<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 28, 1997
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 July 31, 1997, 26,370,677 shares of common stock, no par value, are issued
and outstanding.
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KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 28, March 29,
1997 1997
-------- --------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (including temporary
investments of $26,502 at June 28 and
$28,728 at March 29)........................... $ 21,035 $ 25,050
Accounts receivable, less allowance of $1,337
at June 28 and $1,256 at March 29.............. 92,476 88,835
Inventories
Materials and purchased products............... 101,868 91,100
Work in process................................ 5,268 3,394
-------- --------
107,136 94,494
Other........................................... 3,974 4,023
-------- --------
Total current assets....................... 224,621 212,402
PROPERTY AND EQUIPMENT
Land............................................ 7,439 7,439
Buildings....................................... 41,543 38,176
Equipment, furniture and fixtures............... 73,646 68,247
Leasehold improvements.......................... 2,574 2,543
-------- --------
125,202 116,405
Less accumulated depreciation and amortization.. (28,030) (25,515)
-------- --------
97,172 90,890
DEFERRED INCOME TAXES............................. 1,255 1,280
OTHER ASSETS...................................... 4,603 4,618
COST IN EXCESS OF NET ASSETS ACQUIRED,
less accumulated amortization of $2,508 at
June 28 and $2,359 at March 29................... 16,255 16,404
-------- --------
$343,906 $325,594
======== ========
The accompanying notes are an integral part of these statements.
Page 2 of 13
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KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
June 28, March 29,
1997 1997
-------- --------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................ $ 46,664 $ 42,317
Accrued compensation........................ 6,941 8,123
Other accrued liabilities................... 9,696 8,051
Income taxes................................ 5,840 3,027
-------- --------
Total current liabilities............. 69,141 61,518
LONG-TERM DEBT............................... -- --
LONG-TERM LIABILITIES........................ 1,993 1,709
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value per share;
authorized 2,000 shares; none issued...... -- --
Common stock, no par value; authorized
60,000 shares; 26,314 shares issued and
26,264 shares outstanding at June 28 and
26,302 shares issued and 26,252 shares
outstanding at March 29................. 42,852 41,348
Additional paid-in capital............... 116,648 116,522
Retained earnings........................ 114,249 105,474
-------- --------
273,749 263,344
Less common stock in treasury - at cost,
50 shares................................. (977) (977)
-------- --------
272,772 262,367
-------- --------
$343,906 $325,594
======== ========
The accompanying notes are an integral part of these statements.
Page 3 of 13
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KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)
Thirteen Weeks Ended
--------------------
June 28, June 29,
1997 1996
-------- --------
(Unaudited)
Net sales..................................... $152,080 $125,144
Cost of sales................................. 117,221 93,238
-------- --------
Gross profit................................. 34,859 31,906
Selling, general and administrative expenses.. 20,780 17,613
-------- --------
Operating profit............................ 14,079 14,293
Other income (expense)
Interest expense............................. (7) (304)
Other - net.................................. 425 1,567
-------- --------
Earnings before income taxes.............. 14,497 15,556
Income taxes.................................. 5,722 6,125
-------- --------
NET EARNINGS............................... $ 8,775 $ 9,431
======== ========
Earnings per share............................ $.32 $.34
======== ========
Weighted average shares....................... 27,762 27,592
======== ========
The accompanying notes are an integral part of these statements.
Page 4 of 13
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KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Thirteen Weeks Ended
--------------------
June 28, June 29,
1997 1996
-------- --------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings.................................... $ 8,775 $ 9,431
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization................. 2,671 1,547
Provision for losses on accounts receivable. 81 38
Loss on sale of property and equipment........ 4 --
Stock option expense.......................... 126 152
Unrealized losses on trading securities....... -- 50
Net sales of trading securities............... -- 11,870
Change in assets and liabilities
Increase in accounts receivable.............. (3,722) (10,259)
Increase in inventories...................... (12,642) (4,254)
(Increase) decrease in other................. 49 (82)
Decrease in deferred income taxes............ 25 79
Decrease in other assets..................... 15 22
Increase (decrease) in accounts payable...... 4,347 (2,957)
Decrease in accrued compensation............. (1,182) (5,838)
Increase in other accrued liabilities........ 1,645 1,646
Increase in income taxes..................... 2,813 1,187
Increase in long-term liabilities............ 284 539
-------- --------
Total adjustments....................... (5,486) (6,260)
-------- --------
Net cash provided by operating
activities............................. 3,289 3,171
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.......................... (8,813) (14,658)
Proceeds from sale of property and equipment.. 5 --
-------- --------
Net cash used by investing activities... (8,808) (14,658)
(Continued)
Page 5 of 13
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KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Thirteen Weeks Ended
--------------------
June 28, June 29,
1997 1996
------- --------
(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit agreements of
pooled companies................................. $ -- $ 3,427
Decrease in long-term debt........................ -- (5)
Issuance of common stock.......................... 114 57
Issuance of common stock of pooled company........ -- 49
Tax effect of common stock issued upon exercise
of employee stock options........................ 1,390 1,406
Distribution to shareholder of pooled company..... -- (345)
------- -------
Net cash provided by financing
activities.............................. 1,504 4,589
------- -------
NET DECREASE IN CASH............................... (4,015) (6,898)
Adjustment for change in pooled companies'
fiscal year-ends................................ -- 344
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD... 25,050 73,431
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD......... $21,035 $66,877
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest......................................... $ -- $ 296
Income taxes..................................... $ 1,675 $ 3,582
The accompanying notes are an integral part of these statements.
Page 6 of 13
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KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
- -------------------
The consolidated balance sheet as of June 28, 1997, and the consolidated
statements of earnings and cash flows for the thirteen week periods ended June
28, 1997 and June 29, 1996, 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 29,
1997, included in the Company's Form 10-K/A for that period.
In January 1997, the Company acquired Futronix Corporation and Wire & Cable
Specialties Corporation in a transaction accounted for as a pooling of
interests. Accordingly, the fiscal 1997 consolidated statements of earnings and
cash flows have been restated to include the operations of Futronix Corporation
and Wire & Cable Specialties Corporation.
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
- ------------------------
No customer of the Company represented 10% or more of net sales for the thirteen
week periods ending June 28, 1997 and June 29, 1996.
Recent Pronouncement
- --------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"). This
statement is effective for financial statements issued for periods ending after
Page 7 of 13
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KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
December 15, 1997 and will require restatement of all prior period comparative
amounts. The new standard eliminates primary and fully diluted earnings per
share and requires presentation of basic and diluted earnings per share together
with disclosure of how the per share amounts were computed. The effect of
adopting FAS 128 has not been determined.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(In thousands)
Results of Operations
- ---------------------
Net sales for the thirteen weeks ended June 28, 1997 increased $26,936, or
21.5%, compared to the same period of the prior year. The increase in net sales
resulted primarily from increased demand from existing customers and an expanded
customer base. The Company's distribution businesses, which accounted for
approximately 65% of first quarter net sales, benefited from increased customer
demand of materials management and logistical services and the December 1996
acquisition of the EMC Distribution Division of Electronics Marketing
Corporation. The Company's contract manufacturing business increased as a
result of improving business conditions in markets served and as a result of
increased demand for the Company's recently expanded contract manufacturing
services.
Gross profit increased $2,953, or 9.3%, compared to the corresponding period a
year ago. Gross profit as a percentage of sales decreased to 22.9% from 25.5%
for the period. The increase in gross profit was primarily due to increased
sales, offset by a decrease in the gross profit percentage primarily due to
pricing pressures and product mix with a lower percentage of certain higher
margin contract manufacturing business.
Selling, general and administrative ("SG&A") expenses increased $3,167, or
18.0%, compared to the same period last year. However, as a percentage of sales,
SG&A declined to 13.7% from 14.1% in the prior year period. The decline as a
percentage of sales reflects the Company's continued focus on cost containment
to
Page 8 of 13
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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.
Interest expense decreased due to the retirement, in the fourth quarter of
fiscal 1997, of all outstanding debt of Futronix Corporation and Wire & Cable
Specialties Corporation.
Other-net consists principally of interest and dividend income generated by cash
and cash equivalents. The decrease in interest and dividend income resulted
from a decrease of invested cash, cash equivalents and trading securities, which
were expended for capital expenditures, acquisitions and the retirement of
Futronix Corporation and Wire & Cable Specialties Corporation debt.
Net earnings decreased $656, or 7.0%, compared to the same period a year ago.
The decrease was primarily due to a decrease in the gross profit percentage and
a decrease in interest and dividend income, partially offset by lower SG&A
expenses as a percentage of sales.
Liquidity and Capital Resources
- -------------------------------
Working capital at June 28, 1997 was $155,480, an increase of $4,596, or 3.0%,
from March 29, 1997. The increase was primarily the result of growth in
accounts receivable and inventories in relation to current and future sales
levels.
Included in the Company's working capital at June 28, 1997 are investments of
$26,502, a decrease of $2,226 since March 29, 1997. 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
28, 1997, funds were invested primarily in reverse repurchase agreements and an
institutional money market fund. Both are compatible with the Company's stated
investment strategy.
On June 12, 1997, the Company obtained a $25,000 line of credit with a bank. As
of June 28, 1997, there was no indebtedness outstanding under the line of
credit.
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
Page 9 of 13
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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 and increased levels of inventory and accounts receivable. Management
believes that current resources, including the line of credit, along with funds
generated from operations, should be sufficient to meet its current capital
requirements.
PART II - OTHER INFORMATION
Items 1, 2, 3, 4 and 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
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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 11, 1997 By: /s/Morrie K. Abramson
------------------------- -----------------------
Morrie K. Abramson
Chairman of the Board, Chief
Executive Officer, President
and Director (Principal Executive
Officer)
Date: August 11, 1997 By: /s/Stephen J. Chapko
------------------------- -----------------------
Stephen J. Chapko
Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary (Principal Financial
Officer)
Date: August 11, 1997 By: /s/David D. Johnson
------------------------- -----------------------
David D. Johnson
Vice President, Corporate
Controller (Principal Accounting
Officer)
Page 11 of 13
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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) --
Page 12 of 13
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EXHIBIT 11
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
Thirteen Weeks Ended
---------------------------------------------
June 28, June 29,
1997 1996
------------------- ---------------------
Fully Fully
Primary Diluted Primary Diluted
------- ------- ------- -------
Net earnings.............. $ 8,775 $ 8,775 $ 9,431 $ 9,431
======= ======= ======= =======
Weighted average number of
common shares outstanding 26,257 26,257 26,043 26,043
Excess of shares issuable
upon exercise of stock
options over shares
deemed retired utilizing
the treasury stock method 1,505 1,912 1,549 1,584
======= ======= ======= =======
27,762 28,169 27,592 27,627
======= ======= ======= =======
Earnings per share........ $ .32 $ .31 $ .34 $ .34
======= ======= ======= =======
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-28-1998
<PERIOD-END> JUN-28-1997
<CASH> 21,035
<SECURITIES> 0
<RECEIVABLES> 93,813
<ALLOWANCES> 1,337
<INVENTORY> 107,136
<CURRENT-ASSETS> 224,621
<PP&E> 125,202
<DEPRECIATION> 28,030
<TOTAL-ASSETS> 343,906
<CURRENT-LIABILITIES> 69,141
<BONDS> 0
0
0
<COMMON> 41,875
<OTHER-SE> 230,897
<TOTAL-LIABILITY-AND-EQUITY> 343,906
<SALES> 152,080
<TOTAL-REVENUES> 152,080
<CGS> 117,221
<TOTAL-COSTS> 117,221
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 81
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 14,497
<INCOME-TAX> 5,722
<INCOME-CONTINUING> 8,775
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,775
<EPS-PRIMARY> .32
<EPS-DILUTED> .31
</TABLE>
