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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 SEPTEMBER 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 November 11, 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.
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
FORM 10-Q - INDEX
PART ITEM PAGE
NO. NO. DESCRIPTION NO.
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<S> <C> <C> <C>
I FINANCIAL INFORMATION:
1. Financial Statements
Consolidated Condensed Balance Sheets at September 30, 1996
(Unaudited) and December 31, 1995.......................................................... 1
Consolidated Condensed Statements of Operations for the Quarters
and Nine Months Ended September 30, 1996 and 1995 (Unaudited).............................. 2
Consolidated Condensed Statements of Cash Flows for the
Nine Months Ended September 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...................................................................... 8
II OTHER INFORMATION:
4. Submission of Matters to a Vote of Security Holders......................................... 12
6. Exhibits and Reports on Form 8-K............................................................ 12
SIGNATURES.................................................................................. 13
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30 DECEMBER 31
ASSETS 1996 1995
- ------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash............................................................... $ 199,000 $ 276,000
Accounts receivable, less allowances for doubtful
accounts of $1,442,000 and $921,000............................ 34,130,000 35,101,000
Inventories........................................................ 67,480,000 67,463,000
Other current assets............................................... 6,211,000 1,959,000
----------------- -----------------
Total current assets........................................... 108,020,000 104,799,000
Property, plant and equipment - net.................................... 5,492,000 3,882,000
Deposits and other assets.............................................. 5,229,000 2,316,000
Excess of cost over fair value of net assets acquired - net............ 1,096,000 3,477,000
----------------- -----------------
$ 119,837,000 $ 114,474,000
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt.................................. $ 473,000 $ 844,000
Accounts payable and accrued expenses.............................. 33,774,000 43,451,000
Income taxes payable............................................... - 199,000
Other current liabilities.......................................... 620,000 953,000
----------------- -----------------
Total current liabilities...................................... 34,867,000 45,447,000
Long-term debt:
Notes payable...................................................... 53,280,000 29,900,000
Subordinated debt.................................................. 6,441,000 6,515,000
Other long-term debt............................................... 535,000 345,000
----------------- -----------------
95,123,000 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 (deficit)........................................ (704,000) 7,008,000
Treasury stock, at cost, 180,295 shares............................ (451,000) (451,000)
----------------- -----------------
24,714,000 32,267,000
----------------- -----------------
$ 119,837,000 $ 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 NINE MONTHS
PERIODS ENDED SEPTEMBER 30 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES................................... $ 56,514,000 $ 46,512,000 $ 181,219,000 $ 130,287,000
Cost of sales............................... (45,473,000) (36,261,000) (141,435,000) (101,364,000)
---------------- ----------------- ------------------ ----------------
Gross profit................................ 11,041,000 10,251,000 39,784,000 28,923,000
Selling, general and
administrative expenses.................... (14,040,000) (8,048,000) (40,130,000) (22,966,000)
Impairment of goodwill...................... (2,428,000) - (2,428,000) -
Restructuring and other nonrecurring
expenses................................... (1,092,000) - (2,022,000) -
---------------- ----------------- ------------------ ----------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS................................. (6,519,000) 2,203,000 (4,796,000) 5,957,000
Interest expense............................ (1,475,000) (627,000) (3,923,000) (2,013,000)
---------------- ----------------- ------------------ ----------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES .............................. (7,994,000) 1,576,000 (8,719,000) 3,944,000
Income tax (provision) benefit.............. 2,394,000 (604,000) 2,706,000 (1,622,000)
---------------- ----------------- ----------------- ----------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE DISCONTINUED
OPERATIONS AND EXTRAORDINARY
ITEMS...................................... (5,600,000) 972,000 (6,013,000) 2,322,000
Discontinued operations:
Loss from operations (net of $120,000;
$100,000; $125,000 and $103,000
income tax benefit)........................ (159,000) (131,000) (166,000) (135,000)
Loss on disposal (net of $1,200,000
income tax benefit)........................ (1,591,000) - (1,591,000) -
---------------- ----------------- ------------------ ----------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEMS........................ (7,350,000) 841,000 (7,770,000) 2,187,000
Extraordinary items:
Gain from settlement of litigation (net of
$205,000 income tax provision)............. - - 272,000 -
Loss on early retirement of debt (net of
$161,000 income tax benefit)............... - - (214,000) -
---------------- ----------------- ------------------ ----------------
NET INCOME (LOSS)........................... $ (7,350,000) $ 841,000 $ (7,712,000) $ 2,187,000
================ ================= ================== ================
Primary earnings per share:
Income (loss) from continuing operations ... $(.28) $ .06 $(.29) $ .16
Discontinued operations..................... (.09) (.01) (.09) (.01)
Extraordinary items......................... - - - -
----- ----- ----- -----
Net income (loss)........................... $(.37) $ .05 $(.38) $ .15
===== ===== ===== =====
Fully diluted earnings per share:
Income (loss) from continuing operations ... $(.28) $ .05 $(.29) $ .15
Discontinued operations..................... (.09) (.01) (.09) (.01)
Extraordinary items......................... - - - -
----- ----- ----- -----
Net income (loss) .......................... $(.37) $ .04 $(.38) $ .14
===== ===== ===== =====
</TABLE>
See notes to consolidated condensed financial statements
2
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30 1996 1995
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<S> <C> <C>
Cash Flows Used By Operating Activities........................... $ (19,622,000) $ (9,460,000)
---------------- -----------------
Cash Flows From Investing Activities:
Acquisition of property and equipment............................. (2,132,000) (1,074,000)
Increase in other assets.......................................... (1,163,000) (223,000)
---------------- -----------------
Cash flows used for investing activities..................... (3,295,000) (1,297,000)
---------------- -----------------
Cash Flows From Financing Activities:
Net borrowings under line of credit agreement..................... 23,556,000 2,411,000
Increase in notes payable......................................... 15,000,000 133,000
Repayments of notes payable....................................... (15,725,000) (310,000)
Net proceeds from issuance of equity securities................... 9,000 8,538,000
---------------- -----------------
Cash flows provided by financing activities.................. 22,840,000 10,772,000
---------------- -----------------
Increase (decrease) in cash....................................... (77,000) 15,000
Cash, beginning of period......................................... 276,000 200,000
---------------- -----------------
Cash, end of period............................................... $ 199,000 $ 215,000
================ =================
Supplemental Cash Flow Information:
Interest paid..................................................... $ 2,501,000 $ 1,733,000
================ =================
Income taxes paid................................................. $ 1,104,000 $ 523,000
================ =================
</TABLE>
Supplemental Schedule of Noncash Investing and Financing Activities:
Effective January 1, 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
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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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 September 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.
Prior periods' financial statements have been reclassified to conform with the
current period's presentation.
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. At the time of entering into such facility, borrowings under the New
Credit Facility bore 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%). Borrowings under the New Credit Facility 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, and November 1996, subsequent to the balance sheet date, the
Company's New Credit Facility was amended whereby certain financial covenants
were modified. In addition, the November 1996 amendment increased the Company's
borrowing rate by one-quarter of one percent (.25%).
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 nine months ended
September 30, 1996.
At September 30, 1996, outstanding borrowings under the Company's credit
facility aggregated $53,266,000.
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
4
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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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
excess cost over fair value of net assets acquired was subsequently deemed
impaired (see Note 4 below) and, as of September 30, 1996, was written-off. 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. See Note 4 below
regarding impairment of goodwill in connection with the acquisitions of the
Added Value Companies.
The following unaudited pro forma consolidated income statement data presents
the consolidated results of operations of the Company for the quarter and nine
months ended September 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 SEPTEMBER 30, 1995 QUARTER NINE MONTHS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales..................................................... $57,758,000 $161,327,000
Net income.................................................... 1,147,000 2,948,000
Primary earnings per share.................................... .06 .17
Fully diluted earnings per share.............................. .05 .16
</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. IMPAIRMENT OF GOODWILL
In connection with the Company's acquisitions of the Added Value Companies and
PPI, at September 30, 1996, the Company recognized an impairment of goodwill.
This noncash charge of approximately $2,400,000, which is primarily related to
the Added Value Companies, has no associated tax benefit. A variety of factors
contributed to the impairment of the goodwill relating to the Added Value
Companies. These factors include a significant reduction in the revenues and
operating results generated by the Added Value Companies` customer base acquired
by the Company, a restructuring of the Added Value Companies' kitting and
turnkey operations due to the Company determining that it was not economically
feasible to continue and expand such division as originally planned, as well as
the termination of certain principals and senior management of the Added Value
Companies who became employees of the Company at the time of the closing of the
acquisitions. See Note 5 below. These factors have greatly reduced the estimated
future cash flows from the Added Value Companies. In determining the amount of
the impairment charge, the Company developed its best estimate of projected
operating cash flows over the remaining period of expected benefit. Projected
future cash flows were discounted
5
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
and compared to the carrying value of the related goodwill. As a result, a
write-down of approximately $2,400,000 was recorded as of September 30, 1996.
5. RESTRUCTURING AND OTHER NONRECURRING EXPENSES
During the third quarter of 1996, the Company recorded a pretax charge of
$1,092,000 associated primarily with the restructuring of its kitting and
turnkey operations. The kitting department was created toward the end of 1994
and, at the time of the December 1995 acquisitions of the Added Value Companies,
the Company intended to utilize the extensive kitting capabilities acquired and
expand such service nationwide. In addition, the acquisitions provided the
Company with capabilities in turnkey manufacturing services. After evaluating,
with the assistance of consultants, the Company's cost structure and service
capabilities, management determined that it was not economically feasible to
continue its current level of investment in such services, especially in light
of the adverse market conditions within the industry. As a result, the Company
adopted a plan to restructure its kitting and turnkey operations. In connection
with this plan, the Company reduced the related workforce and accrued for
employee severance and related benefits and wrote down various related assets.
The portion of the restructuring charge which represented severance and related
benefits aggregated approximately $625,000. The workforce reductions primarily
affected approximately 90 employees of the Company's sales, management and
operations departments. As of September 30, 1996, approximately $56,000 of
termination benefits were applied to the restructuring accrual. The Company
expects to pay approximately 30% of the accrued liability by the end of 1996,
with the balance expected to be paid during 1997. After the completion of the
restructuring, the Company should have reduced overhead and enhanced operational
efficiency.
In addition, in the third quarter of 1996, the Company wrote-off $2,000,000 of
inventory associated primarily with the restructuring of the kitting and turnkey
operations which is reflected in cost of sales in the accompanying Consolidated
Condensed Statements of Operations.
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.
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 write-down of
certain cable assembly-specific inventory, operating costs through the date of
relocation and severance pay.
6. DISCONTINUED OPERATIONS
In June 1995, the Company established a computer products division ("CPD") which
operates under the name Access Micro Products. This division sells
microprocessors, motherboards, computer upgrade kits, keyboards and disk drives
primarily to value added resellers, retailers and distributors of computer
products. During the first quarter of 1996 this division was profitable and
growing. As a result of this growth and at the request of the division's primary
supplier, the Company expanded its staffing and infrastructure to support the
expected continued growth. During the second quarter of 1996, the Company was
notified by the division's primary supplier that it had discontinued the
production of certain products that were the mainstay of the Company's computer
products division. Although the Company obtained additional product offerings,
without these mainstay products revenues of Access Micro Products were severely
impacted and, as a result, management decided to discontinue CPD. The Company
finalized its plan of disposal during the third quarter of 1996. Accordingly,
this division is accounted for as discontinued operations and the results of
operations for all periods shown are segregated in the accompanying Consolidated
Condensed Statements of Operations. Net sales, cost
6
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
of sales, operating expenses and income taxes for the prior periods have been
reclassified for amounts associated with the discontinued division. The loss on
disposal of $2,791,000, on an pretax basis, includes the estimated costs and
expenses associated with the disposal of $2,326,000 as well as a provision of
$465,000 for operating losses during the phase-out period, which is expected to
be approximately six months.
Sales from this division were $835,000, $5,894,000, $436,000 and $436,000 for
the three and nine months ended September 30, 1996 and for the same periods of
1995, respectively. The net assets of discontinued operations, after reflecting
certain noncash write-offs of inventory and receivables, included in the
accompanying Consolidated Condensed Balance Sheet at September 30, 1996 are
summarized as follows:
Current assets.................................... $ 767,000
Property, plant and equipment - net............... 42,000
Current liabilities............................... (4,000)
---------
Net assets........................................ $ 805,000
=========
7. OPTIONS
During the nine months ended September 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.
8. EARNINGS PER SHARE
The weighted average shares outstanding are as follows:
<TABLE>
<CAPTION>
QUARTERS NINE MONTHS
PERIODS ENDED SEPTEMBER 30 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Primary 20,058,994 18,659,388 20,303,120 15,050,361
Fully Diluted 20,058,994 18,989,945 20,303,120 15,822,097
</TABLE>
9. 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, net of related expenses, which is reflected in the Consolidated
Condensed Financial Statements for the nine months ended September 30, 1996.
7
<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. During the third quarter of 1996, the Company decided to discontinue its
computer products division. See Note 6 to Notes to Consolidated Condensed
Financial Statements. 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 nine months ended September 30, 1996 were $56.5
million and $181.2 million, representing a 21.5% and 39.1% increase over net
sales of $46.5 million and $130.3 million for the same periods of 1995. The
increases were primarily attributable to revenues generated by acquired
companies, higher sales in certain territories, and revenues generated from new
sales offices. While sales for the 1996 periods were ahead of last year, sales
for the third quarter of 1996 represented the second consecutive quarterly
decline and were substantially below the Company's expectations due to adverse
market conditions and continued price erosion on a broad range of products.
Gross profit, without giving effect to a $2.0 million inventory write-off
associated primarily with the Company's restructuring plan of its kitting and
turnkey operations (see Note 5 to Notes to Consolidated Condensed Financial
Statements), was $13.0 million in the third quarter of 1996 representing a 27.2%
increase over gross profit of $10.3 million for the same period of 1995. For the
first nine months of 1996, gross profit was $41.8 million, excluding the
inventory write-off, compared to $28.9 million for the same period of 1995,
representing a 44.5% 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, without giving effect to the
inventory write-off, were 23.1% for the third quarter and first nine months of
1996 compared to 22.0% and 22.2% for the third quarter and first nine 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. After giving effect to the inventory write-off, gross profit
dollars were $11.0 million and $39.8 million and gross profit margins were 19.5%
and 22.0% for the third quarter and first nine months of 1996.
Selling, general and administrative expenses ("SG&A") was $14.0 million for the
third quarter of 1996 compared to $8.0 million for the third quarter of 1995.
SG&A for the first nine months of 1996 was $40.1 million compared to $23.0
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 staffing and also incurred additional operating expenses. In addition
to the impact of these acquisitions, variable SG&A expenses, including sales
8
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
================================================================================
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 five new sales offices,
created and staffed northeast and southwest credit departments and increased
staffing in 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, which in May
1996 was relocated to the Company's Miami distribution facility. 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 early 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 reflects 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 24.8% and 22.1% for the third quarter and
nine months ended September 30, 1996, compared to 17.3% and 17.6% 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, the additional operating costs in connection with the restructuring 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 and has restructured and discontinued unprofitable
divisions. During the third quarter of 1996, the Company determined that it was
not economically feasible to continue its current level of investment in Apex
Solutions, especially in light of the adverse market conditions within the
industry. As a result, the Company adopted a plan to restructure its kitting and
turnkey operations. In connection with this plan, the Company reduced the
related workforce and accrued for employee severance and related benefits and
wrote down various related assets. This restructuring resulted in a pretax
charge of $1.1 million which is reflected as restructuring and other
nonrecurring expenses in the accompanying Consolidated Condensed Statements of
Operations. See Note 5 to Notes to Consolidated Condensed Financial Statements.
In addition, SG&A for the 1996 periods includes approximately $800,000 of costs
primarily associated with operating Apex Solutions during the restructuring
phase. In addition, based on a decision made in the third quarter of 1996, the
Company is in the process of closing CPD and has reflected this division in the
accompanying Consolidated Condensed Financial Statements as discontinued
operations. See Note 6 to Notes to Consolidated Condensed Financial Statements.
The positive impact of these strategies may not be realized until future
periods. The Company believes that as the expense adjustments take effect,
including the benefits of the restructuring of the kitting and turnkey
operations and the discontinuance of CPD, and as the adverse market conditions
subside, the Company should improve its performance in the future.
In connection with the Company's acquisitions of the Added Value Companies and
PPI, at September 30, 1996, the Company recognized an impairment of goodwill.
This noncash charge of approximately $2,400,000, which is primarily related to
the Added Value Companies, has no associated tax benefit. A variety of factors
contributed to the impairment of the goodwill relating to the Added Value
Companies. These factors include a significant reduction in the revenues and
operating results generated by the Added Value Companies' customer base acquired
by the Company, a restructuring of the Added Value Companies' kitting and
turnkey operations due to the Company determining that it was not economically
feasible to continue and expand such division as originally planned, as well as
the termination of certain principals and senior management of the Added Value
Companies who became employees of the Company at the time of the closing of the
acquisitions. These factors
9
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
================================================================================
have greatly reduced the estimated future cash flows from the Added Value
Companies. See Notes 4 and 5 to Notes to Consolidated Condensed Financial
Statements.
For the third quarter of 1996, after deducting the above mentioned inventory
write-off, impairment of goodwill and restructuring and other nonrecurring
expenses, the Company had a loss from continuing operations of $6.5 million.
This compared to $2.2 million of income from continuing operations for the third
quarter of 1995. For the nine months ended September 30, 1996, the loss from
continuing operations was $4.8 million, after deducting the previously described
inventory write-off, impairment of goodwill and restructuring expenses
associated with the kitting and turnkey operations, as well as other
nonrecurring expenses relating to the termination of certain employment
agreements entered into in connection with the acquisitions of the Added Value
Companies and the relocation of the Company's Illinois cable assembly division.
See Notes 4 and 5 to Notes to Consolidated Condensed Financial Statements.
Income from continuing operations was $6.0 million for the nine months ended
September 30, 1995. The decreases in income from continuing operations, without
giving effect to these charges, 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 $3.9 million for the third
quarter and first nine months of 1996, as compared to $627,000 and $2.0 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 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.
After giving effect to the previously described after-tax write-off of
inventory, impairment of goodwill, restructuring and other nonrecurring
expenses, as well as a loss from discontinued operations of CPD, the Company had
a net loss of $7.4 million, $.37 per share, and $7.7 million, $.38 per share,
for the quarter and nine months ended September 30, 1996, compared to net income
of $841,000, $.05 per share ($.04 fully diluted), and $2.2 million, $.15 per
share ($.14 fully diluted), for the 1995 periods. Management decided to
discontinue CPD due to revenues generated by this division being significantly
below the Company's expectations principally as a result of the division's
primary supplier discontinuing the production of certain products that were the
mainstay of this division. The loss from discontinued operations reflects the
estimated costs and expenses associated with the disposal, including the
write-off of certain assets, as well as a provision for operating losses during
the phase-out period which is expected to be approximately six months. Included
in the first nine months of 1996 is an extraordinary after-tax gain of $272,000
recognized in connection with the Company's settlement of a civil litigation.
The nine-month period of 1996 also includes an extraordinary after-tax expense
of $214,000 resulting from the early extinguishment of the Company's $15 million
senior subordinated promissory note.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at September 30, 1996 increased to $73.2 million, from working
capital of $59.4 million at December 31, 1995. The current ratio was 3.10:1 at
September 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 other current assets
relating to a receivable generated in 1996 in connection with income tax
benefits associated with the restructuring and other nonrecurring expenses, and
discontinued operations, as well as a reduction in accounts payable and accrued
expenses. Accounts receivable levels at September 30, 1996 were $34.1 million,
down slightly from accounts receivable of $35.1 million at December 31, 1995.
The decrease in accounts receivable at September 30, 1996 was due to a noncash
write-off of $1.1 million of accounts receivable relating to the closing of CPD
as well as a decrease in the average number of days that accounts receivables
were outstanding from December 31, 1995. Inventory levels were $67.5 million at
September 30, 1996 and December 31, 1995. The inventory balance at September 30,
1996 reflects noncash write-offs of $2.0 million relating to the restructuring
of the kitting and turnkey operations and $650,000 relating to the closing of
CPD. Accounts
10
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
================================================================================
payable and accrued expenses decreased to $33.8 million at September 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
accrued expenses associated with the restructuring of the kitting and turnkey
operations and the closing of the computer products division. The Company
expects to pay approximately 30% of this accrued liability by the end of 1996,
with the balance expected to be paid during 1997. See Notes 5 and 6 to Notes to
Consolidated Condensed Financial Statements.
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. At the time of entering into such facility, borrowings under the New
Credit Facility bore 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%). Borrowings under the New Credit Facility 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, and November 1996, subsequent to the balance sheet date, the
Company's New Credit Facility was amended whereby certain financial covenants
were modified. In addition, the November 1996 amendment increased the Company's
borrowing rate by one-quarter of one percent (.25%). See Note 2 to Notes to
Consolidated Condensed Financial Statements. At September 30, 1996, outstanding
borrowings under the New Credit Facility aggregated $53.3 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 excess cost over fair value of net assets
acquired was subsequently deemed impaired and, as of September 30, 1996, was
written-off. The assets, liabilities and operating results of PPI are included
in the consolidated financial statements of the Company from the date of
acquisition. See Note 3 to Notes to Consolidated Condensed Financial Statements.
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.
11
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
- ------------------------------------------------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On August 28, 1996, the Registrant held its 1995 annual
meeting of shareholders (the "Annual Meeting").
(b) One matter voted on at the Annual Meeting was the election
of two directors of the Registrant. The two nominees, who were
existing directors of the Registrant and nominees of the
Registrant's Board of Directors, were re-elected at the Annual
Meeting as directors of the Registrant, receiving the number
and percentage of votes for election and abstentions as set
forth next to their respective names below:
<TABLE>
<CAPTION>
NOMINEE FOR DIRECTOR FOR ABSTAIN
-------------------- ---------- -------
<S> <C> <C> <C> <C>
Bruce M. Goldberg 17,042,249 98.8% 208,635 1.2%
Howard L. Flanders 17,038,749 98.8% 212,135 1.2%
</TABLE>
The other directors whose term of office as directors
continued after the Annual Meeting are Paul Goldberg, Rick
Gordon, S. Cye Mandel and Sheldon Lieberbaum.
(c) The following additional matter was separately voted upon
at the Annual Meeting and received the votes of the holders of
the number of shares of Common Stock voted in person or by
proxy at the Annual Meeting and the percentage of total votes
cast as indicated below:
Ratification of selection of independent accountants
for 1996 fiscal year
For 17,095,416 99.1%
Against 108,986 0.6%
Abstain 46,482 0.3%
(d) Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 Amendment No. 2 to Loan and Security Agreement
dated November 14, 1996
11.1 Statement Re: Computation of Per Share Earnings
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 September 30, 1996.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALL AMERICAN SEMICONDUCTOR, INC.
-----------------------------------------
(Registrant)
Date: November 14, 1996 /s/ PAUL GOLDBERG
-----------------------------------------
Paul Goldberg, Chairman of the Board and
Chief Executive Officer
(Duly Authorized Officer)
Date: November 14, 1996 /s/ HOWARD L. FLANDERS
-----------------------------------------
Howard L. Flanders, Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
PAGE
DOCUMENTS NUMBER
--------- ------
10.1 Amendment No. 2 to Loan and Security Agreement dated
November 14, 1996.
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule
14
AMENDMENT NO. 2 TO
LOAN AND SECURITY AGREEMENT
November 14, 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 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 1.1. Section 1.1 of the Loan Agreement is
amended, as follows:
(i) The definition of the term "Applicable Domestic
Margin" contained in Section 1.1 of the Loan Agreement is
hereby amended and restated in its entirety, as follows:
"Applicable Domestic Margin" shall mean an amount
equal to one-half of one percent (.50%), subject to a
prospective decrease of one-quarter of one percent (.25%) upon
the occurrence of the Special Rate Decrease Event and each
Rate Decrease Event, and subject to a
<PAGE>
prospective increase of one-quarter of one percent (.25%) upon
the occurrence of each Rate Increase Event."
(ii) The definition of the term "Applicable LIBOR
Margin" contained in Section 1.1 of the Loan Agreement is
hereby amended and restated in its entirety, as follows:
"Applicable LIBOR Margin" shall mean an amount equal
to two and one-half percent (2.50%), subject to a prospective
decrease of one-quarter of one percent (.25%) upon the
occurrence of the Special Rate Decrease Event and each Rate
Decrease Event, and subject to a prospective increase of
one-quarter of one percent (.25%) upon the occurrence of each
Rate Increase Event; PROVIDED, that any increase or decrease
of the Applicable LIBOR Margin will only be applicable with
respect to LIBOR Portions selected or continued after the
effective date of the applicable Rate Increase Event, Special
Rate Decrease Event or Rate Decrease Event."
(iii) The definition of the term "Tangible Net Worth"
contained in Section 1.1 of the Loan Agreement is hereby
amended by inserting the following immediately after clause
(e) thereof and immediately prior to the phrase ", all
determined on a consolidated basis in accordance with GAAP":
", plus the amount of any loss recognized by the Designated
Companies with respect to the 1996 fiscal year relating to the
buyout of an executive management contract entered into on
May 24, 1995 which included a Retirement Election"
(b) Section 1.1 of the Loan Agreement is further amended by
inserting the following additional definition therein, in appropriate
alphabetical order:
"Special Rate Decrease Event" shall mean the
satisfaction, as of the last day of any calendar month,
commencing January 31, 1997, that the Applicable Domestic
Margin is equal to one-half of one percent (.50%) and the
Applicable LIBOR Margin is equal to two and one-half percent
(2.50%), of all of the following conditions: (a) as of such
date, no Default or Event of Default is in existence, (b)
Tangible Net Worth during the calendar month ending on such
date is greater than or equal to Twenty-Three Million Five
Hundred Thousand Dollars ($23,500,000), and (c) average Excess
Loan Availability for the three (3) month period ending on
such date is greater than or equal to Four Million Dollars
($4,000,000); PROVIDED, that compliance with clause (b) above
shall be determined pursuant to the consolidated monthly (or,
for the last month in any fiscal year, the annual audited)
financial
-2-
<PAGE>
statements of the Designated Companies for such period, all
delivered pursuant to SECTION 7.1 and shall prospectively take
effect ten (10) Business Days after the date of delivery of
such financial statements to the Administrative Agent."
(c) SECTION 2.9. Clause (c) of Section 2.9 of the Loan
Agreement is hereby amended and restated in its entirety, as follows:
"(c) one percent (1%) of the Maximum Facility if such
prepayment and termination occurs after the second anniversary
of the date hereof (including without limitation during any
renewal Term, if applicable)."
(d) SECTION 7.1. Clause (a) of Section 7.1 of the Loan
Agreement is hereby amended by deleting therefrom the phrase "as soon as
practicable and in any event with thirty (30) days after the end of each month,
commencing no later than ninety (90) days after the date hereof" and inserting
in its place the following:
"as soon as practicable and in any event within forty-five
(45) days after the end of each month that is the last month
of a fiscal quarter and within thirty (30) days after the end
of each other month,"
(e) SECTION 8.17. The table contained in Section 8.17 of the
Loan Agreement is hereby amended and restated in its entirety, as follows:
<TABLE>
<CAPTION>
"PERIOD AMOUNT
------- ------
<S> <C>
June 30, 1996 through and including $19,000,000
September 29, 1996
September 30, 1996 through and including $19,000,000
December 30, 1996
December 31, 1996 through and including $19,000,000
March 30, 1997
March 31, 1997 through and including $19,000,000
June 29, 1997
June 30, 1997 through and including $19,250,000
September 29, 1997
September 30, 1997 through and including $19,500,000
December 30, 1997
-3-
<PAGE>
December 31, 1997 through and including $20,000,000
March 30, 1998
Each three month period thereafter The actual Tangible Net
commencing on March 31 and ending Worth of the Designated
on the next succeeding June 29 Companies as of the prior
September 30, plus $1,500,000
Each three month period thereafter The actual Tangible Net
commencing on June 30 and ending Worth of the Designated
on the next succeeding September 29 Companies as of the prior
December 31, plus $1,500,000
Each three month period thereafter The actual Tangible Net
commencing on September 30 and ending Worth of the Designated
on the next succeeding December 30 Companies as of the prior
March 31, plus $1,500,000
Each three month period thereafter The actual Tangible Net
commencing on December 31 and Worth of the Designated
ending on the next succeeding March 30 Companies as of the prior
June 30, plus $1,500,000"
</TABLE>
(f) SECTION 8.18. The table contained in Section 8.18 of the
Loan Agreement is hereby amended and restated in its entirety, as follows:
"PERIOD RATIO
------- -----
Nine month period ending September 30, 1996 (2.85):1.00
Twelve month period ending (1.75):1.00
December 31, 1996
Twelve month period ending (1.75):1.00
March 31, 1997
Twelve month period ending (1.25):1.00
June 30, 1997
Twelve month period ending 1.00:1.00
September 30, 1997
Twelve month period ending 1.20:1.00
December 31, 1997
-4-
<PAGE>
Twelve month period ending 1.25:1.00"
March 31, 1998 and each
twelve month period ending on
the last day of a calendar quarter
thereafter
(g) SCOPE. This Amendment No. 2 to Loan and Security Agreement
shall have the effect of amending the Loan Agreement and the other Financing
Agreements as appropriate to 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. 2 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 November 14, 1996.
Very truly yours,
HARRIS TRUST AND SAVINGS BANK,
as Administrative Agent and a Lender
Pro Rata Share: 25%
By: _______________________________
Its: ______________________________
AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO,
as Collateral Agent and a Lender
Pro Rata Share: 25%
By: _______________________________
Its: ______________________________
SANWA BUSINESS CREDIT
CORPORATION, as a Lender
Pro Rata Share: 12.5%
-5-
<PAGE>
By: _______________________________
Its: ______________________________
MERCANTILE BUSINESS CREDIT,
INC., as a Lender
Pro Rata Share: 12.5%
By: _______________________________
Its: ______________________________
-6-
<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 14th day of November, 1996.
ALL AMERICAN SEMICONDUCTOR, INC.
By: __________________________
Its: _________________________
-7-
<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. 2 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: November 14, 1996
Each of the Subsidiaries of All American
Semiconductor, Inc. listed on Exhibit A
attached hereto
By: _______________________________
Its: ______________________________
-8-
<TABLE>
<CAPTION>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES EXHIBIT 11.1
COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
QUARTERS NINE MONTHS
PERIODS ENDED SEPTEMBER 30 1996 1995 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
NET INCOME (LOSS)........................... $ (7,350,000) $ 841,000 $ (7,712,000) $ 2,187,000
================ ================= ================== ================
WEIGHTED AVERAGE SHARES:
Common shares outstanding............... 19,748,600 17,588,296 19,746,118 14,420,449
Common share equivalents................ 310,394 1,071,092 557,002 629,912
---------------- ----------------- ------------------ ----------------
Weighted average number of common
shares and common share
equivalents outstanding............... 20,058,994 18,659,388 20,303,120 15,050,361
================ ================= ================== ================
PRIMARY EARNINGS (LOSS) PER
COMMON SHARE........................... $(.37) $.05 $(.38) $.15
===== ==== ===== ====
FULLY DILUTED EARNINGS PER SHARE:
NET INCOME (LOSS)........................... $ (7,350,000) $ 841,000 $ (7,712,000) $ 2,187,000
================ ================= ================== ================
WEIGHTED AVERAGE SHARES:
Weighted average number of common
shares and common share
equivalents outstanding............... 20,058,994 18,659,388 20,303,120 15,050,361
Additional options not included
above................................. - 330,557 - 771,736
---------------- ----------------- ------------------ ----------------
Weighted average number of common
shares outstanding as adjusted....... 20,058,994 18,989,945 20,303,120 15,822,097
================ ================= ================== ================
FULLY DILUTED EARNINGS (LOSS)
PER COMMON SHARE........................ $(.37) $.04 $(.38) $.14
===== ==== ===== ====
</TABLE>
<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 nine months ended
September 30, 1996, and is qualified in its entirety by reference to such
consolidated condensed financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 199
<SECURITIES> 0
<RECEIVABLES> 35,572
<ALLOWANCES> 1,442
<INVENTORY> 67,480
<CURRENT-ASSETS> 108,020
<PP&E> 8,947
<DEPRECIATION> 3,455
<TOTAL-ASSETS> 119,837
<CURRENT-LIABILITIES> 34,867
<BONDS> 60,256
0
0
<COMMON> 199
<OTHER-SE> 24,515
<TOTAL-LIABILITY-AND-EQUITY> 119,837
<SALES> 181,219
<TOTAL-REVENUES> 181,219
<CGS> 141,435
<TOTAL-COSTS> 141,435
<OTHER-EXPENSES> 43,888
<LOSS-PROVISION> 692
<INTEREST-EXPENSE> 3,923
<INCOME-PRETAX> (8,719)
<INCOME-TAX> 2,706
<INCOME-CONTINUING> (6,013)
<DISCONTINUED> (1,757)
<EXTRAORDINARY> 58
<CHANGES> 0
<NET-INCOME> (7,712)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> (.38)
</TABLE>
