<PAGE>
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 June 29, 1996
------------------
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)
Registrant's telephone number, including area code (713) 780-7770
-------------------
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 August 5, 1996, 23,951,266 shares of common stock, no par value, are
issued and outstanding.
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
June 29, March 30,
1996 1996
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (including temporary
investments of $71,376,000 at June 29
and $75,552,000 at March 30).................... $ 66,486,000 $ 73,191,000
Trading securities, net........................... 26,827,000 38,747,000
Accounts receivable, less allowance of
$1,022,000 at June 29 and $999,000 at March 30.. 60,703,000 52,469,000
Inventories
Materials and purchased products................ 44,879,000 44,741,000
Work in process................................. 3,765,000 3,414,000
------------ ------------
48,644,000 48,155,000
Other............................................. 4,416,000 4,297,000
------------ ------------
Total current assets.......................... 207,076,000 216,859,000
PROPERTY AND EQUIPMENT
Land.............................................. 7,436,000 7,422,000
Buildings......................................... 20,235,000 18,590,000
Furniture, fixtures and equipment................. 47,229,000 34,444,000
Leasehold improvements............................ 1,769,000 1,722,000
------------ ------------
76,669,000 62,178,000
Less accumulated depreciation and amortization ... (18,660,000) (17,329,000)
------------ ------------
58,009,000 44,849,000
DEFERRED INCOME TAXES............................... 1,344,000 1,369,000
OTHER ASSETS........................................ 1,560,000 1,582,000
COST IN EXCESS OF NET ASSETS ACQUIRED,
less accumulated amortization of $2,085,000 at
June 29 and $1,994,000 at March 30.............. 12,711,000 12,802,000
------------ ------------
$280,700,000 $277,461,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
Page 2 of 14
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 29, March 30,
1996 1996
------------ ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................................ $ 25,789,000 $ 30,924,000
Accrued compensation............................ 4,146,000 9,904,000
Other accrued liabilities....................... 6,774,000 5,177,000
Income taxes.................................... 6,444,000 5,172,000
------------ ------------
Total current liabilities................... 43,153,000 51,177,000
LONG-TERM DEBT.................................... -- --
LONG-TERM LIABILITIES............................. 1,515,000 976,000
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,
23,945,414 shares at June 29 and 23,937,176
shares at March 30............................ 39,799,000 38,336,000
Additional paid-in capital...................... 110,306,000 110,154,000
Retained earnings............................... 85,927,000 76,818,000
------------ ------------
236,032,000 225,308,000
------------ ------------
$280,700,000 $277,461,000
------------ ------------
------------ ------------
The accompanying notes are an integral part of these statements.
Page 3 of 14
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Thirteen Weeks Ended
--------------------------
June 29, July 1,
1996 1995
------------ -----------
Net sales........................................ $106,162,000 $77,585,000
Cost of sales.................................... 78,261,000 57,612,000
------------ -----------
Gross profit................................ 27,901,000 19,973,000
Selling, general and administrative expenses..... 14,267,000 12,675,000
------------ -----------
Operating profit................................. 13,634,000 7,298,000
Other income (expense)
Interest expense............................ (21,000) (5,000)
Other - net................................. 1,567,000 505,000
------------ -----------
Earnings before income taxes................ 15,180,000 7,798,000
Income taxes..................................... 6,071,000 3,119,000
------------ -----------
NET EARNINGS................................ $ 9,109,000 $ 4,679,000
------------ -----------
------------ -----------
Earnings per share............................... $ .36 $ .23
------------ -----------
------------ -----------
Weighted average shares.......................... 25,490,100 20,612,400
------------ -----------
------------ -----------
The accompanying notes are an integral part of these statements.
Page 4 of 14
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen Weeks Ended
--------------------------
June 29, July 1,
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings..................................... $ 9,109,000 $ 4,679,000
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization................ 1,422,000 906,000
Provision for losses on accounts receivable.. 23,000 73,000
Loss on sale of property and equipment....... -- 3,000
Stock option expense......................... 152,000 237,000
Provision for unrealized (gains) losses on
trading securities......................... 50,000 (74,000)
Net sales of trading securities.............. 11,870,000 --
Change in assets and liabilities
Increase in accounts receivable............ (8,257,000) (822,000)
Increase in inventories.................... (489,000) (4,820,000)
(Increase) decrease in other..... ......... (119,000) 245,000
(Increase) decrease in other assets........ 22,000 (55,000)
Decrease in deferred income taxes.......... 25,000 25,000
Increase (decrease) in accounts payable.... (5,135,000) 1,682,000
Decrease in accrued compensation........... (5,758,000) (918,000)
Increase in other accrued liabilities...... 1,597,000 953,000
Increase in income taxes................... 1,272,000 1,520,000
Increase in long-term liabilities.......... 539,000 247,000
----------- -----------
Total adjustments....................... (2,786,000) (798,000)
----------- -----------
Net cash provided by operating
activities......................... $ 6,323,000 $ 3,881,000
(Continued)
Page 5 of 14
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen Weeks Ended
--------------------------
June 29, July 1,
1996 1995
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures........................... $(14,491,000) $(2,986,000)
Proceeds from sale of property and equipment... -- 7,000
----------- -----------
Net cash used by investing activities........ (14,491,000) (2,979,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock....................... 57,000 93,000
Tax effect of common stock issued upon
exercise of employee stock options........... 1,406,000 --
----------- -----------
Net cash provided by financing
activities............................... 1,463,000 93,000
----------- -----------
NET INCREASE (DECREASE) IN CASH.................. (6,705,000) 995,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD. 73,191,000 4,434,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD....... $66,486,000 $ 5,429,000
----------- -----------
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest................................... $ -- $ --
Income taxes............................... $ 3,367,000 $1,574,000
The accompanying notes are an integral part of these statements.
Page 6 of 14
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
The consolidated balance sheet as of June 29, 1996, and the related
consolidated statements of earnings and cash flows for the thirteen week
periods ended June 29, 1996 and July 1, 1995, 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 March 30, 1996, included in the
Company's Form 10-K for that period.
CASH AND CASH EQUIVALENTS
Temporary investments may be greater than the cash and cash equivalents
balance because they may be offset by individual bank accounts with a book
overdraft position within the same bank where multiple accounts are
maintained.
SALES TO MAJOR CUSTOMERS
For the thirteen week periods ended June 29, 1996 and July 1, 1995, sales to
Compaq Computer Corporation represented 10.7% and 12.2% of net sales,
respectively. Sales to Applied Materials, Inc. represented 11.5% and 12.8%
of net sales, respectively, for the same periods.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the thirteen weeks ended June 29, 1996 increased $28,577,000,
or 36.8%, compared to the same period of the prior year. The sales increase
reflected internal growth primarily from increased demand from existing
customers and an expanded customer base. While revenues for the quarter
ending September 28, 1996 are anticipated to be substantially above the
comparable period last year, the Company expects them to be approximately
equal to first quarter fiscal 1997 levels. For the quarter ending December
28, 1996, the Company expects to
Page 7 of 14
<PAGE>
resume sequential growth with revenues expected to increase over the quarter
ending September 28, 1996. The additional revenues should be derived from
the addition of new contract manufacturing customers as well as expanded
relationships with existing customers.
Gross profit increased $7,928,000, or 39.7%, compared to the corresponding
period a year ago. Gross profit as a percentage of sales increased to 26.3%
from 25.7% for the period. The increase in gross profit was primarily due to
increased sales and a slight increase in the gross profit percentage.
However, as a result of pricing pressure and the start-up of new business
services by our contract manufacturing division, the Company's gross margin
is expected to be in the range of 23% to 25% for the quarters ending
September 28, 1996 and December 28, 1996.
Selling, general and administrative ("SG&A") expenses increased $1,592,000,
or 12.6%, compared to the same period last year. However, as a percentage of
sales, SG&A declined to 13.4% from 16.3% 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.
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 primarily due to the invested net proceeds from the
September 1995 public offering.
Net earnings increased $4,430,000, or 94.7%, compared to the same period a
year ago. The improved profitability was primarily due to the incremental
profit associated with the increase in sales volume and the Company's
continued focus on cost containment. Net earnings for the quarter ending
September 28, 1996 are expected to be lower than the quarter ended June 29,
1996 due to gross margin pressures and the absence of revenue growth.
However, for the quarter ending December 28, 1996, it is expected that net
earnings will increase sequentially over the quarter ending September 28,
1996 as revenue growth resumes and additional SG&A expense savings as a
percentage of revenues are realized.
Page 8 of 14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 29, 1996 was $163,923,000, a decrease of $1,759,000,
or 1.1%, from March 30, 1996.
Included in the Company's working capital at June 29, 1996 are investments of
$98,203,000, a decrease of $16,096,000 since March 30, 1996. The decrease
reflects the Company's continued investment in property, equipment, accounts
receivable and inventory. 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 June 29, 1996, funds were
invested primarily in a reverse repurchase agreement, a managed fund
consisting primarily of taxable, high quality corporate debt instruments and
an institutional money market fund consisting primarily of taxable, high
quality money market type instruments. All 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 constructing the second phase of the K*TEC
manufacturing facility and a new distribution facility at its Sugar Land,
Texas location which will require aggregate capital expenditures of
approximately $20,000,000 for the balance of fiscal 1997. Management
believes that current resources, along with funds generated from operations,
should be sufficient to meet its current capital requirements.
Certain statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations contain forward-looking information that
involves risks and uncertainties. The Company is providing this information
in view of the current heightened concern about the industry's immediate
prospects and the effect of those general industry conditions on the Company.
The forward-looking statements, including statements relating to the
Company's performance for its second quarter and forward, are made pursuant
to the safe harbor provisions of
Page 9 of 14
<PAGE>
the Private Securities Litigation Reform Act of 1995. In making these
forward-looking statements, and in addition to the effects of current general
industry and economic conditions, we assume that (i) revenues for the quarter
ending September 28, 1996 will be consistent with the quarter ended June 29,
1996, (ii) there will be continued pricing pressures on the Company's
operating margins, (iii) the manufacturing business may become slightly more
concentrated with certain customers, and (iv) the manufacturing business will
continue to make progress transitioning its business to new services for its
existing customers. There can be no assurance that the above mentioned range
of estimated revenues and earnings will actually result or that the other
anticipated developments will occur.
PART II - OTHER INFORMATION
Items 1, 2, 3, and 5 are not applicable and have been omitted.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Shareholders on June 27, 1996. At
such meeting, Messrs. Morrie K. Abramson and Alvin L. Zimmerman were elected
to serve as directors of the Company for the next three years. The other
directors of the Company, Messrs. Max Levit, David Siegel and Richard Webb,
continued in their terms as directors after the meeting. In addition,
shareholders adopted the 1996 Non-Employee Director Stock Option Plan, the
1996 Employee Incentive Plan and adopted a Stock Option Plan and Agreement
for the Company's Vice President, Corporate Controller. The appointment of
Grant Thornton LLP as the Company's independent public accountants for the
fiscal year ending March 29, 1997 was ratified. Shareholders did not approve
by the requisite margin the proposal to amend the Articles of Incorporation
to increase the number of authorized shares of common stock from 30 million
shares to 100 million shares.
Votes Against
or Withheld Votes Broker
Proposal Votes For Authority Abstained Non-Votes
-------- ---------- ------------- --------- ---------
1. Election of Directors:
Morrie K. Abramson 21,449,232 184,784 0 0
Richard C. Webb 21,336,425 297,591 0 0
Page 10 of 14
<PAGE>
Votes Against
or Withheld Votes Broker
Proposal Votes For Authority Abstained Non-Votes
-------- ---------- ------------- --------- ---------
2. Approval and adoption of
the Amendment of the
Company's Articles of
Incorporation to increase
the number of authorized
shares of common stock
from 30 million shares
to 100 million shares. 13,898,999 7,696,112 38,905 0
3. Approval, adoption and
ratification of the 1996
Non-Employee Director
Stock Option Plan. 17,110,072 1,821,810 57,299 2,644,835
4. Approval, adoption and
ratification of the
1996, Employee
Incentive Plan. 13,918,095 4,957,684 48,490 2,709,747
5. Approval, adoption and
ratification of the
Stock Option Plan and
Agreement for the
Company's Vice
President, Corporate
Controller. 15,718,424 3,212,464 58,293 2,644,835
6. Approval and ratification
of the appointment of
Grant Thornton LLP as
the Company's independent
public accountants for
the fiscal year ending
March 29, 1997. 21,589,406 13,883 30,727 0
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.
Page 11 of 14
<PAGE>
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: August 12, 1996 By: /s/ Morrie K. Abramson
----------------------------- ---------------------------------
Morrie K. Abramson
Chairman of the Board, Chief
Executive Officer and President
(Principal Executive Officer)
Date: August 12, 1996 By: /s/ Stephen J. Chapko
----------------------------- ---------------------------------
Stephen J. Chapko
Vice President, Treasurer and
Secretary (Principal Financial
Officer)
Date: August 12, 1996 By: /s/ David D. Johnson
----------------------------- ---------------------------------
David D. Johnson
Vice President, Corporate
Controller (Principal
Accounting Officer)
Page 12 of 14
<PAGE>
EXHIBIT INDEX
Exhibit numbers are in accordance with the
EXHIBIT TABLE IN ITEM 601 OF REGULATION S-K
EXHIBIT NO. EXHIBIT DESCRIPTION SEQUENTIAL PAGE NO.
- ----------- ------------------- -------------------
11 Statement re computation 14
of per share earnings
27 Financial Data Schedule
(filed only in electronic format) --
Page 13 of 14
<PAGE>
EXHIBIT 11
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
Thirteen Weeks Ended
----------------------------------------------------
June 29, July 1,
1996 1995
------------------------ -------------------------
Fully Fully
Primary Diluted Primary Diluted
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net earnings................. $ 9,109,000 $ 9,109,000 $ 4,679,000 $ 4,679,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average number of
common shares outstanding... 23,941,100 23,941,100 19,615,800 19,615,800
Excess of shares issuable
upon exercise of stock
options over shares deemed
retired utilizing the
treasury stock method....... 1,549,000 1,584,200 996,600 1,195,400
----------- ----------- ----------- -----------
25,490,100 25,525,300 20,612,400 20,811,200
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per share........... $ .36 $ .36 $ .23 $ .23
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
Page 14 of 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000793024
<NAME> KENT ELECTRONICS CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-29-1997
<PERIOD-END> JUN-29-1996
<CASH> 66,486,000
<SECURITIES> 26,827,000
<RECEIVABLES> 61,725,000
<ALLOWANCES> 1,022,000
<INVENTORY> 48,644,000
<CURRENT-ASSETS> 207,076,000
<PP&E> 76,669,000
<DEPRECIATION> 18,660,000
<TOTAL-ASSETS> 280,700,000
<CURRENT-LIABILITIES> 43,153,000
<BONDS> 0
0
0
<COMMON> 39,799,000
<OTHER-SE> 196,233,000
<TOTAL-LIABILITY-AND-EQUITY> 236,032,000
<SALES> 106,162,000
<TOTAL-REVENUES> 106,162,000
<CGS> 78,261,000
<TOTAL-COSTS> 78,261,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23,000
<INTEREST-EXPENSE> 21,000
<INCOME-PRETAX> 15,180,000
<INCOME-TAX> 6,071,000
<INCOME-CONTINUING> 9,109,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,109,000
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
