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 September 30,1996
( ) 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 - 23426
__________
REPTRON ELECTRONICS, INC.
___________________________________________________________________________
(Exact name of registrant as specified in its charter)
Florida 38-2081116
_____________________________ __________________________________
State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization
14401 McCormick Drive
Tampa, Florida 33626
__________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813)854-2351
____________
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
________ _______
6,062,519 shares of common stock issued and outstanding as of
October 28, 1996.
_________________
REPTRON ELECTRONICS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Financial Statements
Consolidated Statements of Earnings --
Three months ended September 30, 1996 and
September 30, 1995 and Nine months ended
September 30, 1996 and September 30, 1995 3
Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995 4
Consolidated Statement of
Shareholders' Equity -- Nine months ended
September 30, 1996 and year ended December 31, 1995 5
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1996 and September
30, 1995 6
Notes to Consolidated Financial
Statements -- September 30, 1996 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share and per share data)
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
____ ____ ____ ____
<S> <C> <C> <C> <C>
Net sales $65,953 $59,492 $198,595 $155,441
Cost of goods sold 53,359 48,763 160,821 127,026
______ ______ _______ _______
Gross profit 12,594 10,729 37,774 28,415
Selling, general and administrative expenses 8,394 7,037 25,748 18,251
______ ______ _______ _______
Operating income 4,200 3,692 12,026 10,164
Interest expense 837 837 2,955 1,827
______ ______ _______ _______
Earnings from operations before income taxes 3,363 2,855 9,071 8,337
Income taxes 1,346 1,143 3,629 3,336
______ ______ _______ _______
Net earnings $ 2,017 $ 1,712 $ 5,442 $ 5,001
====== ====== ======= =======
Net earnings per share $ 0.33 $ 0.28 $ 0.88 $ 0.81
====== ====== ======= =======
Weighted average number of shares of Common
Stock and Common Stock equivalents 6,181,105 6,179,083 6,176,039 6,172,720
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
September 30, December 31,
1996 1995
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,463 $ 224
Accounts receivable - trade, less allowances
for doubtful accounts of $180 37,570 41,183
Inventories 54,319 63,461
Prepaid expenses and other assets 2,141 1,893
Deferred tax benefit 105 124
_______ _______
Total current assets 95,598 106,885
PROPERTY, PLANT & EQUIPMENT - AT COST 27,284 20,954
EXCESS OF COST OVER NET ASSETS ACQUIRED 4,316 4,385
OTHER ASSETS 1,720 1,514
_______ _______
$128,918 $133,738
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to banks $ - $ 1,933
Accounts payable - trade 17,549 24,948
Accrued expenses 1,744 1,828
Income taxes payable 226 -
Current portion of long-term obligations 2,415 2,547
_______ _______
Total current liabilities 21,934 31,256
NOTES PAYABLE TO BANKS 46,750 50,200
LONG-TERM OBLIGATIONS, less current portion 12,668 10,430
DEFERRED INCOME TAXES 1,102 904
SHAREHOLDERS' EQUITY
Preferred Stock - authorized 15,000,000 shares
of $.10 par value; no shares issued - -
Common Stock - authorized 15,000,000 shares
of $.01 par value; issued and outstanding,
6,057,519 and 6,048,519 shares, respectively 61 60
Additional paid-in capital 21,218 21,145
Retained earnings 25,185 19,743
_______ _______
46,464 40,948
_______ _______
$128,918 $133,738
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
Total
Common Stock Capital Share-
Shares Par In excess of Retained holders'
Outstanding Value Par Value Earnings Equity
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 6,043,269 $60 $21,098 $13,257 $34,415
Exercise of stock
options 5,250 - 47 - 47
Net Earnings - - - 6,486 6,486
_________ ___ ______ _______ _______
Balance at
December 31, 1995 6,048,519 60 21,145 19,743 40,948
Exercise of stock
options (Unaudited) 14,000 1 73 - 74
Net Earnings (Unaudited) - - - 5,442 5,442
_________ ___ ______ ______ ______
Balance at
September 30, 1996
(Unaudited) 6,062,519 $61 $21,218 $25,185 $46,464
========= == ====== ====== ======
</TABLE>
The accompanying notes are an integral part of this financial statement
5
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine months ended
September 30,
1996 1995
_______ _______
Increase (decrease) in cash and cash equivalents:
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,442 $ 5,001
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,616 1,501
Deferred income taxes 217 -
Change in assets and liabilities:
Accounts receivable - trade 3,613 (3,459)
Inventories 9,142 (16,522)
Prepaid expenses and other assets (248) (9)
Other assets (592) (2,420)
Accounts payable - trade (7,399) 4,318
Accrued expenses (84) (715)
Income taxes Payable 226 257
______ _______
Net cash provided by (used in) operating
activities 12,933 (12,048)
______ _______
Cash flows from investing activities:
Net cash paid for acquisitions (102) (11,941)
Purchases of property, plant and equipment (8,388) (6,387)
______ _______
Net cash used in investing activities (8,490) (18,328)
______ _______
Cash flows from financing activities:
Proceeds from exercise of stock options 73 46
Net proceeds from (payments on) note payable to bank (5,383) 27,809
Proceeds from long-term obligations 4,000 4,718
Payments on long-term obligations (1,894) (1,610)
______ ______
Net cash provided by (used in) financing
activities (3,204) 30,963
______ ______
Net increase (decrease) in cash and cash
equivalents 1,239 587
Cash and cash equivalents at beginning of period 224 266
______ ______
Cash and cash equivalents at end of period $ 1,463 $ 853
====== ======
Supplemental cash flow information:
Interest paid $ 2,776 $ 2,352
====== ======
Income taxes paid $ 3,185 $ 3,078
====== ======
</TABLE>
Non-cash investing and financing activities:
During the nine month periods ended September 30, 1996 and 1995, the
Company incurred approximately $372 and $791, respectively, of obligations
under capital leases for the acquisition of equipment.
The accompanying notes are an integral part of these financial statements
6
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE A -- BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and footnote disclosure required by generally accepted accounting
principles for complete financial statements. The consolidated financial
statements as of September 30, 1996 and for the three and nine months ended
September 30, 1996 and September 30, 1995 are unaudited and reflect all
adjustments (consisting only of normal recurring adjustments) which are, in
the opinion of management, necessary for a fair presentation of the financial
position and operating results for the interim periods. The results of
operations for the three and nine months ended September 30, 1996 are not
necessarily indicative of results that may be expected for the year ending
December 31, 1996. The consolidated financial statements should be read in
conjunction with the financial statements and notes thereto, together with
management's discussion and analysis of financial condition and results of
operations, included in the 1995 Form 10-K.
<TABLE>
<CAPTION>
NOTE B -- INVENTORIES
Inventories consist of the following (in thousands):
September 30, December 31,
1996 1995
____________ ____________
<S> <C> <C>
Reptron Distribution:
Inventories $34,490 $43,647
K-Byte Manufacturing:
Work in process 6,888 7,421
Raw Materials 12,941 12,393
______ ______
$54,319 $63,461
====== ======
</TABLE>
NOTE C -- NOTE PAYABLE TO BANK
On September 25, 1996, the Revolving Credit Agreement was amended to reduce
the pricing schedule and extend the termination date to June 30, 1999. The
amended Revolving Credit Agreement contains identical collateral terms and
similar covenants as the previous amended Revolving Credit Agreement.
7
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SEPTEMBER 30, 1996
NOTE D -- FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company has two industry segments: Distribution and Contract
Manufacturing. Distribution purchases a wide variety of electronic
components, including semiconductors, passive products and electromechanical
components, for distribution to manufacturers and wholesalers primarily
throughout the midwestern, southeastern, and northeastern U.S. Contract
Manufacturing manufactures electronic products according to customer design,
for customers in various industries, including telecommunications, banking,
and medical services.
The following table shows net sales and gross profit by industry segments:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
(in thousands) (in thousands)
__________________ ________________
1996 1995 1996 1995
____ ____ ____ ____
<S> <C> <C> <C> <C>
Net Sales
Distribution $40,856 $39,510 $124,687 $ 96,498
Contract Manufacturing 25,097 19,982 73,908 58,943
______ ______ _______ _______
$65,953 $59,492 $198,595 $155,441
====== ====== ======= =======
Gross Profit
Distribution $ 8,235 $ 7,852 $ 25,290 $ 19,225
Contract Manufacturing 4,359 2,877 12,484 9,190
______ ______ _______ _______
$12,594 $10,729 $ 37,774 $ 28,415
====== ====== ======= =======
</TABLE>
NOTE E -- PRO FORMA INFORMATION
The following pro forma summary combines the results of operations of the
Company with the operations of the electronic component distribution business
of Western Micro Technology, Inc. as if the July 26, 1995 acquisition had
occurred at the beginning of the period ended September 30, 1995. This pro
forma summary does not necessarily reflect the results of operations as they
would have been if the Company and the operations of the electronic component
distribution business of Western Micro Technology, Inc. operated as a single
entity during the period.
Nine months ended
September 30, 1995
(In thousands, except share data)
Net sales $186,495
Gross profit $ 32,777
Operating income $ 9,483
Net earnings $ 4,306
Net earnings per Common Share $ 0.70
8
REPTRON ELECTRONICS, INC
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales. Total third quarter net sales increased $6.5 million,
or 10.9%, from $59.5 million in the third quarter of 1995 to $66.0 million
in the third quarter of 1996. Total net sales for the first three quarters
of 1996 increased $43.2 million, or 27.8% from $155.4 million in the first
three quarters of 1995 to $198.6 million in the first three quarters of 1996.
Reptron Distribution third quarter net sales increased $1.4
million, or 3.4%, from $39.5 million in the third quarter of 1995 to $40.9
million in the third quarter of 1996. Net sales generated from the new
memory module division, formed in December of 1995, were $4.5 million in the
third quarter of 1996. Those sales were offset by a decrease in sales from
existing locations and sales offices acquired as a result of the Western
Micro Technology acquisitions, completed in July, 1995, of $3.1 million.
Reptron Distribution has historically generated a significant portion of its
revenue from the sale of memory components (DRAM and SRAM). Selling prices
of these components have decreased by approximately 80% from the third
quarter of 1995 to the third quarter of 1996, thus affecting sales results.
In addition, due to additional services requested by a significant Reptron
Distribution customer, that customer is now being served by the K-Byte
Manufacturing division. Third quarter, 1996 sales to this customer totaled
approximately $825,000 and are included in K-Byte Manufacturing sales. The
largest customer, which is also a K-Byte Manufacturing customer, represented
approximately 18.1% of Reptron Distribution third quarter, 1996 net sales
(12.6% of total Company net sales), no other customer represented more than
3.3% of Reptron Distribution third quarter 1996 sales. The largest sales
office accounted for approximately 23.9% of Reptron Distribution net sales.
Sales of semiconductors accounted for 75.2% of third quarter Reptron
Distribution net sales, with the remaining sales generated from passive
components (19.1%) and electromechanical products (5.7%).
Reptron Distribution net sales increased $28.2 million, or 29.2%,
from $96.5 million in the first three quarters of 1995 to $124.7 million in
the first three quarters of 1996. Net sales generated from the sales
offices acquired as a result of the Western Micro Technology acquisition,
completed during 1995, accounted for approximately $6.9 million of the
increase. Sales from locations that existed prior to the 1995 acquisitions
increased approximately $8.7 million, or 9.4%. Net sales generated from the
new memory module division, formed in December, 1995, accounted for
approximately $12.2 million of the increase. The remainder of the increase
was generated by new locations, opened since the third quarter of 1995. In
the first three quarters of 1996, the largest Reptron Distribution customer,
which is also a K-Byte Manufacturing customer, represented approximately
13.4% of total Reptron Distribution net sales (11.5% of total Company net
sales) and the largest sales office accounted for 19.2% of total Reptron
Distribution net sales.
K-Byte Manufacturing net sales increased $5.1 million, or 25.6%,
from $20.0 million in the third quarter of 1995 to $25.1 million in the
third quarter of 1996. Sales to new customers accounted for approximately
$3.0 million of this increase with $2.0 million of this increase generated
by the previously established K-Byte customer base. Additionally, as
discussed above, a significant Reptron Distribution customer began being
served by K-Byte Manufacturing in 1996 and third quarter sales to this
customer totaled approximately $825,000. The largest K-Byte Manufacturing
customer accounted for approximately 20.5% of third quarter division net
sales (7.7% of total Company net sales), no other customers accounted for
9
more than 9.8% of third quarter division net sales. Sales from the Tampa,
Florida manufacturing facility accounted for approximately 52.7% of K-Byte
Manufacturing third quarter net sales. The Gaylord, Michigan manufacturing
facility generated approximately 43.2% of K-Byte Manufacturing third quarter
net sales with the remaining sales originating from the Saline, Michigan
location.
K-Byte Manufacturing net sales increased $15.0 million, or 25.4%,
from $58.9 million in the first three quarters of 1995 to $73.9 million in
the first three quarters of 1996. Sales to three new customers accounted
for approximately $4.6 million of the increase with the remainder of the
increase generated from the previously established customer base. The
largest three K-Byte customers accounted for approximately 16.0%, 10.2% and
9.1%, respectively, of total division net sales (5.9%, 3.8% and 3.4%,
respectively, of total Company net sales). Sales from the Tampa, Florida,
Gaylord, Michigan and Saline, Michigan manufacturing facilities accounted
for approximately 62.1%, 34.7% and 3.2%, respectively, of total K-Byte
Manufacturing sales in the first three quarters of 1996.
Gross Profit. Total third quarter gross profit increased $1.9
million, or 17.4%, from $10.7 million in the third quarter of 1995 to $12.6
million in the third quarter of 1996. The gross profit percentage of the
Company increased from 18.0% in the third quarter of 1995 to 19.1% in the
third quarter of 1996. Total gross profit increased $9.4 million, or 32.9%,
from $28.4 million in the first three quarters of 1995 to $37.8 million in
the first three quarters of 1996. The gross profit percentage increased
from 18.3% in the first three quarters of 1995 to 19.0% in the first three
quarters of 1996.
Reptron Distribution third quarter gross profit increased
$383,000, or 4.9%, from $7.9 million in the third quarter of 1995 to $8.2
million in the third quarter of 1996. The gross profit percentage increased
from 19.9% in the third quarter of 1995 to 20.2% in the third quarter of
1996. This increase in gross profit percentage was generated despite the
negative impact of lower margin sales generated by the memory module
division, formed in December, 1995. Sales in this niche are generally
characterized by high volumes, lower gross profit margins and lower selling
and administrative expenses than other electronic component sales generated
by Reptron Distribution. The increase in third quarter, 1996 gross profit
margins was primarily the result of an increase in the percentage of sales
that were generated from Reptron Distribution's value-added services.
Value-added sales generally carry higher gross profit percentages than
traditional electronic component sales. Reptron Distribution's gross profit
percentage increased from 19.9% in the first three quarters of 1995 to 20.3%
in the first three quarters of 1996 for similar reasons.
K-Byte Manufacturing gross profit increased $1.5 million, or
51.5%, from $2.9 million in the third quarter of 1995 to $4.4 million in the
third quarter of 1996 and its gross profit percentage increased from 14.4%
in the third quarter of 1995 to 17.4% in the third quarter of 1996. Price
reductions for many types of electronic components used by K-Byte
Manufacturing have helped to improve gross profit margins. Additionally,
the increase in net sales has resulted in higher fixed overhead cost
absorption allowing for higher gross profit margins. Finally, the mix of
business in the third quarter of 1996 was favorable, resulting in higher
gross profit margins. K-Byte Manufacturing gross profit percentage
increased from 15.6% in the first three quarters of 1995 to 16.9% in the
first three quarters of 1996 for similar reasons.
Selling, General, and Administrative Expenses. Selling, general,
and administrative expenses increased $1.4 million, or 19.3%, from $7.0
million in the third quarter of 1995 to $8.4 million in the third quarter of
1996. These expenses, as a percentage of net sales, increased from 11.8% in
the third quarter of 1995 to 12.7% in the third quarter of 1996. This
increase is attributable to higher variable costs associated with the
10
increase in sales. However, selling, general and administrative expenses as
a percentage of net sales have decreased from 13.6% in the second quarter of
1996. Selling, general and administrative expenses as a percentage of net
sales increased from 11.7% in the first three quarters of 1995 to 13.0% in
the first three quarters of 1996, for similar reasons.
Interest Expense. Interest expense in the third quarter of 1995
and 1996 remained constant, as a result of slightly higher levels of
outstanding working capital debt during the third quarter of 1996, offset by
slightly lower interest rates in 1996. Borrowings under the bank credit
line increased from $44.3 million on September 30, 1995 to $46.8 million on
September 30, 1996. First three quarters interest expense increased $1.2
million, or 61.7%, from $1.8 million in the first three quarters of 1995 to
$3.0 million in the first three quarters of 1996. This increase resulted
from an increase in the average outstanding working capital debt of $19.0 or
62.5%, from $30.4 million during the first three quarters of 1995 to $49.4
million during the first three quarters of 1996. The Western Micro
Technology acquisition, in July 1995, resulted in cash expenditures of
approximately $11.0 million and was financed through the bank credit line.
In addition, higher levels of current assets during the first three quarters
of 1996 were financed through the bank credit line.
LIQUIDITY AND CAPITAL RESOURCES
The Company primarily finances its operations through bank credit
lines, capital equipment leases, and short-term financing through supplier
credit lines.
Operating activities for the third quarter of 1996 generated cash
of approximately $1.0 million. This increase resulted primarily from net
earnings of $2.0 million and an increase in accounts payable of $5.1
million. These items were offset by a $837,000 increase in accounts
receivable, a $4.7 million increase in inventories, a $887,000 increase in
other assets and a $529,000 decrease in accrued expenses.
Operating activities for the first three quarters of 1996 generated
cash of approximately $12.9 million. This increase resulted primarily from
net earnings of $5.4 million, decrease in accounts receivable of $3.6
million, decrease in inventories of approximately $9.1 million and an
increase in income taxes payable of $226,000. These items were offset by a
$7.4 million decrease in accounts payable and an increase in other assets of
$600,000.
Capital expenditures totaled approximately $8.4 million in the
first three quarters of 1996. These capital expenditures were primarily for
the acquisition of manufacturing equipment and costs associated with the
construction of the new plant/warehouse in Tampa, Florida. These capital
expenditures were funded primarily through variable rate demand notes as
provided by the bank credit line. Additionally, the Company financed
approximately $372,000 of capital expenditures through capital leases.
The Company believes that cash generated from operations and
available credit facilities will be sufficient for the Company to meet its
capital expenditures and working capital needs for its operations as
presently conducted. Additionally, the Company's future liquidity and cash
requirements will depend on a wide range of factors, including the level of
business in existing operations, expansion of facilities, and possible
acquisitions. While there can be no assurance that such financing will be
available in amounts and on terms acceptable to the Company, the Company
believes that such financing will be available on acceptable terms.
11
REPTRON ELECTRONICS, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended September 30, 1996.
12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated:_______________________________
REPTRON ELECTRONICS, INC.
_________________________
(Registrant)
By:______________________
Paul J. Plante, Vice President-
Finance and Chief Financial
Officer (Principal Financial and
Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF EARNINGS AND THE CONSOLIDATED BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1463
<SECURITIES> 0
<RECEIVABLES> 37570
<ALLOWANCES> 180
<INVENTORY> 54319
<CURRENT-ASSETS> 95598
<PP&E> 27284
<DEPRECIATION> 0
<TOTAL-ASSETS> 128918
<CURRENT-LIABILITIES> 21934
<BONDS> 0
0
0
<COMMON> 61
<OTHER-SE> 46403
<TOTAL-LIABILITY-AND-EQUITY> 128918
<SALES> 198595
<TOTAL-REVENUES> 198595
<CGS> 160821
<TOTAL-COSTS> 186569
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2955
<INCOME-PRETAX> 9071
<INCOME-TAX> 3629
<INCOME-CONTINUING> 5442
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5442
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
</TABLE>
