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
--OR--
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1996
Commission File Number: 0-16207
ALL AMERICAN SEMICONDUCTOR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-2814714
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
16115 NORTHWEST 52ND AVENUE, MIAMI, FLORIDA 33014
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 621-8282
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. X Yes ___ No
As of August 9, 1996, 20,418,894 shares (including 160,703 shares held by a
wholly-owned subsidiary of the Registrant) of the common stock of All American
Semiconductor, Inc. were outstanding.
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
FORM 10-Q - INDEX
PART ITEM PAGE
NO. NO. DESCRIPTION NO.
- --------------------------------------------------------------------------------
I FINANCIAL INFORMATION:
1. Financial Statements
Consolidated Condensed Balance Sheets at June 30, 1996
(Unaudited) and December 31, 1995..................... 1
Consolidated Condensed Statements of Operations for the
Quarters and Six Months Ended June 30, 1996 and 1995
(Unaudited)........................................... 2
Consolidated Condensed Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 (Unaudited)... 3
Notes to Consolidated Condensed Financial Statements
(Unaudited)........................................... 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 6
II OTHER INFORMATION:
6. Exhibits and Reports on Form 8-K....................... 9
SIGNATURES............................................. 9
<PAGE>
<TABLE>
<CAPTION>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
JUNE 30 December 31
ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash................................................................. $ 179,000 $ 276,000
Accounts receivable, less allowances for doubtful
accounts of $1,248,000 and $921,000.............................. 37,066,000 35,101,000
Inventories.......................................................... 80,736,000 67,463,000
Other current assets................................................. 4,087,000 1,959,000
------------------ ------------------
Total current assets............................................. 122,068,000 104,799,000
Property, plant and equipment - net...................................... 5,250,000 3,882,000
Deposits and other assets................................................ 5,594,000 2,316,000
Excess of cost over fair value of net assets acquired - net.............. 3,575,000 3,477,000
------------------ ------------------
$ 136,487,000 $ 114,474,000
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................... $ 447,000 $ 844,000
Accounts payable and accrued expenses................................ 41,577,000 43,451,000
Income taxes payable................................................. - 199,000
Other current liabilities............................................ 578,000 953,000
----------------- ------------------
Total current liabilities........................................ 42,602,000 45,447,000
Long-term debt:
Notes payable........................................................ 54,843,000 29,900,000
Subordinated debt.................................................... 6,496,000 6,515,000
Other long-term debt................................................. 482,000 345,000
----------------- ------------------
104,423,000 82,207,000
----------------- ------------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued.......................................... - -
Common stock, $.01 par value, 40,000,000 shares authorized,
20,418,894 and 19,863,895 shares issued, 19,928,895 and
19,863,895 shares outstanding.................................... 199,000 199,000
Capital in excess of par value....................................... 25,670,000 25,511,000
Retained earnings.................................................... 6,646,000 7,008,000
Treasury stock, at cost, 180,295 shares.............................. (451,000) (451,000)
------------------ ------------------
32,064,000 32,267,000
------------------ ------------------
$ 136,487,000 $ 114,474,000
================== ==================
</TABLE>
See notes to consolidated condensed financial statements
1
<PAGE>
<TABLE>
<CAPTION>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
QUARTERS SIX MONTHS
PERIODS ENDED JUNE 30 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES................................... $ 62,567,000 $ 45,489,000 $ 129,764,000 $ 83,775,000
Cost of sales............................... (47,949,000) (35,685,000) (100,490,000) (65,103,000)
---------------- ----------------- ------------------ ----------------
Gross profit................................ 14,618,000 9,804,000 29,274,000 18,672,000
Selling, general and
administrative expenses................. (14,078,000) (7,666,000) (26,635,000) (14,925,000)
Nonrecurring expenses....................... (485,000) - (930,000) -
---------------- ----------------- ------------------ ----------------
INCOME FROM OPERATIONS...................... 55,000 2,138,000 1,709,000 3,747,000
Interest expense............................ (1,451,000) (721,000) (2,448,000) (1,386,000)
---------------- ----------------- ------------------ ----------------
Income (loss) before income taxes
and extraordinary items................. (1,396,000) 1,417,000 (739,000) 2,361,000
Income tax (provision) benefit.............. 601,000 (609,000) 319,000 (1,015,000)
---------------- ----------------- ----------------- ----------------
Income (loss) before
extraordinary items..................... (795,000) 808,000 (420,000) 1,346,000
Extraordinary items:
Gain from settlement of litigation
(net of $205,000 income tax
provision)......................... 272,000 - 272,000 -
Loss on early retirement of debt
(net of $161,000 income tax
benefit)........................... - - (214,000) -
---------------- ----------------- ------------------ ----------------
NET INCOME (LOSS)........................... $ (523,000) $ 808,000 $ (362,000) $ 1,346,000
================ ================= ================== ================
Primary and fully diluted earnings per share:
Income (loss) before
extraordinary items................ $(.04) $.06 $(.02) $.10
Extraordinary items..................... .01 - - -
----- ---- ----- ----
Net income (loss)....................... $(.03) $.06 $(.02) $.10
===== ==== ===== ====
Average number of common shares outstanding:
Primary................................. 20,439,031 14,043,283 20,444,245 13,348,802
========== ========== ========== ==========
Fully diluted........................... 20,439,031 14,170,464 20,444,245 13,585,049
========== ========== ========== ==========
</TABLE>
See notes to consolidated condensed financial statements
2
<PAGE>
<TABLE>
<CAPTION>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows Used By Operating Activities........................... $ (19,235,000) $ (4,199,000)
---------------- -----------------
Cash Flows From Investing Activities:
Acquisition of property and equipment............................. (1,655,000) (689,000)
Increase in other assets.......................................... (3,658,000) (72,000)
---------------- -----------------
Cash flows used for investing activities..................... (5,313,000) (761,000)
---------------- -----------------
Cash Flows From Financing Activities:
Net borrowings (repayments) under line of credit agreement........ 25,073,000 (2,306,000)
Increase in notes payable......................................... 15,000,000 90,000
Repayments of notes payable....................................... (15,631,000) (223,000)
Net proceeds from issuance of equity securities................... 9,000 7,404,000
---------------- -----------------
Cash flows provided by financing activities.................. 24,451,000 4,965,000
---------------- -----------------
Increase (decrease) in cash....................................... (97,000) 5,000
Cash, beginning of period......................................... 276,000 200,000
---------------- -----------------
Cash, end of period............................................... $ 179,000 $ 205,000
================ =================
Supplemental Cash Flow Information:
Interest paid..................................................... $ 1,850,000 $ 1,255,000
================ =================
Income taxes paid................................................. $ 1,093,000 $ 156,000
================ =================
</TABLE>
Supplemental Schedule of Noncash Investing and Financing Activities:
During the six months ended June 30, 1996, the Company purchased all of the
capital stock of Programming Plus Incorporated ("PPI"). The consideration paid
by the Company for such capital stock consisted of 549,999 shares of common
stock of the Company valued at $1,375,000 (or $2.50 per share); however, only
60,000 shares of common stock (valued at $150,000) were released to the PPI
selling shareholders at closing, with the balance retained in escrow subject to
certain conditions subsequent.
See notes to consolidated condensed financial statements
3
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated condensed
financial statements include all adjustments (consisting of normal recurring
accruals or adjustments only) necessary to present fairly the financial position
at June 30, 1996, and the results of operations and the cash flows for all
periods presented. The results of operations for the interim periods are not
necessarily indicative of the results to be obtained for the entire year.
For a summary of significant accounting policies (which have not changed from
December 31, 1995) and additional financial information, see the Company's
Annual Report on Form 10-K for the year ended December 31, 1995, including the
consolidated financial statements and notes thereto which should be read in
conjunction with these financial statements.
2. LONG-TERM DEBT
On May 3, 1996 the Company entered into a new $100 million line of credit
facility with a group of banks (the "New Credit Facility") which expires May 3,
2001. Borrowings under the New Credit Facility bear interest, at the Company's
option, at either prime plus one-quarter of one percent (.25%) or LIBOR plus two
and one-quarter percent (2.25%) and are secured by all of the Company's assets
including accounts receivable, inventories and equipment. The amounts that the
Company may borrow under the New Credit Facility are based upon specified
percentages of the Company's eligible accounts receivable and inventories (as
defined). Under the New Credit Facility, the Company is required to comply with
certain affirmative and negative covenants as well as to comply with certain
financial ratios. These covenants, among other things, place limitations and
restrictions on the Company's borrowings, investments and transactions with
affiliates and prohibit dividends and stock redemptions. Furthermore, the New
Credit Facility requires the Company to maintain certain minimum levels of
tangible net worth throughout the term of the agreement and a minimum debt
service coverage ratio which is tested on a quarterly basis. In August 1996,
subsequent to the balance sheet date, the Company's New Credit Facility was
amended whereby certain financial covenants were modified.
In connection with the New Credit Facility, on May 6, 1996, the Company repaid
all outstanding borrowings under the Company's previous $45 million line of
credit facility and repaid the Company's $15 million senior subordinated
promissory note (the "Subordinated Note"). The Subordinated Note had been issued
on March 18, 1996 and was scheduled to mature on July 31, 1997. As a result of
the early extinguishment of the Subordinated Note, the Company accrued, in the
first quarter of 1996, an extraordinary after-tax expense of $214,000, net of a
related income tax benefit of $161,000. The extraordinary expense as well as the
related decrease in subordinated debt and increase in notes payable are
reflected in the consolidated financial statements for the six months ended June
30, 1996.
At June 30, 1996, outstanding borrowings under the Company's credit facility
aggregated $54,783,000.
3. ACQUISITIONS
Effective January 1, 1996, the Company purchased all of the capital stock of
Programming Plus Incorporated ("PPI"), which provides programming and tape and
reel services with respect to electronic components. The purchase price for PPI
consisted of $1,375,000 of common stock of the Company, valued at $2.50 per
share. Only 60,000 shares of the Company's common stock, valued at $150,000,
were released to the PPI selling shareholders at closing. The $1,225,000 balance
of the consideration ("Additional Consideration"), represented by 489,999 shares
of common stock of the Company, was retained in escrow by the Company, as escrow
agent. The Additional Consideration will be released to the PPI selling
shareholders annually if and based upon certain levels of pre-tax net income
being attained by the acquired company for the years ended December 31, 1996
through December 31, 2000. If, as of December 31, 2000, all of the Additional
Consideration has not been released, the balance held in escrow will be
canceled. The PPI selling shareholders must vote all of the Company's common
stock issued to them (whether or not held in escrow) as directed by the Company
until the
4
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
escrow is terminated. In addition, the PPI selling shareholders entered into a
four-year consulting obligation with PPI in consideration of certain automobile
benefits, and a covenant not to compete with PPI. The total amount paid by PPI
for such automobile benefits and covenant was $150,000. The acquisition was
accounted for by the purchase method of accounting which resulted in the
recognition of approximately $70,000 of excess cost over fair value of net
assets acquired. The assets, liabilities and operating results of PPI are
included in the consolidated financial statements of the Company from the date
of acquisition.
On December 29, 1995, the Company purchased through two separate mergers with
and into the Company's wholly-owned subsidiaries all of the capital stock of
Added Value Electronics Distribution, Inc. and A.V.E.D.-Rocky Mountain, Inc.
(collectively, the "Added Value Companies"). The assets, liabilities and
operating results of the Added Value Companies are included in the consolidated
financial statements from the date of the acquisitions.
The following unaudited pro forma consolidated income statement data presents
the consolidated results of operations of the Company for the quarter and six
months ended June 30, 1995 as if the acquisitions of the Added Value Companies
and PPI had occurred at the beginning of the periods presented:
<TABLE>
<CAPTION>
PERIODS ENDED JUNE 30, 1995 QUARTER SIX MONTHS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales..................................................... $54,751,000 $103,570,000
Net income.................................................... 993,000 1,783,000
Primary earnings per share.................................... .06 .12
Fully diluted earnings per share.............................. .06 .11
</TABLE>
The above pro forma information does not purport to be indicative of what would
have occurred had the acquisitions been made as of such date or of the results
which may occur in the future.
4. OPTIONS
During the six months ended June 30, 1996, the Company issued an aggregate of
226,500 stock options to 27 individuals pursuant to the Employees', Officers',
Directors' Stock Option Plan, as previously amended and restated. These options
have an exercise price of $2.31 per share and are exercisable over a five-year
period.
5. SETTLEMENT OF LITIGATION
In June 1996, the Company settled a civil action in connection with the
Company's prior acquisition of certain computer equipment. In connection with
the settlement agreement, the Company recognized an extraordinary after-tax gain
of $272,000 ($.01 per share), net of related expenses, which is reflected in the
consolidated financial statements for the three and six months ended June 30,
1996.
6. NONRECURRING EXPENSES
In May 1996, the Company decided to close its cable assembly division in Lisle,
Illinois and to relocate certain of such operations to its Miami distribution
facility. Accordingly, the Company accrued $445,000 of nonrecurring expenses in
the first quarter of 1996 relating to such decision, including the writedown of
certain cable assembly-specific inventory, operating costs through the date of
relocation and severance pay.
In June 1996, the Company terminated certain employment agreements which were
entered into in connection with the Added Value Companies' acquisitions. As a
result, the Company accrued $485,000 of nonrecurring expenses in the second
quarter of 1996 representing the aggregate of the payments to be made under such
agreements through their expiration dates of December 31, 1997.
5
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
================================================================================
All American Semiconductor, Inc. and its subsidiaries (the "Company") is a
national distributor of electronic components manufactured by others. The
Company distributes a full range of semiconductors (active components),
including transistors, diodes, memory devices and other integrated circuits, as
well as passive components, such as capacitors, resistors, inductors and
electromechanical products, including cable, connectors, filters and sockets.
These products are sold primarily to original equipment manufacturers ("OEMs")
in a diverse and growing range of industries, including manufacturers of
computers and computer-related products, satellite and communications products,
consumer goods, robotics and industrial equipment, defense and aerospace
equipment and medical instrumentation. In June 1995, the Company began
distributing a very limited offering of computer products, presently consisting
of microprocessors, motherboards, computer upgrade kits, keyboards and disk
drives. The Company's computer products are sold primarily to value added
resellers, retailers and distributors of computer products. As a result of
certain acquisitions completed in December 1995, the Company is also involved in
the design, manufacture and sale of flat panel display products, as well as
standard and custom memory module products.
RESULTS OF OPERATIONS
Net sales for the quarter and six months ended June 30, 1996 were $62.6 million
and $129.8 million, representing a 37.5% and 54.9% increase over net sales of
$45.5 million and $83.8 million for the same periods of 1995. The increases were
attributable to revenues generated by acquired companies, higher sales in
substantially all territories, revenues generated from new sales offices, and
revenues from the computer products division. Sales for the second quarter were
substantially below the Company's expectations due to adverse market conditions
and price erosion on a broad range of products.
Gross profit was $14.6 million in the second quarter of 1996, a 49.1% increase
over gross profit of $9.8 million for the same period of 1995. For the first six
months of 1996, gross profit was $29.3 million compared to $18.7 million for the
same period of 1995 representing a 56.8% increase. The increases were due to the
growth in sales as well as the increase in gross profit margins as a percentage
of net sales. Gross profit margins as a percentage of net sales were 23.4% and
22.6% for the second quarter and first six months of 1996, compared to 21.6% and
22.3% for the second quarter and first six months of 1995. The increase in gross
profit margins primarily reflects a fewer number of low margin, large volume
transactions during the 1996 periods than in the previous year.
Selling, general and administrative expenses ("SG&A") was $14.1 million for the
second quarter of 1996 compared to $7.7 million for the second quarter of 1995.
SG&A for the first half of 1996 was $26.6 million compared to $14.9 million for
the same period of 1995. The increases were primarily the result of the December
1995 acquisitions as well as the Company's rapid growth and aggressive
expansion. In connection with such acquisitions, all categories of SG&A
increased. In addition, the Company incurred consulting fees associated with the
systems conversions of the acquired companies and with the further development
of the Company's value added strategies. SG&A also increased as a result of two
new divisions, Aved Industries and Apex Solutions, which were created as part of
the acquisitions. Aved Industries concentrates on the design, manufacture, sales
and marketing of flat panel display products and technical support for these
products, as well as the design, manufacture, sales and marketing of standard
and custom memory module products. Apex Solutions was created to expand the
Company's ability to support kitting and turnkey services on a national basis.
In connection with these two new divisions, the Company increased staff and also
incurred additional operating expenses. In addition to the impact of these
acquisitions, variable SG&A expenses, including sales commissions and telephone
expenses, increased as a result of the increases in sales for the 1996 periods
over the same periods of 1995.
In order to drive and support future growth as well as to support the operations
of the above referenced acquisitions, the Company expanded its sales personnel,
during the latter part of 1995 and early 1996 opened four new sales offices,
created and staffed northeast and southwest credit departments and increased
staffing in
6
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
================================================================================
almost all corporate departments. Furthermore, in an effort to diversify its
business and expand its service capabilities and product offerings, the Company,
during 1995, created a computer products division ("CPD") which distributes
microprocessors, motherboards and other computer products and created a cable
assembly division in Lisle, Illinois. During 1996, the Company relocated its
west coast programming and distribution center into a significantly larger
facility and added additional staff for these operations. In 1996, the Company
also acquired Programming Plus Incorporated (see Note 3 to Notes to Consolidated
Condensed Financial Statements) and further increased staffing to support CPD.
As a result of all of the foregoing, SG&A for the 1996 periods reflect increased
salaries, payroll taxes and employee benefit costs as well as additional
operating expenses such as rent and office supplies.
SG&A as a percentage of net sales was 22.5% and 20.5% for the second quarter and
six months ended June 30, 1996, compared to 16.9% and 17.8% for the same periods
of 1995. The increases in SG&A as a percentage of net sales reflect the
increases in expenses associated with the acquisitions and expansion described
above as well as with the continued building of the Company's infrastructure to
support significantly higher sales levels than were attained. SG&A in absolute
dollars and as a percentage of net sales may further increase in the near term.
Due to the recent adverse market conditions and the significantly lower than
anticipated sales level, the Company has developed and begun implementing
expense control strategies. The positive impact of these strategies may not be
realized until future periods. The Company believes that as the expense
adjustments take effect and as the adverse market conditions subside, the
Company should improve its performance in the future.
Income from operations for the second quarter of 1996 was $55,000, after
deducting nonrecurring expenses of $485,000 relating to the termination of
certain employment agreements which were entered into in connection with the
Company's December 1995 acquisitions (see Note 6 to Notes to Consolidated
Condensed Financial Statements). This compared to $2.1 million of income from
operations for the second quarter of 1995. For the six months ended June 30,
1996, income from operations was $1.7 million, after deducting nonrecurring
expenses of $930,000 (see Note 6 to Notes to Consolidated Condensed Financial
Statements) compared with $3.7 million for the same period of 1995. The
decreases in income from operations, excluding the nonrecurring expenses, was
attributable to the increases in SG&A which more than offset the increase in
sales and gross profit margins.
Interest expense increased to $1.5 million and $2.4 million for the second
quarter and first half of 1996, respectively, as compared to $721,000 and $1.4
million for the same periods of 1995. The increases resulted from additional
borrowings to fund the two acquisitions completed in December 1995 as well as
additional borrowings required to support the Company's continued growth.
Interest expense for the 1996 periods also reflects amortization of deferred
financing fees as well as the impact from the increase in the Company's
borrowing rate under the New Credit Facility. See Note 2 to Notes to
Consolidated Condensed Financial Statements.
For the quarter and six months ended June 30, 1996, the Company had net losses
of $523,000, $.03 per share, and $362,000, $.02 per share, compared to net
income of $808,000, $.06 per share, and $1.3 million, $.10 per share, for the
1995 periods. Included in the second quarter and first six months of 1996 is an
extraordinary after-tax gain of $272,000 recognized in connection with the
Company's settlement of a civil litigation (see Note 5 to Notes to Consolidated
Condensed Financial Statements). In addition, the six-month period of 1996
includes an extraordinary after-tax expense of $214,000 resulting from the early
extinguishment of the Company's $15 million senior subordinated promissory note
(see Note 2 to Notes to Consolidated Condensed Financial Statements).
7
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
================================================================================
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 30, 1996 increased to approximately $79.5 million, from
working capital of $59.4 million at December 31, 1995. The current ratio was
2.87:1 at June 30, 1996, as compared to 2.31:1 at December 31, 1995. The
increase in the current ratio was primarily due to an increase in inventory as
well as a slight reduction in accounts payable and accrued expenses. Accounts
receivable levels at June 30, 1996 were $37.1 million, up slightly from accounts
receivable of $35.1 million at December 31, 1995, reflecting the growth in sales
in the first half of 1996. Inventory increased to $80.7 million at June 30,
1996, from $67.5 million at December 31, 1995. The increase in inventory was
primarily to support previously budgeted growth as well as increases in sales.
Accounts payable and accrued expenses decreased slightly to $41.6 million at
June 30, 1996, from $43.5 million at December 31, 1995. This decrease was
primarily due to the payment of liabilities incurred in connection with the two
acquisitions completed in December 1995, which was partially offset by the
increase in inventory.
On May 3, 1996, the Company entered into a new $100 million line of credit
facility with a group of banks (the "New Credit Facility") which expires May 3,
2001. Borrowings under the New Credit Facility bear interest, at the Company's
option, at either prime plus one-quarter of one percent (.25%) or LIBOR plus two
and one-quarter percent (2.25%) and are secured by all of the Company's assets
including accounts receivable, inventories and equipment. The amounts that the
Company may borrow under the New Credit Facility are based upon specified
percentages of the Company's eligible accounts receivable and inventories (as
defined). Under the New Credit Facility, the Company is required to comply with
certain affirmative and negative covenants as well as to comply with certain
financial ratios. These covenants, among other things, place limitations and
restrictions on the Company's borrowings, investments and transactions with
affiliates and prohibit dividends and stock redemptions. Furthermore, the New
Credit Facility requires the Company to maintain certain minimum levels of
tangible net worth throughout the term of the agreement and a minimum debt
service coverage ratio which is tested on a quarterly basis. See Note 2 to Notes
to Consolidated Condensed Financial Statements. At June 30, 1996, outstanding
borrowings under the New Credit Facility aggregated $54.8 million.
Effective January 1, 1996, the Company purchased all of the capital stock of
Programming Plus Incorporated ("PPI"). The purchase price for PPI consisted of
$1,375,000 of common stock of the Company, valued at $2.50 per share. Only
60,000 shares of the Company's common stock, valued at $150,000, were released
to the PPI selling shareholders at closing. The $1,225,000 balance of the
consideration ("Additional Consideration"), represented by 489,999 shares of
common stock of the Company, was retained in escrow by the Company, as escrow
agent. The Additional Consideration will be released to the PPI selling
shareholders annually if and based upon certain levels of pre-tax net income
being attained by the acquired company for the years ended December 31, 1996
through December 31, 2000. If, as of December 31, 2000, all of the Additional
Consideration has not been released, the balance held in escrow will be
canceled. The PPI selling shareholders must vote all of the Company's common
stock issued to them (whether or not held in escrow) as directed by the Company
until the escrow is terminated. In addition, the PPI selling shareholders
entered into a four-year consulting obligation with PPI in consideration of
certain automobile benefits, and a covenant not to compete with PPI. The total
amount paid by PPI for such automobile benefits and covenant was $150,000. The
acquisition was accounted for by the purchase method of accounting which
resulted in the recognition of approximately $70,000 of excess cost over fair
value of net assets acquired. The assets, liabilities and operating results of
PPI are included in the consolidated financial statements of the Company from
the date of acquisition.
The Company expects that its cash flows from operations and additional
borrowings available under the New Credit Facility will be sufficient to meet
its current financial requirements over the next twelve months.
8
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
================================================================================
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Amendment No. 1 to Loan and Security Agreement
dated August 2, 1996
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K
during the quarter ended June 30, 1996.
------------------------------
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.
ALL AMERICAN SEMICONDUCTOR, INC.
----------------------------------------------
(Registrant)
Date: August 14, 1996 /s/ PAUL GOLDBERG
----------------------------------------------
Paul Goldberg, Chairman of the Board and
Chief Executive Officer
(Duly Authorized Officer)
Date: August 14, 1996 /s/ HOWARD L. FLANDERS
----------------------------------------------
Howard L. Flanders, Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
9
<PAGE>
EXHIBIT INDEX
DOCUMENT DESCRIPTION SEQUENTIAL PAGE NUMBER
-------------------- ----------------------
10.1 Amendment No. 1 to Loan and Security Agreement 14
dated August 2, 1996
27.1 Financial Data Schedule 19
EXHIBIT 10.1
AMENDMENT NO. 1 TO
LOAN AND SECURITY AGREEMENT
August 2, 1996
All American Semiconductor, Inc.
16115 Northwest 52nd Avenue
Miami, Florida 33014
Attention: Chief Financial Officer
Ladies and Gentlemen:
Reference is made to the Loan and Security Agreement dated as
of May 3, 1996 among Harris Trust and Savings Bank, as a Lender and as
Administrative Agent for the Lenders, American National Bank and Trust Company
of Chicago, as a Lender and as Collateral Agent for the Lenders and the other
Lenders party thereto and All American Semiconductor, Inc. (the "Loan
Agreement"). Unless defined herein, capitalized terms used herein shall have the
meanings provided for such terms in the Loan Agreement.
Borrower has requested that Requisite Lenders agree to amend
the Loan Agreement in order to modify certain financial covenants and financial
statement delivery requirements contained in the Loan Agreement. Requisite
Lenders have agreed to the foregoing on the terms and pursuant to the conditions
provided herein.
Therefore, the parties hereto hereby agree as follows:
1. AMENDMENTS TO LOAN AGREEMENT. The Loan Agreement
is hereby amended as follows:
(a) SECTION 7.1(b). Section 7.1(b) of the Loan
Agreement is hereby amended by deleting therefrom the phrase "thirty (30) days"
and inserting in its place the phrase "forty-five (45) days."
(b) SECTION 8.17. Section 8.17 of the Loan Agreement is hereby
amended by deleting the amount "$24,300,000" from the second testing period of
June 30, 1996 through and including September 29, 1996 and inserting in its
place the amount "$23,750,000."
(c) SECTION 8.18. Section 8.18 of the Loan Agreement is hereby
amended by deleting therefrom the first testing period ending on June 30, 1996.
(e) SCOPE. This Amendment No. 1 to Loan and Security
Agreement shall have the effect of amending the Loan Agreement and the other
Financing Agreements as appropriate to
<PAGE>
express the agreements contained herein. In all other respects, the Loan
Agreement and the other Financing Agreements shall remain in full force and
effect in accordance with their respective terms.
2. CONDITIONS TO EFFECTIVENESS. This Amendment
No. 1 to Loan and Security Agreement shall be effective immediately upon the
execution hereof by Requisite Lenders, the acceptance hereof by each Borrower
and each Guarantor, and the delivery hereof to the Administrative Agent, at 111
West Monroe Street, Chicago, Illinois 60603, Attention: Mr. Kevin Delaplane,
Vice President, on or before August 5, 1996.
Very truly yours,
HARRIS TRUST AND SAVINGS BANK,
as Administrative Agent and a Lender
Pro Rata Share: 25%
By: /s/ HAREN BUCH
----------------------------------
Its: Vice President
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
as Collateral Agent and a Lender
Pro Rata Share: 25%
By: /s/ MARTHA GASKIN
----------------------------------
Its: Vice President
SANWA BUSINESS CREDIT
CORPORATION, as a Lender
Pro Rata Share: 12.5%
By: _______________________________
Its: ______________________________
MERCANTILE BUSINESS CREDIT,
INC., as a Lender
Pro Rata Share: 12.5%
By: /s/ MICKEY SELF
---------------------------------
Its: Vice President
-2-
<PAGE>
THE BANK OF NEW YORK
COMMERCIAL CORPORATION,
as a Lender
Pro Rata Share: 12.5%
By: _______________________________
Its: ______________________________
NATIONSBANK OF TEXAS, N.A.,
as a Lender
Pro Rata Share: 12.5%
By: _______________________________
Its: ______________________________
Acknowledged and agreed to as of this 5th day of August, 1996.
---
ALL AMERICAN SEMICONDUCTOR, INC.
By: /s/ HOWARD FLANDERS
-------------------
Its: VP & CFO
-3-
<PAGE>
ACKNOWLEDGMENT AND ACCEPTANCE OF GUARANTORS
Each of the undersigned, in its capacity as a Guarantor of the
Liabilities of Borrowers to Agents and Lenders under the Loan Agreement, hereby
acknowledges receipt of the foregoing Amendment No. 1 to Loan and Security
Agreement, accepts and agrees to be bound by the terms thereof, ratifies and
confirms all of its obligations under the Master Corporate Guaranty executed by
it and agrees that such Master Corporate Guaranty shall continue in full force
and effect as to it, notwithstanding such amendment.
Dated: August 5, 1996
Each of the Subsidiaries of All American
Semiconductor, Inc. listed on Exhibit A
attached hereto
By: /s/ HOWARD FLANDERS
-------------------
Its: VP & CFO
-4-
<PAGE>
EXHIBIT A
SUBSIDIARIES
Access Micro Products, Inc.
All American A.V.E.D., Inc.
All American Added Value, Inc.
All American Semiconductor of Atlanta, Inc.
All American Semiconductor of Chicago, Inc.
All American Semiconductor of Florida, Inc.
All American Semiconductor of Huntsville, Inc.
All American Semiconductor of Massachusetts, Inc.
All American Semiconductor of Michigan, Inc.
All American Semiconductor of Minnesota, Inc.
All American Semiconductor of New York, Inc.
All American Semiconductor of Philadelphia, Inc.
All American Semiconductor of Phoenix, Inc.
All American Semiconductor of Portland, Inc.
All American Semiconductor of Rockville, Inc.
All American Semiconductor of Salt Lake, Inc.
All American Semiconductor of Texas, Inc.
All American Semiconductor-Northern California, Inc.
All American Semiconductor of Washington, Inc.
All American Technologies, Inc.
All American Transistor of California, Inc.
American Assemblies & Design, Inc.
Aved Industries, Inc.
Palm Electronics Manufacturing Corp.
All American Semiconductor of Ohio, Inc.
All American Semiconductor of Wisconsin, Inc.
Programming Plus Incorporated
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information from the Registrant's
consolidated condensed financial statements as of and for the six months ended
June 30, 1996, and is qualified in its entirety by reference to such
consolidated condensed financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 179
<SECURITIES> 0
<RECEIVABLES> 38,314
<ALLOWANCES> 1,248
<INVENTORY> 80,736
<CURRENT-ASSETS> 122,068
<PP&E> 8,470
<DEPRECIATION> 3,220
<TOTAL-ASSETS> 136,487
<CURRENT-LIABILITIES> 42,602
<BONDS> 61,821
0
0
<COMMON> 199
<OTHER-SE> 31,865
<TOTAL-LIABILITY-AND-EQUITY> 136,487
<SALES> 129,764
<TOTAL-REVENUES> 129,764
<CGS> 100,490
<TOTAL-COSTS> 100,490
<OTHER-EXPENSES> 27,230
<LOSS-PROVISION> 335
<INTEREST-EXPENSE> 2,448
<INCOME-PRETAX> (739)
<INCOME-TAX> 319
<INCOME-CONTINUING> (420)
<DISCONTINUED> 0
<EXTRAORDINARY> 58
<CHANGES> 0
<NET-INCOME> (362)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
