REPTRON ELECTRONICS INC, 424B4, 1997-08-06

REPTRON ELECTRONICS INC
424B4, 1997-08-06
ELECTRONIC PARTS & EQUIPMENT, NEC

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<PAGE> 1
Filed pursuant to Rule 424(b)(4)
Registration No. 333-31605

PROSPECTUS
$100,000,000

[REPTRON ELECTRONICS, INC. LOGO]

6 3/4% CONVERTIBLE SUBORDINATED NOTES DUE 2004
------------------------

Reptron Electronics, Inc. ("Reptron" or the "Company") is offering
$100,000,000 aggregate principal amount of its 6 3/4% Convertible Subordinated
Notes due August 1, 2004 (the "Notes"). The Notes are convertible at any time
prior to maturity, unless previously redeemed or repurchased, into shares of
common stock, par value $.01 per share ("Common Stock"), of the Company at a
conversion rate of 35.0877 shares per each $1,000 principal amount of Notes
(equivalent to a conversion price of approximately $28.50 per share), subject to
adjustment in certain circumstances. On August 5, 1997, the last reported bid
price of the Common Stock, which is traded under the symbol "REPT" on The Nasdaq
Stock Market's ("Nasdaq") National Market, was $23.75 per share.

Interest on the Notes is payable on February 1 and August 1 of each year,
commencing February 1, 1998. The Notes are redeemable in whole or in part at the
Company's option at any time on or after August 1, 2000, at the redemption
prices set forth herein, plus accrued interest to the date of redemption. See
"Description of Notes -- Optional Redemption." The Notes are not entitled to any
sinking fund. The Notes will mature on August 1, 2004.

In the event of a Change of Control (as defined herein), each holder of
Notes may require the Company to repurchase its Notes, in whole or in part, for
cash at a repurchase price of 100% of the principal amount of Notes to be
repurchased, plus accrued interest to the repurchase date. See "Description of
Notes -- Repurchase at the Option of Holders Upon a Change of Control."

The Notes are unsecured obligations subordinated in right of payment to all
existing and future Senior Indebtedness (as defined herein) of the Company and
effectively subordinated in right of payment to all indebtedness and other
liabilities of the Company's subsidiaries. As of June 30, 1997, after giving
effect to this offering and the application of the net proceeds therefrom, the
Company would have had $18.5 million of Senior Indebtedness outstanding and the
Company's subsidiaries would have had no indebtedness or other liabilities
outstanding. The Indenture will not restrict the Company or its subsidiaries
from incurring additional Senior Indebtedness or other indebtedness. See
"Description of Notes -- Subordination."

The Notes will not be listed on any securities exchange or the Nasdaq
National Market and will only be traded in the over-the-counter market.

------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY POTENTIAL PURCHASERS OF THE NOTES.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
====================================================================================================================
PRICE TO DISCOUNT TO PROCEEDS TO
PUBLIC(1) UNDERWRITERS(2) COMPANY(3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................................. 100.00% 3.50% 96.50%
- --------------------------------------------------------------------------------------------------------------------
Total(4)................................. $100,000,000 $3,500,000 $96,500,000
====================================================================================================================
</TABLE>

(1) Plus accrued interest, if any, from date of issuance.
(2) The Company has agreed to indemnify the Underwriters (as defined herein)
against certain liabilities, including liabilities under the Securities Act.
See "Underwriting."
(3) Before deducting expenses payable by the Company, estimated to be $500,000.
(4) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional $15,000,000 principal amount of Notes at the offering
price shown above, less the Underwriters' discount, solely for the purpose
of covering over-allotments, if any. If the Underwriters exercise such
option in full, the Price to Public, the Discount to Underwriters and
Proceeds to the Company will be $115,000,000, $4,025,000 and $110,975,000,
respectively.
------------------------

The Notes are offered by the Underwriters, subject to prior sale, when, as
and if delivered to and accepted by the Underwriters and subject to the
Underwriters' right to reject orders in whole or part. It is expected that
delivery of the Notes will be made on or about August 11, 1997, against payment
in immediately available funds.

RAYMOND JAMES & ASSOCIATES, INC.
FORUM CAPITAL MARKETS L.P.
STEPHENS INC.

The date of this Prospectus is August 6, 1997.
<PAGE> 2

[PHOTOGRAPH OF TESTING EQUIPMENT LOCATED IN TAMPA MANUFACTURING FACILITY]

K-Byte Manufacturing performs complex testing procedures on substantially
all products assembled.

[PHOTOGRAPH OF EXTERIOR OF TAMPA MANUFACTURING AND WAREHOUSE FACILITY]

Newly constructed manufacturing and warehouse facility located in Tampa,
Florida.

[PHOTOGRAPH OF SURFACE MOUNT EQUIPMENT LOCATED IN TAMPA MANUFACTURING FACILITY]

K-Byte Manufacturing has invested in advanced surface mount technology
equipment in its Tampa manufacturing facility.

[PHOTOGRAPH OF CONVEYOR BELT LOCATED IN TAMPA WAREHOUSE FACILITY]

Reptron Distribution has recently developed and installed a warehousing
system that combines bar code technology with sophisticated conveyor equipment.

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE SHORT
COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, the Financial Statements and Notes thereto, included or
incorporated by reference in this Prospectus. Except as otherwise indicated, the
information in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised.

This Prospectus contains statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934 (the "1934 Act"). The words "expect,"
"estimate," "anticipate," "predict," "believe" and similar expressions and
variations thereof are intended to identify forward-looking statements. Such
statements appear in a number of places in this Prospectus and include
statements regarding the intent, belief or current expectations of the Company,
its directors, or its officers with respect to, among other things: (i) trends
affecting the Company's financial condition or results of operations; (ii) the
Company's financing plans; (iii) the Company's business and growth strategies,
including potential acquisitions; and (iv) the use of the net proceeds by the
Company from this offering. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, and that actual results may differ materially from
those predicted in the forward-looking statements, as a result of various
factors. The accompanying information contained in this Prospectus, including
the information set forth under the headings "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as information contained in the Company's other filings with
the Securities and Exchange Commission, identify important factors that could
cause such differences.

THE COMPANY

Reptron Electronics, Inc. (the "Company") is a leading integrated
electronics company providing both value-added distribution of electronic
components and targeted contract manufacturing services through its two
divisions, Reptron Distribution and K-Byte Manufacturing. The two divisions are
complementary, enabling the Company to provide customers with a wide range of
products and value-added services, as well as a single source for their product,
material, assembly and test requirements. Approximately 44% of the Company's
1996 net sales were generated by customers utilizing the services of both
divisions. The Company believes that its integrated approach to manufacturing
and distribution distinguishes it in the electronics industry, provides a high
level of value to its customer base and enables it to obtain sole source
relationships with an increasing number of its customers. As a result of the
successful implementation of the Company's business strategy, it has increased
net sales from approximately $83.4 million in 1992 to $268.9 million in 1996 and
net earnings from $1.2 million in 1992 to $7.7 million in 1996.

Reptron Distribution sells over 60 vendor lines of semiconductors, passive
products and electromechanical components, including more than 35,000 different
stock-keeping units ("SKUs"). Reptron Distribution sells to over 9,000 customers
representing diverse industries including robotics, telecommunications,
computers and computer peripherals, consumer electronics, healthcare, industrial
controls and contract manufacturing. Services provided to these customers
include component sales, inventory replenishment programs, in-plant stores,
component programming and electronic data interchange ("EDI"). As a result of
two acquisitions completed in 1995, Reptron Distribution expanded its geographic
presence and currently has 20 sales offices located throughout the U.S.,
enabling the Company to market to approximately 83% of the total available U.S.
electronic components market (based upon 1996 industry sales). Reptron
Distribution's net sales have increased significantly from $48.9 million in 1992
to $168.3 million in 1996.

K-Byte Manufacturing focuses on establishing primary or sole source
relationships with OEMs in a wide variety of industries that require complex
circuit board assembly and turnkey manufacturing services, with low-to-medium
volume production runs. K-Byte Manufacturing leverages its relationship with
Reptron Distribution by utilizing Reptron Distribution's 85-person sales force,
large customer base, greater access to electronic components and advantages in
component pricing. Services provided to K-Byte Manufacturing customers include
concurrent engineering, surface mount technology ("SMT") and pin-through-hole
("PTH") manufacturing. The Company believes that K-Byte Manufacturing provides
Reptron Distribution a
1
<PAGE> 4

significant competitive advantage by broadening value-added services that can be
offered to Reptron Distribution customers. K-Byte Manufacturing, which operates
in two facilities in Michigan and one in Florida, has increased net sales from
$34.5 million in 1992 to $100.7 million in 1996.

The Company believes its growth has been fueled by several key trends:

- Manufacturers of electronic components are reducing the number of
distributors that are authorized to sell their products and selecting
distributors that are able to serve a larger part of the total available
U.S. market;

- Electronic components are increasingly being sold through value-added
services, such as in-plant stores, automated inventory replenishment
systems and the outsourcing of product assembly; and

- OEMs are increasingly outsourcing the assembly and testing of printed
circuit boards, as well as the manufacture of complete electronic
products, to contract manufacturing specialists.

According to the National Electronic Distributors Association ("NEDA"), the
total North American electronics distribution market grew from $10.2 billion in
revenue in 1992 to $21.0 billion in 1996, a compound annual growth rate of
19.8%. NEDA projects the market to grow to $23.6 billion in 1997. According to
the Institute for Interconnecting and Packaging Electronic Circuits ("IPC"), as
a result of the outsourcing of manufacturing services, the contract
manufacturing industry in the U.S. grew from $6.3 billion in 1992 to $14.5
billion in 1996, a compound annual rate of 23.2%. Based on IPC estimates, the
U.S. contract manufacturing industry will expand at a 21.0% compound annual
growth rate from 1995 through 2000.

The Company's principal business objective is to expand its presence as a
leading integrated electronics distributor and contract manufacturer. In order
to implement its objective, the Company has formulated a strategy based upon the
following key elements: (i) capitalize on the advantages of integration; (ii)
increase sales from value-added services; (iii) target contract manufacturing
customers in specific market segments; (iv) leverage investments made in the
Company's manufacturing facilities; and (v) expand through acquisitions and
internal growth.

The Company was incorporated under the laws of Michigan in 1973 and
reincorporated under the laws of Florida in 1993. The Company's principal
executive offices are located at 14401 McCormick Drive, Tampa, Florida 33626,
and its telephone number is (813) 854-2351.

RECENT RESULTS

Total net sales, net earnings and net earnings per share for the three
months ended June 30, 1997 were $79.1 million, $2.4 million and $0.38 per share,
respectively, compared to $66.1 million, $1.9 million and $0.31 per share,
respectively, for the three months ended June 30, 1996. Total net sales, net
earnings and net earnings per share for the six months ended June 30, 1997 were
$155.4 million, $4.5 million and $0.73 per share, respectively, compared to
$132.6 million, $3.4 million and $0.55 per share, respectively, for the six
months ended June 30, 1996.
2
<PAGE> 5

THE OFFERING

Securities Offered......... $100,000,000 aggregate principal amount of 6 3/4%
Convertible Subordinated Notes due August 1, 2004
(the "Notes"). The Company has granted the
Underwriters an option for 30 days to purchase up
to an aggregate of $15,000,000 additional principal
amount of Notes, solely to cover over-allotments.

Interest Payment Dates..... Interest on the Notes is payable at the rate set
forth on the cover page hereof, semi-annually on
each February 1 and August 1, commencing February
1, 1998.

Conversion Rights.......... The Notes are convertible at any time prior to
maturity, unless previously redeemed or
repurchased, into shares of Common Stock at a
conversion rate of 35.0877 shares per $1,000
principal amount of Notes (equivalent to a
conversion price of approximately $28.50 per
share), subject to adjustment in certain
circumstances as described herein. See "Description
of Notes -- Conversion Rights."

Subordination.............. The Notes are subordinated in right of payment to
all existing and future Senior Indebtedness (as
defined herein) of the Company. The Notes are also
effectively subordinated in right of payment to all
indebtedness and liabilities of the Company's
subsidiaries. As of June 30, 1997, after giving
effect to the issuance and sale of the Notes and
the application of the net proceeds therefrom, the
Company would have had $18.5 million of Senior
Indebtedness outstanding, and the Company's
subsidiaries would have had no indebtedness or
other liabilities outstanding. See "Description of
Notes -- Subordination."

Optional Redemption........ The Notes will be redeemable at the Company's
option, in whole or in part, at any time on or
after August 1, 2000, at the redemption prices set
forth herein plus accrued interest to the date of
redemption. See "Description of Notes -- Optional
Redemption."

Repurchase at Option of
Holders Upon a Change of
Control.................. In the event of a Change of Control (as defined
herein), each holder of Notes may require the
Company to repurchase its Notes, in whole or in
part, for cash at a repurchase price of 100% of the
principal amount of Notes to be repurchased, plus
accrued interest to the repurchase date. See
"Description of Notes -- Repurchase at Option of
Holders Upon a Change of Control."

Use of Proceeds............ The Company intends to use approximately $58.9
million of the net proceeds to repay outstanding
indebtedness. The remainder of the net proceeds
from this offering will be added to the Company's
working capital to be available for general
corporate purposes, including possible
acquisitions. See "Use of Proceeds."

Listing and Trading of
Notes.................... The Notes will not be listed on any securities
exchange or on the Nasdaq National Market and will
only be traded in the over-the-counter market.

Common Stock............... The Common Stock issuable upon conversion of the
Notes is listed on the Nasdaq National Market under
the symbol "REPT."
3
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------- -----------------
1992 1993 1994 1995 1996 1996 1997
------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net Sales:
Reptron Distribution................ $48,872 $ 71,346 $ 96,003 $140,146 $168,279 $42,349 $47,368
K-Byte Manufacturing................ 34,541 55,661 68,002 83,198 100,658 24,202 28,883
------- -------- -------- -------- -------- ------- -------
Total net sales.............. 83,413 127,007 164,005 223,344 268,937 66,551 76,251
======= ======== ======== ======== ======== ======= =======
Gross Profit:
Reptron Distribution................ 9,968 15,245 18,780 27,500 34,364 8,111 8,732
K-Byte Manufacturing................ 4,613 9,023 11,431 12,663 17,485 3,871 5,340
------- -------- -------- -------- -------- ------- -------
Total gross profit........... 14,581 24,268 30,211 40,163 51,849 11,982 14,072
Selling, general and administrative
expenses.......................... 11,217 16,455 19,051 26,586 35,023 8,348 9,250
------- -------- -------- -------- -------- ------- -------
Operating income.................... 3,364 7,813 11,160 13,577 16,826 3,634 4,822
Interest expense.................... 1,363 1,811 1,474 2,767 4,025 1,102 1,228
------- -------- -------- -------- -------- ------- -------
Earnings before income taxes........ 2,001 6,002 9,686 10,810 12,801 2,532 3,594
Income tax provision................ 807 2,400 3,823 4,324 5,148 1,013 1,438
------- -------- -------- -------- -------- ------- -------
Net earnings........................ $ 1,194 $ 3,602 $ 5,863 $ 6,486 $ 7,653 $ 1,519 $ 2,156
======= ======== ======== ======== ======== ======= =======
Net earnings per share.............. $ .27 $ .81 $ 1.03 $ 1.05 $ 1.24 $ .25 $ .35
======= ======== ======== ======== ======== ======= =======
Weighted average Common Stock and
Common Stock equivalent shares
outstanding....................... 4,442 4,442 5,714 6,170 6,179 6,168 6,207
======= ======== ======== ======== ======== ======= =======
EBITDA(1)........................... $ 4,115 $ 8,927 $ 12,549 $ 16,039 $ 20,464 $ 4,319 $ 5,853
======= ======== ======== ======== ======== ======= =======
Ratio of earnings to fixed
charges(2)........................ 2.47x 4.31x 7.57x 4.66x 3.56x 2.89x 3.46x
======= ======== ======== ======== ======== ======= =======
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------
AS
ACTUAL ADJUSTED(3)
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 88,194 $121,338
Total assets................................................ 157,470 194,614
Revolving Credit Facility................................... 62,856 --
Long-term obligations(4).................................... 17,769 17,769
6 3/4% Convertible Subordinated Notes due 2004.............. -- 100,000
Shareholders' equity........................................ 50,873 50,873
</TABLE>

- ---------------

(1) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBITDA is not presented as an alternative measure of net
income or cash flow from operations (both as determined in accordance with
generally accepted accounting principles), but because it is an accepted
financial indicator of a company's ability to service debt.
(2) The ratio of earnings to fixed charges is computed by dividing earnings by
fixed charges. For this purpose, "earnings" include pretax income from
continuing operations plus fixed charges. "Fixed charges" include interest,
whether expensed or capitalized, amortization of debt expense and the
portion of rental expense that is representative of the interest factor in
these rentals.
(3) Adjusted to give effect to the issuance and sale of the Notes and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."
(4) Includes $6.1 million of capitalized lease obligations.
4
<PAGE> 7

RISK FACTORS

An investment in the Notes hereby involves a high degree of risk.
Prospective investors should consider carefully the following risk factors, in
addition to the other information included and incorporated by reference in this
Prospectus, in connection with an investment in the Notes offered hereby.

CUSTOMER CONCENTRATION AND OTHER FACTORS AFFECTING OPERATING RESULTS

The Company's divisions have certain customers that account for a
significant part of their net sales. The largest customer of the Company is a
customer of both Reptron Distribution and K-Byte Manufacturing. In 1996 and the
first quarter of 1997, this customer accounted for approximately 15.7% and
15.4%, respectively, of Reptron Distribution's net sales, 6.9% and 3.3%,
respectively, of K-Byte Manufacturing's net sales and 12.4% and 10.8%,
respectively, of the Company's total net sales. K-Byte Manufacturing had 36
principal customers in 1996 with the largest three customers accounting for
15.9%, 9.9% and 8.9% of its net sales in 1996, respectively (6.0%, 3.7% and 3.3%
of the Company's total net sales in 1996, respectively). During the first
quarter of 1997, K-Byte Manufacturing's three largest customers accounted for
14.7%, 9.4% and 8.7% of its net sales, respectively (5.6%, 3.6% and 3.3% of the
Company's total net sales during the first quarter of 1997). The loss of one or
more of these major customers, or a reduction in their level of purchasing,
could have a material adverse effect on the Company's business, results of
operations and financial condition. K-Byte Manufacturing's operating results are
affected by a number of factors, including fixed plant utilization, price
competition, the Company's ability to keep pace with technological developments,
the degree of automation that can be used in an assembly process, efficiencies
that can be achieved by the Company in managing inventories and fixed assets,
the timing of orders from major customers, the timing of capital expenditures in
anticipation of increased sales, customer product delivery requirements and
increased costs and shortages of components and labor. In addition, because of
the limited number of K-Byte Manufacturing's customers and the corresponding
concentration of its accounts receivable, the insolvency or other inability or
unwillingness of its customers to pay for its services could have a material
adverse effect on the Company.

DEPENDENCE UPON KEY VENDORS

Many kinds of components distributed by Reptron Distribution are currently
manufactured by a relatively small number of independent vendors. Four vendors
collectively accounted for approximately 37.5% and 41.5% of Reptron
Distribution's net sales in 1996 and the first quarter of 1997, respectively
(23.4% and 25.8% of the Company's total net sales in 1996 and the first quarter
of 1997, respectively). The Company does not have long-term distribution
contracts with its vendors. The Company's contracts are non-exclusive and
typically are cancelable upon 30 days' written notice. The Company's future
success will depend, in large part, on maintaining such relationships and
developing new relationships in connection with its existing and future product
lines. The Company believes that vendors are consolidating their distribution
relationships. In the first quarter of 1997, the Company and one of its primary
vendors discontinued their relationship. This vendor accounted for 9.3% of
Reptron Distribution's 1996 net sales (5.8% of the Company's total net sales in
1996). Although the Company does not believe that the loss of this vendor will
have a material adverse effect on the Company, the loss of, or significant
disruptions in the relationship with, one or more of Reptron Distribution's
other principal vendors could have a material adverse effect on the Company.

ACQUISITION RISKS

The Company's growth strategy includes expansion through acquisitions. A
part of the net proceeds from this offering may be used for potential
acquisitions. See "Use of Proceeds." There can be no assurance that the Company
will be able to successfully negotiate with potential acquisition candidates (in
which case the Company might pursue unsolicited acquisitions), secure
acquisition financing on acceptable terms (which financing may involve incurring
substantial indebtedness), complete acquisitions, integrate acquired operations
into existing operations or expand into new markets. There can also be no
assurance that future acquisitions will not have an adverse effect on the
Company's operating results, particularly in the periods following the
completion of such acquisitions while the operations of the acquired business
are being

5
<PAGE> 8

integrated into the Company's operations. Once integrated, acquired operations
may not achieve levels of sales, profitability or productivity comparable with
those achieved by the Company's existing operations, or otherwise perform as
expected. In addition, the Company competes for acquisition and expansion
opportunities with companies that have substantially greater resources than
those of the Company. The Company currently has no agreements, arrangements or
understandings with respect to any acquisition and there can be no assurance
that any such acquisition will be consummated.

ABSENCE OF LONG-TERM SALES CONTRACTS

The level and timing of purchase orders placed by K-Byte Manufacturing's
customers are affected by a number of factors, including variation in demand for
customers' products, customer attempts to manage inventory and changes in the
customers' manufacturing strategies. The Company typically does not obtain
long-term purchase orders or commitments but instead works with its customers to
develop nonbinding forecasts of the future volume of orders. Based on such
nonbinding forecasts, the Company makes commitments regarding the level of
business that it will seek and accept, the timing of production schedules and
the levels and utilization of personnel and other resources. A variety of
conditions, both specific to each individual customer and generally affecting
each customer's industry, may cause customers to cancel, reduce or delay orders
that were either previously made or anticipated. Generally, customers may
cancel, reduce or delay purchase orders and commitments without penalty, except
for payment for services rendered, materials purchased and, in certain
circumstances, charges associated with such cancellation, reduction or delay.
Significant or numerous cancellations, reductions or delays in orders by
customers, or any inability by customers to pay for services provided by the
Company or to pay for components and materials purchased by the Company on such
customers' behalf, could have a material adverse effect on the Company.

SUBSTANTIAL START-UP COSTS FOR MANUFACTURING CUSTOMERS

K-Byte Manufacturing targets customers requiring the production of a wide
variety of technologically complex printed circuit board assemblies. The
integration of new customers or new products of existing customers into K-Byte
Manufacturing's facilities and processes involves a substantial amount of
start-up costs which are incurred prior to any sales being generated from these
customers. These start-up costs could have a material adverse effect on K-Byte
Manufacturing.

COMPETITION; EFFECTS ON GROSS MARGIN

Both Reptron Distribution and K-Byte Manufacturing face substantial
competition. Many of the Company's competitors have significantly greater
resources and broader name recognition than the Company. Reptron Distribution
faces competition from hundreds of electronic component distributors of various
sizes, locations and market focuses (e.g., military, commercial, consumer) and
competes principally on the basis of product selection, reputation and
value-added customer services. Vendor representation and product diversity
create a segmentation among distributors. Reptron Distribution has several
primary competitors that carry similar significant Japanese semiconductor
vendors. K-Byte Manufacturing competes in a highly fragmented market composed of
a diverse group of U.S. based contract manufacturers. The Company believes that
the key competitive factors in its markets are manufacturing flexibility, price,
manufacturing quality, advanced manufacturing technology and reliable delivery.
Additionally, K-Byte Manufacturing also faces competition from current and
prospective customers that evaluate the Company's capabilities against the
merits of manufacturing products internally. There can be no assurance that the
Company will be able to continue to compete effectively with existing or
potential competitors. In addition, gross margins in the businesses in which the
Company competes have declined in recent years due to competitive pressures. The
Company believes this trend will continue.

AVAILABILITY OF COMPONENTS

The Company relies on third-party suppliers for components used in its
manufacturing process. Component shortages experienced by the Company and its
suppliers may have a material adverse effect on customer orders for the services
of both Reptron Distribution and K-Byte Manufacturing. At various times,

6
<PAGE> 9

there have been shortages of components in the electronics industry and
currently the supply of certain electronic components is subject to limited
allocations. If shortages of these or other components should intensify or occur
in the future, the Company may be forced to delay manufacturing and shipment or
to purchase components at higher prices (which it may not be able to pass on to
its customers), which may have a material adverse effect on customer demand for
the Company's services, on the Company's gross margins or both. Any of these
events could have a material adverse effect on the Company.

DEPENDENCE UPON KEY PERSONNEL

The success of the Company to date has been largely dependent upon the
efforts and abilities of the senior management. The loss of their services for
any reason could have a material adverse effect on the Company.

MANAGEMENT OF GROWTH

The Company has grown rapidly in recent years, with net sales increasing
from approximately $83.4 million in 1992 to approximately $268.9 million in
1996. The ability to continue this growth rate will depend upon several factors,
including the Company's ability to recruit, train and retain a skilled workforce
to support its expanding operations. There can be no assurance that the Company
will be able to sustain its historic rate of net sales growth, continue its
profitable operations, develop the required workforce or manage any future
growth successfully. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

VOLATILITY OF COMPONENT PRICING

The Company sells a significant amount of commodity-type components that
have historically experienced volatile pricing. These components include dynamic
random access memory and static random access memory products. If market pricing
for these components decreases significantly, the Company may experience periods
when its investment in component inventory exceeds the market price of such
components. Such market conditions could have a negative impact on sales and
gross profit margins unless and until the Company's vendors reduce the cost of
such components (through price protection rights, if any, outlined in the vendor
agreements).

CONTROL BY PRINCIPAL SHAREHOLDER

Michael L. Musto, the Company's President and Chief Executive Officer,
beneficially owned approximately 38.6% of the Common Stock at June 30, 1997
(24.5% assuming conversion of the Notes and 23.2% assuming exercise of the
Underwriters' over-allotment option in full and conversion of the Notes). As a
result, Mr. Musto effectively will be able to continue to control the Company
after the consummation of this offering. See "Principal Shareholders."

ANTI-TAKEOVER PROVISIONS

The Company's articles of incorporation and bylaws and Florida law contain
certain provisions that may discourage or make more difficult any attempt by a
person or group to obtain control of the Company. In addition, the board of
directors of the Company is empowered to issue from time to time one or more
series of Preferred Stock without shareholder approval, the terms of which could
have the effect of delaying or preventing a change in control of the Company.
See "Description of Capital Stock."

DISCRETION IN USE OF PROCEEDS

The Company intends to use approximately $58.9 million of the net proceeds
from this offering to repay certain of its outstanding indebtedness. The
remaining $37.1 million of the net proceeds from this offering will be added to
the Company's working capital and will be available for general corporate
purposes, including possible acquisitions. As of the date of this Prospectus,
the Company cannot specify with certainty the particular uses for the net
proceeds to be added to its working capital. Accordingly, management will have

7
<PAGE> 10

broad discretion in the application of such net proceeds. See "Use of Proceeds"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

SUBORDINATION OF THE NOTES

The Notes will be unsecured and subordinated in right of payment in full to
all existing and future Senior Indebtedness of the Company. As a result of such
subordination, in the event of the Company's liquidation or insolvency, payment
default with respect to Senior Indebtedness, a covenant default with respect to
Senior Indebtedness, or upon acceleration of the Notes due to an Event of
Default (as defined herein), the assets of the Company will be available to pay
obligations on the Notes only after all Senior Indebtedness has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the Notes then outstanding. The Company may from time to time incur
indebtedness constituting Senior Indebtedness. The Notes are also effectively
subordinated in right of payment to all indebtedness and other liabilities,
including trade payables, of the Company's subsidiaries. The Indenture does not
prohibit or limit the incurrence of Senior Indebtedness or other indebtedness
and other liabilities by the Company or its subsidiaries. The incurrence of
additional indebtedness and other liabilities by the Company or its subsidiaries
could adversely affect the Company's ability to pay its obligations on the
Notes. In addition, the cash flow and ability of the Company to service debt,
including the Notes, may in the future become dependent in part upon the
earnings from the business conducted by the Company through subsidiaries and
distribution of those earnings, or upon loans or other payments of funds by
those subsidiaries to the Company. As of June 30, 1997, after giving effect to
the issuance and sale of the Notes and the application of the net proceeds
therefrom, the Company would have had $18.5 million of Senior Indebtedness
outstanding, and the Company's subsidiaries would have had no indebtedness or
other liabilities outstanding. See "Description of Notes -- Subordination."

LIMITATIONS ON REPURCHASE OF NOTES

Upon a Change of Control, each holder of Notes will have the right, at the
holder's option, to require the Company to repurchase all or a portion of such
holder's Notes. If a Change of Control were to occur, there can be no assurance
that the Company would have sufficient funds to pay the repurchase price for all
Notes tendered by the holders thereof. In addition, the Company's repurchase of
Notes as a result of the occurrence of a Change of Control may be prohibited or
limited by, or create an Event of Default under, the terms of agreements related
to borrowings which the Company may enter into from time to time, including
agreements relating to Senior Indebtedness. The agreement relating to the
Company's current Senior Indebtedness would limit the Company's ability to
repurchase the Notes. See "Description of Notes -- Repurchase at Option of
Holders Upon a Change of Control."

ABSENCE OF PUBLIC MARKET FOR THE NOTES

The Notes will be a new issue of securities with no established trading
market. The Underwriters have advised the Company that they intend to make a
market in the Notes. The Underwriters are not obligated, however, to make a
market in the Notes, and any such market making may be discontinued at any time
at the sole discretion of the Underwriters without notice. There can be no
assurance that an active market for the Notes will develop and continue upon
completion of this offering or that the market price of the Notes will not
decline. Various factors such as changes in prevailing interest rates or changes
in perceptions of the Company's creditworthiness could cause the market price of
the Notes to fluctuate significantly. The trading price of the Notes could also
be significantly affected by the market price of the Common Stock, which could
be subject to wide fluctuations in response to a variety of factors, including
quarterly variations in operating results, announcements of technological
innovations or new products by the Company or its competitors, general
conditions in the industry and general economic and market conditions. The Notes
will not be listed on any securities exchange or the Nasdaq Stock Market and
will only be traded in the over-the-counter market.

8
<PAGE> 11

USE OF PROCEEDS

The net proceeds to the Company from the sale of the Notes offered hereby,
after deducting the underwriting discount and the estimated expenses of this
offering, will be $96.0 million ($110.5 million if the Underwriters'
over-allotment option is exercised in full). The Company intends to use a part
of the net proceeds to repay all outstanding indebtedness under the Company's
Amended and Restated Revolving Credit and Reimbursement Agreement, dated July
29, 1995, as amended (the "Revolving Credit Facility"). At June 30, 1997,
approximately $58.9 million of borrowings were outstanding under the Revolving
Credit Facility and such borrowings bore interest at a weighted average interest
rate of 7.6% per year at that date. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

The remainder of the net proceeds will be added to the Company's working
capital and will be available for general corporate purposes, including
acquisitions. An important component of the Company's growth strategy is the
ability to pursue acquisitions. The purpose of this offering is to provide the
Company with increased financial flexibility to pursue acquisitions of other
businesses that are consistent with the Company's growth strategy. The Company
currently has no agreement, arrangement or understanding with respect to any
acquisition. See "Risk Factors -- Acquisition Risks", "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Business -- Strategy."

Pending use of the net proceeds from this offering as discussed above, the
Company intends to make temporary investments in interest-bearing savings
accounts, certificates of deposit, United States government obligations, money
market accounts, interest bearing securities or other insured short-term,
interest-bearing investments.

9
<PAGE> 12

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1997 on an actual basis and as adjusted to give effect to the issuance
and sale of the Notes and the application of the net proceeds therefrom. See
"Use of Proceeds." This table should be read in conjunction with the
Consolidated Financial Statements and Notes included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------
ACTUAL AS ADJUSTED(1)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
Revolving Credit Facility................................... $ 62,856 $ --
Long-term obligations(2).................................... 17,769 17,769
6 3/4% Convertible Subordinated Notes due 2004.............. -- 100,000
Shareholders' equity:
Preferred Stock, $.10 par value; 15,000,000 shares
authorized, no shares issued........................... -- --
Common Stock, $.01 par value; 50,000,000 shares
authorized(3), 6,071,019 shares issued and outstanding
and issued and outstanding as adjusted(4).............. 61 61
Additional paid-in capital................................ 21,260 21,260
Retained earnings......................................... 29,552 29,552
-------- --------
Total shareholders' equity........................ 50,873 50,873
-------- --------
Total capitalization.............................. $131,498 $168,642
======== ========
</TABLE>

- ---------------

(1) Adjusted to give effect to the issuance and sale of the Notes and the
application of the estimated net proceeds therefrom. See "Use of Proceeds."
(2) Includes $6.1 million of capitalized lease obligations.
(3) Since March 31, 1997, the Company has increased the authorized Common Stock
to 50,000,000 shares.
(4) Excludes (i) 261,550 shares of Common Stock issuable upon the exercise of
options outstanding, which had a weighted average exercise price of $9.82
per share and (ii) 198,200 shares of Common Stock reserved for future
issuance under the Company's Incentive Stock Option Plan (the "Plan"). Since
March 31, 1997, the number of shares available for the issuance of options
under the Plan has been increased to 1,500,000 and the Company has granted
options to purchase an additional 479,500 shares of its Common Stock under
the Plan. See "Description of Capital Stock."

10
<PAGE> 13

SELECTED CONSOLIDATED FINANCIAL DATA

The balance sheet data as of December 31, 1995 and 1996 and the statement
of earnings data for each of the three years in the period ending December 31,
1996 have been derived from the Company's Consolidated Financial Statements for
such years, which have been audited by Grant Thornton LLP, independent certified
public accountants, and are included elsewhere in this Prospectus. The balance
sheet data as of December 31, 1992, 1993 and 1994 and the statement of earnings
data for each of the two years in the period ended December 31, 1993 have been
derived from the Company's Consolidated Financial Statements, which were audited
by Grant Thornton LLP and which are not included herein. The selected
consolidated financial information set forth below for the three months ended
March 31, 1996 and 1997 have been derived from the unaudited financial
statements of the Company and includes all adjustments the Company considers
necessary for a fair presentation of results of operations for the periods
presented. Operating results for the three months ending March 31, 1997 are not
necessarily indicative of the results which may be expected for the full year
ended December 31, 1997. The selected consolidated financial data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- -------- ------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net Sales:
Reptron Distribution............... $48,872 $71,346 $96,003 $140,146 $168,279 $42,349 $47,368
K-Byte Manufacturing............... 34,541 55,661 68,002 83,198 100,658 24,202 28,883
------- ------- ------- -------- -------- ------- -------
Total net sales............. 83,413 127,007 164,005 223,344 268,937 66,551 76,251
======= ======= ======= ======== ======== ======= =======
Gross Profit:
Reptron Distribution............... 9,968 15,245 18,780 27,500 34,364 8,111 8,732
K-Byte Manufacturing............... 4,613 9,023 11,431 12,663 17,485 3,871 5,340
------- ------- ------- -------- -------- ------- -------
Total gross profit.......... 14,581 24,268 30,211 40,163 51,849 11,982 14,072
Selling, general and administrative
expenses........................... 11,217 16,455 19,051 26,586 35,023 8,348 9,250
------- ------- ------- -------- -------- ------- -------
Operating income..................... 3,364 7,813 11,160 13,577 16,826 3,634 4,822
Interest expense..................... 1,363 1,811 1,474 2,767 4,025 1,102 1,228
------- ------- ------- -------- -------- ------- -------
Earnings before income taxes......... 2,001 6,002 9,686 10,810 12,801 2,532 3,594
Income tax provision................. 807 2,400 3,823 4,324 5,148 1,013 1,438
------- ------- ------- -------- -------- ------- -------
Net earnings......................... 1,194 3,602 5,863 6,486 7,653 1,519 2,156
======= ======= ======= ======== ======== ======= =======
Net earnings per share............... .27 .81 1.03 1.05 1.24 .25 .35
======= ======= ======= ======== ======== ======= =======
Weighted average Common Stock
equivalent shares outstanding...... 4,442 4,442 5,714 6,170 6,179 6,168 6,207
======= ======= ======= ======== ======== ======= =======
EBITDA(1)............................ $ 4,115 $ 8,927 $12,549 $ 16,039 $ 20,464 $ 4,319 $ 5,853
======= ======= ======= ======== ======== ======= =======
Ratio of earnings to fixed
charges(2)......................... 2.47x 4.31x 7.57x 4.66x 3.56x 2.89x 3.46x
======= ======= ======= ======== ======== ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1997
----------------------------------------------- ---------------------
1992 1993 1994 1995 1996 ACTUAL ADJUSTED(3)
------- ------- ------- ------- ------- ------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................ $15,660 $28,328 $40,490 $75,629 $77,231 $88,194 $121,338
Total assets........................... 30,710 51,917 70,073 133,738 138,632 157,470 194,614
Revolving Credit Facility.............. 13,575 24,042 16,491 52,133 48,550 62,856 --
Long-term obligations.................. 2,188 4,755 4,307 12,977 18,795 17,769 17,769
6 3/4% Convertible Subordinated Notes
due 2004............................. -- -- -- -- -- -- 100,000
Shareholders' equity................... 3,834 7,436 34,415 40,948 48,690 50,873 50,873
</TABLE>

11
<PAGE> 14

- ---------------

12
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following should be read in conjunction with the Consolidated Financial
Statements, including the notes thereto, included elsewhere in this Prospectus.

GENERAL

The Company has grown rapidly through the implementation of its strategy of
integrating value-added distribution services with contract manufacturing. Since
the acquisition of K-Byte Manufacturing in 1986, the Company's net sales have
increased from approximately $25 million to approximately $269 million in 1996.
The Company has also focused on improving its operating margin through such
measures as: (i) shifting Reptron Distribution's business mix from standard
component sales to higher margin value-added services, which now represent 35%
of its net sales; (ii) continuing to increase the number of customers using both
of the Company's distribution and contract manufacturing services, thereby
lowering overall selling expenses; (iii) investing in facilities technology in
order to improve efficiencies; and (iv) creating a telemarketing operation to
more efficiently access smaller volume customers.

K-Byte Manufacturing offers contract manufacturing services to its
customers on a turnkey basis pursuant to customer designs. In turnkey contracts,
K-Byte Manufacturing purchases the electronic components and other material used
in assembly and charges for these items in addition to its labor and
manufacturing costs. For strategic reasons, K-Byte Manufacturing does not pursue
consignment business in which the customer supplies the product material and
pays only for labor and manufacturing costs. The Company believes that by
retaining total responsibility for material procurement it can achieve greater
control of the manufacturing process and can leverage the strengths of Reptron
Distribution. The marketing cycle for K-Byte Manufacturing engagements tends to
span six to twelve months and the start-up phase typically spans another six
months. During start-up, significant investments are made by K-Byte
Manufacturing and its customers to prepare for the successful launch of the
contract manufacturing engagement. K-Byte Manufacturing's contracts with
customers address the customers' obligations relative to cancellation, component
price increases, engineering change notices, inventory (stores, work-in-process
and vendor stock) and payment terms.

In 1995, in order to expand Reptron's geographic presence, the Company
acquired substantially all of the assets and certain liabilities of Cronin
Electronics, Inc. and the electronic components distribution business of Western
Micro Technology, Inc. (collectively, the "1995 Acquisitions"). The 1995
Acquisitions, which were accounted for using the purchase method, involved a
total consideration of $19.5 million, consisting of $12.6 million in cash and
the balance in assumed liabilities. These acquisitions accounted for
approximately $30.4 million of 1996 total net sales. The 1995 Acquisitions and
the opening of an additional sales office enable Reptron Distribution to market
to 83% of the total available U.S. market for electronic components (based upon
1996 industry sales) compared to approximately 30% prior to these acquisitions.

In December 1995, the Company also created a division devoted solely to
selling memory modules. This division sells memory modules primarily to computer
integrators and value-added resellers, a customer base not historically served
by Reptron Distribution. Sales in this market segment are generally
characterized by lower gross margins and lower selling, general and
administrative expenses than other sales generated by Reptron Distribution.
Sales from this division have increased rapidly and accounted for 10.2% and 8.6%
of Reptron Distribution's net sales in 1996 and the first quarter of 1997,
respectively (6.4% and 5.3% of the Company's total net sales in 1996 and the
first quarter of 1997, respectively).

Sales for Reptron Distribution and K-Byte Manufacturing are recognized upon
shipment, except for sales from in-plant stores. Sales from in-plant stores are
recognized when a customer removes a product from the Company's in-plant
inventory. Sales from in-plant stores represented 19.8% and 18.6% of Reptron
Distribution's and 11.2% and 4.4% of K-Byte Manufacturing's 1996 and first
quarter of 1997 net sales, respectively (16.6% and 13.2% of the Company's total
net sales in 1996 and first quarter of 1997, respectively). In-plant inventories
are tracked using bar-code labeling technology or frequent inventory counts.
Cost of sales for

13
<PAGE> 16

Reptron Distribution includes only the cost of materials (electronic
components). Cost of sales for K-Byte Manufacturing includes the cost of
materials, labor and manufacturing overhead.

The Company has centralized many of its operations, including finance,
accounting, credit and collections, MIS, human resources and senior management.
These functions are performed by personnel in the corporate headquarters in
Tampa, who serve both divisions of the Company. Certain economic and integration
benefits are realized by centralizing these functions, allowing each division to
concentrate on its core business and focus on serving customers without being
distracted by administrative issues. The Company believes that through this
centralization, it can better control overhead expenses and spread the costs of
centralized functions over a larger sales base and thereby increase
profitability.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
of the Company's total net sales represented by each line item presented, except
for Reptron Distribution and K-Byte Manufacturing gross profit, which is
presented as a percentage of net sales of the respective segments.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
--------------------- -------------
1994 1995 1996 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net Sales:
Reptron Distribution..................................... 58.5% 62.7% 62.6% 63.6% 62.1%
K-Byte Manufacturing..................................... 41.5 37.3 37.4 36.4 37.9
----- ----- ----- ----- -----
Total net sales.................................. 100.0 100.0 100.0 100.0 100.0
===== ===== ===== ===== =====
Gross Profit:
Reptron Distribution..................................... 19.6 19.6 20.4 19.2 18.4
===== ===== ===== ===== =====
K-Byte Manufacturing..................................... 16.8 15.2 17.4 16.0 18.5
===== ===== ===== ===== =====
Total gross profit............................... 18.4 18.0 19.3 18.0 18.5
Selling, general and administrative expenses............... 11.6 11.9 13.0 12.5 12.1
----- ----- ----- ----- -----
Operating income........................................... 6.8 6.1 6.3 5.5 6.4
Interest expense........................................... 0.9 1.2 1.5 1.7 1.6
----- ----- ----- ----- -----
Earnings before income taxes............................... 5.9 4.9 4.8 3.8 4.8
Income tax provision....................................... 2.3 2.0 2.0 1.5 1.9
----- ----- ----- ----- -----
Net earnings..................................... 3.6% 2.9% 2.8% 2.3% 2.9%
===== ===== ===== ===== =====
</TABLE>

THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31,
1996

Net Sales. Total first quarter net sales increased $9.7 million, or 14.6%,
from $66.6 million in the first quarter of 1996 to $76.3 million in the first
quarter of 1997.

Reptron Distribution first quarter net sales increased $5.0 million, or
11.9%, from $42.4 million in the first quarter of 1996 to $47.4 million in the
first quarter of 1997. Sales to the largest customer of the Company, Tellabs,
Inc., accounted for approximately $2.7 million of the increase in first quarter
1997 net sales. Tellabs, Inc. is a customer of both Reptron Distribution and
K-Byte Manufacturing and represented approximately 15.4% of Reptron Distribution
first quarter 1997 net sales (10.8% of total Company net sales). Sales from the
memory module division accounted for approximately $760,000 of the increase in
first quarter 1997 net sales. The balance of the increase in first quarter 1997
net sales was generated by the remainder of the Reptron Distribution sales
offices. The highest volume sales office accounted for approximately 21.5% of
Reptron Distribution net sales. Sales of semiconductors accounted for 75.1% of
first quarter Reptron Distribution net sales, with the remaining sales generated
from passive components (19.4%) and electromechanical products (5.5%).

14
<PAGE> 17

K-Byte Manufacturing net sales increased $4.7 million, or 19.3%, from $24.2
million in the first quarter of 1996 to $28.9 million in the first quarter of
1997. Sales to new customers accounted for a $6.6 million increase in net sales
over the first quarter of 1996. This increase was partially offset by an
intentional $1.4 million decrease in sales volume to a financially troubled
customer. Net sales from the remaining active K-Byte Manufacturing customers
varied based on differing customer requirements during these time periods. The
largest K-Byte Manufacturing customer accounted for approximately 14.7% of
division net sales (5.6% of total net sales). No other customer represented more
than 9.5% of division net sales. Sales from the Tampa, Florida manufacturing
facility accounted for approximately 58.0% of K-Byte Manufacturing net sales.
The Gaylord, Michigan manufacturing facility generated approximately 38.2% of
K-Byte Manufacturing net sales with the remaining net sales originating from the
Saline, Michigan location.

Gross Profit. Total first quarter gross profit increased $2.1 million, or
17.4%, from $12.0 million in the first quarter of 1996 to $14.1 million in the
first quarter of 1997. The gross margin of the Company increased from 18.0% in
the first quarter of 1996 to 18.5% in the first quarter of 1997.

Reptron Distribution first quarter gross profit increased $621,000, or
7.7%, from $8.1 million in the first quarter of 1996 to $8.7 million in the
first quarter of 1997. The gross margin decreased from 19.2% in the first
quarter of 1996 to 18.4% in the first quarter of 1997. Sales of a specific ASIC
component to the Company's largest customer, Tellabs, Inc., resulted in lowering
the first quarter 1997 gross margin. Additionally, the increase in lower margin
sales from the memory module division as a percentage of total Reptron
Distribution net sales, from 7.8% in the first quarter of 1996 to 8.6% in the
first quarter of 1997, contributed to the decrease in first quarter 1997 gross
margin.

K-Byte Manufacturing gross profit increased $1.4 million, or 38.0%, from
$3.9 million in the first quarter of 1996 to $5.3 million in the first quarter
of 1997 and its gross margin increased from 16.0% in the first quarter of 1996
to 18.5% in the first quarter of 1997. This increase is primarily attributable
to the efficiencies of fixed overhead costs being spread over a larger revenue
base and a favorable mix of business in the first quarter of 1997.

Selling, General and Administrative Expense. Selling, general and
administrative expenses increased $900,000, or 10.8%, from $8.3 million in the
first quarter of 1996 to $9.2 million in the first quarter of 1997. These
expenses, as a percentage of net sales, decreased from 12.5% in the first
quarter of 1996 to 12.1% in the first quarter of 1997.

Interest Expense. Interest expense increased $126,000, or 11.4%, from $1.1
million in the first quarter of 1996 to $1.2 million in the first quarter of
1997 as a result of higher levels of average outstanding debt. The Company's
current assets have increased to support the 14.6% increase in net sales. The
increases in current assets were financed through the bank credit line.

1996 COMPARED TO 1995

Net Sales. Total net sales increased $45.6 million, or 20.4%, from $223.3
million in 1995 to $268.9 million in 1996.

Reptron Distribution net sales increased $28.2 million, or 20.1%, from
$140.1 million in 1995 to $168.3 million in 1996. The memory module division,
established in December 1995, accounted for approximately $17.2 million of the
increase in net sales in 1996. Approximately $7.0 million of the increase in net
sales in 1996 was attributable to the 1995 Acquisitions. In addition,
approximately $3.2 million of the increase in 1996 net sales was attributable to
net sales from sales offices with greater than twelve months of sales history.
The remainder of the net sales increase, approximately $800,000, was generated
by a new sales office.

Sales of semiconductors, passive components and electromechanical
components accounted for 74.8%, 20.2% and 5.0%, respectively, of Reptron
Distribution's 1996 net sales. The percentage of net sales derived from
semiconductor sales increased from 73.8% in 1995, primarily as a result of sales
generated by the memory module division, established in December 1995. Sales
generated from the top four vendors accounted for approximately $63.0 million,
or 37.5% of Reptron Distribution's 1996 net sales.

15
<PAGE> 18

K-Byte Manufacturing net sales increased $17.5 million, or 21.0%, from
$83.2 million in 1995 to $100.7 million in 1996. Approximately $13.0 million of
the increase in net sales was generated by the previously existing K-Byte
Manufacturing customer base. The remainder of the increase in net sales,
approximately $4.5 million, was generated by sales to new customers.

Gross Profit. Total gross profit increased $11.6 million, or 29.1%, from
$40.2 million in 1995 to $51.8 million in 1996. Gross margin increased from
18.0% in 1995 to 19.3% in 1996.

Reptron Distribution's gross profit increased $6.9 million, or 25.0%, from
$27.5 million in 1995 to $34.4 million in 1996 and the gross margin increased
from 19.6% in 1995 to 20.4% in 1996. The increase in gross margin in 1996 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 have higher gross margins than traditional electronic component sales.
The increase in gross margin was generated despite the negative impact of lower
margin sales generated by the memory module division.

K-Byte Manufacturing's gross profit increased $4.8 million, or 38.1%, from
$12.7 million in 1995 to $17.5 million in 1996. Gross margin increased from
15.2% in 1995 to 17.4% in 1996. Price reductions for many types of electronic
components used by K-Byte Manufacturing helped improve the gross margin. In
addition, the increase in net sales has resulted in spreading overhead cost over
a larger sales base, allowing for higher gross margins.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $8.4 million, or 31.7%, from $26.6 million in
1995 to $35.0 million in 1996. These expenses, as a percentage of net sales,
increased from 11.9% in 1995 to 13.0% in 1996. Increases in K-Byte Manufacturing
support staff required to manage the increased sales activity accounted for
approximately $3.1 million of the increase in selling, general and
administrative expenses in 1996. The 1995 Acquisitions accounted for
approximately $2.6 million of the increase and the remainder of the increase
resulted from higher variable costs associated with the increase in Reptron
Distribution's net sales.

Interest Expense. Interest expense increased $1.2 million, or 45.5%, from
$2.8 million in 1995 to $4.0 million in 1996. This increase resulted from a
46.7% increase in the average borrowings outstanding under the Revolving Credit
Facility, from $34.3 million in 1995 to $50.3 million in 1996. The increased
borrowings were used to fund higher working capital needs.

1995 COMPARED TO 1994

Net Sales. Total net sales increased $59.3 million, or 36.2%, from $164.0
million in 1994 to $223.3 million in 1995.

Reptron Distribution's net sales increased $44.1 million, or 46.0%, from
$96.0 million in 1994 to $140.1 million in 1995. Net sales generated from the
1995 Acquisitions, which were consummated in March and July 1995, accounted for
approximately $20.1 million of the increase in net sales. The remainder of the
net sales increase (approximately $24.0 million, or 25.0%, over 1994 net sales)
was generated by the previously established offices of Reptron Distribution.

Sales of semiconductors, passive components and electromechnical components
accounted for 73.8%, 21.0% and 5.2%, respectively, of Reptron Distribution's
1995 net sales. The percentage of 1995 net sales generated by semiconductor
sales increased in the second half of 1995 primarily as a result of the
acquisition of the electronic component distribution division of Western Micro
Technology, Inc., which generated all of its net sales from semiconductor sales
prior to its acquisition by the Company. Sales generated from the top five
vendors increased $39.3 million in 1995. Sales from new vendor lines accounted
for $9.0 million of Reptron Distribution's 1995 net sales.

K-Byte Manufacturing's net sales increased $15.2 million, or 22.3%, from
$68.0 million in 1994 to $83.2 million in 1995. Sales to four major new
customers accounted for approximately $21.1 million of increased sales in 1995.
These increases were partially offset by the intentional reduction in sales of
approximately $3.0

16
<PAGE> 19

million to a financially troubled customer. The remainder of the change in net
sales resulted from differing customer requirements in 1995.

Gross Profit. Total gross profit increased $10.0 million, or 32.9%, from
$30.2 million in 1994 to $40.2 million in 1995. Gross margin decreased from
18.4% in 1994 to 18.0% in 1995.

Reptron Distribution's gross profit increased $8.7 million, or 46.4%, from
$18.8 million in 1994 to $27.5 million in 1995 and gross margin remained
unchanged at 19.6% in both 1994 and 1995.

K-Byte Manufacturing's gross profit increased $1.2 million, or 10.8%, from
$11.4 million in 1994 to $12.7 million in 1995. Gross margin decreased from
16.8% in 1994 to 15.2% in 1995. The decrease in K-Byte Manufacturing's gross
margin resulted primarily from a change in the mix of business and reflected
competitive market conditions.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $7.5 million, or 39.6%, from $19.1 million in
1994 to $26.6 million in 1995. These expenses, as a percentage of net sales,
increased from 11.6% in 1994 to 11.9% in 1995. The 1995 Acquisitions accounted
for approximately $3.5 million of the increase in selling, general and
administrative expenses. The remainder of the increase resulted from higher
variable costs associated with the increase in net sales.

Interest Expense. Interest expense increased $1.3 million, or 87.7%, from
$1.5 million in 1994 to $2.8 million in 1995. This increase primarily resulted
from a 69.3% increase in the average borrowings outstanding under the Revolving
Credit Facility from $20.3 million in 1994 to $34.3 million in 1995. The
increased borrowings were used primarily to finance the 1995 Acquisitions.

QUARTERLY RESULTS OF OPERATIONS AND SEASONALITY

The following table presents unaudited quarterly operating results for the
Company for each of the four quarters in both 1995 and 1996 and the first
quarter of 1997. In the opinion of management, this information has been
prepared on the same basis as the audited Consolidated Financial Statements
included in this Prospectus and includes all adjustments (consisting of only
normal recurring accruals) that management considers necessary for a fair
presentation of the results for such periods. Such quarterly results are not
necessarily indicative of the results of operations for any future period. In
1996, the industry experienced significant reductions in the pricing of many
types of semiconductors, including most memory products (DRAM and SRAM).
Although the Company's unit volume sales of such memory products increased
throughout 1996, the effect of such price reductions caused reduced revenue
growth in the first three quarters of 1996.

<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------------------
1995 1996 1997
---------------------------------------- ---------------------------------------- -------
MARCH JUNE SEPTEMBER DECEMBER MARCH JUNE SEPTEMBER DECEMBER MARCH
31, 30, 30, 31, 31, 30, 30, 31, 31,
------- ------- --------- -------- ------- ------- --------- -------- -------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales........................ $43,076 $52,873 $59,492 $67,903 $66,551 $66,092 $65,953 $70,341 $76,251
Gross profit..................... 8,171 9,515 10,729 11,748 11,982 13,199 12,594 14,074 14,072
Operating income................. 2,949 3,523 3,692 3,413 3,936 4,183 4,200 4,507 4,822
Net earnings..................... 1,511 1,778 1,713 1,484 1,519 1,905 2,017 2,212 2,156
Net earnings per share........... 0.25 0.29 0.28 0.24 0.25 0.31 0.33 0.36 0.35
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has primarily financed its operations
through bank credit lines, capital equipment leases and short-term financing
through supplier credit lines. Additionally, on April 5, 1994, the Company
received net proceeds totaling $21.1 million from its initial public offering,
which were used to repay borrowings outstanding under the Revolving Credit
Facility.

Pursuant to the Company's Revolving Credit Facility, four lenders have made
available to the Company a $63.8 million revolving credit facility through June
30, 1999. The lenders may advance funds to the Company pursuant to two types of
loans, each of which bears a separate rate of interest. As long as the Company
is not in default under the Revolving Credit Facility, and upon notice to the
lender, the Company may convert

17
<PAGE> 20

advances from one type of loan to the other. Interest rates on borrowings
outstanding under the Revolving Credit Facility ranged from 7.56% to 8.50% as of
June 30, 1997. Borrowings under the Revolving Credit Facility are collateralized
by all of the Company's inventory and accounts receivable. The Revolving Credit
Facility contains certain financial covenants, including requiring the Company
to maintain a minimum tangible net worth, maintain various financial ratios and
limit the amount of capital expenditures. In addition, the Revolving Credit
Facility requires the financial institutions' approval of annual dividends in
excess of the lesser of $1,000,000 or 25% of net earnings, thereby restricting
the distribution of the retained earnings of the Company. The Company was in
compliance with all financial covenants as of June 30, 1997.

The Company has entered into various capital lease transactions with
several leasing companies to finance capital expenditures, primarily for K-Byte
Manufacturing. These leases had an aggregate balance outstanding of $6.5 million
as of December 31, 1996. The leases bear interest at rates ranging from 7.4% to
11.1% and expire on various dates through December 2001.

The Company's operating activities used cash of approximately $10.6 million
in the first quarter of 1997. This decrease in liquidity resulted primarily from
an increase in accounts receivable of $7.6 million and an increase in
inventories of $6.8 million. These items were offset by a $4.0 million increase
in accounts payable. The Company's accounts receivable collections averaged 52.5
days as of March 31, 1997. Reptron Distribution averaged 5.2 inventory turns in
the first quarter of 1997 while K-Byte Manufacturing averaged 3.9 inventory
turns during this period. K-Byte Manufacturing's inventory turns have been
negatively impacted by the complex process associated with integrating ten new
customers, representing over 290 different circuit board assemblies into the
Tampa manufacturing plant.

The Company's capital expenditures, including capital leases, were
approximately $8.0 million in 1994, $10.2 million in 1995, $12.8 million in 1996
and $3.2 million in the first quarter of 1997. In 1994, the Company purchased
its corporate headquarters building in Tampa, Florida and a 336-acre parcel
adjacent to its headquarters for construction of its manufacturing and warehouse
facility. These items accounted for approximately $4.0 million of the 1994
capital expenditures total. In 1995, the Company added 22,000 square feet to its
K-Byte Manufacturing facility in Gaylord, Michigan and initiated construction on
a 150,000 square-foot building adjacent to the corporate headquarters in Tampa,
Florida. This building is used as the main warehouse for Reptron Distribution
and the Tampa K-Byte Manufacturing facility. These items accounted for
approximately $3.0 million of the 1995 capital expenditures total. The
continuing construction of the 150,000 square-foot building accounted for
approximately $5.9 million of the 1996 capital expenditures. Reptron
Distribution warehouse equipment represented approximately $750,000 of the 1996
total capital expenditures. The remainder of the capital expenditures in years
1994 through 1996 were primarily for the acquisition of manufacturing equipment
for use in K-Byte Manufacturing. Capital expenditures during the years 1994
through 1996 were funded through cash flow from operations, capital leases and
borrowings under the Revolving Credit Facility. In the first quarter of 1997,
the Company's capital expenditures were primarily for the acquisition of
manufacturing equipment and were funded with borrowings under the Revolving
Credit Facility. The Company expects that capital expenditures for the balance
of 1997 will approximate $6.0 million primarily for machinery and equipment for
K-Byte Manufacturing and renovation of corporate headquarters.

The 1995 Acquisitions were financed through a combination of cash and the
assumption of specified liabilities. Of the approximately $19.5 million total
consideration, approximately $12.6 million was paid in cash with the remainder
in the form of assumption of specified liabilities. The cash payments were
funded with borrowings under the Revolving Credit Facility.

The Company pays for its purchases from foreign sources, including Japanese
manufacturers, in U.S. dollars, which reduces the adverse effects of currency
fluctuations. The Company has not experienced a substantial adverse effect from
currency fluctuations.

18
<PAGE> 21

After the application of the net proceeds of this offering as described in
"Use of Proceeds," the Company believes that cash generated from operations and
amounts available under the Revolving Credit Facility will be sufficient for the
Company to meet its capital expenditures and working capital needs for its
operations as presently conducted for the foreseeable future. The Company's
growth strategy includes growth through acquisitions. The net proceeds of this
offering, together with cash generated from operations, may not be adequate to
finance such acquisitions and the Company may be required to seek additional
financing. See "Acquisition Risks." Although the Company intends to seek an
increase in its Revolving Credit Facility, there can be no assurance that it
will be able to obtain such an increase. See "Use of Proceeds." Further, there
can be no assurance that other financing would be available in amounts and on
terms acceptable to the Company.

19
<PAGE> 22

BUSINESS

GENERAL

The Company is a leading integrated electronics company providing both
value-added distribution of electronic components and targeted contract
manufacturing services through its two divisions, Reptron Distribution and
K-Byte Manufacturing. The two divisions are complementary, enabling the Company
to provide customers with a wide range of products and value-added services, as
well as a single source for their product, material, assembly and test
requirements. Approximately 44% of the Company's 1996 net sales were generated
by customers utilizing the services of both divisions. The Company believes that
its integrated approach to manufacturing and distribution distinguishes it in
the electronics industry, provides a high level of value to its customer base
and enables it to obtain sole source relationships with an increasing number of
its customers. As a result of the successful implementation of the Company's
business strategy, it has increased net sales from approximately $83.4 million
in 1992 to $268.9 million in 1996 and net earnings from $1.2 million in 1992 to
$7.7 million in 1996.

INDUSTRY OVERVIEW

Distribution. Most manufacturers of electronics components rely on
independent distributors, such as the Company, to extend their marketing
operations. As a stocking, marketing and financial intermediary, a distributor
relieves the manufacturer of part of the costs associated with the stocking and
selling of their products, including otherwise potentially sizeable investments
in inventories, accounts receivable and personnel. At the same time, the
distributor offers to a broad range of customers the convenience of diverse
inventory, flexible deliveries and a wide range of value-added services to help
manage material requirements. The growth of the electronics component
distribution industry has been fueled by the growing number of electronic
component manufacturers that view their distributors as essential extensions of
their marketing organizations and by customers who recognize the value that
distributors add to the total material procurement process. According to NEDA,
the total North American electronics distribution market grew from $10.2 billion
in revenue in 1992 to $21.0 billion in 1996 and is projected to grow to $23.6
billion in 1997.

Two important trends have developed recently in the U.S. electronic
components distribution industry. First, manufacturers of electronic components
are reducing the number of distributors who are authorized to sell their
products. This trend is the result of the need for electronic component
manufacturers to reduce their operating costs. Engaging a smaller number of
distributors allows the manufacturer to reduce support staff. Accordingly, the
reduced number of authorized distributors must be able to service the majority
of the total available U.S. market in order to allow the manufacturer to reduce
its distributor base without losing significant market share.

A second trend in the industry is for an increasing percentage of
distribution sales being associated with value-added services. This trend is the
result of the need for OEMs to reduce their operating costs. By interacting with
distributors through the use of in-plant stores, automated inventory
replenishment systems utilizing EDI and outsourcing of product assembly, among
other actions, OEMs may reduce their total materials acquisition cost. The
distributor assumes a larger role in the management of the supply chain in these
types of engagements.

Contract Manufacturing. The basis for the development of the contract
manufacturing industry in recent years has been the increasing reliance of OEMs
on contract manufacturing specialists such as the Company for the manufacture of
printed circuit board assemblies. As a result of outsourcing manufacturing
services, the contract manufacturing industry in the U.S. grew from $6.3 billion
in 1992 to $14.5 billion in 1996, a compound annual rate of 23.2%. Based on IPC
estimates, the U.S. contract manufacturing industry has expanded and will expand
at a 21% compound annual growth rate from 1995 through 2000. Some of the
advantages OEMs receive as a result of outsourcing are:

- Reduced Time to Market. Because of the intense competitive pressures
and rapidly progressing technology in the electronics industry, OEMs
are faced with increasingly short product life-cycles and therefore
have a growing need to reduce the time required to bring a product to
market.

20
<PAGE> 23

OEMs can reduce their time to market by using a contract manufacturer's
established manufacturing expertise and infrastructure.

- Minimized Capital Investment. As electronic products have become more
technologically advanced, the manufacturing process has become
increasingly automated and highly intricate, and manufacturers have had
to invest in new capital equipment at an accelerated rate. Contract
manufacturing specialists enable OEMs to gain access to advanced
manufacturing facilities and equipment, thereby reducing their overall
capital equipment requirements.

- Focused Resources. Because the electronics industry is experiencing
greater levels of competition and more rapid technological change, many
OEMs increasingly seek to focus their resources on activities and
technologies that add greater value. By offering turnkey manufacturing
services and comprehensive electronic assembly, contract manufacturing
specialists permit OEMs to focus on their core business activities,
such as product development, marketing and distribution.

- Access to Leading Edge Manufacturing Technology. Electronic products
and electronics manufacturing technology have become increasingly
sophisticated and complex. OEMs desire to work with contract
manufacturing specialists in order to gain access to their
technological expertise in process development and control.

- Improved Inventory Management and Purchasing Power. Electronics
industry OEMs are faced with increasing difficulties in planning,
procuring and managing their inventories efficiently due to frequent
design changes, short product life-cycles, large investments in
electronic components, component price fluctuations and the need to
achieve economies of scale in materials procurement. OEMs can reduce
production costs by using a contract manufacturing specialist's volume
procurement capabilities and expertise in inventory management. By
utilizing a contract manufacturing specialist, OEMs frequently can
better manage inventory costs and increase their return on assets.

The increasing cost of automated equipment used in the industry, the
working capital requirements relating to inventory and the additional services
that contract manufacturers are providing make it more difficult for smaller
contract manufacturers and start-up companies to compete with the services
provided by larger, well-capitalized companies. Additionally, the purchasing
power generated by the volumes of material purchased by larger contract
manufacturers makes it difficult for smaller manufacturers to be price
competitive. The Company believes that these factors are driving consolidation
in the industry and may provide opportunities for growth through acquisitions.

STRATEGY

- Continue to Capitalize on the Benefits of Integration. The Company
operates as an integrated electronics company that provides value-added
distribution of electronic components and targeted contract
manufacturing services. Reptron Distribution emphasizes its value-added
services as a method to lower the customer's total material acquisition
costs. The Company believes that K-Byte Manufacturing provides Reptron
Distribution with a significant advantage over its major competitors
that lack in-house contract manufacturing operations by broadening the
selection of products and services that can be offered to Reptron
Distribution's customers. Similarly, Reptron Distribution provides
K-Byte Manufacturing with advantages over other contract manufacturers
because of its access to Reptron Distribution's field sales force,
large customer base and expertise in component purchasing. Of K-Byte
Manufacturing's 36 customers in 1996, 32 are also Reptron Distribution
customers.

- Increase Sales from Value-Added Services. The Company seeks to
enhance sales by providing value-added services. Reptron Distribution
has developed a comprehensive value-added service

21
<PAGE> 24

offering which includes inventory control programs (e.g., bonded,
consigned, just-in-time), in-plant stores, automated inventory
replenishment systems utilizing EDI technology, component programming,
custom display integration and contract manufacturing (through K-Byte
Manufacturing). These value-added programs allow the OEMs to reduce
their total acquisition costs for materials. An increasing percentage
of industry sales are being generated from value-added engagements and
management believes the Company is well positioned to capitalize on
this trend. In 1996, and in the first quarter of 1997, approximately
35% of Reptron Distribution sales were generated through value-added
services.

- Target Manufacturing Customers in Specific Market Segments. The
Company follows a well-defined strategy in its contract manufacturing
business. K-Byte Manufacturing focuses on complex assemblies in
low-to-medium volumes for commercial and industrial customers.
Additionally, the Company seeks customers that will utilize K-Byte
Manufacturing's ability to assemble customers' products by integrating
printed circuit board assemblies into other elements of the customers'
products (sometimes referred to as total "box build"). The Company also
seeks customer relationships in which K-Byte Manufacturing is the
primary source and avoids engagements requiring an overflow supplier.
K-Byte Manufacturing targets customers in a variety of industries to
establish a diversity among customers and industries served.

- Leverage Investments Made in its Manufacturing Facilities. The
Company has invested in facilities that will allow it to expand its
business. The Company believes its combined manufacturing facilities
can accommodate the equipment and infrastructure capable of generating
approximately $225 million in annual contract manufacturing net sales
based on the types of business currently transacted by K-Byte
Manufacturing. K-Byte Manufacturing's sales totaled approximately $101
million in 1996 and, consequently, there is substantial capacity to
support K-Byte Manufacturing's future sales growth. Management believes
that significant opportunities exist for additional business from
present and new customers which will utilize the fixed investment
already made in these facilities.

- Expand Through Acquisitions and Internal Growth. The Company seeks to
expand its operations into geographic areas that it currently does not
serve and to increase its presence in existing markets. Reptron
Distribution currently serves approximately 83% of the total available
U.S. market (based upon 1996 industry sales). However, the Company
believes that significant opportunities exist to expand its business in
existing regions and into new regions either by acquiring distributors
in these markets or by opening new sales offices. The Company is
actively pursuing acquisition opportunities for Reptron Distribution
for the purpose of increasing its geographic coverage and increasing
its penetration in existing markets served. Additionally, the Company
intends to expand K-Byte Manufacturing within the Company's western
region to better capture contract manufacturing opportunities in that
area.

REPTRON DISTRIBUTION

The Company was founded in 1973 in Detroit as a distributor of electronic
components. From 1973 through 1989, the Company expanded by opening nine sales
offices in the midwestern and southeastern U.S. Additional expansion has been
generated through a series of acquisitions:

- In 1993, the Company acquired a distributor with offices in
Philadelphia, Pennsylvania and Baltimore, Maryland.

- In 1995, the Company acquired a distributor (Cronin Electronics) with
offices in Boston, Massachusetts and Hartford, Connecticut.

- In 1995, the Company acquired the electronic component distribution
business of Western Micro Technology, Inc. with offices in Boston,
Massachusetts; Irvine, Los Angeles, San Diego and San Jose, California;
Portland, Oregon; and Seattle, Washington.

22
<PAGE> 25

Reptron Distribution now operates from 20 sales offices that allow the
Company to market to approximately 83% of the total available electronic
components market in the U.S.

Products. Reptron Distribution represents over 60 vendor lines and
distributes more than 35,000 separate items. The products that the Company
distributes can be broadly divided into three main groups: semiconductors,
passive products and electromechanical components.

Semiconductors accounted for approximately 75% of Reptron Distribution's
net sales in both 1996 and the first quarter of 1997, respectively. Reptron
Distribution's product offering includes application specific integrated
circuits ("ASICs"), a variety of memory devices (e.g., dynamic, static,
programmable) and microprocessors and controllers produced by 25 vendors. The
Company represents a number of leading semiconductor manufacturers, including
Chips & Technologies, Hitachi, NEC, OKI, Orbit Semiconductor and Sharp. Passive
products and electromechanical components accounted for the remaining 25% of net
sales of Reptron Distribution in 1996 and in the first quarter of 1997. Among
these components are capacitors, resistors, relays, power supplies and
connectors manufactured by over 35 vendors, such as Astec, Dale, Potter &
Brumfield and Sprague. Reptron Distribution's largest four vendor lines
represented 37.5% and 41.5% of Reptron Distribution's net sales in 1996 and in
the first quarter of 1997, respectively (23.4% and 25.8% of the Company's total
net sales in 1996 and in the first quarter of 1997, respectively). See "Risk
Factors -- Customer Concentration and Other Factors Affecting Operating
Results."

In December 1995, Reptron Distribution created its K-Byte Memory Module
division, which is devoted solely to selling memory modules. This memory modules
division employs a separate sales and support staff that focuses on a different
market niche and customer base than was previously serviced by Reptron
Distribution. This division sells primarily to computer integrators and
value-added resellers. Sales in this niche are generally characterized by higher
volumes, lower gross profit margins and lower selling, general and
administrative expenses than other electronic component sales generated by
Reptron Distribution. Sales from the memory module division have increased
rapidly and accounted for 10.2% and 8.6% of Reptron Distribution's net sales in
1996 and the first quarter of 1997, respectively (6.4% and 5.3% of the Company's
total net sales in 1996 and in the first quarter of 1997, respectively).

Services. Reptron Distribution sells to over 9,000 customers representing
diverse industries including robotics, telecommunications, computers and
computer peripherals, consumer electronics, healthcare, industrial controls and
contract manufacturing. Services provided to these customers include component
sales, inventory replenishment programs, in-plant stores, component programming
and EDI. During 1996 and the first quarter of 1997, approximately 35% of Reptron
Distribution net sales were generated through value-added services. The Company
believes that an increasing percentage of Reptron Distribution's net sales will
be generated through its value-added services as customers continue to search
for ways to reduce costs. The Company has invested significantly in capital
equipment and support staff to help increase net sales from value-added
services. For its vendors, Reptron Distribution has developed product promotion
and customer identification programs that help vendors build recognition of
individual products and target and market to specific types of customers.

Vendors. In selecting vendors to represent, Reptron Distribution considers
numerous factors, including product demand, availability and compatibility with
existing product lines. Reptron Distribution has non-exclusive, geographically
limited agreements with its vendors for the sale of their products, which is
customary in the industry. Reptron Distribution's agreements with vendors do not
restrict the Company from selling similar products manufactured by competitors
of its vendors, and typically allow termination by either party upon 30 to 90
days' notice.

Reptron Distribution's vendors protect the Company against potential
write-downs of inventories based upon vendors' price reductions or technological
change. Under the terms of most of Reptron Distribution's distributor
agreements, if the Company complies with certain conditions, the vendor is
required, pursuant to price protection privileges, to credit the Company for
decreases in inventory value resulting from reductions in the vendor's list
prices of the items. In addition, under the stock rotation terms of Reptron
Distribution's distributor agreements, the Company has the right to return to
the vendor for credit against current obligations or future orders a specified
portion of those inventory items purchased within a designated period. A vendor

23
<PAGE> 26

that elects to terminate a distributor agreement is generally required to
purchase from the Company the total amount of its products carried in inventory.
The Company believes that its distributor agreements are on terms and conditions
consistent with industry standards. Most of the components sold through the
memory module division formed in December 1995 are not supplied under
distribution agreements with the Company's vendors, and consequently, this
inventory is not subject to the price protection and stock rotation privileges.
However, the majority of these components are not purchased until the Company
has received a customer purchase order for their sale.

Sales and Marketing. Reptron Distribution has developed a focused sales
strategy. Large key accounts are identified in each market and field sales
personnel are assigned to serve these accounts directly. All other customers in
each market are served by telemarketers from the local market or from the
corporate headquarters. The telemarketers also service customers in regions of
the country where the Company does not have a sales office.

Reptron Distribution's marketing plan also includes catalog sales, direct
mail, print advertising, field sales events, customer identification programs,
seminars and public relations efforts. The Company periodically publishes
product catalogs. These catalogs complement the efforts of the sales force by
extending the reach of the sales force beyond the immediate areas of the
established offices and by building customer awareness of Reptron Distribution's
name and product line.

Customers. Reptron Distribution has over 9,000 customers located
throughout the United States. The largest customer of the Company, Tellabs,
Inc., is a customer of both Reptron Distribution and K-Byte Manufacturing. In
the first quarter of 1997, this customer accounted for approximately 15.4% of
Reptron Distribution's net sales, 3.3% of K-Byte Manufacturing's net sales and
10.8% of the Company's total net sales. In 1996, Tellabs, Inc. accounted for
approximately 15.7% of Reptron Distribution net sales, 6.9% of K-Byte
Manufacturing net sales and 12.4% of the Company's total net sales. In 1995,
Tellabs, Inc. accounted for approximately 6.4% of Reptron Distribution net
sales, 9.4% of K-Byte Manufacturing net sales and 7.5% of the Company's total
net sales. Reptron Distribution's customers are in diverse industries, including
robotics, telecommunications, computers and computer peripherals, consumer
electronics, healthcare, industrial controls and contract manufacturing.

Training. A key element of the Company's operating philosophy is the
training of its employees in order to establish technical competency and to
assist in uniform application of the Company's procedures throughout its office
network. Reptron Distribution maintains a formal "Reptron University" training
program and all of Reptron Distribution's employees are required to participate
in these training classes. Additionally, field training takes place on a weekly
basis in the sales offices. The Company has also created a 16-18 month program
for developing product marketing managers.

Property and Offices. The Company owns a 77,500-square foot facility in
Tampa, Florida, which houses centralized corporate support personnel, management
staff and executive offices for Reptron Distribution and K-Byte Manufacturing.
Reptron Distribution's main warehouse is located in a portion of a
newly-constructed 150,000-square foot facility located adjacent to the Company's
Tampa headquarters. Substantially all Reptron Distribution shipments originate
from this warehouse.

24
<PAGE> 27

The Company also leases 20 sales offices for Reptron Distribution. Lease
terms on these facilities range from three to five years and expire at various
dates through June 2001. The table below shows the location of each office and
the date it was established.

<TABLE>
<CAPTION>
OFFICE DATE ESTABLISHED
- ------ -----------------
<S> <C>
Detroit, Michigan........................................... 1973
Chicago, Illinois........................................... 1979
Tampa, Florida.............................................. 1982
Atlanta, Georgia............................................ 1985
Ft. Lauderdale, Florida..................................... 1985
Minneapolis, Minnesota...................................... 1986
Cleveland, Ohio............................................. 1988
Huntsville, Alabama......................................... 1988
Raleigh, North Carolina..................................... 1989
Philadelphia, Pennsylvania.................................. 1993
Baltimore, Maryland......................................... 1993
San Jose, California........................................ 1994
Boston, Massachusetts....................................... 1995
Hartford, Connecticut....................................... 1995
Hauppauge (Long Island), New York........................... 1995
Irvine, California.......................................... 1995
Portland, Oregon............................................ 1995
San Diego, California....................................... 1995
Seattle, Washington......................................... 1995
Salem, New Hampshire........................................ 1996
</TABLE>

As part of its expansion strategy, Reptron Distribution has leased office
space and plans to open a sales office in Dallas, Texas in September 1997.

K-BYTE MANUFACTURING

The Company entered into the contract manufacturing business through its
acquisition of K-Byte Manufacturing in 1986. K-Byte Manufacturing's net sales
have grown from approximately $2 million in 1986 to approximately $101 million
in 1996.

Manufacturing Operations. K-Byte Manufacturing provides turnkey
manufacturing services, including the purchase of customer-specified components
from its extensive network of component suppliers (including Reptron
Distribution), assembly of components onto printed circuit boards and
performance of post-production testing. In addition, approximately 21% of K-Byte
Manufacturing's 1995 and 1996 net sales was generated by total box build
assembly. K-Byte Manufacturing attempts to perform as much of a given
manufacturing process as is feasible and generally does not perform labor-only,
consignment assembly functions unless they may provide a direct route to turnkey
contracts.

K-Byte Manufacturing provides design-for-manufacturability engineering
services as well as SMT conversion and printed circuit board layout services for
existing products. The Company also provides test process design capabilities
that include the design and development of test fixtures and procedures and
software for both in-circuit tests and functional tests of circuit boards,
components and products.

In its manufacturing services, the Company offers both SMT and PTH
interconnection technologies. SMT is a computer-automated process that allows
the placement of a higher density of components directly on both sides of a
printed circuit board. The SMT process is a more recent advancement over the
mature PTH technology which normally permits electronic components to be
attached to only one side of a printed circuit board by inserting components
into holes drilled through the board. The SMT process allows OEMs to use
advanced circuitry, while at the same time permitting the placement of a greater
number of components on a printed circuit board without having to increase the
size of the board. By allowing increasingly complex

25
<PAGE> 28

circuits to be packaged with the components placed in closer proximity to each
other, SMT greatly enhances circuit processing speed and thus board and system
performance. The SMT process allows a reduction in the number of printed circuit
boards required per system and allows the use of more fully automated production
processes.

K-Byte Manufacturing performs PTH assembly both manually and with
computer-automated component insertion and soldering equipment. Although SMT is
the leading interconnection technology, the Company intends to continue
providing PTH assembly services for its customers. PTH is of continuing
viability because most printed circuit boards assembled using SMT require some
PTH assembly. In addition, certain current and prospective customers have not
shifted or do not wish to change their manufacturing process to utilize SMT.

K-Byte Manufacturing is able to manage its materials procurement and
inventory management functions efficiently through its relationship with Reptron
Distribution. The inherent scheduling and procurement challenges in
low-to-medium volume production of a large number of different circuit board
assemblies requires a high level of expertise in material procurement. K-Byte
Manufacturing currently manages a supply chain that provides approximately
56,000 different part types that are required to produce approximately 2,000
different kinds of circuit board assemblies. K-Byte Manufacturing obtains its
electronic components from a wide variety of manufacturers, some of which are
procured through Reptron Distribution. The Company developed this materials
procurement competency through its experience as a component distributor.

Marketing and Customers. K-Byte Manufacturing follows a well-defined
marketing strategy, which includes the following key elements:

Target Customers Requiring Low-to-Medium Volume Production of Multiple
Products. K-Byte Manufacturing focuses on complex assemblies in low-to-medium
volumes for commercial and industrial customers. The Company has not been a
manufacturer of high volume printed circuit board assemblies for personal
computers, consumer products or the automotive industries, which typically have
relatively low gross profit margins. K-Byte Manufacturing targets customers
requiring a high number of different circuit board assemblies, thereby
minimizing the exposure to any one product made for a specific customer. This
market niche typically generates higher gross margins than the high volume
sector. K-Byte Manufacturing focuses on the low-to-medium volume batch business
because of its reduced volatility. K-Byte Manufacturing has access to a
significant number of these kinds of customers through its relationship with
Reptron Distribution.

Target Customer Relationships where K-Byte Manufacturing is the Primary
Source. K-Byte Manufacturing seeks engagements with customers that have decided
to strategically outsource substantially all circuit board assembly.
Consequently, K-Byte Manufacturing markets its services as a "partnership" with
the customer and encourages the customer to view K-Byte Manufacturing as an
extension of its own manufacturing capabilities. The Company attempts to avoid
relationships where K-Byte Manufacturing is used as an overflow supplier to
level peak volume periods for its customers.

Maintain a Diverse Customer and Industry Base. The Company targets
customers in the telecommunications, healthcare devices, banking and industrial
controls industries and seeks to maintain a diversity of customers among these
industries and within each industry. In addition, the Company believes that the
industries that it targets make products that generally have longer life cycles,
more stable demand and less price pressure compared to consumer oriented
products.

The marketing cycle for customers meeting these criteria tends to span
six-to-twelve months. Additionally, the start-up phase for these kinds of
engagements spans another six months. During this phase, significant investments
are made by K-Byte Manufacturing and the customer to successfully launch a high
number of different, complex circuit board assemblies. K-Byte Manufacturing
works closely with its customers in all phases of design, start-up and
production and develops a close working relationship with the customer. These
relationships and the investments made both in time and financial resources by
the customer and K-Byte Manufacturing promote long-term customer loyalty.

Reptron Distribution provides a comprehensive marketing effort for K-Byte
Manufacturing. Reptron Distribution has approximately 85 field sales personnel
who transact business with over 9,000 customers and

26
<PAGE> 29

are trained to identify potential customers for K-Byte Manufacturing. The
Reptron Distribution sales personnel are motivated through sales commissions to
promote K-Byte Manufacturing.

Using the Reptron Distribution sales force to market K-Byte Manufacturing
has proven to be successful as 32 of 36 customers serviced by K-Byte
Manufacturing in 1996 have come from the Reptron Distribution channel.
Additionally, the use of the Reptron Distribution sales force reduces the
overall selling costs for K-Byte Manufacturing. Other contract manufacturers
often use commissioned manufacturers' sales representatives, which is generally
a more costly method of selling.

K-Byte Manufacturing seeks to maintain diversity within its customer base
and industries served. During the first quarter of 1997, K-Byte Manufacturing
had 36 principal customers, with the largest three customers representing 14.7%,
9.4% and 8.7% of K-Byte Manufacturing's first quarter 1997 net sales (5.6%, 3.6%
and 3.3% of total Company net sales). During 1996, K-Byte Manufacturing had
approximately 36 customers, with the largest three customers representing 15.9%,
9.9% and 8.9% of K-Byte Manufacturing's 1996 net sales (6.0%, 3.7% and 3.3% of
total Company net sales in 1996). The following table sets forth the number of
principal customers and percentage of K-Byte Manufacturing sales derived from
various industries for 1995 and 1996.

<TABLE>
<CAPTION>
1995 1996
---------------------- ----------------------
INDUSTRY CUSTOMERS % OF SALES CUSTOMERS % OF SALES
- -------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Industrial/Instrumentation 7 21.9% 11 24.6%
Telecommunications 4 22.8 6 22.3
Banking 2 19.9 2 20.2
Healthcare 4 10.5 5 15.1
Mass Storage 2 8.9 2 8.5
Office Products 2 7.7 2 7.3
Other 4 8.3 8 2.0
</TABLE>

Training. The Company believes that its highly trained and productive work
force is an essential element in its ability to compete effectively, and the
Company is committed to investing in training its employees. K-Byte
Manufacturing has developed a formal training program taught by Company
employees at an in-house "K-Byte Academy," which includes classes in technical
training and employee personal skills in areas such as communication, team
building and leadership. Additionally, K-Byte Manufacturing cross-trains its
employees to perform multiple job functions.

Manufacturing Facilities. K-Byte Manufacturing operates three plants. The
Gaylord, Michigan facility is owned by the Company and was constructed in 1988.
The Company completed a 22,000 square foot addition to this plant in 1995 and
this facility now totals approximately 72,000 square feet. The Tampa, Florida
150,000 square foot manufacturing and warehouse facility was completed in the
first quarter of 1997. These manufacturing facilities are equipped with advanced
SMT assembly equipment and PTH insertion equipment. The Company has a variety of
automated and manual test equipment capable performing in-circuit and functional
testing, as well as a skilled staff of technicians who perform customer-specific
or product-specific testing requirements. The Saline, Michigan plant is located
in a 15,000 square foot, rented building. This facility is equipped for
prototype assembly and shorter production runs, services that cannot be
efficiently provided at the larger plants.

The Company believes the three facilities, depending on product mix, can
accommodate the equipment and infrastructure capable of generating approximately
$225 million in annual contract manufacturing net sales based on the kinds of
business currently transacted by K-Byte Manufacturing. The Tampa, Florida
manufacturing plant accounted for 60.4% and 58.0% of K-Byte Manufacturing's 1996
and first quarter 1997, net sales, respectively, with the Gaylord, Michigan
plant totaling 36.0% and 38.2% of 1996 and first quarter 1997 net sales,
respectively, and the Saline, Michigan, short production run plant accounting
for the remaining 3.6% and 3.8% of 1996 and first quarter 1997 net sales,
respectively.

27
<PAGE> 30

COMPETITION

Both Reptron Distribution and K-Byte Manufacturing face substantial
competition. Many of the Company's competitors in each division have
significantly greater financial resources and broader name recognition than the
Company. Reptron Distribution faces competition from hundreds of electronic
component distributors of various sizes, locations and market focuses (e.g.,
military, commercial, consumer) and competes principally on the basis of product
selection and value-added customer service. Vendor representation and product
diversity create a segmentation among distributors. Reptron Distribution has
several primary competitors that carry similar significant Japanese
semiconductor vendors. Reptron Distribution attempts to differentiate itself
from these competitors through its wide offering of value-added services,
including contract manufacturing (through K-Byte Manufacturing). To the
Company's knowledge, no significant competitor offers customers the combination
and versatility of a leading national distributor with substantial in-house
contract manufacturing capability.

K-Byte Manufacturing competes in a highly fragmented market composed of a
diverse group of U.S. based contract manufacturers. The Company believes that
the key competitive factors in its markets are manufacturing flexibility, price,
manufacturing quality, advanced manufacturing technology and reliable delivery.
Many contract manufacturers operate high-volume facilities and focus on target
markets, such as the computer industry, that K-Byte Manufacturing does not seek
to serve. K-Byte Manufacturing considers its key competitive advantages to
include its expertise in low-to-medium volume, flexible batch processing, its
provision of value-added services and its material management techniques (as a
result of its integration with Reptron Distribution). The Company believes that
K-Byte Manufacturing's expertise in flexible, batch processing differentiates it
from its high-volume competitors because of the relative complexity of
economically fulfilling a large number of batch contracts. The Company believes
that by focusing on low- to medium-volume production runs, by manufacturing
products using Reptron Distribution's product line and by leveraging Reptron
Distribution's sales force and customer base, K-Byte Manufacturing competes
effectively. See "Risk Factors -- Competition; Effects on Gross Margin."

MANAGEMENT INFORMATION SYSTEMS

The Company has made significant investments in computer hardware, software
and MIS personnel. The MIS department totals 20 individuals who are responsible
for hardware upgrades, maintenance of current software and related data bases
and augmenting software packages with custom programming.

The Company operates MIS for both Reptron Distribution and K-Byte
Manufacturing with UNIX-based software packages. Reptron Distribution operates
an integrated distribution software package that has been greatly enhanced with
custom programming. This system allows management to direct the entire Reptron
Distribution operation by connecting all 20 sales offices to the corporate
headquarters. In 1996, Reptron Distribution significantly upgraded the software
that operates its main warehouse in Tampa, Florida. This upgrade combines bar
code technology with sophisticated conveyor systems and storage of electronic
components. The entire warehouse system is controlled and organized by software
written and implemented by the Company's MIS staff. The Reptron Distribution
software package accommodated the integration of the 1995 Acquisitions and is
expected to be sufficient for the Company's growth for the foreseeable future.
K-Byte Manufacturing operates an integrated MRP II package that has also been
greatly enhanced by the Company's MIS staff through custom programming. This
system is used to operate and integrate all three manufacturing plants with
central administrative functions. The K-Byte Manufacturing software system is
also expected to accommodate the Company's growth for the foreseeable future.

The UNIX-based software used by the Company may be operated on a variety of
hardware platforms. Therefore, the Company is not restricted to the use of
computer hardware from any one supplier and does not have the constraints
associated with proprietary hardware or software. The Company is currently
upgrading and expanding to a client-server based system. This Windows-based
system is expected to improve productivity and facilitate the integration of
internet and intranet software applications. The Company currently maintains a
web home page that provides a wide variety of information as well as links to
vendors and customers.

28
<PAGE> 31

BACKLOG

Backlog of Reptron Distribution as of March 31, 1997 was approximately
$42.3 million, as compared to approximately $45.5 million at March 31, 1996.
Reptron Distribution includes in backlog only those product shipment orders for
which a confirmed customer order has been received as of the date on which the
backlog is computed. A growing percentage of Reptron Distribution's sales are
generated through its in-plant store value-added program. These orders are not
included in backlog as the booking and billing are both recorded when the
customer removes a product from the Company's in-plant inventory. In 1996, 19.8%
of Reptron Distribution's sales were generated by in-plant stores as compared to
8.9% in 1995. Backlog for K-Byte Manufacturing totaled $42.0 million as of March
31, 1997 and $31.4 million as of March 31, 1996. K-Byte Manufacturing includes
in backlog only specific purchase orders or product releases that it has
received under manufacturing agreements it has established with customers.
Typically, customers release orders to K-Byte Manufacturing in 120-day
increments. Because of the possibility of customer changes in delivery
schedules, cancellations of orders and potential delays in product shipment and
performance, the Company's backlog on any particular date may not be indicative
of revenues for any succeeding period.

EMPLOYEES

As of June 30, 1997, the Company employed 1,467 persons, of whom 351 were
dedicated to Reptron Distribution, 1,091 were dedicated to K-Byte Manufacturing
and 25 were corporate employees. The Company has no collective bargaining
agreements with any of its employees, has never experienced any material labor
disruption and is not aware of any current efforts or plans to organize its
employees.

LEGAL PROCEEDINGS

The Company is, from time to time, involved in litigation relating to
claims arising out of its operations in the ordinary course of business. The
Company believes that these matters, individually or in the aggregate, are not
likely to have a material adverse effect on the Company's business, results of
operations and financial condition.

29
<PAGE> 32

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The Company's executive officers and directors are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- --- -----------
<S> <C> <C>
Michael L. Musto(1).................................. 56 President, Chief Executive
Officer, and Director
Paul J. Plante....................................... 39 Chief Operating Officer, Treasurer
and Director
Michael Branca....................................... 37 Chief Financial Officer
Patrick J. Flynn..................................... 56 President -- K-Byte Manufacturing
Gary G. Bolohan...................................... 42 President -- Reptron Distribution
Robert M. Moore...................................... 62 Vice President -- Corporate
Operations
Michael R. Nichols................................... 40 Vice President -- Sales
Leigh A. Adams(1)(2)................................. 32 Corporate Credit Manager,
Secretary, and Director
William L. Elson(3).................................. 49 Director
Barry M. Alpert(3)................................... 56 Director
</TABLE>

- ---------------

(1) Mr. Musto and Ms. Adams serve on the Company's Stock Option Committee.
(2) Ms. Adams is the daughter of Mr. Musto.
(3) Messrs. Alpert and Elson serve on the Company's Audit and Compensation
Committees.

Michael L. Musto. Mr. Musto has been the President, Chief Executive
Officer and a director of the Company since its inception in 1973. Prior to
1973, Mr. Musto worked for nine years in electronic components distribution for
Northland Electronics and Diplomat Electronics.

Paul J. Plante. Mr. Plante was appointed Chief Operating Officer of the
Company in January 1997 and has been a director since 1994. Mr. Plante has
served as Treasurer since 1986. Mr. Plante has been employed by the Company
since 1986, and previously served as its Vice President of Finance and Chief
Financial Officer (1986-1997). He was Controller of K-Byte Manufacturing, which
is now a division of the Company, during the period 1983-1986. Prior to 1983,
Mr. Plante worked for a regional accounting firm (1980-83). Mr. Plante is a
Certified Public Accountant and is a graduate of Michigan State University, with
a Bachelor of Arts degree in accounting. He also has an MBA degree from the
University of South Florida.

Michael Branca. Mr. Branca was appointed Chief Financial Officer in July
1997. Prior to joining the Company, Mr. Branca served as Vice President of
Business Development and Financial Operations at Utility Partners, LC from 1996
to 1997 and Chief Financial Officer of IVANS, Inc.'s wholly owned subsidiary,
Pivotal, Inc., from 1995 to 1996. From 1982 to 1995, Mr. Branca held various
positions with IBM Corporation ("IBM"), including Division Controller for IBM's
Multimedia Systems Division and Controller for IBM's Enterprise Systems
Division. Mr. Branca has a Bachelor of Science degree in Business Management
from Cornell University and a MBA in Finance from the University of Scranton.

Patrick J. Flynn. Mr. Flynn has been employed by the Company since 1986 as
President of K-Byte Manufacturing. He has over 30 years of experience in the
electronics business. He was employed by the KTB Group (an engineering firm) in
Detroit from 1966 to 1983. During his employment with the KTB Group, Mr. Flynn
served in a number of capacities, including as Executive Vice President and
Chief Operating Officer. He purchased K-Byte Manufacturing from the KTB Group in
1983 and was the sole owner of K-Byte Manufacturing prior to its acquisition by
the Company in 1986. Mr. Flynn is a graduate of the University of Detroit with a
Bachelor of Science degree in electrical engineering.

Gary G. Bolohan. Mr. Bolohan has served as President of Reptron
Distribution since May 1997. In this role, Mr. Bolohan is responsible for all
aspects of the operations of Reptron Distribution. Prior to his current
position, Mr. Bolohan held several positions, including Executive Vice President
of Reptron Distribution

30
<PAGE> 33

(1990-1997), Vice President of Product Marketing (1989-1990), midwest regional
sales manager (1985-1989), general manager of the Detroit sales office
(1983-1985), and field salesperson. Mr. Bolohan has been employed by the Company
since 1978.

Robert M. Moore. Mr. Moore joined the Company in 1990 as Corporate
Director of Operations and became Vice President of Corporate Operations in
1992. His previous experience includes: President of Moore Investment Corp., a
consulting firm (1988-1990); President of Bufkor, Inc., a manufacturer of
jewelry packaging and displays (1986-1988); Senior Vice President and Chief
Financial Officer of Duro Bag Manufacturing Company (1982-1986); and Vice
President of Finance of Tresler Oil Company Division, Ashland Oil, Inc.
(1977-1982). Mr. Moore is a graduate of the University of Cincinnati with a
Bachelor of Science degree in management.

Michael R. Nichols. Mr. Nichols was promoted to Vice President of Sales in
1990. He is responsible for all sales activity for Reptron Distribution and is
instrumental in generating sales opportunities for K-Byte Manufacturing. Prior
to his current role, Mr. Nichols held several positions with the Company,
including southeast regional sales manager (1985-1990), sales manager for the
Tampa sales office (1982-1985), and field salesperson. Mr. Nichols has been
employed by the Company since 1978. He is a graduate of the University of
Florida with a Bachelor of Arts degree in management and marketing.

Leigh A. Adams. Ms. Adams serves as the Company's Secretary and has been a
director since 1994. Ms. Adams joined the Company in 1982 and has served in a
number of administrative posts, including Operations Manager (1989-1991) and
Corporate Credit Manager (1991-present).

William L. Elson. Mr. Elson has served as the Company's outside general
counsel since 1979 and has been a director since 1994. He has practiced as a
sole practitioner since 1975 and worked for Coopers & Lybrand from 1973 to 1975.
Mr. Elson is a Certified Public Accountant and is a graduate of Wayne State
University, with a J.D. degree and a Bachelor of Science degree in accounting.

Barry M. Alpert. Mr. Alpert currently is a Managing Director at Raymond
James & Associates, Inc. Mr. Alpert has served as Vice President and then as
Senior Vice President of Investment Banking for Robert W. Baird & Co.
Incorporated from 1991-1997. Since 1989, Mr. Alpert has served as President and
Chief Executive Officer of Alpert Financial Group, Inc. (a family investment
holding company). From 1989-1993, Mr. Alpert served as Vice Chairman of Colony
Bank. Mr. Alpert holds a graduate degree in banking from the University of
Wisconsin and a BS/BA degree from Roosevelt University. He has been a director
since 1995.

31
<PAGE> 34

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of July 1, 1997 by (i) each person who is known
to the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock, (ii) the Chief Executive Officer and the other four most highly
compensated executive officers, (iii) each of the directors of the Company, and
(iv) all directors and executive officers of the Company as a group. Except as
set forth below, the shareholders named below have sole voting and investment
power with respect to all shares of Common Stock shown as being beneficially
owned by them.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT
- --------------------------------------- ----------- ---------
<S> <C> <C>
Michael L. Musto............................................ 2,344,790(2) 38.6%
MLM Investment Company Limited Partnership.................. 1,996,154 32.8
Paul J. Plante(3)........................................... 701,456 11.5
Patrick J. Flynn(4)......................................... 41,250 *
Gary G. Bolohan(5).......................................... 22,651 *
Michael R. Nichols(6)....................................... 20,518 *
Leigh A. Adams(7)........................................... -- *
William L. Elson(8)......................................... 12,500 *
3000 Town Center, Suite 2690
Southfield, Michigan 48075
Barry M. Alpert(9).......................................... 5,000 *
880 Carillon Parkway
St. Petersburg, Florida 33716
All directors and executive officers as a group (10
persons).................................................. 2,811,529 46.2%
</TABLE>

- ---------------

* Less than 1% of the outstanding Common Stock.
(1) The business address for Ms. Adams and Messrs. Musto, Plante, Flynn, Bolohan
and Nichols is 14401 McCormick Drive, Tampa, Florida 33626.
(2) Includes 1,996,154 shares held by: (i) MLM Investment Company Limited
Partnership ("MLM") of which certain trusts for the benefit of Mr. Musto and
Mr. Musto's children are the limited partners and a corporation, in which
Mr. Musto is the sole shareholder and director, and Mr. Musto's revocable
trust are the general partners (Mr. Musto has sole voting and dispositive
power over the shares held by MLM); and (ii) 348,636 shares held by Paul J.
Plante as Trustee of the Reptron Electronics, Inc. Employee Profit Sharing
Trust (the "Profit Sharing Trust"), which are attributable to Mr. Musto in
accordance with Rule 13d-3 under the Exchange Act. Excludes: (i) up to
116,212 shares which are expected to be allocated to Mr. Musto by the Profit
Sharing Trust, (ii) 1,000 shares owned by Mr. Musto's mother and (iii) 3,000
shares subject to options that are currently exercisable by Mr. Musto's
mother. Mr. Musto disclaims beneficial ownership of his mother's shares.
(3) Includes: (i) 37,500 shares subject to options that are currently
exercisable and (ii) 661,956 shares held by Mr. Plante as trustee of the
Profit Sharing Trust. The Profit Sharing Trust has been terminated and it is
expected that all such shares will be distributed among Profit Sharing Trust
participants. Except for Mr. Musto, no director or executive officer of the
Company will beneficially own more than 5% of the outstanding shares of
common stock immediately after, and as a result of, the Profit Sharing Trust
distribution.
(4) Represents shares subject to options that are currently exercisable.
(5) Excludes up to 22,650 shares expected to be distributed to Mr. Bolohan from
the Profit Sharing Trust.
(6) Excludes up to 20,517 shares that are expected to be distributed to Mr.
Nichols from the Profit Sharing Trust.
(7) Excludes up to 1,299 shares expected to be distributed to Ms. Adams from the
Profit Sharing Trust.
(8) Includes 5,000 shares subject to options that are currently exercisable.
(9) Represents shares subject to options that are currently exercisable.

32
<PAGE> 35

DESCRIPTION OF NOTES

The Notes are to be issued under an Indenture, to be dated as of August 5,
1997 (the "Indenture"), between the Company and Reliance Trust Company, as
Trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement (as defined). Wherever particular defined terms of the
Indenture (including the Notes) are referred to, such defined terms are
incorporated herein by reference (the Notes and various terms relating to the
Notes being referred to in the Indenture as "Securities"). References in this
section to the "Company" are solely to Reptron Electronics, Inc. and not to its
subsidiaries. The following summaries of certain provisions of the Indenture do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, the detailed provisions of the Notes and the
Indenture, including the definitions therein of certain terms. Section
references below are references to Sections of the Indenture.

GENERAL

The Notes will be unsecured subordinated obligations of the Company, will
be limited to $115,000,000 aggregate principal amount and will mature on August
1, 2004. The Notes will bear interest at the rate per annum shown on the front
cover of this Prospectus from August 11, 1997, payable semiannually on February
1 and August 1 of each year, commencing on February 1, 1998. Interest payable
per $1,000 principal amount of Notes for the period from August 11, 1997 to
February 1, 1998 will be $31.875. (sec.sec. 301 and 307)

The Notes will be convertible into Common Stock initially at the conversion
rate stated on the cover page of the Prospectus, subject to adjustment upon the
occurrence of certain events described under "-- Conversion Rights," at any time
prior to the close of business on the maturity date, unless previously redeemed
or repurchased. (sec. 1301)

The Notes are redeemable under the circumstances and at the redemption
prices set forth below under "-- Optional Redemption," plus accrued interest to
the redemption date. (sec. 203)

The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple thereof. (sec. 302). No
service charge will be made for any registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith. (sec. 305)

CONVERSION RIGHTS

The Holder of any Note will have the right to convert any portion of the
principal amount of a Note that is an integral multiple of $1,000 into shares of
Common Stock at any time prior to the close of business on the maturity date,
unless previously redeemed or repurchased, at a conversion rate of 35.0877
shares of Common Stock per $1,000 principal amount of Notes (the "Conversion
Rate") (equivalent to a conversion price of approximately $28.50 per share of
Common Stock) (subject to adjustment as described below). The right to convert a
Note called for redemption will terminate at the close of business on the
Business Day prior to the Redemption Date for such Note, and the right to
convert a Note tendered for repurchase will terminate at the close of business
on the Repurchase Date for such Note. (sec. 1301)

The right of conversion attaching to any Note may be exercised by the
Holder by delivering the Note at the specified office of the Conversion Agent,
accompanied by a duly signed and completed notice of conversion, a copy of which
may be obtained from the Trustee. The conversion date will be the date on which
the Note and the duly signed and completed notice of conversion are so
delivered. As promptly as practicable on or after the conversion date, the
Company will issue and deliver to the Trustee a certificate or certificates for
the number of full shares of Common Stock issuable upon conversion, together
with payment in lieu of any fraction of a share; such certificate will be sent
by the Trustee to the Conversion Agent (if other than the Trustee) for delivery
to the Holder. Such shares of Common Stock issuable upon conversion of the
Notes, in accordance with the provisions of the Indenture, will be fully paid
and nonassessable and will rank pari passu with the other shares of Common Stock
of the Company outstanding from time to time.

As described below, except in certain limited circumstances with respect to
any conversion of Notes prior to August 1, 2000 as described below, Holders that
surrender Notes for conversion on a date that is not an

33
<PAGE> 36

Interest Payment Date will not receive any interest for the period from the
Interest Payment Date next preceding the date of conversion to the date of
conversion or for any later period, even if the Notes are surrendered after a
notice of redemption (except for the payment of interest on Notes called for
redemption on a Redemption Date or to be repurchased on a Repurchase Date
between a Regular Record Date and the Interest Payment Date to which it relates
(including any Notes (or portion thereof) called for redemption on a Redemption
Date that is a Record Date or Interest Payment Date, as the case may be), as
provided above).

Accordingly, except as provided below, any Note surrendered for conversion
during the period from the close of business on any Regular Record Date next
preceding any Interest Payment Date to the opening of business on such Interest
Payment Date (except Notes (or portions thereof) called for redemption on a
Redemption Date or which are repurchaseable on a Repurchase Date occurring, in
either case, within such period (including any Notes (or portions thereof)
called for redemption on a Redemption Date that is a Record Date or Interest
Payment Date, as the case may be)) must be accompanied by payment of an amount
equal to the interest payable on such Interest Payment Date on the principal
amount of Notes being surrendered for conversion. The interest so payable on
such Interest Payment Date with respect to any Note (or portion thereof, if
applicable) which has been called for redemption on a Redemption Date, or which
may be repurchased on a Repurchase Date, occurring, in either case, during the
period from the close of business on any Record Date next preceding any Interest
Payment Date to the opening of business on such Interest Payment Date (including
any Notes (or portions thereof) called for redemption on a Redemption Date that
is a Record Date or Interest Payment Date, as the case may be), which Note (or
portion thereof, if applicable) is surrendered for conversion during such period
(or on the last Business Day prior to the Record Date or Interest Payment Date
in the case of a Note (or portions thereof) called for redemption on a Record
Date or Interest Payment Date, as the case may be), shall be paid to the Holder
of such Note being converted in an amount equal to the interest that would have
been payable on such Note if such Note had been converted as of the close of
business on such Interest Payment Date. The interest so payable on such Interest
Payment Date in respect of any Note (or portion thereof, as the case may be)
which has not been called for redemption on a Redemption Date, or is not
eligible for repurchase on a Repurchase Date, occurring, in either case, during
the period from the close of business on any Record Date next preceding any
Interest Payment Date to the opening of business on such Interest Payment Date,
which Note (or portion thereof, as the case may be) is surrendered for
conversion during such period, shall be paid to the Holder of such Note as of
such Regular Record Date. Interest payable in respect of any Note surrendered
for conversion or repurchase on or after an Interest Payment Date shall be paid
to the Holder of such Note as of the next preceding Regular Record Date,
notwithstanding the exercise of the right of conversion or repurchase.

Notwithstanding the foregoing, any Notes surrendered for conversion prior
to August 1, 2000 during the period from the close of business on any Regular
Record Date next preceding any Interest Payment Date to the opening of business
on such Interest Payment Date (other than Notes which are repurchaseable on a
Purchase Date occurring within such period) shall not be accompanied by an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of Notes being surrendered for conversion, and the Company
shall pay to the Holder of such Notes as of such Regular Record Date in cash or
in shares of Common Stock having a fair market value equal to the amount of such
interest (such fair market value being determined based on the Closing Price Per
Share of the Common Stock on the Business Day immediately preceding such
Interest Payment Date).

No other payment or adjustment for interest, or for any dividends in
respect of Common Stock, will be made upon conversion. Holders of Common Stock
issued upon conversion will not be entitled to receive any dividends payable to
holders of Common Stock as of any record time or date before the close of
business on the conversion date. No fractional shares will be issued upon
conversion but, in lieu thereof, the Company will pay an appropriate amount in
cash based on the market price of Common Stock at the close of business on the
date of conversion. (sec.sec. 101, 203, 307, 1302 and 1303)

A Holder delivering a Note for conversion will not be required to pay any
taxes or duties in respect of the issue or delivery of Common Stock on
conversion but will be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue or delivery of the Common Stock in
a name other than

34
<PAGE> 37

that of the Holder of the Note. Certificates representing shares of Common Stock
will not be issued or delivered unless all taxes and duties, if any, payable by
the Holder have been paid. (sec.sec. 1302 and 1308)

The Conversion Rate is subject to adjustment in certain events, including,
without duplication: (a) dividends (and other distributions) payable in Common
Stock on shares of capital stock (other than on shares of preferred stock issued
by the Company for cash to the extent that the right to pay dividends on such
preferred stock in shares of Common Stock was included in the terms of such
preferred stock as of the date of original issuance), (b) the issuance to all
holders of Common Stock of Rights, options or warrants entitling them to
subscribe for or purchase Common Stock at less than the then current market
price of such Common Stock (determined as provided in the Indenture) as of the
record date for shareholders entitled to receive such rights, options or
warrants, (c) subdivisions, combinations and reclassifications of Common Stock,
(d) distributions to all holders of Common Stock of evidences of indebtedness of
the Company, shares of capital stock, cash or assets (including securities, but
excluding those dividends, rights, options, warrants and distributions referred
to above, dividends and distributions paid exclusively in cash and in mergers
and consolidations to which the next succeeding paragraph applies), (e)
distributions consisting exclusively of cash (excluding any cash portion of
distributions referred to in (d) above) to all holders of Common Stock in an
aggregate amount that, combined together with (i) other such all-cash
distributions made within the preceding 12 months in respect of which no
adjustment has been made and (ii) any cash and the fair market value of other
consideration payable in respect of any tender offer by the Company or any of
its subsidiaries for Common Stock concluded within the preceding 12 months in
respect of which no adjustment has been made, exceeds 10% of the Company's
market capitalization (being the product of the then current market price per
share of the Common Stock (determined as provided in the Indenture) and the
number of shares of Common Stock then outstanding) on the record date for such
distribution, and (f) the successful completion of a tender offer made by the
Company or any of its subsidiaries for Common Stock which involves an aggregate
consideration that, together with (i) any cash and other consideration payable
in a tender offer by the Company or any of its subsidiaries for Common Stock
expiring within the 12 months preceding the expiration of such tender offer in
respect of which no adjustment has been made and (ii) the aggregate amount of
any such all-cash distributions referred to in (e) above to all holders of
Common Stock within the 12 months preceding the expiration of such tender offer
in respect of which no adjustments have been made, exceeds 10% of the Company's
market capitalization on the expiration of such tender offer. The Company
reserves the right to make such increases in the Conversion Rate in addition to
those required in the foregoing provisions as it considers to be advisable in
order that any event treated for federal income tax purposes as a dividend or
distribution of stock or issuance of rights or warrants to purchase or subscribe
for stock will not be taxable to the recipients. No adjustment of the Conversion
Rate will be required to be made until the cumulative adjustments amount to 1.0%
or more of the Conversion Rate. (sec. 1304) The Company shall compute any
adjustments to the Conversion Rate pursuant to this paragraph and will give
notice to the Holders of the Notes of any adjustments. (sec. 1305)

In case of any consolidation or merger of the Company with or into another
Person or any merger of another Person into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of the Common Stock), or in case of any sale or transfer of all or
substantially all of the assets of the Company, each Note then outstanding will,
without the consent of the Holder of any Note, become convertible only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Note was convertible immediately prior thereto
(assuming such holder of Common Stock failed to exercise any rights of election
and that such Note was then convertible). (sec. 1311)

The Company from time to time may increase the Conversion Rate by any
amount for any period of at least 20 days, in which case the Company shall give
at least 15 days' notice of such increase, if the Board of Directors has made a
determination that such increase would be in the best interests of the Company,
which determination shall be conclusive. No such increase shall be taken into
account for purposes of determining whether the closing price of the Common
Stock exceeds the Conversion Price by 105% in connection with an event which
otherwise would be a Change of Control. (sec. 1304)

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<PAGE> 38

If at any time the Company makes a distribution of property to its
shareholders which would be taxable to such shareholders as a dividend for
United States federal income tax purposes (e.g., distributions of evidence of
indebtedness or assets of the Company, but generally not stock dividends on
Common Stock or rights to subscribe for Common Stock) and, pursuant to the
anti-dilution provisions of the Indenture, the number of shares into which Notes
are convertible is increased, such increase may be deemed for federal income tax
purposes to be the payment of a taxable dividend to Holders of Notes. See
"Certain Federal Income Tax Considerations."

SUBORDINATION

The payment of the principal of, premium, if any, and interest on
(including any amounts payable upon the redemption or repurchase of the Notes
permitted by the Indenture), the Notes will be subordinated in right of payment,
to the extent set forth in the Indenture, to the prior payment in full of the
principal of, premium, if any, interest and other amounts in respect of all
Senior Indebtedness of the Company. The Notes also are effectively subordinated
in right of payment to all indebtedness and other liabilities of the Company's
subsidiaries. As of June 30, 1997, after giving effect to the issuance and sale
of the Notes and the application of the net proceeds therefrom, the Company
would have had $18.5 million of Senior Indebtedness outstanding, and the
Company's subsidiaries would have had no indebtedness or other liabilities
outstanding.

Senior Indebtedness is defined in the Indenture to mean the principal of
(and premium, if any) and interest (including all interest accruing subsequent
to the commencement of any bankruptcy or similar proceeding, whether or not a
claim for post-petition interest is allowable as a claim in any such proceeding)
on, and all fees and other amounts payable in connection with, the following,
whether absolute or contingent, secured or unsecured, due or to become due,
outstanding on the date of the Indenture or thereafter created, incurred or
assumed: (a) indebtedness of the Company to banks, insurance companies and other
financial institutions evidenced by credit or loan agreements, notes or other
written obligations, (b) all other indebtedness of the Company (including
obligations of the Company arising from its guarantee of the indebtedness of
others) other than the Notes, whether outstanding on the date of the Indenture
or thereafter created, incurred or assumed, which is (i) for money borrowed or
(ii) evidenced by a note, security, debenture, bond or similar instrument or
guarantee thereof, (c) obligations of the Company as lessee under leases
required to be capitalized on the balance sheet of the lessee under generally
accepted accounting principles, and (d) renewals, extensions, modifications,
restatements and refundings of and any amendments, modifications or supplements
to, or any indebtedness or obligation issued in exchange for, any such
indebtedness or obligation described in clauses (a) through (c) of this
paragraph; provided, however, that Senior Indebtedness shall not include any
such indebtedness or obligation if the terms of such indebtedness or obligation
(or the terms of the instrument under which, or pursuant to which, it is issued)
expressly provide that such indebtedness or obligation shall not be senior in
right of payment to the Notes, or expressly provide that such indebtedness or
obligation is pari passu with or junior to the Notes. Notwithstanding the
foregoing, unsecured indebtedness of the Company shall only be included in
Senior Indebtedness if the incurrence of such unsecured indebtedness should not,
in the opinion of counsel or a nationally recognized accounting firm experienced
in tax matters, cause the Notes to be considered "corporate acquisition
indebtedness" within the meaning of sec. 279 of the Internal Revenue Code of
1986, as amended. "Designated Senior Indebtedness" means any particular Senior
Indebtedness in which the instrument creating or evidencing the same or the
assumption or guarantee thereof (or related agreements or documents to which the
Company is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of the Indenture (provided that
such instrument, agreement or other document may place limitations and
conditions on the right of such Senior Indebtedness to exercise the Rights of
Designated Senior Indebtedness). (sec.sec. 101, 1201 and 1202)

Upon any acceleration of the principal due on the Notes or payment or
distribution of assets of the Company to creditors upon any dissolution, winding
up, liquidation or reorganization, whether voluntary or involuntary, or in
bankruptcy, insolvency, receivership or other similar proceedings of the
Company, all principal, premium, if any, and interest or other amounts due on
all Senior Indebtedness must be paid in full before the Holders of the Notes are
entitled to receive any payment. (sec. 1202) The Indenture will further

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<PAGE> 39

require that the Company promptly notify holders of Senior Indebtedness if
payment of the Notes is accelerated because of an Event of Default. The Company
also may not make any payment upon or in respect of the Notes if (i) a default
in the payment of the principal of, premium, if any, interest or other amounts
due on any Senior Indebtedness occurs and is continuing beyond any applicable
period of grace or (ii) any other default occurs and is continuing with respect
to Designated Senior Indebtedness that permits holders of the Designated Senior
Indebtedness as to which such default relates to accelerate the maturity thereof
and the Trustee receives a notice of such default (a "Payment Blockage Notice")
from the Company, any lender of Designated Senior Indebtedness (or agent bank on
behalf of such lender) or other person permitted to give such notice under the
Indenture. Payments on the Notes may and shall be resumed (a) in the case of a
payment default, upon the date on which such default is cured or waived in
accordance with the agreements evidencing such Senior Indebtedness and (b) in
case of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived in accordance with the agreements evidencing such
Senior Indebtedness or 179 days after the date on which the applicable Payment
Blockage Notice is received. No new period of payment blockage may be commenced
unless and until (i) 365 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice and (ii) all scheduled payments of
principal, premium, if any, and interest on the Notes that have come due have
been paid in full in cash. No nonpayment default that existed or was continuing
on the date of delivery of any Payment Blockage Notice to the Trustee shalt be,
or be made, the basis for a subsequent Payment Blockage Notice.

By reason of the foregoing subordination, in the event of insolvency,
creditors of the Company who are holders of Senior Indebtedness are likely to
recover more, ratably, than the Holders of the Notes, and such subordination may
result in a reduction or elimination of payments to the Holders of the Notes.

The Indenture does not limit the Company's ability to incur Senior
Indebtedness or any other indebtedness or the ability of any subsidiary of the
Company to incur any indebtedness or other liabilities.

OPTIONAL REDEMPTION

The Notes may not be redeemed prior to August 1, 2000. Thereafter, the
Notes may be redeemed, in whole or in part, at the option of the Company, upon
not less than 30 nor more than 60 days' prior notice as provided under
"-- Notices" below, at the redemption prices set forth below.

The redemption prices (expressed as a percentage of principal amount) are
as follows for the 12-month period beginning on August 1, of the following
years:

<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---- ----------------
<S> <C>
2000...................................................... 103.375%
2001...................................................... 102.250
2002...................................................... 101.125
</TABLE>

and thereafter at a redemption price equal to 100% of the principal amount, in
each case together with accrued interest to the date of redemption. (sec. 203,
Article Eleven)

No sinking fund is provided for the Notes.

REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE OF CONTROL

If a Change of Control (as defined) occurs, each Holder of Notes shall have
the right, at the Holder's option, to require the Company to repurchase all of
such Holder's Notes, or any portion of the principal amount thereof specified by
the Holder that is equal to $1,000 or an integral multiple of $1,000 in excess
thereof, on the date (the "Repurchase Date") that is 45 days after the date of
the Company Notice (as defined), at a price equal to 100% of the principal
amount of the Notes to be repurchased, together with interest accrued to the
Repurchase Date (the "Repurchase Price"). (sec. 1401)

Within 30 days after the occurrence of a Change of Control, the Company is
obligated to give to all Holders of the Notes notice, as provided in the
Indenture (the "Company Notice"), of the occurrence of such Change of Control
and of the repurchase right arising as a result thereof, or, at the request of
the Company on or before the 15th day after such occurrence, the Trustee shall
give the Company Notice. The Company must

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<PAGE> 40

also deliver a copy of the Company Notice to the Trustee and to the office of
each Paying Agent. To exercise the repurchase right, a Holder of Notes must
deliver on or before the 30th day after the date of the Company Notice
irrevocable written notice to the Trustee or Paying Agent of the Holder's
exercise of such right, together with the Notes with respect to which the right
is being exercised. (sec. 1403)

A Change of Control shall be deemed to have occurred at such time after the
original issuance of the Notes as there shall occur:

(i) the acquisition by any Person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) of the Exchange Act) of (a)
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of
capital stock of the Company entitling such Person to exercise 50% or more
of the total voting power of all shares of capital stock of the Company
entitled to vote generally in elections of directors, other than any such
acquisition by the Company, any subsidiary of the Company, any employee
benefit plan of the Company or by Michael L. Musto, the President and Chief
Executive Officer of the Company, or (b) the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the entire Board of Directors; or

(ii) any consolidation of the Company with, or merger of the Company
into, any other Person, any merger of another Person into the Company, or
any conveyance, sale, transfer or lease, in one transaction or a series of
related transactions, of all or substantially all of the assets (other than
to a wholly owned Subsidiary of the Company) of the Company to any other
Person (other than (a) any such transaction pursuant to which the holders
of 50% or more of the total voting power of all shares of capital stock of
the Company entitled to vote generally in elections of directors
immediately prior to such transaction have, directly or indirectly, at
least 50% or more of the total voting power of all shares of capital stock
of the continuing or surviving corporation entitled to vote generally in
elections of directors of the continuing or surviving corporation
immediately after such transaction and (b) a merger (x) which does not
result in any reclassification, conversion, exchange or cancellation of
outstanding shares of capital stock of the Company or (y) which is effected
solely to change the jurisdiction of incorporation of the Company and
results in a reclassification, conversion or exchange of outstanding shares
of Common Stock into solely shares of common stock); or

(iii) at any time Continuing Directors (as defined) cease to
constitute a majority of the Board of Directors of the Company then in
office. "Continuing Director" means at any date a member of the Company's
Board of Directors (i) who was a member of such Board on the date of the
Indenture or (ii) who was nominated or elected by at least two-thirds of
the directors who were Continuing Directors at the time of such nomination
or election or whose election to the Company's Board of Directors was
recommended or endorsed by at least two-thirds of the directors who were
Continuing Directors at the time of such election. Under this definition,
if the present Board of Directors of the Company were to approve a new
director or directors and then resign, no Change of Control would occur
even though the present Board of Directors would thereafter cease to be in
office.

The Company's ability to repurchase Notes upon the occurrence of a Change
of Control is subject to limitations. There can be no assurance that the Company
would have the financial resources or be able to arrange financing on acceptable
terms to pay the Repurchase Price for all the Notes as to which the purchase
right is exercised. Further, any repurchase in connection with a Change in
Control could, depending on the circumstances and absent a waiver from the
holders of Senior Indebtedness, be blocked by the subordination provisions of
the Notes. See "-- Subordination." The agreement relating to the Company's
current Senior Indebtedness would limit the Company's ability to repurchase the
Notes. See "Use of Proceeds." Failure by the Company to repurchase the Notes
when required may result in an Event of Default with respect to the Notes (and
with respect to Senior Indebtedness) whether or not such repurchase is permitted
by the subordination provisions. See "-- Events of Default" and "Risk
Factors -- Limitations on Repurchase of Notes."

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<PAGE> 41

Rule 13e-4 under the Exchange Act requires the dissemination of certain
information to security holders in the event of an issuer tender offer and may
apply in the event that the repurchase option becomes available to Holders of
the Notes. The Company will comply with this rule to the extent applicable at
that time.

The foregoing provisions would not necessarily afford Holders of the Notes
protection in the event of highly leveraged or other transactions involving the
Company that may adversely affect Holders.

MERGERS AND SALES OF ASSETS BY THE COMPANY

The Company may not consolidate with or merge into any other Person or,
directly or indirectly, convey, transfer, sell, lease or otherwise dispose of
its properties and assets substantially as an entirety to any Person (other than
a conveyance, sale, transfer or lease to a wholly owned subsidiary), and the
Company may not permit any Person (other than a wholly owned subsidiary) to
merge into the Company or convey, transfer or lease its properties and assets
substantially as an entirety to the Company, unless (a) the Person formed by
such consolidation or into which the Company is merged or the Person to which
the properties and assets of the Company are so transferred or leased is a
corporation, limited liability company, partnership or trust organized and
existing under the laws of the United States, any State thereof or the District
of Columbia and has expressly assumed the due and punctual payment of the
principal of, premium, if any, and interest on the Notes and the performance of
the other covenants of the Company under the Indenture, (b) immediately after
giving effect to such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, shall
have occurred and be continuing, and (c) the Company has provided to the Trustee
an Officer's Certificate and Opinion of Counsel if required by the Indenture.
(sec. 801)

EVENTS OF DEFAULT

The following will be Events of Default under the Indenture: (a) failure to
pay principal or Redemption Price of any Note when due, whether or not such
payment is prohibited by the subordination provisions of the Indenture; (b)
failure to pay any interest on any Note when due, continuing for 30 days,
whether or not such payment is prohibited by the subordination provisions of the
Indenture; (c) default in the Company's obligation to provide a Company Notice
of Change in Control; (d) failure to perform any other covenant of the Company
in the Indenture, continuing for 60 days after written notice as provided in the
Indenture; (e) any indebtedness for money borrowed by the Company in an
aggregate principal amount in excess of $5,000,000 is not paid at final maturity
or upon acceleration thereof and such default in payment or acceleration is not
cured or rescinded within 30 days after written notice as provided in the
Indenture; and (f) certain events of bankruptcy, insolvency or reorganization.
(sec. 501) Subject to the provisions of the Indenture relating to the duties of
the Trustee in case an Event of Default shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity. (sec. 603)
Subject to such provisions for the indemnification of the Trustee, the Holders
of a majority in aggregate principal amount of the Outstanding Notes will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee. (sec. 512)

If an Event of Default (other than an Event of Default specified in
subsection (f) above) occurs and is continuing, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of the Outstanding
Notes, by notice in writing to the Company, may declare the principal of all the
Notes to be due and payable immediately, and upon any such declaration such
principal and any accrued interest thereon will become immediately due and
payable. If an Event of Default specified in subsection (f) occurs and is
continuing, the principal and any accrued interest on all of the then
Outstanding Notes shall ipso facto become due and payable immediately without
any declaration or other Act on the part of the Trustee or any Holder.
(sec. 502)

At any time after a declaration of acceleration has been made but before a
judgment or decree based on acceleration, the Holders of a majority in aggregate
principal amount of Outstanding Notes may, under certain

39
<PAGE> 42

circumstances, rescind and annul such acceleration if all Events of Default,
other than the nonpayment of accelerated principal and interest have cured or
waived as provided in the Indenture. (sec. 502)

No Holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the Holders of at least 25% in aggregate principal
amount of the Outstanding Notes shall have made written request, and offered
reasonable indemnity, to the Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the Outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. (sec. 507) However, such limitations do not apply to a suit instituted by
a Holder of a Note for the enforcement of payment of the principal of, premium,
if any, or interest on such Note on or after the respective due dates expressed
in such Note or of the right to convert such Note in accordance with the
Indenture. (sec. 508)

The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance. (sec. 1004)

MODIFICATION AND WAIVER

Modifications and amendments of the Indenture may be made, and certain past
defaults by the Company may be waived, with the written consent of the Holders
of not less than a majority in aggregate principal amount of the Notes at the
time Outstanding. However, no such modification or amendment may, without the
consent of the Holder of each outstanding Note affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest on, any
Note, (b) reduce the principal amount of, or the premium, if any, or rate of
interest on, any Note, (c) reduce the amount payable upon redemption or
repurchase, (d) modify the provisions with respect to the repurchase right of
the Holders in a manner adverse to the Holders, (e) change the place or currency
of payment of principal of, premium, if any, or interest on, any Note, (f)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Note (including any payment of the Repurchase Price in respect of
such Note), (g) modify the obligation of the Company to maintain an office or
agency in New York City, (h) except as otherwise permitted by the Indenture or
contemplated by provisions concerning consolidation, merger, conveyance,
transfer, sale or lease of all or substantially all of the property and assets
of the Company, adversely affect the right of Holders to convert any of the
Notes or to require the Company to repurchase any Note other than as provided in
the Indenture, (i) modify the subordination provisions in a manner adverse to
the Holders of the Notes, (j) reduce the above-stated percentage of Outstanding
Notes necessary to modify or amend the Indenture, or (k) reduce the percentage
of aggregate principal amount of Outstanding Notes necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults. (sec.sec. 902 and 513)

The Holders of a majority in aggregate principal amount of the Outstanding
Notes may waive compliance by the Company with certain restrictive provisions of
the Indenture. (sec. 1009) The Holders of a majority in aggregate principal
amount of the Outstanding Notes also may waive any past default under the
Indenture, except a default in the payment of principal, premium, if any, or
interest. (sec. 513)

TRANSFER AND EXCHANGE

The Company has initially appointed the Trustee as security registrar and
transfer agent, acting through its Corporate Trust Office. The Company reserves
the right to vary or terminate the appointment of the security registrar or of
any transfer agent or to appoint additional or other transfer agents or to
approve any change in the office through which any security registrar or any
transfer agent acts. (sec.sec. 305 and 1002)

PURCHASE AND CANCELLATION

The Company or any subsidiary may at any time and from time to time
purchase Notes at any price in the open market or otherwise.

40
<PAGE> 43

All Notes surrendered for payment, redemption, repurchase, registration of
transfer or exchange or conversion shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee. All Notes so delivered to the
Trustee shall be canceled promptly by the Trustee. No Notes shall be
authenticated in lieu of or in exchange for any Notes canceled as provided in
the Indenture.

TITLE

The Company and the Trustee may treat the registered owner (as reflected in
the Security Register) of any Note as the absolute owner thereof (whether or not
such Note shall be overdue) for the purpose of making payment and for all other
purposes. (sec. 308)

NOTICES

Notice to Holders of the Notes will be given by first class mail to the
addresses of such Holders as they appear in the Security Register. Such notices
will be deemed to have been given on the date of the first such publication or
on the date of such mailing, as the case may be. (sec. 106)

Notice of a redemption of Notes will be given at least once not less than
30 nor more than 60 days prior to the redemption date (which notice shall be
irrevocable) and will specify the redemption date. (sec. 1105)

REPLACEMENT OF NOTES

Notes that become mutilated, destroyed, stolen or lost will be replaced by
the Company at the expense of the Holder upon delivery to the Trustee of the
mutilated Notes or evidence of the loss, theft or destruction thereof
satisfactory to the Company and the Trustee. In the case of a lost, stolen or
destroyed Note indemnity satisfactory to the Trustee and the Company may be
required at the expense of the Holder of such Note before a replacement Note
will be issued. (sec. 306)

SATISFACTION AND DISCHARGE

The Company may discharge its payment obligations under the Indenture while
Notes remain outstanding if (a) all outstanding Notes have become due and
payable or will become due and payable at their scheduled maturity within one
year, (b) all outstanding Notes are scheduled for redemption within one year or
(c) all outstanding Notes are delivered to the Trustee for conversion in
accordance with the Indenture and in the case of (a) or (b) above, the Company
has deposited with the Trustee an amount sufficient to pay and discharge the
entire indebtedness on all outstanding Notes on the date of their scheduled
maturity or the scheduled date of redemption. (sec. 401)

GOVERNING LAW

The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York. (sec. 112)

THE TRUSTEE

In case an Event of Default shall occur (and shall not be cured), the
Trustee will be required to use the degree of care of a prudent person in the
conduct of his own affairs in the exercise of its powers. Subject to such
provisions, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request of any of the Holders of
Notes, unless they shall have offered to the Trustee reasonable security or
indemnity. (sec.sec. 601 and 603)

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<PAGE> 44

BOOK-ENTRY

The Notes will be issued in the form of a global note (the "Global Note")
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of Cede & Co. as DTC's nominee. Owners of beneficial
interests in the Notes represented by the Global Note will hold such interests
pursuant to the procedures and practices of DTC and must exercise any rights in
respect of their interests (including any right to convert or require repurchase
of their interests) in accordance with those procedures and practices. Such
beneficial owners will not be Holders, and will not be entitled to any rights
under the Global Note or the Indenture, with respect to the Global Note, and the
Company and the Trustee, and any of their respective agents, may treat DTC as
the sole Holder and owner of the Global Note.

DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code, and a "clearing agency" registered pursuant to the provisions
of Section 17A of the Exchange Act. DTC holds securities that its participants
deposit with DTC. DTC also facilitates the settlement among participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct participants include securities brokers and dealers, banks, trust
companies, clearing corporation, and certain other organizations. DTC is owned
by a number of its direct participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant, either directly or
indirectly. The rules applicable to DTC and its participants are on file with
the Securities and Exchange Commission.

Unless and until they are exchanged in whole or in part for certificated
Notes in definitive form as set forth below, the Global Note may not be
transferred except as a whole by DTC to a nominee of DTC, or by a nominee of DTC
to DTC or another nominee of DTC.

The Notes represented by the Global Note will not be exchangeable for
certificated Notes, provided that if (a) DTC is at any time unwilling, unable or
ineligible to continue as depositary and a successor depositary is not appointed
by the Company within 90 days or (b) there shall have occurred and be continuing
an Event of Default with respect to the Notes, the Company will issue individual
Notes in definitive form in exchange for the Global Note. In addition, the
Company may at any time and in its sole discretion determine not to have a
Global Note, and, in such event, will issue individual Notes in definitive form
in exchange for the Global Note previously representing all such Notes. In
either instance, an owner of a beneficial interest in a Global Note will be
entitled to physical delivery of Notes in definitive form equal in principal
amount to such beneficial interest and to have such Notes registered in its
name. Individual Notes so issued in definitive form will be issued in
denominations of $1,000 and any larger amount that is an integral multiple of
$1,000 and will be issued in registered form only, without coupons.

Payments of principal of and interest on the Notes will be made by the
Company through the Trustee to DTC or its nominee, as the case may be, as the
registered owner of the Global Note. Neither the Company nor the Trustee will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests of the Global Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests. The Company expects that DTC, upon receipt of
any payment of principal or interest in respect of the Global Note, will credit
the accounts of the related participants with payment in amounts proportionate
to their respective holdings in principal amount of beneficial interest in the
Global Note as shown on the records of DTC. The Company also expects that
payments by participants to owners of beneficial interests in the Global Note
will be governed by standing customer instructions and customary practices, as
is now the case with securities held for the accounts of customers in bearer
form or registered in "street name," and will be the responsibility of such
participants.

42
<PAGE> 45

So long as the Notes are represented by a Global Note, DTC or its nominee
will be the only entity that can exercise a right to repayment pursuant to the
Holder's option to elect repayment of its Notes or the right of conversion of
the Notes. Notice by participants or by owners of beneficial interests in a
Global Note held through such participants of the exercise of the option to
elect repayment, or the right of conversion, of beneficial interests in Notes
represented by the Global Note must be transmitted to DTC in accordance with its
procedures on a form required by DTC and provided to participants. In order to
ensure that DTC's nominee will timely exercise a right to repayment, or the
right of conversion, with respect to a particular Note, the beneficial owner of
such Notes must instruct the broker or other participant through which it holds
an interest in such Notes to notify DTC of its desire to exercise a right to
repayment, or the right of conversion. Different firms have different cut-off
times for accepting instructions from their customers and, accordingly, each
beneficial owner should consult the broker or other participant through which it
holds an interest in a Note in order to ascertain the cut-off time by which such
an instruction must be given in order for timely notice to be delivered to DTC.
The Company will not be liable for any delay in delivery of such notice to DTC.

43
<PAGE> 46

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of certain United States federal income tax
considerations relating to the purchase, ownership and disposition of the Notes
and of Common Stock into which Notes may be converted, but does not purport to
be a complete analysis of all the potential tax considerations relating thereto.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), and existing, temporary and proposed Treasury Regulations, laws,
rulings and decisions now in effect, all of which are subject to change. This
summary deals only with Holders that will hold Notes and Common Stock into which
Notes may be converted as "capital assets" (within the meaning of Section 1221
of the Code) and that are (i) citizens or residents of the United States, (ii)
domestic corporations, or (iii) otherwise subject to United States federal
income taxation on a net income basis in respect of a Note or Common Stock. This
summary does not address tax considerations applicable to investors that may be
subject to special tax rules, such as banks, tax-exempt organizations, insurance
companies, dealers in securities or currencies, or persons that will hold Notes
as a position in a hedging transaction, "straddle" or "conversion transaction"
for tax purposes. This summary discusses the tax considerations applicable to
the initial purchasers of the Notes who purchase the Notes at their "issue
price" as defined in Section 1273 of the Code and does not discuss the tax
considerations applicable to subsequent purchasers of the Notes. The Company has
not sought any ruling from the Internal Revenue Service with respect to the
statements made and the conclusions reached in the following summary, and there
can be no assurance that the Internal Revenue Service will agree with such
statements and conclusions.

INVESTORS CONSIDERING THE PURCHASE OF NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME AND
ESTATE TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION OR
UNDER ANY APPLICABLE TAX TREATY.

PAYMENT OF INTEREST

Interest on a Note generally will be includable in the income of a Holder
as ordinary income at the time such interest is received or accrued, in
accordance with such Holder's method of accounting for United States federal
income tax purposes.

SALE, EXCHANGE OR REDEMPTION OF THE NOTES

Upon the sale, exchange or redemption of a Note, a Holder generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash proceeds and the fair market value of any property received on the sale,
exchange or redemption (except to the extent such amount is attributable to
accrued interest income not previously included in income which is taxable as
ordinary income) and (ii) such Holder's adjusted tax basis in the Note. A
Holder's adjusted tax basis in a Note generally will equal the cost of the Note
to such Holder. Such capital gain or loss will be long-term capital gain or loss
if the Holder's holding period in the Note is more than one year at the time of
sale, exchange or redemption.

CONSTRUCTIVE DISTRIBUTION

If at any time (i) the Company makes a distribution of cash or property to
its shareholders or purchases Common Stock and such distribution or purchase
would be a taxable distribution to such shareholders for United States federal
income tax purposes (e.g., distributions of evidences of indebtedness or assets
of the Company, but generally not stock dividends or rights to subscribe for
Common Stock) and, pursuant to the anti-dilution provision of the Indenture, the
conversion rate of the Notes is increased, or (ii) the conversion rate of the
Notes is increased at the discretion of the Company, such increase in conversion
rate may be deemed to be a taxable distribution to Holders of Notes (pursuant to
Section 305 of the Code). Such a deemed distribution will be taxable as a
dividend, return of capital or capital gain in accordance with the earnings and
profits rules discussed under "-- Dividends." Holders of Notes could therefore
have taxable income as a result of an event pursuant to which they receive no
cash or property.

44
<PAGE> 47

CONVERSION OF THE NOTES

A Holder of a Note generally will not recognize any income, gain or loss
upon conversion of a Note into shares of Common Stock except with respect to
cash received either in lieu of a fractional share of Common Stock or
attributable to accrued interest on the converted Notes. A Holder's tax basis in
the Common Stock received on conversion of a Note will be the same as such
Holder's adjusted tax basis in the Note at the time of conversion (reduced by
any basis allocable to a fractional share interest). The holding period for the
shares of Common Stock received on conversion will generally include the holding
period of the Note converted.

Cash received in lieu of a fractional share of Common Stock upon conversion
will be treated as a payment in exchange for the fractional share of Common
Stock. Accordingly, the receipt of cash in lieu of a fractional share of Common
Stock generally will result in capital gain or loss (measured by the difference
between the cash received for the fractional share and the Holder's adjusted tax
basis in the fractional share).

DIVIDENDS

Distributions paid on shares of Common Stock will constitute dividends for
United States federal income tax purposes to the extent of the Company's current
or accumulated earnings and profits and will be includable in the income of a
Holder as ordinary income. Dividends paid to Holders that are United States
corporations may qualify for a dividends-received deduction.

To the extent that a distribution to a Holder on shares of Common Stock
that would otherwise constitute a dividend for United States federal income tax
purposes exceeds current and accumulated earnings and profits of the Company,
such distribution will be treated first as a non-taxable return of capital,
reducing the Holder's basis in the shares of Common Stock. Any such distribution
in excess of the Holder's basis in the shares of Common Stock will be treated as
capital gain.

SALE OF COMMON STOCK

Upon the sale or exchange of Common Stock, a Holder generally will
recognize capital gain or loss equal to the difference between (i) the amount of
cash and the fair market value of any property received upon the sale or
exchange and (ii) such Holder's adjusted tax basis in the Common Stock. Such
capital gain or loss will be long-term if the Holder's holding period in such
Common Stock is more than one year at the time of the sale or exchange. A
Holder's basis and holding period in Common Stock received upon conversion of a
Note are determined as discussed above under "Conversion of the Notes."

CONSTRUCTIVE SALE OF THE NOTES OR COMMON STOCK

Under section 1001 of the H.R. 2014 (the "Bill"), which is currently
pending before Congress, a taxpayer generally would be required to recognize
gain with respect to an "appreciated financial position" upon entering into
certain transactions, including, but not limited to, a short sale, certain
offsetting notional principal contracts, or certain future or forward contracts,
with respect to the "appreciated financial position." Both the Notes and the
underlying Common Stock will constitute "appreciated financial positions" if
gain would be recognized were such instruments sold for their fair market value.
Accordingly, if the Bill is enacted into law, then upon entering into one of the
enumerated transactions with respect to any Note or underlying Common Stock, the
holder of such Note or Common Stock must recognize gain, if any, on such Note or
Common Stock as if it sold either instrument for the instrument's fair market
value. Proper adjustment will be made to the amount of gain or loss subsequently
realized with respect to any Note or underlying Common Stock for any gain taken
into account by virtue of the constructive sale, and the holding period of such
Note or Common Stock will be determined as if such instrument were acquired on
the date of the constructive sale. If enacted, section 1001 of the Bill
generally will apply to any constructive sale occurring after June 8, 1997.

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest on a Note, payments of dividends on
Common Stock, payments of the proceeds of the sale of a Note

45
<PAGE> 48

and payments of the proceeds of the sale of Common Stock to certain noncorporate
Holders, and a 31% backup withholding tax may apply to such payments if the
Holder (i) fails to furnish or certify his correct taxpayer identification
number to the payor in the manner required, (ii) is notified by the Internal
Revenue Service (the "IRS") that he has failed to report payments of interest
and dividends properly, or (iii) under certain circumstances, fails to certify
that he has not been notified by the IRS that he is subject to backup
withholding for failure to report interest and dividend payments. Any amounts
withheld under the backup withholding rules from a payment to a Holder will be
allowed as a credit against such Holder's United States federal income tax and
may entitle the Holder to a refund, provided that the required minimum
information is furnished to the IRS.

46
<PAGE> 49

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company is authorized to issue 50,000,000 shares of Common Stock, par
value $.01 per share, and 15,000,000 shares of preferred stock, par value $.10
per share (the "Preferred Stock"). As of July 1, 1997, 6,079,519 shares of
Common Stock were outstanding and such shares were held by approximately 119
holders of record. None of the Preferred Stock is outstanding.

The following descriptions of the Common Stock and the Preferred Stock are
based on the Company's Articles of Incorporation (the "Articles") and Bylaws and
applicable Florida law.

COMMON STOCK

Each holder of Common Stock is entitled to one vote for each share owned of
record on all matters presented to the shareholders. In the event of a
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to share equally and ratably in the assets of the Company, if
any, remaining after the payment of all debts and liabilities of the Company and
the liquidation preference of any outstanding Preferred Stock. The Common Stock
has no preemptive rights, no cumulative voting rights and no redemption, sinking
fund or conversion provisions. Currently, 1,500,000 shares of Common Stock are
reserved for issuance under the Company's Incentive Stock Option Plan (the "ISO
Plan").

Holders of Common Stock are entitled to receive dividends if, as and when
declared by the Board of Directors out of funds legally available therefor,
subject to the dividend and liquidation rights of any Preferred Stock that may
be issued and outstanding and subject to any dividend restrictions in the
Revolving Credit Facility. No dividends or other distributions (including
redemptions or repurchases of shares of capital stock) may be made if after
giving effect to any such dividends or distributions, the Company would not be
able to pay its debts as they become due in the usual course of business or the
Company's total assets would be less than the sum of its total liabilities plus
the amount that would be needed at the time of a liquidation to satisfy the
preferential rights of any holders of Preferred Stock. See "Dividend Policy."

All of the shares of Common Stock offered hereby, when issued and sold,
will be validly issued, fully paid and nonassessable.

The transfer agent and registrar for the Common Stock is First Union
National Bank of North Carolina, Charlotte, North Carolina.

PREFERRED STOCK

The Board of Directors of the Company is authorized, without further
shareholder action, to designate and issue from time to time one or more series
of Preferred Stock. The Board of Directors may fix and determine the
designations, preferences and relative rights and qualifications, limitations or
restrictions of any series of Preferred Stock so established, including voting
powers, dividend rights, liquidation preferences, redemption rights and
conversion privileges. Because the Board of Directors has the power to establish
the preferences and rights of each series of Preferred Stock, it may afford the
holders of any series of Preferred Stock preferences and rights, voting or
otherwise, senior to the rights of holders of Common Stock. As of the date of
this Prospectus, the Board of Directors has not authorized any series of
Preferred Stock and has no plans to issue any shares of Preferred Stock.

CERTAIN PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION

The Articles provide that special meetings of shareholders may be called
only by: (i) holders of not less than 25% of all votes entitled to be cast at
the meeting; (ii) the President; (iii) the Board of Directors; or

47
<PAGE> 50

(iv) the Chairman of the Board of Directors. Shareholders may take action only
at a duly called and held meeting and may not take action by written consent.

The Articles provide for a classified Board of Directors and permit removal
of directors only for cause by the shareholders of the Company at a meeting by
the affirmative vote of at least 66 2/3% of the outstanding shares of Common
Stock. See "Management -- Executive Officers and Directors." The Articles
establish an advance notice procedure for the nomination of candidates for
election as directors, as well as for other shareholder proposals to be
considered at shareholders' meetings. Nominations may be made at shareholders'
meetings by or at the direction of the Board of Directors, by any nominating
committee or person appointed by the Board or by any shareholder entitled to
vote for the election of directors. Notice of shareholder proposals and
nominations of directors by shareholders must be given timely in writing to the
Secretary of the Company before the meeting at which such matters are to be
acted upon or directors are to be elected. Such notice, to be timely, must be
received at the principal executive offices of the Company with respect to
shareholder proposals and elections to be held at the annual meeting, not less
than 60 days before the date of the meeting at which the director(s) are to be
elected; however, if less than 70 days' notice or prior public disclosure of the
date of the scheduled meeting is given or made, notice by the shareholder, to be
timely, must be so delivered or received not later than the close of business on
the tenth day following the earlier of the day on which notice of the date of
such meeting is mailed to shareholders or public disclosure of the date of such
meeting is made.

Notice to the Company from a shareholder who intends to present a proposal
or to nominate a person for election as a director at a meeting must contain
certain information about the shareholder giving such notice and, in the case of
director nominations, all information that would be required to be included in a
proxy statement soliciting proxies for the election of the proposed nominee
(including such person's written consent to serve as a director if so elected).
If the presiding officer of the meeting determines that a shareholder's proposal
or nomination is not made in accordance with the procedures set forth in the
Articles, such proposal or nomination, at the direction of such presiding
officer, may be disregarded. The notice requirement for shareholder proposals
contained in the Articles does not restrict a shareholder's right to include
proposals in the Company's annual proxy materials pursuant to rules promulgated
under the Exchange Act.

The preceding provisions of the Articles may be changed only upon the
affirmative vote of holders of 66 2/3% of the outstanding Common Stock.

The provisions of the Articles summarized in the preceding four paragraphs
and the provisions of Florida's Business Corporation Act described under
"Certain Provisions of Florida Law" may have certain anti-takeover effects. Such
provisions, individually or in combination, may discourage other persons, or
make it more difficult, without the approval of the Board of Directors, for
other persons to make a tender offer or acquisitions of substantial amounts of
the Common Stock or from launching other takeover attempts that a shareholder
might consider in such shareholder's best interest, including attempts that
might result in the payment of a premium over the market price for the Common
Stock held by such shareholder.

CERTAIN PROVISIONS OF FLORIDA LAW

The Company is subject to several anti-takeover provisions under Florida
law that apply to a public corporation organized under Florida law, unless the
corporation has elected to opt out of those provisions in its articles of
incorporation or bylaws. The Company has not elected to opt out of those
provisions. The Florida Business Corporation Act, as amended (the "FBCA"),
prohibits the voting of shares in a publicly-held Florida corporation that are
acquired in a "control share acquisition" unless the holders of a majority of
the corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition. A
"control share acquisition" is defined as an acquisition that immediately
thereafter entitles the acquiring party to vote in the election of directors
within each of the following ranges of voting power: (i) one-fifth or more but
less than one-third of such voting power; (ii) one-third or more but less than a
majority of such voting power; and (iii) more than a majority of such voting
power.

48
<PAGE> 51

The FBCA also contains an "affiliated transaction" provision that prohibits
a publicly-held Florida corporation from engaging in a broad range of business
combinations or other extraordinary corporate transactions with an "interested
shareholder" unless: (i) the transaction is approved by a majority of
disinterested directors before the person becomes an interested shareholder;
(ii) the interested shareholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years; or (iii) the transaction is
approved by the holders of two-thirds of the corporation's voting shares other
than those owned by the interested shareholder. An interested shareholder is
defined as a person who together with affiliates and associates beneficially
owns more than 10% of the corporation's outstanding voting shares.

49
<PAGE> 52

UNDERWRITING

Subject to the terms and conditions of an underwriting agreement (the
"Underwriting Agreement") among the Company and the Underwriters named below
(the "Underwriters"), the Company has agreed to sell to each of the Underwriters
named below, and each of such Underwriters have severally agreed to purchase
from the Company, the principal amount of Notes set forth opposite its name
below.

<TABLE>
<CAPTION>
UNDERWRITER AMOUNT OF NOTES
- ----------- ----------------
<S> <C>
Raymond James & Associates, Inc. ......................... $ 38,750,000
Forum Capital Markets L.P. ............................... 38,750,000
Stephens Inc. ............................................ 17,500,000
Needham & Company, Inc. .................................. 5,000,000
------------
Total........................................... $100,000,000
============
</TABLE>

The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the Notes are subject to certain conditions. The
Underwriters are committed to purchase all the Notes if any of the Notes are
purchased.

The Company has granted to the Underwriters an option, expiring 30 days
after the date of this Prospectus, to purchase from the Company up to an
aggregate of $15,000,000 additional principal amount of Notes at the public
offering price less the underwriting discount set forth on the cover page of
this Prospectus solely to cover over-allotments, if any. If the Underwriters
exercise such option, the Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
principal amount of the Notes to be purchased by each of them shown in the above
table bears to the aggregate principal amount of the Notes offered hereby.

The Notes will not be listed on any securities exchange or the Nasdaq
National Market. The Underwriters have advised the Company that they intend to
make a market in the Notes. The Underwriters are not obligated, however, to make
a market in the Notes, and any such market making may be discontinued at any
time at the sole discretion of the Underwriters without notice.

Forum Capital Markets L.P., on behalf of the Underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.
Over-allotment involves syndicate sales in excess of the offering size, which
creates a syndicate short position. Stabilizing transactions permit bids to
purchase shares of Common Stock so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of Common
Stock in the open market after the distribution has been completed in order to
cover syndicate short positions. Penalty bids permit Forum Capital Markets L.P.,
on behalf of the Underwriters, to reclaim a selling concession from a syndicate
member when the Notes originally sold by such syndicate member are purchased in
a syndicate covering transaction to cover syndicate short positions. Such
over-allotment, stabilizing transactions, syndicate covering transaction and
penalty bids may cause the price of the Notes to be higher than it would
otherwise be in the absence of such transaction. These transactions may be
effected in the over-the-counter market or otherwise and, if commenced, may be
discontinued at any time.

The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act, or to contribute to certain payments that
the Underwriters may be required to make in respect thereof.

Barry M. Alpert, a director of the Company, is a Managing Director of
Raymond James & Associates, Inc., one of the Underwriters.

50
<PAGE> 53

LEGAL MATTERS

Certain legal matters in connection with the offering and sale of the Notes
will be passed upon for the Company by Holland & Knight LLP, Tampa, Florida. The
validity of the Notes will be passed upon for the Underwriters by King &
Spalding, New York, New York.

EXPERTS

The Consolidated Financial Statements and schedule of the Company at
December 31, 1995, 1996 and for each of the three years in the period ended
December 31, 1996, included and incorporated by reference in this Prospectus
have been audited by Grant Thornton LLP, independent certified public
accountants, as set forth in their reports with respect thereto, and are
included and incorporated herein in reliance upon the authority of such firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files periodic reports and other information
with the Securities and Exchange Commission (the "Commission"). Reports, proxy
and information statements and other information filed by the Company may be
inspected and copies may be obtained (at prescribed rates) at the Commission's
Public Reference Section, 450 5th Street, N.W., Washington, D.C. 20549, as well
as the following Regional Offices of the Commission: Seven World Trade Center,
13th Floor, New York, New York 10048 and at Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can also be obtained by mail from the Public Reference Section,
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington D.C.
20549, upon payment of prescribed rates. In addition, electronically filed
documents, including reports, proxy and information statements and other
information regarding the Company, can be obtained from the Commission's Web
site at: http://www.sec.gov. The Company's Common Stock is traded on the Nasdaq
National Market, and reports, proxy statements and other information concerning
the Company can also be inspected at the offices of the National Association of
Securities Dealers, Inc. at 1735 K Street, Washington, D.C. 20006.

The Company has filed a Registration Statement on Form S-3 under the
Securities Act with respect to the Notes offered hereby (the "Registration
Statement"). This Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and such Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits, schedules and
reports filed as part thereof. Statements contained in the Prospectus with
respect to the contents of any contract or other document filed as an exhibit to
the Registration Statement are not necessarily complete, and in each such
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement. Each such statement is qualified in
all respects by such reference to such exhibit. Copies of all or any part of the
Registration Statement, including the documents incorporated by reference
therein or exhibits thereto, may be obtained upon payment of the prescribed
rates at the offices of the Commission set forth above.

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<PAGE> 54

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission pursuant
to the Exchange Act are hereby incorporated by reference in this Prospectus:

(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996; and

(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997.

All documents filed by the Company pursuant to sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Notes shall be deemed to be incorporated
by reference in this Prospectus. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to each person to whom a Prospectus
is delivered, upon written or oral request of such person, a copy of any and all
of the information that has been incorporated by reference in this Prospectus
(excluding exhibits unless such exhibits are specifically incorporated by
reference into such documents). Please direct such requests to the Secretary,
Reptron Electronics, Inc., 14401 McCormick Drive, Tampa, Florida, 33626,
telephone number (813) 854-2351.

52
<PAGE> 55

REPTRON ELECTRONICS, INC.

INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.......... F-2

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets as of December 31, 1995 and
1996 and March 31, 1997 (unaudited).................... F-3

Consolidated Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996, and the three months
ended March 31, 1996 and 1997 (unaudited).............. F-4

Consolidated Statement of Shareholders' Equity for the
years ended December 31, 1994, 1995 and 1996, and the
three months ended March 31, 1997 (unaudited).......... F-5

Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996, and the three months
ended March 31, 1996 and 1997 (unaudited).............. F-6

Notes to Consolidated Financial Statements................ F-7

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
SCHEDULE.................................................. F-18

Schedule II -- Valuation and Qualifying Accounts for the
years ended December 31, 1994, 1995 and 1996........... F-19
</TABLE>

F-1
<PAGE> 56

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Reptron Electronics, Inc.

We have audited the accompanying consolidated balance sheets of Reptron
Electronics, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of earnings, shareholders' equity, and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Reptron
Electronics, Inc. as of December 31, 1996 and 1995, and the consolidated results
of operations and cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

GRANT THORNTON LLP

Tampa, Florida
February 5, 1997

F-2
<PAGE> 57

REPTRON ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
1995 1996 1997
--------- --------- ----------
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 224 $ 479 $ 50
Accounts receivable -- trade, less allowances for doubtful
accounts of $180, $350 and $350, respectively.......... 41,234 39,807 47,360
Inventories............................................... 63,461 58,694 65,498
Prepaid expenses and other................................ 1,842 2,764 4,714
Deferred tax benefit...................................... 124 138 167
-------- -------- --------
Total current assets.............................. 106,885 101,882 117,789
PROPERTY, PLANT AND EQUIPMENT -- AT COST, NET............... 20,953 30,869 33,189
EXCESS OF COST OVER NET ASSETS ACQUIRED, NET................ 4,385 4,504 4,444
OTHER ASSETS................................................ 1,515 1,377 2,048
-------- -------- --------
$133,738 $138,632 $157,470
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable -- trade................................. $ 24,948 $ 18,339 $ 22,359
Notes payable to banks.................................... 1,933 -- 2,856
Current portion of long-term obligations.................. 2,547 3,560 2,352
Accrued expenses.......................................... 1,828 2,506 2,028
Income taxes payable...................................... -- 246 --
-------- -------- --------
Total current liabilities......................... 31,256 24,651 29,595
NOTES PAYABLE TO BANKS...................................... 50,200 48,550 60,000
LONG-TERM OBLIGATIONS, less current portion................. 10,430 15,235 15,417
DEFERRED INCOME TAXES....................................... 904 1,506 1,585
COMMITMENTS AND CONTINGENCIES............................... -- -- --
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, 6,048,519, 6,065,519 and
6,071,019 shares, respectively......................... 60 61 61
Additional paid-in capital................................ 21,145 21,233 21,260
Retained earnings......................................... 19,743 27,396 29,552
-------- -------- --------
40,948 48,690 50,873
-------- -------- --------
$133,738 $138,632 $157,470
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-3
<PAGE> 58

REPTRON ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales............................ $ 164,005 $ 223,344 $ 268,937 $ 66,551 $ 76,251
Cost of goods sold................... 133,794 183,181 217,088 54,569 62,179
---------- ---------- ---------- ---------- ----------
Gross profit......................... 30,211 40,163 51,849 11,982 14,072
Selling, general and administrative
expenses........................... 19,051 26,586 35,023 8,348 9,250
---------- ---------- ---------- ---------- ----------
Operating income..................... 11,160 13,577 16,826 3,634 4,822
Interest expense..................... 1,474 2,767 4,025 1,102 1,228
---------- ---------- ---------- ---------- ----------
Earnings before income taxes......... 9,686 10,810 12,801 2,532 3,594
Income tax provision................. 3,823 4,324 5,148 1,013 1,438
---------- ---------- ---------- ---------- ----------
NET EARNINGS............... 5,863 6,486 7,653 1,519 2,156
========== ========== ========== ========== ==========
Net earnings per common
share.................... $ 1.03 $ 1.05 $ 1.24 $ 0.25 $ 0.35
========== ========== ========== ========== ==========
Weighted average Common Stock and
Common Stock equivalent shares
outstanding........................ 5,713,808 6,170,265 6,179,231 6,168,288 6,206,952
========== ========== ========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-4
<PAGE> 59

REPTRON ELECTRONICS, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
TOTAL ADDITIONAL
SHARES PAR PAID-IN RETAINED SHAREHOLDERS'
OUTSTANDING VALUE CAPITAL EARNINGS EQUITY
----------- ----- ---------- -------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994.................... 4,230,769 $42 $ -- $ 7,394 $ 7,436
Initial public offering, net of offering costs
of $708..................................... 1,800,000 18 21,036 -- 21,054
Exercise of stock options..................... 12,500 -- 62 -- 62
Net Earnings.................................. -- -- -- 5,863 5,863
--------- --- ------- ------- -------
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..................... 17,000 1 88 -- 89
Net Earnings.................................. -- -- -- 7,653 7,653
--------- --- ------- ------- -------
Balance at December 31, 1996.................. 6,065,519 61 21,233 27,396 48,690
Exercise of stock options (Unaudited)......... 5,500 -- 27 -- 27
Net Earnings (Unaudited)...................... -- -- -- 2,156 2,156
--------- --- ------- ------- -------
Balance at March 31, 1997 (Unaudited)......... 6,071,019 $61 $21,260 $29,552 $50,873
========= === ======= ======= =======
</TABLE>

The accompanying notes are an integral part of this statement.

F-5
<PAGE> 60

REPTRON ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- -----------------
1994 1995 1996 1996 1997
------- -------- ------- ------- -------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net earnings.................................. $ 5,863 $ 6,486 $ 7,653 $ 1,519 $ 2,156
------- -------- ------- ------- -------
Adjustments to reconcile net earnings to net
cash provided by (used in) operating
activities.................................
Depreciation and amortization.............. 1,389 2,462 3,638 685 1,031
Gain on sale of assets..................... (24) -- (47) -- (2)
Deferred income taxes...................... 369 350 588 -- 50
Change in assets and liabilities:
Accounts receivable -- trade............. (2,531) (11,425) 1,427 2,932 (7,553)
Inventories.............................. (7,990) (23,329) 4,344 6,022 (6,804)
Prepaid expenses and other............... (744) (669) (920) (34) (1,951)
Other assets............................. (507) (963) (396) 397 (788)
Related party receivable................. 479 -- -- -- --
Accounts payable -- trade................ (678) 5,842 (6,607) (9,985) 4,020
Accrued expenses......................... (454) 457 678 (449) (478)
Income taxes payable..................... (156) (72) 246 617 (246)
------- -------- ------- ------- -------
Net cash provided by (used in)
operating activities................ (4,984) (20,861) 10,604 1,704 (10,565)
------- -------- ------- ------- -------
Cash flows from investing activities:
Net cash paid for acquisitions................ -- (12,629) -- (91) --
Purchases of property, plant and equipment.... (5,900) (7,642) (7,586) (3,062) (3,173)
Proceeds from sale of property, plant and
equipment.................................. -- -- 72 -- 2
------- -------- ------- ------- -------
Net cash used in investing
activities.......................... (5,900) (20,271) (7,514) (3,153) (3,171)
------- -------- ------- ------- -------
Cash flows from financing activities:
Net proceeds from (payments on) note payable
to bank.................................... (7,551) 35,642 (3,582) (33) 14,306
Proceeds from long-term obligation............ 77 7,389 3,409 2,100 --
Payments on long-term obligations............. (2,586) (1,988) (2,751) (684) (1,026)
Net proceeds from initial public offering..... 21,054 -- -- -- --
Proceeds from exercise of stock options....... 62 47 89 26 27
------- -------- ------- ------- -------
Net cash provided by (used in)
financing activities................ 11,056 41,090 (2,835) 1,409 13,307
------- -------- ------- ------- -------
Net increase (decrease) in cash and
cash equivalents.................... 172 (42) 255 (40) (429)
Cash and cash equivalents at beginning of
period........................................ 94 266 224 224 479
------- -------- ------- ------- -------
Cash and cash equivalents at end of period...... $ 266 $ 224 $ 479 $ 184 $ 50
======= ======== ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these statements.

F-6
<PAGE> 61

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reptron Electronics, Inc. (the "Company") is a leading integrated
electronics company providing through two divisions both value-added
distribution of electronic components ("Reptron Distribution") and targeted
contract manufacturing services ("K-Byte Manufacturing"). Reptron Distribution
sells to over 60 vendor lines of semiconductors, passive products and
electromechanical components, including more than 35,000 different items. K-Byte
Manufacturing focuses on establishing primary or sole source relationships with
OEMs in a wide variety of industries that require complex circuit board assembly
with low-to-medium volume production requirements.

A summary of the significant accounting policies consistently applied in
the preparation of the accompanying consolidated financial statements follows:

1. Principles of Consolidation. The financial statements include the
accounts of Reptron Electronics, Inc. and its wholly-owned subsidiary. All
significant inter-company balances and transactions have been eliminated.

2. Cash Equivalents. For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.

3. Inventories. Inventories are stated at the lower of cost or
market. For K-Byte Manufacturing, cost is determined using the first-in,
first-out method (FIFO). To better reflect the movement of Reptron
Distribution inventory, the Company changed its inventory method from FIFO
to the average cost method. Since the average cost method and FIFO
generally yield similar results, the change had and will have an immaterial
effect on the financial statements of the Company.

4. Property, Plant and Equipment. Depreciation is provided for, using
the straight-line method, in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives
(building 39 1/2 years, all other asset categories 5 years). Leasehold
improvements are amortized using the straight-line method over the lives of
the respective leases or the service lives of the improvements, whichever
is shorter.

Leased equipment under capital leases is amortized using the
straight-line method over the lives of the respective leases or over the
service lives of the assets for those leases which substantially transfer
ownership.

5. Production Set-up Costs. Under certain contractual arrangements
with customers, the Company incurs set-up costs. These costs are
capitalized, included in prepaid expenses and other assets, and amortized
over the contract period, or two years, whichever is less, using the
straight-line method. Amortization begins after the development stage of
the contract is complete and the production stage begins.

6. Excess of Cost Over Net Assets Acquired. The excess of cost over
net assets acquired is amortized over twenty years using the straight-line
method. Accumulated amortization totaled approximately $134,000, $362,000
and $422,000 at December 31, 1995, 1996, and March 31, 1997, respectively.

7. Accounting for Impairment of Long-Lived Assets. The Company's
evaluates long-lived assets and intangibles held and used for impairment
whenever events or changes in circumstances indicate that carrying amounts
may not be recoverable. Impairment is recognized when the carrying amounts
of such assets cannot be recovered by the net cash flows they will
generate.

8. Income Taxes. The Company accounts for income taxes on the
liability method, as provided by Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting For Income Taxes." Under the
liability method specified by SFAS 109, deferred tax assets and liabilities
are determined based on the difference between the financial statement and
tax bases of assets and liabilities as measured

F-7
<PAGE> 62

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

by the enacted tax rates which will be in effect when these differences
reverse. Deferred tax expense is the result of changes in deferred tax
assets and liabilities.

9. Earnings Per Common Share. Earnings per share are computed using
the weighted average number of Common Shares plus Common Stock equivalents,
consisting of the incentive stock options, using the treasury stock method.
Primary and fully diluted calculations result in the same earnings per
share. If the sale by the Company of 1,800,000 shares of Common Stock had
occurred on January 1, 1994 and the net proceeds of the sale had been
applied to the reduction of the Company's Revolving Credit Facility,
earnings per share would have been $0.99 in 1994.

10. Use of Estimates. In preparing financial statements in conformity
with generally accepted accounting principles, management makes estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.

11. New Accounting Pronouncement. In October, 1995 the Financial
Accounting Standards Board issued SFAS No. 123 "Accounting for Stock Based
Compensation". For employee stock awards, as allowed by SFAS No. 123, the
Company has elected to continue using the accounting method promulgated by
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees". The pro-forma disclosures required by SFAS No. 123, as a result
of this election, would have resulted in a decrease in net earnings in 1995
and 1996 of approximately $45,000 and $90,000 respectively are not included
as the pro-forma effect on these financial statements is insignificant.
These pro-forma amounts may not be representative of future disclosures
because they reflect options granted for only three years, while the effect
of issuing the options is recognized over a five year period.

12. Reclassifications. Certain reclassifications have been made to
conform the 1994 and 1995 presentations to the 1996 presentation.

13. Unaudited Financial Statements. The unaudited financial
statements and the related notes thereto for March 31, 1996 and 1997
include all normal and recurring adjustments which in the opinion of
management are necessary for a fair presentation and are prepared on the
same basis as audited annual statements. The interim results are not
necessarily indicative of the results that may be expected for the full
year.

NOTE B -- STATEMENTS OF CASH FLOWS

Supplemental disclosures of cash flow information (in thousands):

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- ------------------
1994 1995 1996 1996 1997
------ ------ ------ ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash paid during the period indicated
for:
Interest............................ $1,436 $2,781 $4,879 $1,102 $1,125
Income taxes........................ $3,437 $4,085 $4,269 $ 396 $2,425
</TABLE>

The Company incurred approximately $2,061,000, $2,645,000, $5,209,000 and
$372,000 of obligations under capital leases for the acquisition of equipment
during 1994, 1995, 1996 and the three months ended March 31, 1996, respectively.
No capital leases were entered into during the period ended March 31, 1997.

F-8
<PAGE> 63

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company purchased substantially all the assets of Cronin Electronics,
Inc. and the electronic component division of Western Micro Technology, Inc.
during 1995. In conjunction with the acquisitions, specified liabilities were
assumed as follows (in thousands):

<TABLE>
<S> <C>
Fair value of assets acquired............................... $ 19,467
Cash paid................................................... (12,629)
--------
Liabilities assumed......................................... $ 6,838
========
</TABLE>

NOTE C -- INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------ ---------
1995 1996 1997
------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Reptron Distribution:
Inventories......................................... $43,647 $31,085 $36,362
K-Byte Manufacturing:
Work in process..................................... 7,421 8,833 11,089
Raw materials....................................... 12,393 18,776 18,047
------- ------- -------
$63,461 $58,694 $65,498
======= ======= =======
</TABLE>

NOTE D -- PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------ ---------
1995 1996 1997
------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Land and buildings.................................... $ 6,765 $ 6,837 $15,375
Furniture, fixtures and equipment..................... 18,375 24,908 27,427
Leasehold improvements................................ 1,182 1,275 1,240
Construction in progress.............................. 2,564 8,380 476
------- ------- -------
28,886 41,400 44,518
Less accumulated depreciation and amortization........ 7,933 10,531 11,329
------- ------- -------
$20,953 $30,869 $33,189
======= ======= =======
</TABLE>

The Company completed construction of a 150,000 square foot manufacturing
and warehouse facility in 1997. The total cost of the construction project was
approximately $8,000,000, exclusive of land costs. During the years ended
December 31, 1995 and 1996 and the three months ended March 31, 1996 and 1997,
capitalized interest totaled approximately $170,000, $820,000, $200,000 and
$197,000, respectively.

NOTE E -- NOTES PAYABLE TO BANKS

The Company is a party to an Amended and Restated Revolving Credit and
Reimbursement Agreement dated June 29, 1995, as amended (the "Revolving Credit
Facility"). Pursuant to the Revolving Credit Facility, four lenders have made
available to the Company a $55 million revolving credit facility ($60 million at
March 31, 1997). The lenders may advance funds to the Company pursuant to two
types of loans, each of which bears a separate rate of interest. As long as the
Company is not in default under the Revolving Credit Facility, and upon notice
to the lender, the Company may convert advances from one type of loan to the
other. Interest rates on advances made under the Revolving Credit Facility
ranged from 7.25% to 8.25% as of

F-9
<PAGE> 64

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1996 (7.06% to 8.50% as of March 31, 1997). Borrowings under the
Revolving Credit Facility are collateralized by all of the Company's inventory
and accounts receivable. The Revolving Credit Facility contains certain
financial covenants, including the requirement that the Company maintain a
minimum tangible net worth, maintain various financial ratios and limit the
amount of capital expenditures. In addition, the Revolving Credit Facility
requires the financial institutions' approval of dividends in excess of the
lesser of $1,000,000 or 25% of net earnings, thereby restricting the
distribution of the retained earnings of the Company. The Company was in
compliance with all financial covenants as of December 31, 1996. The Revolving
Credit Facility is scheduled to terminate on June 30, 1999 but may be extended
by agreement.

The weighted average interest rate on short-term borrowings on December 31,
1995 was 8.01% and there were no short term borrowings on December 31, 1996.

NOTE F -- LONG-TERM OBLIGATIONS

Long-term obligations consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31,
----------------- -----------
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Variable rate demand notes issued in conjunction with
the notes payable to banks, collateralized by certain
land and buildings due in semi-annual payments of $500
beginning July 1, 1996 through 2003, interest rates
range from 5.4% to 6.2% at December 31, 1996.......... $ 6,300 $ 9,300 $ 8,800
Capitalized lease obligations (net of interest of
approximately $1,894) for equipment, due in monthly
principal and interest payments of approximately $189,
through 2001.......................................... 4,575 6,467 6,057
Notes payable collateralized by real property, due in
monthly principal and interest installments of $13,
two requiring a final balloon payment due March 1998,
interest rates of prime plus .5% (8.75% at December
31, 1996) and 10%..................................... 568 983 969
Notes payable collateralized by certain equipment, due
in monthly principal and interest installments of $47,
through November 2001 at an interest rates of 7.5% and
7.9%.................................................. 998 2,045 1,943
Other................................................... 536 -- --
------- ------- -------
12,977 18,795 17,769
Less current maturities................................. 2,547 3,560 2,352
------- ------- -------
$10,430 $15,235 $15,417
======= ======= =======
</TABLE>

At December 31, 1996, aggregate maturities of long-term obligations are as
follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1997...................................................... $ 3,560
1998...................................................... 3,755
1999...................................................... 2,871
2000...................................................... 2,622
2001...................................................... 2,018
Thereafter................................................ 3,969
-------
$18,795
=======
</TABLE>

F-10
<PAGE> 65

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has entered into various capital leases for equipment, totaling
approximately $2,061,000 in 1994, $2,645,000 in 1995, $5,209,000 in 1996 and
$372,000 for the three months ended March 31, 1996. No capital leases were
entered into during the period ended March 31, 1997. At December 31, 1995 and
1996 and March 31, 1997, the net book value of equipment under capital leases is
approximately $6,034,000, $7,215,000 and $6,988,000, respectively. The related
capital lease obligations are included with long-term obligations.

NOTE G -- INCOME TAXES

The provision for income taxes for the years ended December 31, 1994, 1995,
1996 and the three months ended March 31, 1996 and 1997, respectively, is as
follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
-------------------------- ----------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current............................. $3,454 $3,974 $4,560 $1,013 $1,388
Deferred............................ 369 350 588 -- 50
------ ------ ------ ------ ------
$3,823 $4,324 $5,148 $1,013 $1,438
====== ====== ====== ====== ======
</TABLE>

The Company's effective tax rate differs from the statutory U. S. federal
income tax rate as a result of the following:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- ------------
1994 1995 1996 1996 1997
----- ----- ----- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statutory federal tax rate...................... 34.0% 34.0% 35.0% 34.0% 35.0%
Effect of marginal federal tax rate............. -- -- (0.8) -- (0.8)
State income taxes of approximately 6.6%, 6.4%,
6.9%, 6.4% and 6.9%, respectively, net of
Federal tax benefit........................... 4.3 4.3 4.6 4.3 4.6
Other........................................... 1.2 1.7 1.4 1.7 1.2
---- ---- ---- ---- ----
Effective tax rate.............................. 39.5% 40.0% 40.2% 40.0% 40.0%
==== ==== ==== ==== ====
</TABLE>

The Company's income in excess of $10.0 million is subject to federal
income tax at a marginal rate of 35%. As a result of the Company's current and
expected earnings, management has chosen 35% as the Company's statutory federal
tax rate.

F-11
<PAGE> 66

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income tax assets and liabilities resulting from differences
between accounting for financial statement purposes and tax purposes pursuant to
SFAS No. 109, are summarized as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
----------------- -----------
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets
Accrued vacation...................................... $ 51 $ 51 $ 50
Allowance for bad debts............................... 71 138 138
Other................................................. 2 23 22
------- ------- -------
124 212 210
Deferred tax liabilities
Depreciation.......................................... 846 1,399 1,478
Other................................................. 58 181 150
------- ------- -------
904 1,580 1,628
Net deferred tax liability.................... $ (780) $(1,368) $(1,418)
======= ======= =======
</TABLE>

A valuation allowance has not been recorded against the deferred tax assets
for 1995, 1996 and 1997.

NOTE H -- COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company has operating leases for facilities and certain machinery and
equipment which expire at various dates through 2001. Certain leases provide for
payment by the Company of any increases in property taxes and insurance over a
base amount and others provide for payment of all property taxes and insurance
by the Company.

One of the leases, which expires in November 1998, is for a building owned
by the Chief Executive Officer of the Company and provides for annual rentals of
$68,000. Rent paid on this facility totaled $69,000 in 1994, and $68,000 in both
1995 and 1996 and $17,000 for the three months ended March 31, 1997. The Company
pays for property taxes and insurance in accordance with the provisions of the
lease.

The Company also leases an aircraft from a corporation controlled by the
Chief Executive Officer of the Company. The Company is responsible for all costs
associated with the operation of the aircraft, including fuel, maintenance,
storage and crew salary and expenses. Rent expense for the use of aircraft
totaled approximately $156,000 in 1994, $74,000 in 1995 and $240,000 in 1996 and
$60,000 for the three months ended March 31, 1997.

Future minimum payments, by year and in the aggregate, under noncancellable
operating leases consist of the following at December 31, 1996 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------------------------------------------------------
<S> <C>
1997...................................................... $1,167
1998...................................................... 870
1999...................................................... 544
2000...................................................... 221
2001...................................................... 73
</TABLE>

Total rent expense for the years ended December 31, 1994, 1995, 1996 and
the three months ended March 31, 1996 and 1997 was approximately $1,519,000,
$1,725,000, $1,555,000, $347,000 and $301,000, respectively, which includes
$225,000, $142,000, $308,000, $77,000 and $77,000 to the Chief Executive Officer
of the Company.

F-12
<PAGE> 67

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Litigation

The Company is, from time to time, involved in litigation relating to
claims arising out of its operations in the ordinary course of business. The
Company believes that none of these claims which should have a material adverse
impact on its financial condition or results of operations.

NOTE I -- SHAREHOLDERS' EQUITY

The Board of Directors is authorized, without further shareholder action,
to divide any or all shares of the authorized Preferred Stock into series and to
fix and determine the designations, preferences, relative rights,
qualifications, limitations or restrictions thereon, of any series so
established, including voting powers, dividend rights, liquidation preferences,
redemption rights and conversion privileges. The Board of Directors has not
authorized any issuance of Preferred Stock and there are no plans, agreements,
or understandings for the authorization or issuance of any shares of Preferred
Stock.

In April 1997, the Company increased the number of authorized Common Stock
shares to 50,000,000.

NOTE J -- EMPLOYEE BENEFITS

Incentive Stock Option Plan

The Company's Incentive Stock Option Plan (the "ISO Plan") was adopted in
November, 1993 to provide for the grant to employees of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code. The ISO Plan is
intended to provide incentives to directors, officers, and other key employees
and to enhance the Company's ability to attract and retain qualified employees.
A total of 500,000 shares of Common Stock has been reserved for issuance under
the ISO Plan. Stock options are granted for the purchase of Common Stock at a
price not less than the fair market on the date of grant.

The following table summarizes the activity in Common Stock subject to
options:

<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE
EXERCISE EXERCISE REMAINING
SHARES PRICE PRICE CONTRACTUAL LIFE
------- -------------- -------- ----------------
(IN YEARS)
<S> <C> <C> <C> <C>
Outstanding at January 1, 1994................ 211,300 $5.00 $ 5.00 9.9
Granted..................................... 16,000 9.13 9.13
Exercised................................... (12,500) 5.00 5.00
Forfeited................................... (3,500) 5.00 5.00
-------
Outstanding at December 31, 1994.............. 211,300 $ 5.00 -- 9.13 $ 5.31 9.0
Granted..................................... 10,000 14.25 -- 15.07 14.66
Exercised................................... (5,250) $ 5.00 -- 9.13 8.93
Forfeited................................... (24,250) 5.00 5.00
-------
Outstanding at December 31, 1995.............. 191,800 5.00 -- 15.07 $ 5.74 8.0
Granted..................................... 22,000 12.75 -- 14.75 14.30
Exercised................................... (17,000) 5.00 -- 9.13 5.18
Forfeited................................... (2,750) 5.00 -- 9.13 8.38
-------
Outstanding at December 31, 1996.............. 194,050 $5.00 -- 15.07 $ 6.72 7.3
Granted (unaudited)......................... 73,500 14.75 -- 18.00 17.61
Exercised (unaudited)....................... (5,500) 5.00 5.00
Forfeited (unaudited)....................... (500) 5.00 5.00
-------
Outstanding at March 31, 1997 (unaudited)..... 261,500 $5.00 -- 18.00 9.82 7.8
=======
</TABLE>

F-13
<PAGE> 68

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table summarizes information about Common Stock options
outstanding at December 31, 1996:

<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
OPTIONS OUTSTANDING WEIGHTED
----------------------------------------- ----------------------
WEIGHTED WEIGHTED NUMBER WEIGHTED
NUMBER AVERAGE AVERAGE EXERCISABLE AVERAGE
RANGE OF OUTSTANDING REMAINING EXERCISE AT EXERCISE
EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE PRICE 12/31/96 PRICE
- --------------- ----------- ---------------- -------- ----------- --------
(IN YEARS)
<C> <C> <C> <C> <C> <C>
$5.00 154,050 6.9 $ 5.00 115,538 $ 5.00
$ 9.13 -- 12.75 13,000 8.3 10.52 4,000 9.13
$14.25 -- 15.07 27,000 9.1 14.72 2,500 14.66
------- -------
$ 5.00 -- 15.07 194,050 7.3 $ 6.72 122,038 $ 5.33
======= =======
</TABLE>

The duration of options granted under the ISO Plan is ten years from the
date of grant, or such other date as determined by the Board of Directors. In
general, the options must be exercised while a person is employed by the Company
or 90 days thereafter. The options may be exercised in four equal annual
increments, cumulatively, beginning one year after the date of grant, and all
such options may be exercised in full four years after the date of grant. The
options are non-transferable other than by will or by the laws of descent and
distribution.

Profit Sharing Plan

The Company previously maintained a discretionary Profit Sharing Plan (the
"Profit Sharing Plan"), for the benefit of its employees. The amount of the
Company's previous contribution to the Profit Sharing Plan for any year was
determined by the Board of Directors in its sole discretion, subject to certain
limitations imposed by the Internal Revenue Code. In 1992, the Administrator of
the Profit Sharing Plan approved termination of the Profit Sharing Plan and a
favorable determination has been issued by the Internal Revenue Service. The
Profit Sharing Plan began distributions to its participants during 1996 and is
expected to distribute the participants' remaining shares by December 31, 1997.
The Profit Sharing Plan currently holds 661,955 shares of the Company's Common
Stock.

401(k) Plan

In 1993, the Company established a deferred compensation plan (the "Plan")
under section 401(a) of the Code. Substantially all of the officers and
employees of the Company are eligible to participate in the Plan. Employees are
eligible to participate in the Plan after six months of service and after
attaining age 21. At its discretion, the Company may make matching contributions
to the Plan. Employees are always vested in their contributions and are fully
vested in the employer contributions after five years of service. The Company
contributed approximately $54,000, $82,000, $18,000 and $26,000 to the Plan for
the years ended December 31, 1995 and 1996 and the three months ended March 31,
1996 and 1997, respectively.

NOTE K -- ACQUISITIONS

On March 22, 1995, the Company purchased substantially all of the assets
and assumed certain liabilities of Cronin Electronics, Inc. Cronin Electronics
was a distributor of electronic components serving the New England market with
locations in suburban Boston, Massachusetts and Hartford, Connecticut. The
acquisition was accounted for using the purchase method and, accordingly, the
acquired business operations have been included herein since the date of the
acquisition. Of the approximately $6.2 million total costs involved in the
acquisition, approximately $2.9 million was in cash, with the remainder in
assumption of specified liabilities.

F-14
<PAGE> 69

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company allocated approximately $3.3 million of the purchase price to
tangible assets. Pro forma information is not presented as the effect of the
acquisition was not significant to the financial statements.

On July 26, 1995, the Company purchased substantially all of the assets and
assumed certain liabilities of the electronic component distribution business of
Western Micro Technology, Inc. The electronic component distribution business of
Western Micro Technology, Inc. had offices in Seattle, Washington; Portland,
Oregon; Saratoga, California; Irvine, California; Los Angeles, California; San
Diego, California; Philadelphia, Pennsylvania; and Boston Massachusetts. The
acquisition was accounted for using the purchase method and, accordingly, the
acquired business operations have been included herein since the date of the
acquisition. Of the approximately $13.3 million in total costs involved in the
acquisition, approximately $9.7 million was in cash, with the remainder in
assumption of specified liabilities. The Company allocated approximately $11.6
million of the purchase price to tangible assets.

The following unaudited 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 acquisition
had occurred at the beginning of the respective periods. 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
such periods.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1994 1995
-------- --------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Net Sales................................................... $223,356 $254,398
Gross Profit................................................ 41,281 44,525
Operating Income............................................ 12,264 12,896
Net Earnings................................................ 6,107 5,790
Net Earnings per Common Share............................... 1.07 .94
</TABLE>

NOTE L -- RELATED PARTY TRANSACTIONS

The Company has a non-interest bearing loan receivable from the profit
sharing plan totaling approximately $99,000, $194,000, $279,000 and $194,000 as
of December 31, 1994, 1995 and 1996 and March 31, 1997, respectively.

A director of the Company serves as its general counsel and received
approximately $178,000, $235,000, $185,000 and $39,000 for services rendered
during 1994, 1995, 1996 and the three months ended March 31, 1997, respectively.

See Note H for related party leases.

NOTE M -- FAIR VALUE OF FINANCIAL INSTRUMENTS

At December 31, 1996, the carrying amount of cash, accounts receivable,
accounts payable and accrued expenses approximate fair value because of the
short-term maturities of these items.

The carrying amounts of current and long-term portions of notes payable,
and long-term obligations approximate fair market value since the interest rates
on most of these instruments change with market interest rates.

F-15
<PAGE> 70

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE N -- 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 throughout the United States.
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, operating income, identifiable assets,
depreciation and amortization expense and capital expenditures as of and for the
years 1994, 1995 and 1996.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Net Sales
Unaffiliated customers
Distribution........................................... $ 96,003 $140,146 $168,279
Contract Manufacturing................................. 68,002 83,198 100,658
-------- -------- --------
164,005 223,344 268,937
Intersegment sales..................................... 5,437 14,494 10,235
-------- -------- --------
169,442 237,838 279,172
======== ======== ========
Operating Income
Distribution........................................... 5,174 8,804 7,036
Contract Manufacturing................................. 5,986 4,773 9,790
-------- -------- --------
11,160 13,577 16,826
======== ======== ========
Identifiable Assets
Distribution........................................... 32,257 71,839 64,993
Contract Manufacturing................................. 32,158 49,600 59,948
-------- -------- --------
64,415 121,439 124,941
Corporate................................................. 5,658 12,299 13,691
-------- -------- --------
70,073 133,738 138,632
======== ======== ========
Depreciation and Amortization
Distribution........................................... 81 580 674
Contract Manufacturing................................. 1,064 1,736 2,444
-------- -------- --------
1,145 2,316 3,118
Corporate.............................................. 244 146 520
-------- -------- --------
1,389 2,462 3,638
======== ======== ========
Capital Expenditures (includes equipment under capitalized
leases)
Distribution........................................... 727 1,142 1,516
Contract Manufacturing................................. 2,761 6,957 5,033
-------- -------- --------
3,488 8,099 6,549
Corporate.............................................. 4,473 2,188 6,149
-------- -------- --------
$ 7,961 $ 10,287 $ 12,698
======== ======== ========
</TABLE>

F-16
<PAGE> 71

REPTRON ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE O -- SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of the quarterly results of operations for the
quarterly periods of 1995 and 1996 (in thousands except per share data):

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
1995
- ----
Net sales................................... $43,076 $52,873 $59,492 $67,903
Gross profit................................ 8,171 9,515 10,729 11,748
Operating income............................ 2,949 3,523 3,692 3,413
Net earnings................................ 1,511 1,778 1,713 1,484
Net earnings per common share............... .25 .29 .28 .24
1996
- ----
Net sales................................... 66,551 66,092 65,953 70,341
Gross profit................................ 11,982 13,199 12,594 14,074
Operating income............................ 3,936 4,183 4,200 4,507
Net earnings................................ 1,519 1,905 2,017 2,212
Net earnings per common share............... $ .25 $ .31 $ .33 $ .36
1997
- ----
Net sales................................... $76,251
Gross profit................................ 14,072
Operating income............................ 4,822
Net earnings................................ 2,156
Net earnings per common share............... $ .35
</TABLE>

NOTE P -- CONCENTRATION OF CREDIT RISK

One customer represented 12.4% of total Company net sales in 1996 (10.8%
for the three months ended March 31, 1997). The loss of this customer or a
reduction in its level of purchasing could have a material impact on the
Company's business and results of operations.

F-17
<PAGE> 72

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON SCHEDULE

Board of Directors
Reptron Electronics, Inc.

In connection with our audit of the consolidated financial statements of
Reptron Electronics, Inc., referred to in our report dated February 5, 1997,
which is included in this Registration Statement we have also audited Schedule
II for each of the three years in the period then ended. In our opinion, this
schedule presents fairly, in all material respects, the information required to
be set forth therein.

GRANT THORNTON LLP

Tampa, Florida
February 5, 1997

F-18
<PAGE> 73

SCHEDULE II

REPTRON ELECTRONICS, INC.

VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, DECEMBER 31, 1995 AND DECEMBER 31, 1996

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ---------- ------------ --------
BALANCE AT CHARGED TO ACCOUNTS BALANCE
BEGINNING COSTS AND WRITTEN OFF, AT END
DESCRIPTION OF YEAR EXPENSES NET OF YEAR
- ----------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended December 31, 1994......................... $179,500 $218,600 $(217,700) $180,400
Year Ended December 31, 1995......................... 180,400 149,775 (150,466) $179,709
Year Ended December 31, 1996......................... 179,709 193,000 (23,000) $349,709
</TABLE>

F-19
<PAGE> 74

(This Page Intentionally Left Blank)
<PAGE> 75

======================================================

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 5
Use of Proceeds....................... 9
Capitalization........................ 10
Selected Consolidated Financial
Data................................ 11
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 13
Business.............................. 20
Management............................ 30
Principal Shareholders................ 32
Description of Notes.................. 33
Certain Federal Income Tax
Considerations...................... 44
Description of Capital Stock.......... 47
Underwriting.......................... 50
Legal Matters......................... 51
Experts............................... 51
Available Information................. 51
Incorporation of Certain Documents by
Reference........................... 52
Index to Financial Statements and
Schedule............................ F-1
</TABLE>

======================================================
======================================================

$100,000,000

[REPTRON ELECTRONICS, INC. LOGO]

6 3/4% CONVERTIBLE SUBORDINATED

NOTES DUE 2004
------------------------

PROSPECTUS
------------------------
RAYMOND JAMES & ASSOCIATES, INC.

FORUM CAPITAL MARKETS L.P.

STEPHENS INC.
AUGUST 6, 1997

======================================================