UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 0-21192
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
LOUISIANA 72-0721367
- - ------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
109 NORTH PARK BLVD., COVINGTON, LOUISIANA 70433
- - ------------------------------------------ -----------
(Address of Principal Executive Offices) (Zip Code)
(504) 867-5000
--------------------------------------------------
Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No _____
At July 12, 1996, there were 5,566,906 shares of common stock,
$.10 par value, outstanding.
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
INDEX
Part I. Financial Information Page
Item 1. Financial Statements - Unaudited
Statements of Operations -
Three and Nine Months Ended May 31, 1996 and 1995 3
Balance Sheets -
As of May 31, 1996, August 31, 1995 and May 31, 1995 4
Statements of Cash Flows -
Nine Months Ended May 31, 1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II. Other Information
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- ----------------------------
May 31, May 31, May 31, May 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 60,188,532 $ 64,283,271 $ 229,009,134 $ 212,652,676
Cost of sales 47,269,251 49,278,790 179,914,389 165,074,879
------------ ------------ ------------- -------------
Gross profit 12,919,281 15,004,481 49,094,745 47,577,797
Selling, general and
administrative expenses 14,745,996 14,784,282 49,025,291 43,046,954
------------ ------------ ------------- -------------
Operating income (loss) (1,826,715) 220,199 69,454 4,530,843
Merger costs ----- ----- ----- (303,413)
Other income (expense):
Interest expense (583,674) (406,734) (1,562,030) (988,260)
Interest income 12,021 28,000 86,036 79,571
Other income, net 117,280 87,705 337,086 382,911
------------ ------------ ------------- -------------
(454,373) (291,029) (1,138,908) (525,778)
------------ ------------ ------------- -------------
Income before income taxes
and cumulative effect of
change in accounting
principle (2,281,088) (70,830) (1,069,454) 3,701,652
Income tax expense (benefit) (879,000) (26,800) (406,000) 1,307,529
------------ ------------ ------------- -------------
Income (loss) before cumulative
effect of change in accounting
principle (1,402,088) (44,030) (663,454) 2,394,123
Cumulative effect of change
in accounting principle ----- ----- ----- (1,891,948)
------------ ------------ ------------- -------------
Net income (loss) $ (1,402,088) $ (44,030) $ (663,454) $ 502,175
============ ============ ============= =============
Per share data:
Income (loss) before cumulative
effect of change in accounting
principle $(0.25) $(0.01) $(0.12) $0.43
Cumulative effect of change in
accounting principle ----- ----- ----- (0.34)
------------ ------------ ------------- -------------
Net income (loss) per share $(0.25) $(0.01) $(0.12) $0.09
============ ============ ============= =============
Weighted average number of
common shares outstanding 5,566,906 5,566,906 5,566,906 5,565,617
============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
May 31, August 31, May 31,
1996 1995 1995
ASSETS ---- ---- ----
------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 2,485,028 $ 3,105,320 $ 6,286,504
Investments in marketable securities 215,570 218,738 169,953
Receivables (net of an allowance of
$806,000, $2,590,000 and $498,000
at May 31, 1996, August 31, 1995
and May 31, 1995, respectively) 17,527,247 19,403,675 20,981,518
Merchandise inventory 61,449,046 60,258,407 59,320,602
Deferred income taxes 1,657,377 4,475,466 2,634,375
Other 720,695 1,749,315 2,188,251
------------ ------------ ------------
Total current assets 84,054,963 89,210,921 91,581,203
------------ ------------ ------------
Property and equipment, net 37,143,490 39,667,520 37,999,090
Deferred income taxes 2,246,169 3,145,734 2,849,207
Intangibles and other 3,600,747 3,685,627 3,587,570
------------ ------------ ------------
$127,045,369 $135,709,802 $136,017,070
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 2,450,517 $ 2,459,266 $ 127,851
Short-term borrowings - line of credit ----- ----- 20,738,357
Accounts payable 52,550,713 54,303,767 54,265,068
Accrued expenses 8,052,488 7,219,505 5,780,071
Deferred revenue 5,101,197 6,693,674 6,389,613
------------ ------------ ------------
Total current liabilities 68,154,915 70,676,212 87,300,960
------------ ------------ ------------
Long-term debt, less current portion 18,412,684 20,257,360 783,258
Deferred revenue 5,612,759 9,271,590 9,075,288
------------ ------------ ------------
24,025,443 29,528,950 9,858,546
============ ============ ============
Commitments and contingencies
Shareholders' equity:
Preferred stock, 500,000 shares authorized,
no shares issued or outstanding ----- ----- -----
Common stock, $.10 par value; 20,000,000
shares authorized, 5,566,906 issued and
outstanding 556,691 556,691 556,691
Paid-in capital 32,373,306 32,373,306 32,373,306
Retained earnings 2,113,456 2,776,910 6,214,278
Less: Unearned compensation (42,188) (67,500) (106,314)
Unrealized loss on marketable
securities available for sale (136,254) (134,767) (180,397)
------------ ------------ ------------
Total shareholders' equity 34,865,011 35,504,640 38,857,564
------------ ------------ ------------
$127,045,369 $135,709,802 $136,017,070
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months Ended May 31,
1996 1995
---- ----
Cash flow from operating activities:
Net income (loss) $ (663,454) $ 502,175
Adjustments to reconcile net income
(loss) to net cash from operating
activities:
Depreciation and amortization 4,309,845 2,440,815
Cumulative effect of change in
accounting principle --- 1,891,948
Deferred income taxes 3,717,654 (1,594,037)
Stock awards 25,313 35,437
(Increase) decrease in assets:
Receivables, net 1,876,428 (9,080,944)
Merchandise inventory (1,190,640) (10,144,684)
Other current assets 16,458 (840,762)
Increase (decrease) in liabilities:
Accounts payable (1,753,055) 12,441,216
Accrued expenses 832,983 (1,527,844)
Deferred revenue (5,251,308) 5,334,236
------------- ------------
Net cash provided by (used in)
operating activites 1,920,225 (542,444)
------------- ------------
Cash flow from investing activities:
Purchase of property and equipment (630,084) (16,594,289)
Purchase of investments --- (67,938)
Sale of investments --- 929,615
Increase on other assets (57,008) (18,805)
------------- ------------
Net cash used in investing
activities (687,092) (15,751,417)
------------- ------------
Cash flow from financing activities:
Repayment of long-term debt (1,746,551) (59,826)
Repayment of capital lease obligation (106,873) (205,614)
Net borrowings under line of credit --- 20,545,462
Exercise of stock options --- 63,500
------------- ------------
Net cash provided by (used in)
financiang activities (1,853,424) 20,343,522
------------- ------------
Net increase (decrease) in cash and
cash equivalents (620,292) 4,049,661
Cash and cash equivalents at beginning
of period 3,105,320 2,236,843
------------ ------------
Cash and cash equivalents at end of
period $ 2,485,028 $ 6,286,504
------------ ------------
See Note 2 for additional cash flow information
The accompanying notes are an integral part of these financial statements.
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) Basis of Presentation
The information for the three and nine months ended May 31, 1996
and 1995 is unaudited, but in the opinion of management, reflects
all adjustments, which are of a normal recurring nature,
necessary for a fair presentation of the Company's financial
position and results of operations for the interim periods. The
accompanying financial statements should be read in conjunction
with the financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1995.
The results of operations for the three and nine months ended May
31, 1996 are not necessarily indicative of the results to be
expected for the full fiscal year ending August 31, 1996.
(2) Cash Flow Information
Supplemental cash flow information for the nine months ended May
31, 1996 and 1995 is as follows:
Nine Months Ended May 31,
---------------------------------------------
1996 1995
Cash paid during the period for:
Interest $ 1,463,593 $ 851,879
Income Taxes $ 118,240 $ 3,871,580
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Industry Overview
For the third quarter of fiscal 1996, the Company experienced
comparable store sales declines of 10.1%, which is a continuation of a trend
that began in the third quarter of fiscal 1995. This business downturn is
attributable to general weakness in the retail industry, a slowdown in
the development of new exciting products in the consumer electronics
categories and a lessened propensity by consumers to spend due to record
high debt levels. This has been experienced in different degrees by all
companies in Campo's industry segment. The softening of business within
the consumer electronics and appliance industry has created an extremely
competitive and highly promotional climate which, in turn, has had an
adverse impact on the Company's gross profit margins. Declining sales and
gross profits are conditions which present a challenging retail environment
for all retailers. In such an environment, retailers are focusing on
maintaining and improving their respective market shares. Recent market share
studies indicate that Campo has exceeded management's expectations
of capturing and growing market share in newly entered markets while
maintaining and improving market share in our existing markets.
Campo Initiatives
As a response to the many changes faced by the consumer electronics
and appliance industry, the Company has been taking certain initiatives to
stream-line store processes, reduce administrative costs and leverage
technology.
In September 1995, Campo began developing a "Superior Customer
Service" (SCS) strategy to improve customer service by streamlining
store operational procedures. SCS was evaluated initially in a model
store during the second quarter of fiscal 1996. Based on positive results
and customer feedback, the Company began to more widely deploy the SCS
strategy, which is expected to be completely implemented during the first
quarter of fiscal 1997. SCS allows sales managers and associates to focus
the majority of their time on serving the customer and selling the
products by reassigning administrative duties. Store processes, such
as third party financing transactions, cellular and paging paperwork,
product retrieval and returned product tasks are being handled by
qualified customer service associates specifically trained in each of these
tasks. SCS has reduced the time required to process sales transactions
which contributes to customer satisfaction and the overall shopping
experience. SCS has also streamlined store stock handling procedures,
thereby enabling store management to attend to customers needs in a more
timely and effective manner.
In an industry characterized by declining gross margins, Campo is
continuously analyzing the profitability of every product line in order to
identify opportunities for improved return on inventory investments. Home
office products continue to evolve into a core part of Campo's major
business categories. Thus, the Company is continuously restructuring its
merchandising strategy to address the impact of the category's inherent low
margins on the chain's overall profitability. The Company has also focused
on improving controls and procedures affecting inventory shortages.
In addition to more widely utilizing SCS and focusing on
opportunities to improve gross margin, Campo has implemented a number of
changes to reduce its variable expense structure in line with declining
sales revenues. Every process at every level is under close scrutiny
to identify opportunities for expense reduction and/or revenue growth. The
Company has right-sized its corporate structure in light of current business
conditions through staff reductions in administrative positions, while
centralizing its non-inventory purchasing functions, which will enable Campo
to increase savings by leveraging its volume purchases. Campo has reduced
telecommunication costs by renegotiating existing service agreements.
In order to compensate for increasing paper costs, the Company has reduced
the number of pages and frequency of its advertising tabloids. Campo has
outsourced functions that can be handled by a third party more efficiently,
such as facilities management and extended warranty claims administration.
Campo is also evaluating opportunities to improve efficiencies within
its distribution operations through system enhancements and process
reengineering which will improve inventory accuracy, enable the Company to
reduce inventory levels and eliminate redundant handling and transportation.
Campo's information systems are being evaluated and a plan
developed to install an information systems infrastructure which will
accommodate current system requirements and provide the foundation to
handle future growth for the Company. The strategic plan is to move
the Company's information to a distributed client/server environment and
place the applications closer to end users to increase productivity,
performance, and data availability.
Clearly, for any retailer to be successful, it must be willing to
embrace a difficult business climate as a challenge to find opportunities
where it can function more efficiently, and at a lower cost than its
competitors. Management believes that by implementing the initiatives
described above and continuously challenging the efficiency and effectiveness
of Campo's retail execution and overall operations, the Company will be
positioned to take advantage of any turnaround in the volatile consumer
electronics and appliance industry.
Results of Operations
The following table sets forth, for the periods indicated, the
relative percentages that certain income and expense items bear to net
sales:
Three Months Ended Nine Months Ended
May 31, May 31,
------------------ -------------------
1996 1995 1996 1995
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 78.5 76.7 78.6 77.6
----- ----- ----- -----
Gross profit 21.5 23.3 21.4 22.4
Selling, general and
administrative expense 24.5 23.0 21.4 20.3
----- ----- ----- -----
Operating income (loss) (3.0) 0.3 0.0 2.1
Merger costs --- --- --- (0.1)
Interest expense (1.0) (0.6) (0.7) (0.5)
Interest income 0.0 0.1 0.0 0.0
Other income, net 0.2 0.1 0.2 0.2
----- ----- ----- -----
(0.8) (0.4) (0.5) (0.3)
----- ----- ----- -----
Income (loss) before taxes (3.8) (0.1) (0.5) 1.7
Income tax expense (benefit) (1.5) (0.0) (0.2) 0.6
----- ----- ----- -----
Income (loss) before cumulative
effect of change in accounting
principle (2.3) (0.1) (0.3) 1.1
Cumulative effect of change
in accounting principle ----- ----- ----- 0.9
------ ------ ------ -----
Net income (loss) (2.3) (0.1) (0.3) 0.2
===== ===== ===== =====
Three Months Ended May 31, 1996 as Compared to Three Months Ended May 31, 1995
Net sales for the three months ended May 31, 1996 decreased 6.4%
to $60.2 million compared to $64.3 million for the same period in 1995.
Comparable retail store sales for the same period decreased by 10.1%.
Extended warranty revenue recognized under the straight-line
method was $2.0 million and $2.5 million for the three months ended May
31, 1996 and 1995, respectively. Extended warranty expenses for these same
periods were $1.3 million and $1.2 million, respectively, before any
allocation of other selling, general and administrative expenses. Also,
effective August 1, 1995, the Company agreed to sell to an unaffiliated
third party all extended warranty service contracts sold by the Company
subsequent to July 31, 1995. The Company records the sale of these
contracts, net of any related sales commissions and the fees paid to the
third party, as a component of net sales. Although the Company sells
these contracts at a discount, the amount of the discount approximates the
cost the Company would incur to service these contracts, while transferring
the full obligation for future services to a third party. Third party
extended warranty contract net revenue during the three months ended May
31, 1996 was $1.8 million.
Gross profit for the three months ended May 31, 1996 was $12.9
million or 21.5% of net sales as compared to $15.0 million, or 23.3% of net
sales for the comparable period in the prior year. Selling, general and
administrative expenses were $14.7 million or 24.5% of net sales for the
three months ended May 31, 1996 as compared to $14.8 million, or 23.0%
of net sales for the comparable period in the prior year. This percentage
increase was primarily due to the effects of additional fixed costs
related to the Company's expansion in fiscal 1995 and soft retail sales on
fixed cost ratios as well as increased advertising costs primarily due to
higher paper costs.
Interest expense for the three months ended May 31, 1996
increased by approximately $177,000 over the same period in the prior year
due to the Company using fixed and short-term borrowing arrangements
to restructure the debt incurred to fund the Company's expansion in fiscal
1995.
The Company's effective income tax rate was 38.5% and 37.8% for
the three months ended May 31, 1996 and 1995, respectively.
Nine Months ended May 31, 1996 as Compared to Nine Months Ended May 31, 1995
Net sales for the nine months ended May 31, 1996 increased 7.7%
to $229.0 million compared to $212.7 million for the same period in the
prior fiscal year. Comparable retail store sales for the same period
decreased by 10.1%. The overall growth in net sales was attributable to new
stores opened during and subsequent to the third quarter of last year and
the sale of warranty contracts to a third party.
Extended warranty revenue recognized under the straight-line
method was $6.6 million and $7.3 million for the nine months ended May 31,
1996, and 1995, respectively. Extended warranty expenses for each of these
periods were $4.1 million and $3.5 million, respectively, before any
allocation of other selling, general and administrative expenses. Net
revenue recognized as a result of selling extended warranty contracts to a
third party during the nine months ended May 31, 1996 was $7.2 million.
Gross profit for the nine months ended May 31, 1996 was $49.1
million or 21.4% of net sales as compared to $47.6 million, or 22.4% of net
sales for the comparable period in the prior year. Selling, general and
administrative expenses were $49.0 million or 21.4% of net sales for the nine
months ended May 31, 1996 as compared to $43.0 million, or 20.3% of
net sales for the comparable period in the prior year. This percentage
increase was primarily due to the effects of additional fixed costs
related to the Company's expansion in fiscal 1995 and of soft retail sales
on fixed cost ratios and increased advertising costs primarily due to higher
paper costs.
Interest expense for the nine months ended May 31, 1996 increased
by approximately $574,000 over the same period in the prior year due to the
Company using fixed borrowing arrangements to restructure the debt incurred
to fund the Company's expansion in fiscal 1995.
The Company's effective income tax rate was 38.0% and 35.3% for
the nine months ended May 31, 1996 and 1995, respectively. The effective
tax rate for the nine months ended May 31, 1995 was positively impacted
by the utilization of inventory tax credits to offset income tax expense.
Liquidity and Capital Resources
Net cash provided by operating activities was approximately $1.9
million for the nine months ended May 31, 1996, as compared to cash used
in operating activities of $542,000 for the nine months ended May 31, 1995.
The increase in net cash provided by operating activities was primarily
due to improved turnover in vendor receivables. As of May 31, 1996, the
Company used several "floor plan" finance companies to finance the
majority of its merchandise purchases. The Company has an aggregate
borrowing limit with these finance companies of approximately $123 million
and it collateralizes the outstanding borrowings with merchandise inventory
and certain receivables. Payment terms under these agreements range from
50 to 120 days. In addition, the Company finances inventory purchases
through open-account arrangements with various vendors. These arrangements
contain certain restrictive covenants which require the Company to maintain
certain tangible net worth, debt and earnings requirements. As of May 31,
1996, the Company was not in compliance with certain of these covenants, but
has obtained waivers of these covenants from the respective financial
institutions.
Long-term debt as of May 31, 1996 consisted of two term loans,
one with three banks and the other with a financial institution. Principal
of $425,000 and applicable interest are payable quarterly on the term
loan with the banks, which accrues interest based on one of the following, at
the option of the Company: (i) the Prime Rate, (ii) LIBOR plus 2.40%, or
(iii) the Commercial Paper Rate plus 2.50%, with the balance of all
outstanding principal due and payable at maturity on August 31, 1998.
Outstanding amounts pursuant to this agreement are collateralized by the
Company's real estate. The outstanding principal balance and applicable
interest rate on this loan as of May 31, 1996 were $14.0 million and 7.63%
(LIBOR plus 2.40%), respectively. The principal balance of the other term
loan, which was $3.7 million at May 31, 1996, accrues interest at an average
weekly yield of 30 Day Commercial paper plus 1.80% (7.64% at May 31, 1996).
Principal and interest on this loan are payable monthly with the balance of
all outstanding principal due and payable at maturity on August 30, 2002.
Outstanding amounts pursuant to this agreement are collateralized by
certain furniture, fixtures and equipment of the Company. These arrangements
contain certain restrictive covenants which require the Company to
maintain minimum tangible net worth, as well as maximum debt to tangible
net worth and minimum fixed charge coverage ratios. The term loan with
the banks also contains a provision which prohibits the Company from paying
dividends on its common stock. As of May 31, 1996, the Company was not
in compliance with certain of these covenants. The Company has obtained
waivers of these covenants from the banks in return for its agreement to
amend the loan agreement with the banks effective June 1, 1996 to eliminate
the LIBO rate and Commercial Paper rate options, thus fixing the interest
rate on the term loan at the Prime rate. The Company's performance for the
fourth quarter continues to deteriorate and it appears probable thus far that
the Company will be required to seek waivers of certain covenant requirements
for the fourth quarter. The Company intends to meet with the banking
group during the fourth quarter of fiscal 1996 to discuss revising its
credit facility agreements with the objective of amending its existing
agreements to better match the Company's needs and to negotiate permanent
changes to covenant requirements.
Also, as of May 31, 1996, the Company had available to it a $10
million line of credit with the banks discussed above. This line of credit
accrues interest similar to that of the term loan; however, interest is
payable monthly following the execution of the line of credit notes. As of
May 31, 1996, the Company had no borrowings outstanding on this line of
credit. During periods of peak purchasing, the Company uses this line of
credit to finance purchases.
The Company incurred capital expenditures of $630,000 during the
nine months ended May 31, 1996 primarily in connection with equipment
purchases and leasehold improvements. Capital expenditures of $16.6
million were incurred for the nine months ended May 31, 1995 in connection
with the opening of twelve new Campo Concept stores. The expenditures for
the nine months ended May 31, 1995 were funded primarily by cash from
financing activities. The Company has no plans for further expansion in
the remainder of fiscal 1996 and 1997.
During the nine months ended May 31, 1996 the Company's net cash
used in financing activities was $1.9 million as compared to net cash
provided by financing activities of $20.3 million for the nine months ended
May 31, 1995. The primary use of funds during the nine months ended May 31,
1996 consisted of principal payments on the Company's long-term debt. For
the same period in the prior year, the primary source of funds was borrowings
under short-term borrowing arrangements to provide for the Company's
expansion during fiscal 1995.
In addition to its available line of credit discussed above, the
Company believes that its existing funds and its vendor and inventory
financing arrangements are sufficient to satisfy its expected cash
requirements in fiscal 1996 and for the foreseeable future.
Impact of Inflation
In management's opinion, inflation has not had a material impact
on the Company's financial results for the three months ended May 31, 1996
and 1995. Technological advances coupled with increased competition have
caused prices on many of the Company's products to decline. Those products
that have increased in price have in most cases done so in proportion to
current inflation rates. As a result of the Company's growth over the last
three years, it has been able to purchase inventory in larger quantities,
thereby lowering the effective cost of its inventory. Management does not
anticipate that inflation will have a material impact on the Company's
financial results in the future.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material developments during the three months
ended May 31, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Second Amendment to Loan Agreement dated May 31, 1996 by and
between Hibernia National Bank and Campo Electronics, Appliances
and Computers, Inc.
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the three months
ended May 31, 1996.
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
July 15, 1996 /s/ ANTHONY P. CAMPO
------------------------------
Anthony P. Campo
Chairman of the Board, Chief Executive Officer,
President and Director
/s/ WILLIAM M. GOLDEN, JR.
-------------------------------
William M. Golden, Jr.
Chief Financial Officer, Secretary and Director
INDEX TO EXHIBITS
Sequentially
Exhibit No. Description of Exhibits Numbered Page
- - ----------- ----------------------- -------------
10.1 Second Amendment to Loan Agreement dated May 31,
1996 by and between Hibernia National Bank and
Campo Electronics, Appliances and Computers, Inc.
27 Financial Data Schedule
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement (this "Second Amendment") is
executed as of May 31, 1996, by and among Campo Electronics, Appliances and
Computers, Inc. (the "Borrower") and Hibernia National Bank, as agent for the
Banks (in such capacity, the "Agent"), and Central Bank, Hibernia National Bank
and Liberty Bank & Trust Company of Tulsa, N.A. (the "Banks").
RECITALS
A. The Borrower and the Banks entered into that certain Loan Agreement
dated as of August 30, 1995 (as amended, the "Loan Agreement"), pursuant to
which the Banks extended to Borrower a term loan in the principal amount of
$17,000,000 and a line of credit in the maximum aggregate principal amount of
$10,000,000.
B. The Borrower has requested that the Banks waive certain affirmative
covenants imposed upon the Borrower by the Loan Agreement for the period through
May 31, 1996, and the Banks are willing to do so on the terms and conditions set
forth below.
C. Terms used herein and not otherwise defined herein shall have the
meanings given to them in the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, the parties hereto amend the Loan Agreement as follows:
AGREEMENT
1. Section 2.03(a) of the Loan Agreement is hereby amended to read as
follows:
Section 2.03 Interest Rate; Fees. (a) Interest Rate. The term
loan and the line of credit shall bear interest at the Prime Rate, effective as
of June 1, 1996.
2. The Borrower hereby reaffirms all the representations and warranties
contained in the Loan Agreement and certifies that all such representations and
warranties are true and correct as of the date of this Second Amendment.
3. The Borrower further certifies that no Default [(other than as
relates to the financial covenants set forth in Sections 4.03(a), 4.03(d) and
4.03(e)] has occurred and is continuing under the Loan Agreement as of the date
of this Second Amendment. Under separate letter the Banks have waived such
Defaults through May 31, 1996.
4. The Borrower hereby specifically reaffirms the mortgage, pledge,
assignment, security agreement and other hypothecation of all collateral as
security for the Loan, including, without limitation, the following:
Mortgage by the Borrower in favor of the Agent dated
August 30, 1995, covering certain immovable property of
the Borrower located in Jefferson County, Alabama.
Mortgage by the Borrower in favor of the Agent dated
August 30, 1995, covering certain immovable property of
the Borrower located in Houston County, Alabama.
Mortgage by the Borrower in favor of the Agent dated
August 30, 1995, covering certain immovable property of
the Borrower located in Mobile County, Alabama.
Mortgage by the Borrower in favor of the Agent dated
August 30, 1995, covering certain immovable property of
the Borrower located in East Baton Rouge Parish,
Louisiana.
Mortgage by the Borrower in favor of the Agent dated
August 30, 1995, covering certain immovable property of
the Borrower located in Jefferson Parish, Louisiana.
Mortgage by the Borrower in favor of the Agent dated
August 30, 1995, covering certain immovable property of
the Borrower located in Ouachita Parish, Louisiana.
Mortgage by the Borrower in favor of the Agent dated
August 30, 1995, covering certain immovable property of
the Borrower located in Caddo Parish, Louisiana.
Deed of Trust by the Borrower in favor of the Agent dated
August 30, 1995, covering certain immovable property of
the Borrower located in Hamilton County, Tennessee.
The Borrower acknowledges and agrees that the Borrower may, from time to time,
one or more times, enter into additional mortgages, pledges, assignments,
security agreements and other hypothecations with the Banks under which the
Borrower may mortgage, pledge, assign, grant a security interest in and
hypothecate the same collateral. The Borrower further acknowledges and agrees
that the execution of such additional agreements will not have the effect of
cancelling, novating or otherwise modifying said agreements, it being the
Borrower's intent that all such agreements shall be cumulative in nature and
shall each and all remain in full force and effect until expressly cancelled by
the Banks under written cancellation instrument delivered to the Borrower.
5. Except as modified and amended hereby, the Loan Agreement shall
remain in full force and effect.
6. The effectiveness of this Second Amendment shall be conditioned upon
the satisfaction of the following conditions:
a. Second Amendment. The Borrower and the Required Banks shall
have executed this Second Amendment.
b. Resolutions. The Borrower shall have adopted corporate
resolutions regarding the authorization of execution of this Second Amendment
and all documents related thereto, certified correct by the secretary or
assistant secretary of the Borrower.
c. No Adverse Change. There shall have occurred no material
adverse changes, either individually or in the aggregate, in the assets,
liabilities, financial conditions, business operations, affairs or circumstances
of the Borrower from those reflected in the most recent financial statements
furnished to the Banks prior to the date of this Second Amendment, except to the
extent that such changes are permitted by the Loan Agreement as amended by this
Second Amendment. Furthermore, immediately following the execution of this
Second Amendment, no Default under the Loan Agreement shall have occurred and be
continuing.
7. This Second Amendment may be executed in two or more counterparts,
and it shall not be necessary that the signatures of all parties hereto be
contained on any one counterpart hereof; each counterpart shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
- 1 -
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
BORROWER: CAMPO ELECTRONICS, APPLIANCES AND COMPUTERS, INC.
By: /s/ Anthony P. Campo
----------------------------------
Name: Anthony P. Campo
Title: Chairman of the Board, Chief Executive
Officer and President
AGENT: HIBERNIA NATIONAL BANK
By: /s/ S. John Castellano
----------------------------------
Name: S. John Castellano
Title: Vice President
BANKS: CENTRAL BANK
By: /s/ Fenton Davidson
----------------------------------
Name: Fenton Davidson
Title: Senior Vice President
Percent: 29.6296%
HIBERNIA NATIONAL BANK
By: /s/ S. John Castellano
----------------------------------
Name: S. John Castellano
Title: Vice President
Percent: 37.0370%
LIBERTY BANK & TRUST COMPANY OF TULSA, N.A.
By: /s/ Gary King
----------------------------------
Name: Gary King
Title: Assistant Vice President
Percent: 33.3333%
- 2 -
NOTE MODIFICATION AGREEMENT
This Note Modification Agreement (this "Agreement") dated as
of May 31, 1996, is made between CAMPO ELECTRONICS, APPLIANCES AND
COMPUTERS, INC. ("Borrower") and HIBERNIA NATIONAL BANK ("Lender").
RECITALS
WHEREAS, Borrower has executed a term note dated August 30,
1995, payable to the order of Lender in the original principal
amount of $6,296,296, having a final maturity of August 31, 1998
(the "Note"); and
WHEREAS, Borrower and Lender desire to eliminate the LIBO Rate
and Commercial Paper Rate options, leaving the Note to bear
interest at the Prime Rate.
NOW, THEREFORE, the parties hereto hereby agree as follows:
AGREEMENT
1. Effective June 1, 1996, the Note is modified to provide
that it shall bear interest at the Prime Rate (as defined in the
Note), and all references in the Note to the LIBO Rate or the
Commercial Paper Rate are deleted.
2. Except as expressly modified by this Agreement, all terms
and provisions of the Note, and all terms and provisions of the
Loan Agreement dated as of August 30, 1995, executed by the
Borrower and the Lender (as amended, the "Loan Agreement") and all
terms and provisions of all other documents securing or evidencing
the obligations under the Note, are hereby ratified and confirmed
and shall be and shall remain in full force and effect, enforceable
in accordance with their terms.
3. Borrower hereby agrees, acknowledges and confirms that
Borrower is truly indebted to Lender pursuant to the terms of the
Note, as modified hereby, and the Loan Agreement. Borrower hereby
promises to pay the Note to Lender in accordance with the terms
thereof, as modified hereby, and hereby agrees to observe, comply
with and perform all of the obligations, terms and conditions under
or in connection with the Note, the Loan Agreement and any and all
other documents and instruments pertaining or relating to the
indebtedness represented by the Note.
4. Borrower hereby represents and warrants that no default
(other than as relates to the financial covenants set forth in
Section 4.03(a), 4.03(d) and 4.03(e)) has occurred and is
continuing as of the date hereof, and Borrower hereby further
represents and warrants that all of the representations, warranties
and covenants made in the Note, the Loan Agreement and all other
documents pertaining or relating to the indebtedness represented by
the Note are, as of the date hereof, true and correct in all
material respects.
5. Borrower represents and warrants that there is no
defense, offset, compensation, counterclaim or reconventional
demand with respect to amounts due under, or performance of, the
terms of the Note, and to the extent any such defense, offset,
compensation, counterclaim or reconventional demand or other causes
of action might exist, whether known or unknown, such items are
hereby waived by Borrower.
6. Nothing in this Agreement shall constitute the
satisfaction or extinguishment of the amount owed under the Note,
nor shall it be a novation of the amount owed under the Note.
BORROWER: CAMPO ELECTRONICS,
APPLIANCES AND COMPUTERS, INC.
By: ________________________________
Name: William M. Golden, Jr.
Title: Vice President and
Chief Financial Officer
LENDER: HIBERNIA NATIONAL BANK
By: ________________________________
Name: S. John Castellano
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 2,485,028
<SECURITIES> 215,570
<RECEIVABLES> 17,527,247
<ALLOWANCES> 806,000
<INVENTORY> 61,449,046
<CURRENT-ASSETS> 84,054,963
<PP&E> 37,143,490
<DEPRECIATION> 12,692,200
<TOTAL-ASSETS> 127,045,369
<CURRENT-LIABILITIES> 68,154,915
<BONDS> 0
0
0
<COMMON> 556,691
<OTHER-SE> 34,308,320
<TOTAL-LIABILITY-AND-EQUITY> 127,045,369
<SALES> 229,009,134
<TOTAL-REVENUES> 229,009,134
<CGS> 179,914,389
<TOTAL-COSTS> 179,914,389
<OTHER-EXPENSES> 48,242,169
<LOSS-PROVISION> 360,000
<INTEREST-EXPENSE> 1,562,030
<INCOME-PRETAX> (1,069,454)
<INCOME-TAX> (406,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (663,454)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
