<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------------- ---------------------
Commission file number 0-14643
------------------------------------------------------
KENT ELECTRONICS CORPORATION
- -------------------------------------------------------------------------------
Exact name of registrant as specified in its charter)
Texas 74-1763541
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7433 Harwin Drive, Houston, Texas 77036-2015
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(713) 780-7770
- -------------------------------------------------------------------------------
Registrant's telephone number, including area code
Not applicable
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At October 31, 1995, 11,896,339 shares of common stock, no par value,
are issued and outstanding.
<PAGE> 2
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, April 1,
1995 1995
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (including temporary
investments of $92,141,000 at September 30
and $6,395,000 at April 1).................. $ 88,210,000 $ 4,434,000
Trading securities, net....................... 16,936,000 16,833,000
Accounts receivable, less allowance of
$1,118,000 at September 30 and $979,000
at April 1.................................. 39,288,000 33,964,000
Inventories
Materials and purchased products............ 38,949,000 30,080,000
Work in process............................. 2,815,000 3,039,000
------------ ------------
41,764,000 33,119,000
Prepaid expenses and other.................... 2,359,000 2,778,000
------------ ------------
Total current assets...................... 188,557,000 91,128,000
PROPERTY AND EQUIPMENT
Land.......................................... 7,117,000 7,090,000
Buildings..................................... 13,766,000 6,697,000
Furniture, fixtures and equipment............. 29,200,000 26,206,000
Leasehold improvements........................ 1,602,000 1,363,000
------------ ------------
51,685,000 41,356,000
Less accumulated depreciation and amortization (15,331,000) (13,621,000)
------------ ------------
36,354,000 27,735,000
DEFERRED INCOME TAXES............................ 788,000 838,000
OTHER ASSETS..................................... 1,534,000 1,022,000
COST IN EXCESS OF NET ASSETS ACQUIRED,
less accumulated amortization of $1,812,000
at September 30 and $1,629,000 at April 1..... 12,984,000 13,167,000
------------ ------------
$240,217,000 $133,890,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
2 of 13
<PAGE> 3
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, April 1,
1995 1995
------------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.............................. $ 20,983,000 $ 15,479,000
Accrued compensation.......................... 5,045,000 4,579,000
Other accrued liabilities..................... 6,619,000 3,057,000
Income taxes.................................. 1,859,000 1,694,000
----------- ------------
Total current liabilities................. 34,506,000 24,809,000
LONG-TERM DEBT................................... -- --
LONG-TERM LIABILITIES............................ 645,000 281,000
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,
11,849,892 shares at September 30 and
9,804,743 shares at April 1................. 35,918,000 34,743,000
Additional paid-in capital.................... 109,608,000 25,214,000
Retained earnings............................. 59,540,000 48,843,000
------------ ------------
205,066,000 108,800,000
------------ ------------
$240,217,000 $133,890,000
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
3 of 13
<PAGE> 4
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
--------------------------------- ----------------------------------
September 30, October 1, September 30, October 1,
1995 1994 1995 1994
------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
Net sales.................................... $90,190,000 $60,335,000 $167,775,000 $116,862,000
Cost of sales................................ 66,387,000 44,895,000 123,999,000 86,898,000
----------- ----------- ------------ ------------
Gross profit............................ 23,803,000 15,440,000 43,776,000 29,964,000
Selling, general and administrative expenses. 14,259,000 10,536,000 26,934,000 20,606,000
----------- ----------- ------------ ------------
Operating profit............................. 9,544,000 4,904,000 16,842,000 9,358,000
Other income (expense)
Interest expense........................ (5,000) (4,000) (10,000) (9,000)
Other - net............................. 492,000 327,000 997,000 482,000
----------- ----------- ------------ ------------
Earnings before income taxes................. 10,031,000 5,227,000 17,829,000 9,831,000
Income taxes................................. 4,013,000 2,012,000 7,132,000 3,785,000
----------- ----------- ------------ ------------
NET EARNINGS............................ $ 6,018,000 $ 3,215,000 $ 10,697,000 $ 6,046,000
=========== =========== ============ ============
Earnings per share........................... $.57 $.32 $1.03 $.60
---- ---- ----- ----
Weighted average shares...................... 10,483,300 10,090,700 10,394,800 10,052,100
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 5
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Twenty Six Weeks Ended
------------------------------
September 30, October 1,
1995 1994
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................................ $10,697,000 $6,046,000
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization................... 1,940,000 1,864,000
Provision for losses on accounts receivable..... 139,000 100,000
Loss on sale of property, plant and equipment .. 3,000 --
Stock option expense............................ 568,000 397,000
Unrealized gains on trading securities.......... (103,000) --
Unrealized losses on short-term investments..... -- 120,000
Change in assets and liabilities
Increase in accounts receivable............ (5,463,000) (1,211,000)
Increase in inventories.................... (8,645,000) (6,520,000)
Decrease in prepaid expenses and other..... 419,000 218,000
Increase in other assets................... (537,000) (445,000)
Decrease in noncurrent deferred income
taxes.................................. 50,000 50,000
Increase in accounts payable............... 5,504,000 491,000
Increase in accrued compensation........... 466,000 325,000
Increase in other accrued liabilities...... 3,562,000 306,000
Increase in income taxes................... 165,000 450,000
Increase in long-term liabilities.......... 364,000 --
----------- ----------
Total adjustments....................... (1,568,000) (3,855,000)
----------- ----------
Net cash generated by operating
activities......................... $ 9,129,000 $2,191,000
</TABLE>
(Continued)
5 of 13
<PAGE> 6
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Twenty Six Weeks Ended
------------------------------
September 30, October 1,
1995 1994
------------ -----------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................... $(10,361,000) $(3,766,000)
Net sales of short-term investments............ -- 125,000
Proceeds from sale of property, plant and
equipment.................................... 7,000 --
------------ -----------
Net cash used by investing
activities....................... (10,354,000) (3,641,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term obligations.............. -- --
Issuance of common stock....................... 84,483,000 514,000
Tax effect of common stock issued upon
exercise of employee stock options........... 518,000 --
------------ -----------
Net cash generated by financing
activities....................... 85,001,000 514,000
------------ -----------
NET INCREASE (DECREASE) IN CASH................... 83,776,000 (936,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.. 4,434,000 11,382,000
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........ $ 88,210,000 $10,446,000
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest..................................... $ -- $ --
Income taxes................................. $ 6,400,000 $ 3,285,000
</TABLE>
The accompanying notes are an integral part of these statements.
6 of 13
<PAGE> 7
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
The consolidated balance sheet as of September 30, 1995, and the related
consolidated statements of earnings and cash flows for the thirteen and
twenty-six week periods ended September 30, 1995 and October 1, 1994, have been
prepared by the Company without audit. In the opinion of management, the
financial statements include all adjustments necessary for a fair presentation.
All adjustments made were of a normal recurring nature. Interim results are
not necessarily indications of results for a full year. For further financial
information, refer to the audited financial statements of the Company and notes
thereto for the fiscal year ended April 1, 1995, included in the Company's Form
10-K for that period.
Public Offering
The Company completed a public offering of its common stock on September 27,
1995. The offering totaled 2,000,000 shares and net proceeds to the Company
from the offering were approximately $83,846,000 after deducting the associated
underwriting discount and expenses. The net proceeds from the offering are
expected to be used for the construction of new facilities, development and
implementation of new information systems, working capital, general corporate
purposes and acquisitions of complementary businesses or assets the Company may
consider from time to time. These proceeds were placed in temporary
investments and are readily available to meet capital requirements as they
arise.
Sales To Major Customers
For the thirteen weeks ended September 30, 1995, sales to two customers
represented 12.9% and 13.2% of net sales. Sales to the same two customers
represented 12.6% and 13.0% of net sales for the twenty-six weeks ended
September 30, 1995. For the thirteen and twenty-six week periods ending
October 1, 1994, one customer represented 11.5% and 11.0% of net sales,
respectively.
7 of 13
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales for the thirteen and twenty-six weeks ended September 30, 1995
increased $29,855,000, or 49.5%, and $50,913,000, or 43.6%, respectively,
compared to the same periods a year ago. The sales increase reflected internal
growth primarily from increased demand from existing customers and an expanded
customer base.
Gross profit increased $8,363,000, or 54.2%, for the thirteen weeks and
$13,812,000, or 46.1%, for the twenty-six weeks when compared to the
corresponding periods a year ago. Gross profit as a percentage of sales
increased to 26.4% from 25.6% for the thirteen week period, and to 26.1% from
25.6% for the twenty-six week period, compared to the same periods last year.
The increase in gross profit was primarily due to increased sales and an
increase in the gross profit percentage resulting from substantial gains in
contract manufacturing sales as a percentage of total sales. The Company
believes that its profit margins from sales of manufactured products is
generally greater than its profit margin on sales of distributed products.
Selling, general and administrative ("SG&A") expenses increased $3,723,000, or
35.3% for the thirteen week period and $6,328,000, or 30.7%, for the twenty-six
week period, compared to the same periods in the previous year. However, as a
percentage of net sales, SG&A declined to 15.8% from 17.5% for the thirteen
weeks and to 16.1% from 17.6% for the twenty-six weeks compared to the same
prior year periods. 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.
Other-net consists principally of interest and dividend income generated by
cash, cash equivalents and trading securities. The increase in interest and
dividend income from both prior year periods was primarily due to higher
interest rates and a reduction of unrealized losses on trading securities.
Also, net proceeds from the public offering generated interest income for the
last three days of the thirteen and twenty-six week periods ended September 30,
1995.
The Company's effective tax rate increased due to the increase in operating
income subjecting the Company to a higher graduated federal income tax rate.
8 of 13
<PAGE> 9
Net earnings increased $2,803,000, or 87.2%, and $4,651,000, or 76.9%, for the
thirteen and twenty-six week periods, respectively, compared to the same
periods a year ago. The improved profitability was primarily due to the
incremental profit associated with the increase in sales volume, the increase
in the gross profit percentage and the Company's continued focus on cost
containment.
Liquidity and Capital Resources
Working capital at September 30, 1995 was $154,051,000, an increase of
$87,732,000 from April 1, 1995. The increase was primarily the result of net
proceeds from the recent public offering, as well as accounts receivable and
inventories growing in response to current sales levels.
Included in the Company's working capital at September 30, 1995 are investments
of $109,077,000. 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. At September 30, 1995, funds were invested
primarily in a reverse repurchase agreement and a managed fund consisting
primarily of taxable, high quality corporate debt instruments. Both are
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 in Sugar Land, Texas. Facility construction and equipment will
require capital expenditures of approximately $14 million, of which
approximately $7 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.
9 of 13
<PAGE> 10
PART II - OTHER INFORMATION
Items 1 through 5 are not applicable and have been omitted.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
11 - Statement re computation of per share earnings.
27 - Financial Data Schedule (filed only in electronic format).
(b) Reports on Form 8-K:
Not applicable.
10 of 13
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KENT ELECTRONICS CORPORATION
--------------------------------------
(Registrant)
Date: November 13, 1995 By: /s/ Morrie K. Abramson
----------------------------- --------------------------------
Morrie K. Abramson
Chairman of the Board, Chief
Executive Officer and President
(Principal Executive Officer)
Date: November 13, 1995 By: /s/ Stephen J. Chapko
----------------------------- ---------------------------------
Stephen J. Chapko
Vice President, Treasurer and
Secretary (Principal Financial
Officer and Principal
Accounting Officer)
11 of 13
<PAGE> 12
EXHIBIT INDEX
Exhibit numbers are in accordance with the
Exhibit Table in Item 601 of Regulation S-K
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Sequential Page No.
- ----------- ------------------- -------------------
<S> <C> <C>
11 Statement re computation 13
of per share earnings
27 Financial Data Schedule
(filed only in electronic format) --
</TABLE>
12 of 13
<PAGE> 1
EXHIBIT 11
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
----------------------------------------------------------------
September 30, 1995 October 1, 1994
----------------------------- ----------------------------
Fully Fully
Primary Diluted Primary Diluted
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings ........................... $ 6,018,000 $ 6,018,000 $ 3,215,000 $ 3,215,000
=========== =========== =========== ===========
Weighted average number of common shares
outstanding .......................... 9,882,300 9,882,300 9,720,300 9,720,300
Excess of shares issuable upon exercise
of stock options over shares deemed
retired utilizing the treasury
stock method ......................... 601,000 661,800 370,400 437,600
----------- ----------- ----------- -----------
10,483,300 10,554,100 10,090,700 10,157,900
=========== =========== =========== ===========
Earnings per share ...................... $.57 $.57 $.32 $.32
==== ==== ==== ====
<CAPTION>
Twenty-Six Weeks Ended
----------------------------------------------------------------
September 30, 1995 October 1, 1994
----------------------------- ----------------------------
Fully Fully
Primary Diluted Primary Diluted
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings ........................... $10,697,000 $10,697,000 $ 6,046,000 $ 6,046,000
=========== =========== =========== ===========
Weighted average number of common shares
outstanding .......................... 9,845,100 9,845,100 9,706,700 9,706,700
Excess of shares issuable upon exercise
of stock options over shares deemed
retired utilizing the treasury
stock method ......................... 549,700 629,800 345,400 399,000
----------- ----------- ----------- -----------
10,394,800 10,474,900 10,052,100 10,105,700
=========== =========== =========== ===========
Earnings per share ...................... $1.03 $1.02 $.60 $.60
===== ===== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000793024
<NAME> KENT ELECTRONICS CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 88,210,000
<SECURITIES> 16,936,000
<RECEIVABLES> 40,406,000
<ALLOWANCES> 1,118,000
<INVENTORY> 41,764,000
<CURRENT-ASSETS> 188,557,000
<PP&E> 51,685,000
<DEPRECIATION> 15,331,000
<TOTAL-ASSETS> 240,217,000
<CURRENT-LIABILITIES> 34,506,000
<BONDS> 0
<COMMON> 35,918,000
0
0
<OTHER-SE> 169,148,000
<TOTAL-LIABILITY-AND-EQUITY> 240,217,000
<SALES> 167,775,000
<TOTAL-REVENUES> 167,775,000
<CGS> 123,999,000
<TOTAL-COSTS> 123,999,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 139,000
<INTEREST-EXPENSE> 10,000
<INCOME-PRETAX> 17,829,000
<INCOME-TAX> 7,132,000
<INCOME-CONTINUING> 10,697,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,697,000
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.02
</TABLE>
