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 December 31, 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 0-16345
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)
(404) 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 February 5, 1996, there were 7,271,347 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
ITEM 1: FINANCIAL STATEMENTS
SOUTHERN ELECTRONICS CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30,
ASSETS 1995 1995
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 769,000 $ 790,000
Trade accounts receivable, net 28,441,000 26,459,000
Inventories 51,930,000 53,688,000
Deferred income taxes 1,144,000 910,000
Prepaid income taxes - 479,000
Other current assets 844,000 271,000
TOTAL CURRENT ASSETS 83,128,000 82,597,000
PROPERTY AND EQUIPMENT, net 3,883,000 4,452,000
INTANGIBLES 7,581,000 326,000
$94,592,000 $87,375,000
December 31, June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1995
(Unaudited)
CURRENT LIABILITIES:
Trade accounts payable $48,548,000 $37,922,000
Accrued liabilities 2,500,000 3,320,000
Income taxes payable 556,000 -
TOTAL CURRENT LIABILITIES 51,604,000 41,242,000
REVOLVING BANK DEBT 4,580,000 11,500,000
STOCKHOLDERS' EQUITY:
Preferred Stock
129,500 shares authorized,
none issued
Common stock, $.01 par value;
10,000,000 shares
authorized shares 7,392,992
and 7,121,492 shares issued 74,000 71,000
Additional paid-in capital 11,933,000 10,579,000
Retained earnings 28,004,000 25,640,000
Treasury stock, at cost, 125,590 (1,390,000) (1,390,000)
Prepaid compensation -
stock awards (213,000) (267,000)
38,408,000 34,633,000
$94,592,000 $87,375,000
<TABLE>
<CAPTION>
SOUTHERN ELECTRONICS CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $101,865,000 $100,783,000 $211,858,000 $191,425,000
COST OF SALES, Including buying
and occupancy expenses 95,006,000 93,523,000 198,391,000 177,466,000
6,859,000 7,260,000 13,467,000 13,959,000
OTHER COSTS AND EXPENSES (INCOME):
Selling, general, and administrative 4,514,000 4,941,000 9,221,000 9,526,000
Interest expense 152,000 191,000 423,000 264,000
4,666,000 5,132,000 9,644,000 9,790,000
EARNINGS BEFORE INCOME TAXES 2,193,000 2,128,000 3,823,000 4,169,000
INCOME TAXES 839,000 805,000 1,459,000 1,580,000
NET EARNINGS $ 1,354,000 $ 1,323,000 $ 2,364,000 $ 2,589,000
NET EARNINGS PER COMMON SHARE $.19 $.19 $.33 $.37
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING 7,083,000 7,063,000 7,103,000 7,084,000
</TABLE>
<TABLE>
<CAPTION>
SOUTHERN ELECTRONICS CORPORATION
AND SUBSIDIARIES
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 49,000
Stock issued - business acquisition 275,000 3,000 1,372,000
Net earnings 2,364,000
BALANCE, December 31, 1995 7,392,992 $74,000 $11,933,000 $28,004,000 125,590 $(1,390,000) $ (213,000)
</TABLE>
See notes to condensed consolidated financial statements.
SOUTHERN ELECTRONICS CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
1995 1994
OPERATING ACTIVITIES:
Net earnings $ 2,364,000 $ 2,589,000
Adjustments to reconcile net earnings
to net cash provided by (used in)
operating activities
Depreciation and amortization 461,000 265,000
Compensation - stock awards 36,000 5,000
Changes in assets and liabilities,
net of effects from acquired business 4,462,000 (8,478,000)
Net cash provided by (used in)
operating activities 7,323,000 (5,619,000)
INVESTING ACTIVITIES:
Purchases of equipment (403,000) (530,000)
Purchase of business, net of cash acquired (21,000) -
Net cash used in investing activities (424,000) (530,000)
FINANCING ACTIVITIES:
Borrowings (Repayments) under
line of credit, net (6,920,000) 6,589,000
Purchase of treasury stock - (122,000)
Net cash provided by
financing activities (6,920,000) 6,467,000
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (21,000) 318,000
CASH AND CASH EQUIVALENTS, beginning of period 790,000 741,000
CASH AND CASH EQUIVALENTS, end of period $ 769,000 $ 1,059,000
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
SOUTHERN ELECTRONICS CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Six Months
Ended December 31, 1995 and 1994
(Unaudited)
A. Interim Financial Statements:
The accompanying condensed consolidated financial statements of
Southern Electronics Corporation and subsidiaries (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 six months ended
December 31, 1995 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.
Six Months Ended
December 31,
1995 1994
Net Sales $237,787,000 $214,146,000
Net Earnings $ 2,678,000 $ 176,000
Net Earnings
per Common Share $.36 $.02
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended December 31, 1995 Compared to Three Months Ended
December 31, 1994
Net sales for the second quarter ended December 31, 1995, which
include sales of approximately $700,000 attributable to U.S. Computer of
North America, Inc. ("USC") acquired by the Company on December 14,
1995, increased 1.1% compared to the second quarter ended December 31,
1994. Sales of microcomputers and computer peripheral products
represented approximately 88.7% of the Company's business for the second
quarter ended December 31, 1995 as compared to approximately 88.2% for
the second quarter ended December 31, 1994. Sales of cellular telephone
products accounted for approximately 11.3% of the business for the
second quarter ended December 31, 1995 as compared to 11.8% for the
year-earlier period.
Gross profit as a percentage of net sales was 6.7% for the second
quarter as compared to 7.2% for the same period in the prior year. This
decrease is primarily attributable to more competitive pricing during
the quarter ended December 31, 1995 as compared to the quarter ended
December 31, 1994.
Selling, general, and administrative expenses as a percentage of net
sales decreased to 4.4% for the second quarter ended December 31, 1995
compared with 4.9% for the quarter ended December 31, 1994. This
decrease is due primarily to a lower provision for doubtful accounts and
lower personnel and 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 38.3% and
37.8% respectively for the second quarters ended December 31, 1995 and
December 31, 1994.
Six Months Ended December 31, 1995 Compared to Six Months Ended
December 31, 1994
Net sales for the six months ended December 31, 1995 increased 10.7%
compared to the six months ended December 31, 1994. 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 89.9% of the Company's business for the six months
ended December 31, 1995 as compared to approximately 89.4% for the six
months ended December 31, 1994. Sales of cellular telephone products
accounted for approximately 10.1% of the business for the six months
ended December 31, 1995 as compared to 10.6% for the year-earlier
period.
Gross profit as a percentage of net sales was 6.4% for the six months
ended December 31, 1995 as compared to 7.3% for the same period in the
prior year. This decrease is primarily attributable to more competitive
pricing during the six months ended December 31, 1995 as compared to the
six months ended December 31, 1994.
Selling, general, and administrative expenses as a percentage of net
sales decreased to 4.4% for the six months ended December 31, 1995
compared with 5.0% for the six months ended December 31, 1994. This
decrease is due primarily to greater revenue coverage of expenses and a
lower provision for doubtful accounts. 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 six months ended December 31,
1995 at an effective annual rate of 38.2% as compared to 37.9% in the
six months ended December 31, 1994.
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 subsidiaries, Southern
Electronics Distributors, Inc. ("SED") and USC Acquisition Corporation,
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. This agreement was entered into on June 29, 1995 and
amended on December 14, 1995 to include USC Acquisition Corporation.
The Company may borrow at the prime rate offered by Wachovia Bank
of Georgia, N.A., 8.5% at December 31, 1995, 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 December
31, 1995, the Company had borrowings of $4,580,000 and irrevocable
standby letters of credit of $3,050,000 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
The Registrant's 1995 Annual Meeting of Stockholders was held
on November 9, 1995 for the following purposes: (i) to elect
two Class I directors for a three-year term; (ii) to approve
an amendment to the Southern Electronics Corporation 1991
Stock Option Plan to increase the number of shares available
for issuance by 250,000; and (iii) to approve the Company's
1995 Formula Stock Option Plan. The voting results on the
foregoing matters, which were all approved, were as follows:
Proposal 1 - Electrion of Directors
Nominee For Authority Withheld
Stewart I. Aaron 6,606,111 129,896
Michel Zaleski 6,606,111 129,896
Proposal 2 - Amendment of the 1991 Stock Option Plan
For Against Abstained Broker Non-Votes
4,963,177 311,833 45,475 1,415,522
Proposal 3 - Approval of the 1995 Formula Stock Option Plan
For Against Abstained Broker Non-Votes
4,381,846 868,446 69,563 1,416,152
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
Exhibit
Number Description
10.31 First Amendment, dated December 14, 1995, among
National City Bank, Columbus, Wachovia Bank of
Georgia, N.A., the Registrant, Southern Electronics
Distributors, Inc., a wholly owned subsidiary of the
Registrant ("SED"), and U.S. Computer of North
America, Inc., also a wholly-owned subsidiary of the
Registrant, to Revolving Credit Agreement dated as
of June 29, 1995 among National City Bank, Columbus,
Wachovia Bank of Georgia, N.A., the Registrant and
SED.
27 Financial Data Schedule
b) Reports on Form 8-K
The Company filed a report on Form 8-K on December 29, 1995
reporting the Company's acquisition of substantially allassets
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)
February 14, 1996 /s/ Gerald Diamond
Gerald Diamond
Chief Executive Officer
Chairman of the Board
(Principal Executive Officer)
February 14, 1996 /s/ Larry G. Ayers
Larry G. Ayers
Vice President-Finance and
Treasurer
(Principal Accounting Officer)
EXHIBIT INDEX
Exhibit
Number Description
10.31 First Amendment, dated December 14, 1995, among
National City Bank, Columbus, Wachovia Bank of
Georgia, N.A., the Registrant, Southern Electronics
Distributors, Inc.("SED"), and U.S. Computer of
North America, Inc., also a wholly-owned subsidiary
of the Registrant, to Revolving Credit Agreement
dated as ofJune 29, 1995 among National City Bank,
Columbus, Wachovia Bank of Georgia, N.A., The
Registrant and SED.
27 Financial Data Schedule
Exhibit No. 10.31
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
THIS FIRST AMENDMENT, effective as of the Effective Date (as
defined in Paragraph 28), by and among (A) Southern Electronics
Corporation, a Delaware corporation, and Southern Electronics
Distributors, Inc., a Delaware corporation (collectively the "Original
Borrowers"), (B) National City Bank, Columbus, a national banking
association ("NCB"), and Wachovia Bank of Georgia, N.A., a national
banking association ("WB") (collectively, the "Banks"), and USC
Acquisition Corporation (being renamed U.S. Computer of North America,
Inc.), a Delaware corporation and wholly owned subsidiary of Southern
Electronics Corporation (the "New Borrower"), amending the Revolving
Credit Agreement dated as of June 29, 1995 by and among the Original
Borrowers and the Banks (the "Credit Agreement"). Capitalized terms
used herein and not otherwise defined shall have the meanings given to
them in the Credit Agreement.
The parties hereto hereby agree as follows:
1. The New Borrower shall hereby become and hereafter be a party
to the Credit Agreement bound thereby as one of the Borrowers
thereunder. In connection therewith, the Borrowers (both the Original
Borrowers and the New Borrower) are concurrently herewith executing and
delivering replacement Notes in the form of the Revolving Credit Note
attached hereto as Exhibit 2.10 (the "Replacement Notes") in exchange
for and to replace the existing Notes executed previously by the
Original Borrowers.
2. Subsection 1.01 of the Credit Agreement shall be and it hereby
is amended by modifying the definition of "Applicable Margin" to read
in its entirety as follows:
"Applicable Margin" means, with respect to any Performance
Pricing Determination Date, the percentage set forth below as the
Applicable Margin based upon the L/TNW Ratio of the Borrowers set forth
below, determined pursuant to subsection 2.12(E).
Applicable
L/TNW Ratio Margin
Not more than .80 to 1 .75%
Greater than .80 to 1 but not more than 1 to 1 1.00%
Greater than 1 to 1 but not more than 1.33 to 1 1.25%
Greater than 1.33 to 1 but not more than 1.6 to 1 1.50%
Greater than 1.6 to 1 but not more than 2 to 1 1.75%
Greater than 2 to 1 but not more than 2.25 to 1 2.00%
Greater than 2.25 to 1 2.25%
3. Subsection 1.01 of the Credit Agreement shall be and it hereby
is amended by adding the definitions of "Approved Transaction" and
"Authorized Approved Transaction Financing" which shall read in their
entirety as follows:
"Approved Transaction" means any transaction consented to or
approved in writing by the Banks.
"Authorized Approved Transaction Financing" means any
financing in connection with an Approved Transaction which is
consented to or approved in writing by the Banks.
4. Subsection 1.01 of the Credit Agreement shall be and it hereby
is amended by modifying the definition of "Borrowers" to read in its
entirety as follows:
"Borrowers" means Southern Electronics Corporation, a Delaware
corporation, Southern Electronics Distributors, Inc., a Delaware
corporation and USC Acquisition Corporation (being renamed U.S.
Computer of North America, Inc.), a Delaware corporation.
5. Subsection 1.01 of the Credit Agreement shall be and it hereby
is amended by modifying the definition of "Loan Commitment" to read in
its entirety as follows:
"Loan Commitment" means the sum of Thirty Million Dollars
($30,000,000) or such lesser amount as shall hereafter be
determined from time to time pursuant to subsection 2.16. The
outstanding amount of any Authorized Approved Transaction Financing
shall be given effect in the calculation of and thereby reduce the
remaining Loan Commitment available for Loans and issuance of
Letters of Credit, with each Bank's Share of the Commitment
available for Loans and issuance of Letters of Credit being reduced
by such Bank's share of such outstanding amount of the Authorized
Approved Transaction Financing determined by multiplying such
outstanding amount by the Bank's Percentage. In computing the
Commitment Fee payable under subsection 2.15(A), the unused portion
of the Share of the Commitment of each Bank shall not be reduced by
a Bank's share of such outstanding amount of the Authorized Approved
Transaction Financing.
6. Subsection 1.01 of the Credit Agreement shall be and it hereby
is amended by modifying Item (F) in the definition of "Permitted Liens"
to read in its entirety as follows:
(F) Existing liens set forth on Schedule 1.01-1 attached
hereto and any liens relating to liabilities assumed by any of the
Borrowers in an Approved Transaction;
7. Subsection 3.07 of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(C) In lieu of any other letter of credit commissions and
fees provided for in any Letter of Credit Application, the
Borrowers agree to pay to the Issuing Bank for the account of the
Banks (pro rata based upon their respective Percentages) a
commission (the "Stand-By Letter of Credit Commission") on the
undrawn and unexpired amount of each irrevocable Stand-By Letter of
Credit at a rate of 1.50% per annum or at such other rate as agreed
to in writing by the Banks and the Borrowers from time to time
(provided that the Borrowers shall pay to the Issuing Bank for the
account of the Banks in each case a minimum Stand-By Letter of
Credit Commission equal to $250.00), plus reimbursement of any and
all reasonable fees and out-of-pocket costs and expenses incurred
by the Issuing Bank in connection with the issuance of each
Stand-By Letter of Credit. The Stand-By Letter of Credit
Commission and such reimbursement shall be payable on the date
of issuance of each such Stand-By Letter of Credit.
8. Subsection 5.01(P) of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(P) Southern Electronics Corporation has no Subsidiaries,
other than Southern Electronics Distributors, Inc. and USC
Acquisition Corporation (being renamed U.S. Computer of North
America, Inc.) and any other approved Subsidiaries created in an
Approved Transaction, and no Subsidiary has any Subsidiaries; and
9. Subsection 6.01(F)(2) of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(2) Maintain a ratio of Liabilities to Tangible Net Worth
(the "L/TNW Ratio") of not more than 2.6 to 1 at all times through
June 29, 1996, 2.5 to 1 at all times from June 30, 1996 through
September 29, 1996, 2.4 to 1 at all times from September 30, 1996
through December 30, 1996, 2.3 to 1 at all times from December 31,
1996 through March 30, 1997, 2.2 to 1 at all times from March 31,
1997 through June 29, 1997 and 2 to 1 at all times thereafter.
10. Subsection 6.01(F)(4) of the Credit Agreement shall be an it
hereby is amended to read in its entirety as follows:
(4) Maintain at all items a minimum Tangible Net Worth of not
less than (a)Twenty-Nine Million Dollars ($29,000,000) plus
(b) Seventy-Five Percent (75%) of Consolidated Net Profit After
Tax for each fiscal quarter of the Borrowers completed after
December 31, 1995. As used herein, "Consolidated Net Profit After
Tax" means the Borrowers' current consolidated earnings (excluding
extraordinary items) less the amount of consolidated income tax
that the Borrowers paid with respect to such earnings.
11. Subsection 6.01(F)(7) of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(7) Be prohibited from making Restricted Payments at any time
during the Loan Commitment Period and while any obligations are
outstanding hereunder or under the Notes, which in the aggregate
exceed 25% of the aggregate Consolidated Net Profit After Tax
earned after the Unaudited Financial Statements Date, excluding
dividends paid by a Subsidiary of Southern Electronics Corporation
to Southern Electronics Corporation.
12. Subsection 6.02(A) of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(A) None of the Borrowers will dissolve or liquidate, or
enter into any merger, consolidation, reorganization or
recapitalization or reclassify its capital stock, except that any
of the Borrowers may merge into or consolidate with another
Borrower or participate in an Approved Transaction.
13. Subsection 6.02(B) of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(B) None of the Borrowers will sell, transfer, lease or
otherwise dispose of all or (except in the ordinary course of
business) any material part of its assets except to another
Borrower in an Approved Transaction.
14. Subsection 6.02(D) of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(D) None of the Borrowers will become liable, directly or
indirectly, as guarantor or otherwise, for any obligation of any
other Person other than another Borrower, except pursuant to an
Approved Transaction.
15. Subsection 6.02(E) of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(E) None of the Borrowers will incur, create, assume or
permit to exist any Indebtedness except: (1) the Loans; (2) the
Letters of Credit; (3)existing Indebtedness as set forth in
Schedule 5.01(L); (4) trade Indebtedness incurred in the ordinary
course of business; (5) contingent Indebtedness permitted by
subsection 6.02(D); (6) Indebtedness secured by Permitted Liens;
and (7) Indebtedness incurred, created or assumed in an Approved
Transaction, including any Authorized Approved Transaction
Financing.
16. Subsection 6.02(F) of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(F) None of the Borrowers will form any Subsidiary or make
any investment in or make any loan in the nature of any investment
to any Person, except pursuant to an Approved Transaction.
17. Subsection 6.02(G) of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(G) None of the Borrowers will acquire any stock in, or all
or substantially all of the assets of, any Person, except pursuant
to an Approved Transaction.
18. Subsection 9.05(A) of the Credit Agreement shall be and it
hereby is amended to read in its entirety as follows:
(A) If to the Borrowers: Southern Electronics Corporation,
Southern Electronics Distributors,
Inc. and U.S. Computer of North
America, Inc.
4916 North Royal Atlanta Drive
Tucker, Georgia 30084
Attention: Larry G. Ayers
Vice President-Finance
Telecopier: 770-938-2814
Confirmation: 770-491-8962
19. The words "either Borrower" and "either of the Borrowers,"
wherever they appear in the Credit Agreement, shall be and they hereby
are amended to read in their entirety as "any of the Borrowers." Also,
the words "neither Borrower" and "neither of the Borrowers," wherever
they appear in the Credit Agreement, shall be and they hereby are
amended to read in their entirety as "none of the Borrowers." Further,
the words "the other Borrower," wherever they appear in the Credit
Agreement, shall be and they hereby are amended to read in their
entirety as "another Borrower."
20. The Borrowers and the Banks acknowledge and agree that
stand-by letter of credit no. LC870-065200, in the amount of $2,000,000,
dated November 24, 1995, for the New Borrower as the applicant and with
Hewlett-Packard Company as the beneficiary, a copy of which is attached
hereto, was issued as a Stand-By Letter of Credit under and shall for
all purposes be treated as a Stand-By Letter of Credit issued under the
Credit Agreement.
21. Concurrently with the execution hereof, the Borrowers shall
deliver to the Banks the following:
(a) The Replacement Notes;
(b) A certified (as of the Effective Date) copy of
resolutions of the Borrowers' boards of directors authorizing the
execution, delivery and performance of this First Amendment, the
Replacement Notes and each other document to be delivered pursuant
hereto;
(c) A certified (as of the Effective Date) copy of each of
the Borrowers' by-laws;
(d) A certificate (dated as of the Effective Date) of each
of the Borrowers' corporate secretary as to the incumbency and
signatures of the officers of such Borrower signing this First
Amendment, the Replacement Notes and each other document to be delivered
pursuant hereto;
(e) A copy, certified as of the most recent date
practicable, by the Secretary of State of Delaware, of each of the
Borrowers' certificate of incorporation, together with a certificate
(dated as of the Effective Date) of each of the Borrowers' corporate
secretary to the effect that such certificate of incorporation has not
been amended since the date of the aforesaid certification;
(f) Certificates, as of the most recent dates practicable,
of the aforesaid secretary of state, the secretary of state of each
state in which the Borrowers are qualified as a foreign corporation and
the department of revenue or taxation of each of the foregoing states,
as to the good standing or valid existence of the Borrowers;
(g) A written opinion of Messrs. Long, Aldridge & Norman,
the Borrower's counsel, dated the Effective Date and addressed to the
Banks, substantially in form satisfactory to the Banks, to the effect
that:
(1) Each Borrower is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Delaware, is qualified to transact business
and validly exists and is in good standing as a foreign
corporation in the State of Georgia (with respect to the
Original Borrowers) and the State of Florida (with respect
to the New Borrower). Each Borrower has the corporate
power (a) to own its properties and to carry on its
business; and (b) to execute and deliver the First
Amendment and the Replacement Notes (the "Additional Loan
Documents") and perform under the Credit Agreement, the
Additional Loan Documents and all other related loan
documents.
(2) The execution and delivery by each Borrower of
the Additional Loan Documents and their performance under
the Credit Agreement, the Additional Loan Documents and
all other related loan documents have been duly authorized
by all requisite corporate action.
(3) The execution and delivery by each Borrower of
the Additional Loan Documents and the performance by each
Borrower under the Credit Agreement, the Additional Loan
Documents and al other related loan documents will not (a)
violate the certificate of incorporation, by-laws or other
organizational documents of each Borrower; (b) violate any
material applicable constitution, rule, regulation, order
or law; (c) to counsel's knowledge, violate any material
order, writ, injunction or decree of any court or
governmental authority or agency, (d) to counsel's
knowledge, result in the breach of or constitute (with the
giving of notice, lapse of time or both) a default under
any material instrument, document or agreement to which
any Borrower is a party, including agreements for borrowed
money or among the shareholders; or (e) to counsel's
knowledge, result in the creation or imposition of any
lien, security interest or other encumbrance upon any of
the revenues or assets of any of the Borrowers pursuant to
the terms of any such instrument, documents or agreement.
(4) The Additional Loan Documents have been duly
executed and delivered by each Borrower, and the Credit
Agreement, the Additional Loan Documents and all other
related loan documents constitute the valid and legally
binding obligations of each of the Borrowers, enforceable
in accordance with their respective terms.
(h) A certificate, dated the Effective Date, signed by the
president or a vice president of each of the Borrowers to the effect
that:
(1) The representations and warranties set forth
in subsection 5.01 of the Credit Agreement are true in all
material respects as of the Effective Date; and
(2) No Event of Default under the Credit Agreement,
and no event which, with the giving of notice or passage of
time or both, would become an Event of Default under the
Credit Agreement, has occurred as of the Effective Date.
(I) A set for each Bank of all of the documents from the
transaction described in Paragraph 22 as the Approved Transaction. For
purposes of the certifications provided for in (c), (d), (e) and (f)
above, the Borrowers shall be required to provide such certifications
with respect to the Original Borrowers only if there have been changes
therein from those delivered at the Closing under the Credit Agreement;
otherwise, such certifications with respect to the Original Borrowers
delivered at the Closing shall be deemed reissued and redelivered by the
Borrowers as of the Effective Date.
22. The Exhibits (2.04, 2.06, 2.10 and 4.02) to the Credit
Agreement are hereby amended to be in the form of such Exhibits attached
hereto.
23. The Banks hereby document their consent and approval, as an
Approved Transaction under the Credit Agreement, to and of the formation
of the New Borrower as a wholly owned subsidiary of Southern Electronics
Corporation and the acquisition by the New Borrower of certain assets of
and the assumption by the New Borrower of certain liabilities of U.S.
Computer of North America, Inc. pursuant to the Agreement and Plan of
Reorganization dated the Effective Date submitted to the Banks. The
Banks further hereby document their consent and approval, as an
Authorized Approved Transaction Financing under the Credit Agreement, to
the financing for the Approved Transaction provided by Hewlett-Packard
Company evidenced by the promissory note attached hereto as Exhibit
23.
24. Concurrently with the execution and delivery of this First
Amendment, the Borrowers shall pay to the Banks an amendment fee of
Fifteen Thousand Dollars ($15,000) for this amendment of the Credit
Agreement and related matters, which amendment fee shall be shared
equally by the Banks. Further, Borrower shall, on demand, reimburse the
Banks for all expenses, including the reasonable fees and expenses of
legal counsel for the Banks, incurred by the Banks in connection with
this First Amendment and related matters.
25. This First Amendment represents the entire understanding of the
parties with respect to the subject matter hereof, and supersedes any
prior oral or written understandings with respect to the subject matter
hereof.
26. Except as set forth expressly herein, all terms of the Credit
Agreement and the other related loan documents shall be and remain in
full force and effect, and shall constitute the legal, valid, binding
and enforceable obligations of the Borrowers. The Borrowers hereby
restate, ratify and reaffirm each and every term, covenant and condition
set forth in the Credit Agreement and the other related loan documents
effective as of the Effective Date, as hereby amended. This Agreement
shall be governed by, and construed and interpreted in accordance with,
the laws of the State of Georgia.
27. This First Amendment may be executed by one of more of the
parties in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the
same instrument. The Borrowers agree to take such further actions as
the Banks shall reasonably request in connection herewith to evidence
the agreements herein contained.
28. This First Amendment shall be effective on the date set forth
below as the Effective Date, which Effective Date is the date of the
closing of the transaction described in Paragraph 23 as the Approved
Transaction (the "Effective Date").
IN WITNESS WHEREOF, the parties have caused this First Amendment to
be duly executed and delivered by their proper and duly authorized
officers effective as of the Effective Date.
Effective Date: December 14, 1995
SOUTHERN ELECTRONICS SOUTHERN ELECTRONICS
CORPORATION DISTRIBUTORS, INC.
By: /s/Larry G. Ayers By: /s/Larry G. Ayers
Name: Larry G. Ayers Name: Larry G. Ayers
Title: Vice President-Finance Title: Vice President-Finance
USC ACQUISITION CORPORATION (being renamed
U.S. COMPUTER OF NORTH AMERICA, INC.)
By: /s/Larry G. Ayers
Name: Larry G. Ayers
Title: Vice President-Finance
NATIONAL CITY BANK, COLUMBUS WACHOVIA BANK OF GEORGIA, N.A.
By: /s/Brian T. Strayton By: /s/Kevin B. Harrison
Name: Brian T. Strayton Name: Kevin B. Harrison
Title: Vice President Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 769,000
<SECURITIES> 0
<RECEIVABLES> 28,441,000
<ALLOWANCES> 2,210,000
<INVENTORY> 51,930,000
<CURRENT-ASSETS> 83,128,000
<PP&E> 3,883,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 94,592,000
<CURRENT-LIABILITIES> 51,604,000
<BONDS> 0
0
0
<COMMON> 74,000
<OTHER-SE> 39,937,000
<TOTAL-LIABILITY-AND-EQUITY> 94,592,000
<SALES> 211,858,000
<TOTAL-REVENUES> 211,858,000
<CGS> 198,391,000
<TOTAL-COSTS> 198,391,000
<OTHER-EXPENSES> 9,221,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 423,000
<INCOME-PRETAX> 3,823,000
<INCOME-TAX> 1,459,000
<INCOME-CONTINUING> 2,364,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,364,000
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
