<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 DECEMBER 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)
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 February 6, 1996, 11,960,088 shares of common stock, no par value,
are issued and outstanding.
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 30, APRIL 1,
1995 1995
----------- --------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents (including temporary
investments of $63,046,000 at December 30
and $6,395,000 at April 1).................. $ 61,675,000 $ 4,434,000
Trading securities, net........................... 47,532,000 16,833,000
Accounts receivable, less allowance of $1,129,000
at December 30 and $979,000 at April 1.......... 45,709,000 33,964,000
Inventories
Materials and purchased products................ 44,445,000 30,080,000
Work in process................................. 3,612,000 3,039,000
------------- ------------
48,057,000 33,119,000
Prepaid expenses and other........................ 3,516,000 2,778,000
------------- ------------
Total current assets.......................... 206,489,000 91,128,000
PROPERTY AND EQUIPMENT
Land.............................................. 7,183,000 7,090,000
Buildings......................................... 16,464,000 6,697,000
Furniture, fixtures and equipment................. 28,245,000 26,206,000
Leasehold improvements............................ 1,684,000 1,363,000
------------- ------------
53,576,000 41,356,000
Less accumulated depreciation and amortization.... (16,305,000) (13,621,000)
------------- ------------
37,271,000 27,735,000
DEFERRED INCOME TAXES................................ 763,000 838,000
OTHER ASSETS......................................... 1,614,000 1,022,000
COST IN EXCESS OF NET ASSETS ACQUIRED,
less accumulated amortization of $1,903,000
at December 30 and $1,629,000 at April 1.......... 12,893,000 13,167,000
------------- ------------
$259,030,000 $133,890,000
------------- ------------
------------- ------------
The accompanying notes are an integral part of these statements.
</TABLE>
2 of 13
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 30, April 1,
1995 1995
----------- -----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.................................... $ 24,843,000 $ 15,479,000
Accrued compensation................................ 7,731,000 4,579,000
Other accrued liabilities........................... 7,901,000 3,057,000
Income taxes........................................ 2,654,000 1,694,000
------------ ------------
Total current liabilities......................... 43,129,000 24,809,000
LONG-TERM DEBT........................................ ---- ----
LONG-TERM LIABILITIES................................. 886,000 281,000
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,
11,898,838 shares at December 30 and
9,804,743 shares at April 1....................... 37,351,000 34,743,000
Additional paid-in capital.......................... 109,871,000 25,214,000
Retained earnings................................... 67,793,000 48,843,000
------------ ------------
215,015,000 108,800,000
------------ ------------
$259,030,000 $133,890,000
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
3 of 13
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
----------------------------- -----------------------------
DECEMBER 30, DECEMBER 31, DECEMBER 30, DECEMBER 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales.................................... $100,059,000 $64,462,000 $267,834,000 $181,324,000
Cost of sales................................ 73,179,000 47,982,000 197,178,000 134,880,000
------------ ----------- ------------ ------------
Gross profit............................ 26,880,000 16,480,000 70,656,000 46,444,000
Selling, general and administrative expenses. 14,473,000 11,084,000 41,407,000 31,690,000
------------ ----------- ------------ ------------
Operating profit............................. 12,407,000 5,396,000 29,249,000 14,754,000
Other income (expense)
Interest expense........................ (5,000) (5,000) (15,000) (14,000)
Other - net............................. 1,615,000 265,000 2,612,000 747,000
------------ ----------- ------------ ------------
Earnings before income taxes................. 14,017,000 5,656,000 31,846,000 15,487,000
Income taxes................................. 5,764,000 2,190,000 12,896,000 5,975,000
------------ ----------- ------------ ------------
NET EARNINGS............................ $ 8,253,000 $ 3,466,000 $ 18,950,000 $ 9,512,000
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
Earnings per share........................... $ .66 $ .34 $ 1.71 $ .94
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
Weighted average shares...................... 12,549,400 10,181,400 11,113,000 10,095,200
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
4 of 13
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
----------------------------
DECEMBER 30, DECEMBER 31,
1995 1994
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings.......................................... $18,950,000 $ 9,512,000
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization..................... 3,021,000 2,826,000
Provision for losses on accounts receivable....... 150,000 123,000
Loss on sale of property, plant and equipment..... 5,000 --
Stock option expense.............................. 831,000 634,000
Unrealized gains on trading securities............ (94,000) --
Unrealized losses on short-term investments....... -- 210,000
Change in assets and liabilities
Increase in accounts receivable................. (11,895,000) (4,598,000)
Increase in inventory........................... (14,938,000) (9,508,000)
(Increase) decrease in prepaid expenses
and other..................................... (738,000) 523,000
Increase in other assets........................ (631,000) (435,000)
Decrease in noncurrent deferred income taxes.... 75,000 75,000
Increase (decrease) in accounts payable......... 9,364,000 (357,000)
Increase in accrued compensation................ 3,152,000 1,375,000
Increase in other accrued liabilities........... 4,844,000 1,201,000
Increase in income taxes........................ 960,000 338,000
Increase in long-term liabilities............... 605,000 --
----------- -----------
Total adjustments............................. (5,289,000) (7,593,000)
----------- -----------
Net cash generated by operating
activities................................... $13,661,000 $ 1,919,000
</TABLE>
(Continued)
5 of 13
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS ENDED
-----------------------------
DECEMBER 30, DECEMBER 31,
1995 1994
------------ -----------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.............................. $(12,257,000) $(4,885,000)
Net purchases of trading securities............... (30,605,000) --
Net sales of short-term investments............... -- 124,000
Proceeds from sale of property, plant and
equipment....................................... 8,000 4,000
------------ -----------
Net cash used by investing
activities.................................. $(42,854,000) $(4,757,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term obligations................. -- --
Issuance of common stock.......................... 85,297,000 1,304,000
Tax effect of common stock issued upon
exercise of employee stock options............ 1,137,000 --
------------ -----------
Net cash generated by
financing activities...................... 86,434,000 1,304,000
------------ -----------
NET INCREASE (DECREASE) IN CASH..................... 57,241,000 (1,534,000)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.... 4,434,000 11,382,000
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.......... $ 61,675,000 $ 9,848,000
------------ -----------
------------ -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest........................................ $ -- $ --
Income taxes.................................... $ 10,725,000 $ 5,561,000
</TABLE>
The accompanying notes are an integral part of these statements.
6 of 13
<PAGE>
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES
The consolidated balance sheet as of December 30, 1995, and the related
consolidated statements of earnings and cash flows for the thirteen and
thirty-nine week periods ended December 30, 1995 and December 31, 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.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include temporary investments held at banks in
which the Company has demand deposit accounts with negative book balances.
Amounts are transferable between these accounts.
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 trading securities and are readily available to
meet capital requirements as they arise.
STOCK SPLIT
Subsequent to the close of the quarter, the Company's Board of Directors
approved a 2-for-1 stock split to be effected as a 100% stock dividend. The
new shares will be distributed on March 1, 1996, to stockholders of record at
the close of business on February 15, 1996. The stock split will double the
11.9 million shares currently outstanding, increasing the total to 23.8
million shares. Earnings per share amounts for the thirteen and thirty-nine
week periods ended December 30, 1995 and December 31, 1994 have not been
adjusted for the stock split because ultimate consummation will not occur
until the March 1, 1996 distribution date.
7 of 13
<PAGE>
SALES TO MAJOR CUSTOMERS
For the thirteen and thirty-nine week periods ended December 30, 1995, sales
to Compaq Computer Corporation represented 14.8% and 13.4% of net sales,
respectively, and sales to Applied Materials represented 12.4% and 12.8% of
net sales, respectively. Sales to Compaq Computer Corporation represented
11.2% of net sales for the thirteen week period and 11.0% for the thirty-nine
week period ended December 31, 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the thirteen and thirty-nine weeks ended December 30, 1995
increased $35,597,000, or 55.2%, and $86,510,000, or 47.7%, 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 $10,400,000, or 63.1%, for the thirteen weeks and
$24,212,000, or 52.1%, for the thirty-nine weeks when compared to the
corresponding periods a year ago. Gross profit as a percentage of sales
increased to 26.9% from 25.6% for the thirteen week period, and to 26.4% from
25.6% for the thirty-nine week period when 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 that resulted from the substantial
gains in contract manufacturing 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 $3,389,000,
or 30.6%, for the thirteen week period and $9,717,000, or 30.7%, for the
thirty-nine week period, compared to the same periods in the previous year.
However, as a percentage of sales, SG&A declined to 14.5% from 17.2% last
year for the thirteen week period and to 15.5% from 17.5% for the thirty-nine
week 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 net proceeds from the public offering
being invested for the full thirteen week period ending December 30, 1995.
Page 8 of 13
<PAGE>
Net earnings increased $4,787,000, or 138.1%, and $9,438,000, or 99.2%, for
the thirteen and thirty-nine 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 December 30, 1995 was $163,360,000, an increase of
$97,041,000 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, although inventories
have grown at a higher rate reflecting anticipated future sales.
Included in the Company's working capital at December 30, 1995 are
investments of $110,578,000. 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 December 30,
1995, funds were invested primarily in a mortgage-backed reverse repurchase
agreement, a managed fund consisting primarily of taxable, high quality
corporate debt instruments, an institutional money market fund consisting
primarily of taxable, high quality money market instruments, and a managed
portfolio of high quality and readily marketable money market and short-term
fixed income securities. 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. Management believes that current resources, along with
funds generated from operations, should be sufficient to meet its current
capital requirements.
Page 9 of 13
<PAGE>
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.
Page 10 of 13
<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: February 9, 1996 By: /s/ Morrie K. Abramson
---------------------------- ---------------------------------
Morrie K. Abramson
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: February 9, 1996 By: /s/ Stephen J. Chapko
--------------------------- ---------------------------------
Stephen J. Chapko
Vice President, Treasurer and
Secretary (Principal Financial
Officer and Principal
Accounting Officer)
11 of 13
<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 13
of per share earnings
27 Financial Data Schedule --
(filed only in electronic format)
12 of 13
<PAGE>
EXHIBIT 11
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------------------------------- --------------------------------------------------
DECEMBER 30, 1995 DECEMBER 31, 1994 DECEMBER 30, 1995 DECEMBER 31, 1994
----------------------- ----------------------- ------------------------- ----------------------
FULLY FULLY FULLY FULLY
PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED PRIMARY DILUTED
---------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net earnings................. $8,253,000 $8,253,000 $3,466,000 $3,466,000 $18,950,000 $18,950,000 $9,512,000 $9,512,000
---------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
---------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
Weighted average number of
common shares outstanding.. 11,889,000 11,889,000 9,770,400 9,770,400 10,526,400 10,526,400 9,727,800 9,727,800
Excess of shares issuable
upon exercise of stock
options over shares
deemed retired utilizing
the treasury stock method.. 660,400 764,700 411,000 476,100 586,600 674,700 367,400 424,800
---------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
12,549,400 12,653,700 10,181,400 10,246,500 11,113,000 11,201,100 10,095,200 10,152,600
---------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
---------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
Earnings per share........... $ .66 $ .65 $ .34 $ .34 $ 1.71 $ 1.69 $ .94 $ .94
---------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
---------- ---------- ---------- ---------- ----------- ----------- ---------- ----------
</TABLE>
13 of 13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> DEC-30-1995
<CASH> 61,675,000
<SECURITIES> 47,532,000
<RECEIVABLES> 46,838,000
<ALLOWANCES> 1,129,000
<INVENTORY> 48,057,000
<CURRENT-ASSETS> 206,489,000
<PP&E> 53,576,000
<DEPRECIATION> 16,305,000
<TOTAL-ASSETS> 259,030,000
<CURRENT-LIABILITIES> 43,129,000
<BONDS> 0
0
0
<COMMON> 37,351,000
<OTHER-SE> 177,664,000
<TOTAL-LIABILITY-AND-EQUITY> 259,030,000
<SALES> 267,834,000
<TOTAL-REVENUES> 267,834,000
<CGS> 197,178,000
<TOTAL-COSTS> 197,178,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 150,000
<INTEREST-EXPENSE> 15,000
<INCOME-PRETAX> 31,846,000
<INCOME-TAX> 12,896,000
<INCOME-CONTINUING> 18,950,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,950,000
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.69
</TABLE>
