self-insurance program for employees' major
medical coverages. Claims under the self-insurance program are insured for
amounts greater than $50,000 per employee. The aggregate annual amount
self-insured varies based on participant levels and was limited to approximately
$2,000,000 as
F-10
<PAGE> 32
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
of April 1, 1995. Claims are accrued as incurred and the total expense under the
program was approximately $1,051,000, $1,258,000 and $2,121,000 in 1993, 1994
and 1995, respectively. For the thirteen weeks ended July 2, 1994 and July 1,
1995, total expense was approximately $509,000 and $550,000, respectively.
The Company is engaged in litigation occurring in the normal course of
business. In the opinion of management, based upon advice of counsel, the
ultimate outcome of these lawsuits will not have a material impact on the
Company's consolidated financial statements.
4. SALES TO MAJOR CUSTOMERS
No customer accounted for as much as 10% of net sales in 1993 or 1994.
Sales to two customers represented 11.2% and 10.3% of net sales in 1995. For the
thirteen weeks ended July 2, 1994, one customer represented 10.3% of net sales.
Sales to two customers represented 12.8% and 12.2% of net sales for the thirteen
weeks ended July 1, 1995.
5. STOCKHOLDERS' EQUITY
Fair Price Provision
The Company has adopted a fair price provision relating to certain business
combinations. The fair price provision provides that, except in certain
circumstances, a business combination between the Company and an interested
shareholder must be approved by the affirmative vote of the holders of 80% of
the outstanding voting stock, unless certain pricing and procedural requirements
regarding the business combination are satisfied.
Stockholder Rights Plan
The Company has adopted a stockholder rights plan, declaring a distribution
of one equity purchase right on each outstanding share of the Company's common
stock. Upon the occurrence of certain events, each right would entitle the
holder to purchase, at a price of $26.67, one one-hundredth of a share of the
Company's Series A Preferred Stock. Additionally, under certain circumstances,
the holder of rights may be entitled to purchase either the Company's common
stock or securities of an acquiring entity at half of market value.
Stock Split
The Company's Common Stock was split three-for-two to stockholders of
record on February 15, 1995, and was effected as a 50% stock dividend. All
issued and outstanding shares, stock option data and earnings per share amounts
in the consolidated financial statements have been restated to give effect to
the stock split.
F-11
<PAGE> 33
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
6. BENEFIT PLANS
Stock Options
At April 1, 1995 and July 1, 1995, the Company had non-qualified stock
option plans which allow for the grant of 2,887,500 and 2,981,250 common shares
for options, respectively, of which 1,079,879 and 1,054,254, respectively, are
available for future grants. Options granted under the plans have a maximum term
of 15 years and are exercisable under the terms of the respective option
agreements. Under some plans, options may be granted with exercise prices of
less than the stock's market value at the date of grant.
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES RANGE
UNDER OPTION PER SHARE
------------ ---------------
<S> <C> <C>
Outstanding at March 28, 1992.......................... 663,450 $ 3.75 - $14.50
Granted.............................................. 188,625 6.92 - 17.59
Exercised............................................ (209,601) 3.75 - 10.67
Lapsed/forfeited..................................... (12,000) 7.33 - 11.33
------------ ---------------
Outstanding at April 3, 1993........................... 630,474 4.00 - 17.59
Granted.............................................. 614,250 7.17 - 19.25
Exercised............................................ (63,375) 4.00 - 14.50
Lapsed/forfeited..................................... (23,300) 4.09 - 17.17
------------ ---------------
Outstanding at April 2, 1994........................... 1,158,049 4.67 - 19.25
Granted.............................................. 71,625 18.25 - 27.75
Exercised............................................ (117,601) 4.67 - 17.59
Lapsed/forfeited..................................... (21,751) 13.92 - 13.92
------------ ---------------
Outstanding at April 1, 1995........................... 1,090,322 6.87 - 27.75
Granted.............................................. 122,875 29.38 - 37.75
Exercised............................................ (8,075) 6.87 - 14.50
Lapsed/forfeited..................................... (3,500) 13.92 - 13.92
------------ ---------------
Outstanding at July 1, 1995............................ 1,201,622 $ 6.92 - $37.75
============ ===============
</TABLE>
At April 1, 1995 and July 1, 1995, options to acquire 179,072 and 284,747
shares, respectively, were exercisable.
Tax-Deferred Savings and Retirement Plan and Trust
The Company sponsors a Tax-Deferred Savings and Retirement Plan (the Plan)
covering substantially all employees. Under the Plan, a participating employee
may allocate up to 12% of salary, and the Company makes matching contributions
of up to 3% thereof. Additionally, the Company may elect to make additional
contributions at its option. Such contributions accrue to employee accounts
regardless of whether they have elected to participate in the salary deferral
option of the Plan. The Company contributed approximately $469,000, $514,000 and
$639,000 to the Plan in fiscal years ended April 3, 1993, April 2, 1994 and
April 1, 1995, respectively. The Company contributed approximately $169,000 and
$212,000 to the Plan for the thirteen weeks ended July 2, 1994 and July 1, 1995,
respectively.
The Company has a deferred compensation plan for a select group of
management or highly compensated employees of the Company. Each year a
participant may elect to defer from 3% to 25% of his or her compensation. The
Company will match the participant compensation amount, limited to 50% of the
first 6%
F-12
<PAGE> 34
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION AS OF JULY 1, 1995 AND RELATING TO THE
THIRTEEN WEEKS ENDED JULY 2, 1994 AND JULY 1, 1995 IS UNAUDITED)
of compensation deferred. Participants become vested in the Company matching
contributions at the rate of 10% per plan year or vest fully at age 60. At April
1, 1995 and July 1, 1995, the Company had accrued $281,000 and $528,000,
respectively, for participant and Company contributions which are recorded as
long-term liabilities on the Balance Sheet.
In fiscal 1995, the Company adopted a spousal salary continuation plan. In
the event of the death of the Chief Executive Officer (CEO), the plan provides
for the payment of 60% of the CEO's monthly base salary for 180 consecutive
months to a designated beneficiary. The Company has purchased life insurance
with the intent to fund this obligation.
7. EARNINGS PER SHARE
Earnings per share are based upon the weighted average number of common
shares outstanding during each period. Options are included in periods where
they have a dilutive effect.
8. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of unaudited quarterly financial data for fiscal
years 1993, 1994 and 1995:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Year ended April 3, 1993
Net sales......................................... $34,524 $37,011 $39,216 $43,926
Gross profit...................................... 9,485 10,134 10,756 11,895
Net earnings...................................... 1,846 1,907 1,937 2,033
Earnings per share................................ .19 .20 .20 .21
Year ended April 2, 1994
Net sales......................................... $43,245 $46,914 $49,238 $53,490
Gross profit...................................... 11,532 12,434 12,935 13,747
Net earnings...................................... 2,073 2,293 2,509 2,660
Earnings per share................................ .21 .23 .25 .27
Year ended April 1, 1995
Net sales......................................... $56,527 $60,335 $64,462 $72,160
Gross profit...................................... 14,524 15,440 16,480 18,433
Net earnings...................................... 2,831 3,215 3,466 3,874
Earnings per share................................ .28 .32 .34 .38
</TABLE>
F-13
<PAGE> 35
KENT ELECTRONICS--
ELECTRONIC COMPONENTS DISTRIBUTION
[PHOTO]
Kent distribution center.
<TABLE>
<S> <C> <C>
[PHOTO] [PHOTO] [PHOTO]
Order tracking through The Company's specialized
integrated real-time inventories supplied by Sales representatives
information technology. leading manufacturers. undergo continuous training.
</TABLE>
<PAGE> 36
===============================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT
RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER
IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
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<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Use of Proceeds....................... 5
Price Range of Common Stock........... 6
Dividend Policy....................... 6
Capitalization........................ 7
Selected Consolidated Financial
Data................................ 8
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 9
Business.............................. 12
Management............................ 15
Description of Capital Stock.......... 17
Underwriting.......................... 19
Legal Matters......................... 20
Experts............................... 20
Available Information................. 20
Incorporation of Certain Documents by
Reference........................... 20
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
2,000,000 SHARES
KENT ELECTRONICS
CORPORATION
COMMON STOCK
[KENT LOGO] [K*TEC LOGO]
------------
PROSPECTUS
SEPTEMBER 22, 1995
------------
SMITH BARNEY INC.
MERRILL LYNCH & CO.
======================================================
