THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 0-16345
SOUTHERN ELECTRONICS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 22-2715444
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4916 North Royal Atlanta Drive, Tucker, Georgia 30085
(Address of principal executive offices) (Zip code)
(770) 491-8962
(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
At April 22, 1996, there were 7,271,622 shares of Common Stock,
$.01 par value, outstanding.
SOUTHERN ELECTRONICS CORPORATION
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of
Earnings 3
Condensed Consolidated Statements of
Stockholders' Equity 4
Condensed Consolidated Statements of
Cash Flows 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-8
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings 9
Item 2 - Changes in Securities 9
Item 3 - Default Upon Senior Securities 9
Item 4 - Submission of Matters to a Vote of
Security Holders 9
Item 5 - Other Information 9
Item 6 - Exhibits and Reports on Form 8-K 9
<TABLE>
ITEM 1: FINANCIAL STATEMENTS
SOUTHERN ELECTRONICS CORPORATION
AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31,
June 30,
ASSETS 1996
1995
(Unaudited)
<S> <C>
<C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,307,000
$ 790,000
Trade accounts receivable, net 37,510,000
26,459,000
Inventories 55,838,000
53,688,000
Deferred income taxes 1,144,000
910,000
Prepaid income taxes --
479,000
Other current assets 506,000
271,000
TOTAL CURRENT ASSETS 98,305,000
82,597,000
PROPERTY AND EQUIPMENT, net 4,082,000
4,452,000
INTANGIBLES 7,507,000
326,000
$109,894,000
$87,375,000
March 31,
June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996
1995
(Unaudited)
CURRENT LIABILITIES:
Trade accounts payable $ 51,206,000
$37,922,000
Accrued liabilities 2,609,000
3,320,000
Income taxes payable 681,000
--
TOTAL CURRENT LIABILITIES 54,496,000
41,242,000
REVOLVING BANK DEBT 15,500,000
11,500,000
STOCKHOLDERS' EQUITY:
Preferred Stock
129,500 shares authorized, none issued
Common stock, $.01 par value; 10,000,000 shares
authorized shares 7,397,212 and 7,121,492
shares issued 74,000
71,000
Additional paid-in capital 11,935,000
10,579,000
Retained earnings 29,473,000
25,640,000
Treasury stock, at cost, 125,590 (1,390,000)
(1,390,000)
Prepaid compensation - stock awards (194,000)
(267,000)
39,898,000
34,633,000
$109,894,000
$87,375,000
</TABLE>
<TABLE>
SOUTHERN ELECTRONICS CORPORATION
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS
(Unaudited)
Three Months
Ended Nine Months Ended
March 31,
March 31,
1996
1995 1996 1995
<S> <C>
<C> <C> <C>
NET SALES $117,261,000
$101,132,000 $329,119,000 $292,557,000
COST OF SALES, Including buying
and occupancy expenses 109,821,000
94,169,000 308,212,000 271,635,000
7,440,000
6,963,000 20,907,000 20,922,000
OTHER COSTS AND EXPENSES (INCOME):
Selling, general, and administrative 4,821,000
4,546,000 14,042,000 14,072,000
Interest expense 209,000
133,000 632,000 397,000
5,030,000
4,679,000 14,674,000 14,469,000
EARNINGS BEFORE INCOME TAXES 2,410,000
2,284,000 6,233,000 6,453,000
INCOME TAXES 941,000
866,000 2,400,000 2,446,000
NET EARNINGS $ 1,469,000 $
1,418,000 $ 3,833,000 $ 4,007,000
NET EARNINGS PER COMMON SHARE $.20
$.20 $.53 $.57
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 7,363,000
7,053,000 7,189,000 7,074,000
</TABLE>
<TABLE>
SOUTHERN ELECTRONICS
CORPORATION
AND
SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS'
EQUITY
(Unaudited)
Common Stock
Additional Prepaid
Par
Paid-In Retained Treasury Stock Compensation
Shares Value
Capital Earnings Shares At Cost Stock Awards
<S> <C> <C> <C>
<C> <C> <C> <C>
BALANCE, June 30, 1995 7,121,492 $71,000
$10,579,000 $25,640,000 125,590 $(1,390,000) $(267,000)
Stock awards cancelled (3,500)
(18,000) 5,000
Amortization of stock awards
68,000
Stock issued - business acquisition 275,000 3,000
1,372,000
Stock options exercised 4,220
2,000
Net earnings
3,833,000
BALANCE, March 31, 1996 7,397,212 $74,000
$11,935,000 $29,473,000 125,590 $(1,390,000) $(194,000)
</TABLE>
See notes to condensed consolidated financial statements.
<TABLE>
SOUTHERN ELECTRONICS CORPORATION
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine
Months Ended
March 31,
1996
1995
<S> <C>
<C>
OPERATING ACTIVITIES:
Net earnings $ 3,833,000
$ 4,007,000
Adjustments to reconcile net earnings
to net cash used in
operating activities
Depreciation and amortization 809,000
413,000
Compensation - stock awards 57,000
11,000
Changes in assets and liabilities,
net of effects from acquired business (5,295,000)
(10,846,000)
Net cash used in operating activities (596,000)
(6,415,000)
INVESTING ACTIVITIES:
Purchases of equipment (866,000)
(1,139,000)
Purchase of business, net of cash acquired (21,000)
--
Net cash used in investing activities (887,000)
(1,139,000)
FINANCING ACTIVITIES:
Borrowings under line of credit, net 4,000,000
8,940,000
Purchase of treasury stock --
(122,000)
Net cash provided by financing activities 4,000,000
8,818,000
NET INCREASE IN CASH
AND CASH EQUIVALENTS 2,517,000
1,264,000
CASH AND CASH EQUIVALENTS, beginning of period 790,000
741,000
CASH AND CASH EQUIVALENTS, end of period $ 3,307,000
$ 2,005,000
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
In conjunction with the acquired business,
liabilities were assumed as follows:
Fair value of assets acquired $13,850,000
Consideration paid consisting of
cash and common stock (2,600,000)
Liabilities assumed $11,250,000
</TABLE>
SOUTHERN ELECTRONICS CORPORATION
AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Nine Months
Ended March 31, 1996 and 1995
(Unaudited)
A. Interim Financial Statements:
The accompanying condensed consolidated financial statements
of Southern Electronics Corporation and subsidiary (the
"Company") have been prepared without audit. In the opinion
of management, all adjustments (which include only normal
recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations
for the three months and nine months ended March 31, 1996
are not necessarily indicative of the operating results for
the full year.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted. It is suggested that these financial statements
be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's
Annual Report on Form 10-K, filed with the Securities and
Exchange Commission for the year ended June 30, 1995.
B. Earnings Per Common Share:
Earnings per common share have been calculated based on the
weighted average number of common shares and common share
equivalents outstanding during each period.
C. Acquisition:
On December 14, 1995, the Company acquired substantially all
of the assets and assumed certain liabilities of U.S.
Computer of North America, Inc., a distributor of
Hewlett-Packard computer products in Latin America for
approximately $2,600,000, including $350,000 in estimated
expenses, consisting of 275,000 shares of common stock
valued at $1,375,000 and cash amounting to $1,225,000.
This acquisition has been accounted for using the purchase
method of accounting. Goodwill arising from this
acquisition is being amortized using the straight-line
method over 30 years. The operating results of the
acquired business are included in the Company's Consolidated
Statements of Earnings from the date of acquisition.
The following unaudited pro forma consolidated financial
information gives effect to the acquisition as if the
transaction had occurred as of July 1,1994. The pro forma
consolidated information is not necessarily indicative
of the results that would have been reported had the
acquisition occurred on such date, nor is it indicative of
the Company's future operations.
Nine Months Ended
March 31,
1996 1995
Net Sales $355,048,000 $329,488,000
Net Earnings $ 4,147,000 $ 1,851,000
Net Earnings
per Common Share $.56 $.25
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared to Three Months Ended
March 31, 1995
Net sales for the third quarter ended March 31, 1996, which
include sales of approximately $15,700,000 attributable to U.S.
Computer of North America, Inc. ("USC") acquired by the Company
on December 14, 1995, increased 16.0% compared to the third
quarter ended March 31, 1995. Sales of microcomputers and
computer peripheral products represented approximately 93.2% of
the Company's business for the third quarter ended March 31, 1996
as compared to approximately 93.1% for the third quarter ended
March 31, 1995. Sales of cellular telephone products accounted
for approximately 6.8% of the business for the third quarter
ended March 31, 1996 as compared to 6.9% for the year-earlier
period.
Gross profit as a percentage of net sales was 6.3% for the third
quarter as compared to 6.9% for the same period in the prior
year. This decrease is primarily attributable to more
competitive pricing during the quarter ended March 31, 1996 as
compared to the quarter ended March 31, 1995.
Selling, general, and administrative expenses as a percentage of
net sales decreased to 4.1% for the third quarter ended March 31,
1996 compared with 4.9% for the quarter ended March 31, 1995.
This decrease is due primarily to greater revenue coverage of
expenses and lower freight costs. These decreases were partially
offset by an increase in depreciation and amortization expenses
relating to the Company's new computer system.
Income tax expense was recorded at an effective annual rate of
39.0% and 37.9% respectively for the third quarters ended March
31, 1996 and March 31, 1995.
Nine Months Ended March 31, 1996 Compared to Nine Months Ended
March 31, 1995
Net sales for the nine months ended March 31, 1996, which include
sales of approximately $16,400,000 attributable to USC, increased
12.5% compared to the nine months ended March 31, 1995. This
growth resulted primarily from the increase in sales to
value-added resellers and dealers served by the Company and the
USC acquisition. Sales of microcomputers and computer
peripherals products represented approximately 91.1% of the
Company's business for the nine months ended March 31, 1996 as
compared to approximately 90.7% for the nine months ended March
31, 1995. Sales of cellular telephone products accounted for
approximately 8.9% of the business for the nine months ended
March 31, 1996 as compared to 9.3% for the year-earlier period.
Gross profit as a percentage of net sales was 6.4% for the nine
months ended March 31, 1996 as compared to 7.1% for the same
period in the prior year. This decrease is primarily
attributable to more competitive pricing during the nine months
ended March 31, 1996 as compared to the nine months ended March
31, 1995.
Selling, general, and administrative expenses as a percentage of
net sales decreased to 4.3% for the nine months ended March 31,
1996 compared with 4.8% for the nine months ended March 31, 1995.
This decrease is due primarily to greater revenue coverage of
expenses, a lower provision for doubtful accounts and lower
freight costs. This decrease was partially offset by an increase
in depreciation and amortization expenses relating to the
Company's new computer system.
Income tax expense was recorded in the nine months ended March
31, 1996 at an effective annual rate of 38.5% as compared to
37.9% in the nine months ended March 31, 1995.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (continued)
Financial Condition, Liquidity, and Capital Resources
The Company and its wholly-owned operating subsidiary, Southern
Electronics Distributors, Inc. ("SED"), are parties to a
revolving credit loan agreement (the "Revolving Credit
Agreement") with National City Bank, Columbus, Ohio, and
Wachovia Bank of Georgia, N.A. which provides for an unsecured
line of credit of $30,000,000. The Company may borrow at the
prime rate offered by Wachovia Bank of Georgia, N.A., 8.25% at
March 31, 1996, or the Company may fix the interest rate for
periods of 30 to 180 days under various interest rate options.
The Revolving Credit Agreement requires a commitment fee of 1/4%
of the unused commitment.
The Revolving Credit Agreement requires maintenance of certain
minimum working capital and other financial ratios and has
certain dividend restrictions. This agreement expires on August
31, 1997. At March 31, 1996, the Company had borrowings of
$15,500,000 and irrevocable standby letters of credit of
$3,500,000 outstanding under the Revolving Credit Agreement.
The Company's liquidity requirements arise primarily from the
funding of working capital needs, including inventories and trade
accounts receivable. The Company funded its increases in
accounts receivable and inventories with internally generated
funds and, at times, borrowings under its Revolving Credit
Agreement.
Management believes that the Revolving Credit Agreement, together
with vendor lines of credit and internally generated funds, will
be sufficient to satisfy its working capital needs during fiscal
1996.
Acquisition
See Note C of Notes to Condensed Consolidated Financial
Statements for information regarding the acquisition of USC which
was consummated on December 14, 1995.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
Exhibit
Number Description
27 Financial Data Schedule
b) Reports on Form 8-K
The Company amended its report on Form 8-K\A on February
26, 1996 reporting the Company's acquisition of
substantially all of the assets of U.S. Computer of North
America, Inc.
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.
SOUTHERN ELECTRONICS CORPORATION
(Registrant)
May 13, 1996 /s/Gerald Diamond
Gerald Diamond
Chief Executive Officer
Chairman of the Board
(Principal Executive
Officer)
May 13, 1996 /s/Larry G. Ayers
Larry G. Ayers
Vice President-Finance and
Treasurer
(Principal Accounting
Officer)
EXHIBIT INDEX
Exhibit
Number Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SOUTHERN
ELECTRONICS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED
FINANCIAL
STATEMENTS AS OF AND FOR THE PERIOD ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,307,000
<SECURITIES> 0
<RECEIVABLES> 37,510,000
<ALLOWANCES> 2,455,000
<INVENTORY> 55,838,000
<CURRENT-ASSETS> 98,305,000
<PP&E> 4,082,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 109,894,000
<CURRENT-LIABILITIES> 54,496,000
<BONDS> 0
0
0
<COMMON> 74,000
<OTHER-SE> 41,408,000
<TOTAL-LIABILITY-AND-EQUITY> 109,894,000
<SALES> 329,119,000
<TOTAL-REVENUES> 329,119,000
<CGS> 308,212,000
<TOTAL-COSTS> 308,212,000
<OTHER-EXPENSES> 14,042,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,400,000
<INCOME-PRETAX> 6,233,000
<INCOME-TAX> 2,400,000
<INCOME-CONTINUING> 3,833,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,833,000
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.53
</TABLE>
