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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 MARCH 31, 1998
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 May 12, 1998, 19,863,895 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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<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 March 31, 1998
(Unaudited) and December 31, 1997.............................. 1
Consolidated Condensed Statements of Income for the Quarters
Ended March 31, 1998 and 1997 (Unaudited)...................... 2
Consolidated Condensed Statements of Cash Flows for the
Quarters Ended March 31, 1998 and 1997 (Unaudited)............. 3
Notes to Consolidated Condensed Financial Statements (Unaudited). 4
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 5
II OTHER INFORMATION:
2. Changes in Securities and Use of Proceeds........................ 8
6. Exhibits and Reports on Form 8-K................................. 8
SIGNATURES....................................................... 8
i
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31 December 31
ASSETS 1998 1997
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(UNAUDITED)
<S> <C> <C>
Current assets:
Cash .............................................................. $ 101,000 $ 444,000
Accounts receivable, less allowances for doubtful
accounts of $1,300,000 and $1,166,000............................. 34,499,000 32,897,000
Inventories......................................................... 67,128,000 67,909,000
Other current assets................................................ 2,253,000 2,074,000
--------------- ---------------
Total current assets.............................................. 103,981,000 103,324,000
Property, plant and equipment - net................................... 4,571,000 4,779,000
Deposits and other assets............................................. 3,099,000 3,157,000
Excess of cost over fair value of net assets acquired - net........... 1,013,000 1,026,000
--------------- ---------------
$ 112,664,000 $ 112,286,000
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt................................... $ 319,000 $ 304,000
Accounts payable and accrued expenses............................... 38,623,000 39,154,000
Income taxes payable................................................ 305,000 389,000
Other current liabilities........................................... 196,000 169,000
--------------- ---------------
Total current liabilities......................................... 39,443,000 40,016,000
Long-term debt:
Notes payable....................................................... 39,579,000 39,084,000
Subordinated debt................................................... 6,231,000 6,293,000
Other long-term debt................................................ 1,219,000 1,219,000
--------------- ---------------
86,472,000 86,612,000
--------------- ---------------
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, 19,863,895 and 20,353,894 shares issued,
19,863,895 shares outstanding..................................... 199,000 199,000
Capital in excess of par value...................................... 25,588,000 25,588,000
Retained earnings................................................... 856,000 338,000
Treasury stock, at cost, 180,295 shares............................. (451,000) (451,000)
--------------- ---------------
26,192,000 25,674,000
--------------- ---------------
$ 112,664,000 $ 112,286,000
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</TABLE>
See notes to consolidated condensed financial statements
1
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED MARCH 31 1998 1997
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<S> <C> <C>
NET SALES..................................................... $ 63,530,000 $ 62,239,000
Cost of sales................................................. (49,419,000) (48,099,000)
---------------- ----------------
Gross profit.................................................. 14,111,000 14,140,000
Selling, general and administrative expenses.................. (12,104,000) (12,413,000)
---------------- ----------------
INCOME FROM OPERATIONS........................................ 2,007,000 1,727,000
Interest expense.............................................. (1,098,000) (1,197,000)
---------------- ----------------
INCOME BEFORE INCOME TAXES.................................... 909,000 530,000
Income tax provision.......................................... (391,000) (228,000)
---------------- ----------------
NET INCOME.................................................... $ 518,000 $ 302,000
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Basic and diluted earnings per share.......................... $ .03 $ .02
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</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)
<TABLE>
<CAPTION>
QUARTERS ENDED MARCH 31 1998 1997
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<S> <C> <C>
Cash Flows Provided By (Used For) Operating Activities............ $ (669,000) $ 4,652,000
------------- -------------
Cash Flows From Investing Activities:
Acquisition of property and equipment............................. (40,000) (49,000)
Increase in other assets.......................................... (77,000) (34,000)
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Cash flows used for investing activities...................... (117,000) (83,000)
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Cash Flows From Financing Activities:
Net borrowings (repayments) under line of credit agreement........ 503,000 (4,839,000)
Repayments of notes payable....................................... (60,000) (66,000)
Net proceeds from issuance of equity securities................... - 15,000
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Cash flows provided by (used for) financing activities........ 443,000 (4,890,000)
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Decrease in cash.................................................. (343,000) (321,000)
Cash, beginning of period......................................... 444,000 525,000
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Cash, end of period............................................... $ 101,000 $ 204,000
============= =============
Supplemental Cash Flow Information:
Interest paid..................................................... $ 913,000 $ 1,079,000
============= =============
Income taxes paid................................................. $ 479,000 $ 11,000
============= =============
</TABLE>
See notes to consolidated condensed financial statements
3
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 March 31, 1998, 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, 1997) and additional financial information, see the Company's
Annual Report on Form 10-K for the year ended December 31, 1997, including the
consolidated financial statements and notes thereto which should be read in
conjunction with these financial statements.
Earnings Per Share
- ------------------
The following average shares were used for the computation of basic and diluted
earnings per share:
QUARTERS ENDED MARCH 31 1998 1997
- --------------------------------------------------------------------------------
Basic................................ 19,683,600 19,665,378
Diluted.............................. 20,146,069 19,697,790
2. LONG-TERM DEBT
Outstanding borrowings at March 31, 1998 under the Company's $100 million line
of credit facility aggregated $39,503,000.
3. OPTIONS
During the quarter ended March 31, 1998, the Company granted an aggregate of
195,000 stock options to 31 individuals pursuant to the Employees', Officers',
Directors' Stock Option Plan, as previously amended and restated. These options
have an exercise price of $1.44 per share and generally vest over a five-year
period and are exercisable over a six-year period.
4
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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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, switches, 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. The Company also sells products
to contract electronics manufacturers who manufacture products for companies in
all electronics industry segments. Through the Aved Memory Products ("AMP") and
Aved Display Technologies ("ADT") divisions of its subsidiary, Aved Industries,
Inc., the Company also designs and has manufactured under the label of its
subsidiary's divisions, certain board level products including memory modules
and flat panel display driver boards. These products are also sold to OEMs.
Results of Operations
- ---------------------
Net sales for the first quarter of 1998 increased to $63.5 million from net
sales of $62.2 million for the same period of 1997. The increase in sales is
attributable to volume increases which more than offset the decline in unit
prices on certain products. In addition, the Company continues to benefit from
its expanded service capabilities including electronic commerce programs.
Gross profit was $14.1 million for both the first quarter of 1998 and 1997.
Gross profit margins as a percentage of net sales were 22.2% for the first three
months of 1998 compared to 22.7% for the same period of 1997. The decline in
gross profit margins reflects a greater number of low margin, large volume
transactions during the first quarter of 1998 than in the first quarter of 1997
as well as continued changes in the Company's product mix. In addition, the
Company has experienced lower margins relating to the development of long-term
strategic relationships with accounts which have required aggressive pricing
programs. Management expects downward pressure on gross profit margins to
continue in the future.
Selling, general and administrative expenses ("SG&A") was $12.1 million for the
first quarter of 1998 down from $12.4 million for the first quarter of 1997.
Even with an increase in net sales, SG&A decreased in absolute dollars
reflecting the continued benefits of the Company's expense control programs.
SG&A as a percentage of net sales improved to 19.1% for the quarter ended March
31, 1998, compared to 19.9% for the same period of 1997. The improvement in SG&A
as a percentage of sales reflects the decrease in SG&A in absolute dollars as
well as the increase in net sales. With its present infrastructure, including
the Company's excess plant capacity, the Company believes that it can support
higher sales without a significant increase in fixed costs. This should result
in improved operating efficiencies and greater economies of scale in the future
if the Company succeeds in increasing its sales volume. SG&A in absolute dollars
and as a percentage of net sales may increase in the near term.
Income from operations increased to $2.0 million for the first quarter of 1998
from $1.7 million for the first quarter of 1997. The increase in income from
operations was attributable to the increase in net sales, the benefits derived
from the Company's cost control programs, improved operating efficiencies as
well as the decrease in SG&A both in absolute dollars and as a percentage of net
sales.
5
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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Interest expense decreased slightly to $1.1 million for the first quarter of
1998 compared to $1.2 million for the same period of 1997. The decrease in
interest expense resulted from lower average borrowings.
Net income was $518,000 ($.03 per share) for the quarter ended March 31, 1998,
up from $302,000 ($.02 per share) for the same period of 1997. The increase in
earnings for the first three months of 1998 reflects the increase in sales
combined with improved operating efficiencies as well as a reduction in interest
expense, all as previously discussed.
Liquidity and Capital Resources
- -------------------------------
Working capital at March 31, 1998 increased to $64.5 million from working
capital of $63.3 million at December 31, 1997. The current ratio improved to
2.64:1 at March 31, 1998, compared to 2.58:1 at December 31, 1997. The increases
in working capital and in the current ratio were due primarily to an increase in
accounts receivable and a decrease in accounts payable. These changes more than
offset a decrease in inventory. Accounts receivable levels at March 31, 1998
were $34.5 million, up from accounts receivable of $32.9 million at December 31,
1997, reflecting increased sales for March 1998 over December 1997.
During the first quarter of 1998, as a result of the Company satisfying certain
conditions, the Company's borrowing rate under its credit facility was decreased
by one-quarter of one percent (.25%). At March 31, 1998, outstanding borrowings
under this facility aggregated $39.5 million.
The Company expects that its cash flows from operations and additional
borrowings available under its credit facility will be sufficient to meet its
current financial requirements over the next twelve months.
Forward-Looking Statements
- --------------------------
This Form 10-Q contains forward-looking statements (within the meaning of
Section 21E. of the Securities Exchange Act of 1934, as amended), representing
the Company's current expectations and beliefs concerning the Company's future
performance and operating results, its products, services, markets and industry,
and/or future events relating to or effecting the Company and its business and
operations. When used in this Form 10-Q, the words "believes," "estimates,"
"plans," "expects," "intends," "anticipates," and similar expressions as they
relate to the Company or its management are intended to identify forward-looking
statements. The actual results or achievements of the Company could differ
materially from those indicated by the forward-looking statements because of
various risks and uncertainties related to and including, without limitation,
the effectiveness of the Company's business and marketing strategies, timing of
delivery of products from suppliers, the product mix sold by the Company, the
Company's development of new customers, existing customer demand as well as the
level of demand for products of its customers, availability of products from and
the establishment and maintenance of relationships with suppliers, price
competition for products sold by the Company, management of growth and expenses,
the Company's ability to collect accounts receivable, price decreases on
inventory that is not price protected, gross profit margins, availability and
terms of financing to fund capital needs, the continued enhancement of
telecommunication, computer and information systems, the achievement by the
Company and its vendors and customers of Year
6
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ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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2000 compliance in a timely and cost efficient manner, the continued and
anticipated growth of the electronics industry and electronic components
distribution industry, the impact on certain of the Company's suppliers and
customers of economic or financial turbulence in off-shore economies and/or
financial markets, change in government tariffs or duties, a change in interest
rates, the state of the general economy, and the other risks and factors
detailed in this Form 10-Q and in the Company's other filings with the
Securities and Exchange Commission. These risks and uncertainties are beyond the
ability of the Company to control. In many cases, the Company cannot predict the
risks and uncertainties that could cause actual results to differ materially
from those indicated by the forward-looking statements.
7
<PAGE>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
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ITEM 2. Changes in Securities and Use of Proceeds
-----------------------------------------
(c) Sales of Unregistered Securities
--------------------------------
The Company has not issued or sold any unregistered securities during
the quarter ended March 31, 1998, except that, pursuant to the
Company's Employees', Officers', Directors' Stock Option Plan, as
previously amended and restated, the Company granted stock options to
31 individuals during the quarter ended March 31, 1998 to purchase
195,000 shares of the Company's common stock at an exercise price of
$1.44 per share. The stock options generally vest over a five-year
period and are exercisable over a six-year period. All of the stock
options were granted by the Company in reliance upon the exemption from
registration available under Section 4(2) of the Securities Act of
1933, as amended. See Note 3 to Notes to Consolidated Condensed
Financial Statements.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
11.1 Statement Re: Computation of Per Share Earnings (Unaudited).
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 March 31, 1998.
------------------------
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: May 12, 1998 /s/ PAUL GOLDBERG
----------------------------------------------------
Paul Goldberg, Chairman of the Board
(Duly Authorized Officer)
Date: May 12, 1998 /s/ HOWARD L. FLANDERS
----------------------------------------------------
Howard L. Flanders, Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
8
<TABLE>
<CAPTION>
ALL AMERICAN SEMICONDUCTOR, INC. AND SUBSIDIARIES EXHIBIT 11.1
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS (UNAUDITED)
QUARTERS ENDED MARCH 31 1998 1997
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<S> <C> <C>
BASIC EARNINGS PER SHARE:
Net Income................................................... $ 518,000 $ 302,000
=============== ===============
Weighted Average Shares Outstanding.......................... 19,683,600 19,665,378
=============== ===============
Basic Earnings Per Share..................................... $ .03 $ .02
====== ======
DILUTED EARNINGS PER SHARE:
Net Income................................................... $ 518,000 $ 302,000
=============== ===============
Weighted Average and Dilutive Shares:
Weighted average shares outstanding........................ 19,683,600 19,665,378
Dilutive shares............................................ 462,469 32,412
--------------- ---------------
20,146,069 19,697,790
=============== ===============
Diluted Earnings Per Share................................... $ .03 $ .02
====== ======
</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 three months ended
March 31, 1998, and is qualified in its entirety by reference to such
consolidated financial statements.
</LEGEND>
<CIK> 0000818074
<NAME> ALL AMERICAN SEMICONDUCTOR, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 101
<SECURITIES> 0
<RECEIVABLES> 35,799
<ALLOWANCES> 1,300
<INVENTORY> 67,128
<CURRENT-ASSETS> 103,981
<PP&E> 9,468
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<CURRENT-LIABILITIES> 39,443
<BONDS> 47,029
0
0
<COMMON> 199
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<TOTAL-LIABILITY-AND-EQUITY> 112,664
<SALES> 63,530
<TOTAL-REVENUES> 63,530
<CGS> 49,419
<TOTAL-COSTS> 49,419
<OTHER-EXPENSES> 11,881
<LOSS-PROVISION> 223
<INTEREST-EXPENSE> 1,098
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</TABLE>
