<PAGE> 1
As filed with the Securities and Exchange Commission on April 10, 1997
Registration Statement No. 333-23289
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
REPTRON ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
------------------------
<TABLE>
<S> <C> <C>
FLORIDA 5065 38-2081116
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
14401 MCCORMICK DRIVE
TAMPA, FLORIDA 33626
(813) 854-2351
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
PAUL J. PLANTE, CHIEF OPERATING OFFICER AND
CHIEF FINANCIAL OFFICER
REPTRON ELECTRONICS, INC.
14401 MCCORMICK DRIVE
TAMPA, FLORIDA 33626
(813) 854-2351
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------
Copies of communications to:
<TABLE>
<S> <C>
MICHAEL L. JAMIESON, ESQ. MARY A. BERNARD, ESQ.
HOLLAND & KNIGHT LLP KING & SPALDING
400 NORTH ASHLEY DRIVE, SUITE 2300 120 WEST 45TH STREET
TAMPA, FLORIDA 33602 NEW YORK, NEW YORK 10036
(813) 227-8500 (212) 556-2100
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION -- DATED APRIL 10, 1997
PROSPECTUS
- --------------------------------------------------------------------------------
2,000,000 Shares
[REPTRON ELECTRONICS, INC. LOGO]
Common Stock
- --------------------------------------------------------------------------------
Of the 2,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby (the "Offering"), 1,500,000 shares are being sold by
Reptron Electronics, Inc. (the "Company") and 500,000 shares are being sold by a
shareholder of the Company (the "Selling Shareholder"). The Company will not
receive any of the proceeds from the sale of shares of Common Stock by the
Selling Shareholder. See "Principal and Selling Shareholders."
The Common Stock of the Company is included in The Nasdaq National Market (the
"Nasdaq National Market") under the symbol "REPT." On April 8, 1997, the last
reported sales price of the Common Stock on the Nasdaq National Market was
$18.625 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" ON PAGES 6 TO 9 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
- --------------------------------------------------------------------------------
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>
=================================================================================================================
Underwriting Proceeds to
Price Discounts and Proceeds to Selling
to Public Commissions(1) Company(2) Shareholder
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
- -----------------------------------------------------------------------------------------------------------------
Total(3)........................ $ $ $ $
=================================================================================================================
</TABLE>
(1) The Company and the Selling Shareholder have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, including the expenses of
the Selling Shareholder, estimated to be $600,000. See "Use of Proceeds."
(3) The Company and the Selling Shareholder have granted the several
Underwriters 30-day over-allotment options to purchase, in the aggregate,
up to 300,000 additional shares of the Common Stock on the same terms and
conditions as set forth above. If all such shares are purchased by the
Underwriters, the total Price to Public will be $ , the total
Underwriting Discounts and Commissions will be $ , the total
Proceeds to Company will be $ and the total Proceeds to Selling
Shareholder will be $ . See "Underwriting."
- --------------------------------------------------------------------------------
The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and the Selling Shareholder and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares to the Underwriters is expected
to be made at the office of Prudential Securities Incorporated, One New York
Plaza, New York, New York, on or about April , 1997.
PRUDENTIAL SECURITIES INCORPORATED
ROBERT W. BAIRD & CO.
INCORPORATED
STEPHENS INC.
NEEDHAM & COMPANY, INC.
April , 1997
<PAGE> 3
[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 COMMON STOCK,
INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES
OF THE COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS, IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M
UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including the Consolidated Financial Statements and Notes thereto,
included elsewhere in this Prospectus. Unless otherwise indicated, the
information contained in this Prospectus assumes that the Underwriters' over-
allotment options will not be exercised.
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 customers 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
items. 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 (some of which are provided
through K-Byte Manufacturing) include component sales, inventory replenishment
programs, in-plant stores, component programming, electronic data interchange
("EDI"), concurrent engineering and surface mount technology ("SMT") and
pin-through-hole ("PTH") manufacturing. 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 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 with low-to-medium volume production runs. K-Byte
Manufacturing leverages its relationship with Reptron Distribution by utilizing
Reptron Distribution's 85-person field sales force, large customer base, greater
access to electronic components and advantages in component pricing. The Company
believes that K-Byte Manufacturing provides Reptron Distribution a significant
competitive advantage by broadening the selection of products and value-added
services that can be offered to Reptron Distribution customers. K-Byte
Manufacturing, which operates 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 large 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 manufacture, assembly and testing
of printed circuit boards to contract manufacturing specialists.
3
<PAGE> 5
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. 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 growth rate of 23.2%, according to the Institute for Interconnecting and
Packaging Electronic Circuits ("IPC"). 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.
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 its
manufacturing facilities; and (v) expand into new geographic areas and increase
penetration in existing markets.
The Company was organized 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.
THE OFFERING
Common Stock Offered by the Company......... 1,500,000 shares
Common Stock Offered by the Selling
Shareholder................................. 500,000 shares
Common Stock to be Outstanding after the
Offering(1)................................. 7,571,019 shares
Use of Proceeds by the Company.............. To repay borrowings outstanding
under the Company's Revolving
Credit Facility (as defined
herein). See "Use of Proceeds."
Nasdaq National Market Symbol............... REPT
- ---------------
(1) Excludes, as of April 8, 1997, (i) 259,550 shares of Common Stock issuable
upon the exercise of options outstanding, which had a weighted average
exercise price of $9.74 per share and of which 117,788 shares were
exercisable at a weighted average exercise price of $5.45 per share and (ii)
200,200 shares of Common Stock reserved for future issuance under the
Company's Incentive Stock Option Plan. See "Description of Capital Stock."
4
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1992 1993 1994 1995 1996
------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net Sales:
Reptron Distribution.................... $48,872 $ 71,346 $ 96,003 $140,146 $168,279
K-Byte Manufacturing.................... 34,541 55,661 68,002 83,198 100,658
------- -------- -------- -------- --------
Total net sales.................... 83,413 127,007 164,005 223,344 268,937
======= ======== ======== ======== ========
Gross Profit:
Reptron Distribution.................... 9,968 15,245 18,780 27,500 34,364
K-Byte Manufacturing.................... 4,613 9,023 11,431 12,663 17,485
------- -------- -------- -------- --------
Total gross profit................. 14,581 24,268 30,211 40,163 51,849
Selling, general and administrative
expenses................................ 11,217 16,455 19,051 26,586 35,023
------- -------- -------- -------- --------
Operating income........................... 3,364 7,813 11,160 13,577 16,826
Interest expense........................... 1,363 1,811 1,474 2,767 4,025
------- -------- -------- -------- --------
Earnings before income taxes............... 2,001 6,002 9,686 10,810 12,801
Income tax provision....................... 807 2,400 3,823 4,324 5,148
------- -------- -------- -------- --------
Net earnings............................... $ 1,194 $ 3,602 $ 5,863 $ 6,486 $ 7,653
======= ======== ======== ======== ========
Net earnings per share(1).................. $ .27 $ .81 $ 1.03 $ 1.05 $ 1.24
======= ======== ======== ======== ========
Weighted average Common Stock and Common
Stock equivalent shares outstanding..... 4,442 4,442 5,714 6,170 6,179
======= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
ACTUAL AS ADJUSTED(2)
-------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 77,231 $ 77,231
Total assets.............................................. 138,632 138,632
Revolving Credit Facility................................. 48,550 22,609
Long-term obligations(3).................................. 18,795 18,795
Shareholders' equity...................................... 48,690 74,631
</TABLE>
- ---------------
(1) Assuming that the Offering and the application of the estimated net proceeds
therefrom to the Company had been consummated on January 1, 1996, pro forma
net earnings per share for 1996 would have been $1.15 per share.
(2) Adjusted to give effect to the Offering at an assumed public offering price
of $18.625 per share (the last reported sales price of the Common Stock on
the Nasdaq National Market on April 8, 1997) and the application of the
estimated net proceeds therefrom to the Company. See "Use of Proceeds."
(3) Includes $6.5 million of capitalized lease obligations.
5
<PAGE> 7
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors, in addition to the other information contained in this Prospectus,
in connection with an investment in the Common Stock offered hereby.
This Prospectus contains statements that constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 (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; (iv) the use of the net proceeds to the Company
of this Offering; and (v) the declaration and payment of dividends. 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 projected in the forward-looking
statements as a result of various factors. The accompanying information
contained in this Prospectus, including without limitation 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 filings with the Securities and Exchange
Commission, identify important factors that could cause such differences.
CUSTOMER CONCENTRATION AND OTHER FACTORS AFFECTING OPERATING RESULTS. The
Company's divisions have certain customers that account for a significant
portion of their net sales. The largest customer of the Company is a customer of
both Reptron Distribution and K-Byte Manufacturing. In 1996, this customer
accounted for approximately 15.7% of Reptron Distribution's net sales, 6.9% of
K-Byte Manufacturing's net sales and 12.4% of the Company's total net sales.
K-Byte Manufacturing had approximately 36 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). 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's business, results
of operations and financial condition.
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
6
<PAGE> 8
components and materials purchased by the Company on such customers' behalf,
could have a material adverse effect on the Company's business, results of
operations and financial condition.
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%
of Reptron Distribution's net sales in 1996 (23.4% of the Company's total net
sales). The Company does not have long-term distribution contracts with its
vendors. The Company's contracts are non-exclusive and typically are cancellable
upon 30 days' written notice. The Company's future success will depend, in large
part, on maintaining its vendor 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's business, results of operations and financial condition, 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's business, results of operations and financial condition.
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's
business, results of operations and financial condition in the periods following
the incurrence of such start up costs.
ACQUISITION RISKS. The Company may continue to expand its operations
through acquisitions. There can be no assurance that the Company will be able to
successfully identify suitable acquisition candidates, secure 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 quarters immediately following the
completion of such acquisitions while the operations of the acquired business
are being 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.
COMPETITION; EFFECTS ON GROSS MARGIN. Both Reptron Distribution and K-Byte
Manufacturing face substantial competition. Many of the Company's competitors
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 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, the Company believes gross
margins in the industries in which it competes may decline due to competitive
pressures. See "Business -- Competition."
7
<PAGE> 9
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, 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's business, results of operations and financial condition.
DEPENDENCE UPON KEY PERSONNEL. The success of the Company to date has been
largely dependent upon the efforts and abilities of senior management. The loss
of their services for any reason could have a material adverse effect on the
Company's business, results of operations and financial condition.
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 which 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 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).
VOLATILITY OF STOCK PRICE. The market price of the Common Stock could be
subject to significant fluctuations in response to the Company's operating
results and other factors, and there can be no assurance that the market price
of the Common Stock will not decline below the public offering price.
Developments in industries served by the Company or changes in general economic
conditions could adversely affect the market price of the Common Stock. In
addition, the stock market has from time to time experienced extreme price and
volume volatility. These fluctuations may be unrelated to the operating
performance of particular companies whose shares are traded and may adversely
affect the market price of the Common Stock. See "Price Range of Common Stock."
SHARES ELIGIBLE FOR FUTURE SALE. After the completion of the Offering, the
Company will have 7,571,019 shares of Common Stock outstanding (7,671,019 if the
Underwriters' over-allotment options are exercised in full). Of those shares,
5,146,018 shares of Common Stock, including the 2,000,000 shares offered hereby
(5,446,018 if the Underwriters' over-allotment options are exercised in full)
will be freely tradeable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company as that term is
defined in Rule 144 under the Securities Act ("Rule 144"). The remaining
2,425,001 shares will be held by affiliates of the Company and may not be sold
except in compliance with the registration requirements of the Securities Act or
in compliance with Rule 144. All of such 2,425,001 shares of Common Stock held
by affiliates of the Company will be eligible for sale immediately following
consummation of the Offering pursuant to Rule 144, subject to certain
restrictions under Rule 144. The Company's executive officers and directors, the
Selling Shareholder and the Profit Sharing Trust, which beneficially own an
aggregate of 3,018,751 shares of Common Stock, and the Company have agreed with
the Underwriters that they will not, directly or indirectly, offer, sell, offer
to sell, contract to sell, pledge, grant any option to purchase or otherwise
sell or dispose (or announce any offer, sale, offer of sale, contract of sale,
pledge, grant of any option to purchase or other sale or disposition) any shares
of Common Stock (excluding the shares offered
8
<PAGE> 10
hereby) or other capital stock or any securities convertible into or exercisable
or exchangeable for, or any rights to purchase or acquire any shares of Common
stock or other capital stock of the Company for a period of 90 days after the
date of this Prospectus without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, except pursuant to the
Company's existing stock option programs. Prudential Securities Incorporated
may, in its sole discretion, at any time and without notice, release all or any
portion of the shares of Common Stock subject to such agreements. Sales of
substantial amounts of Common Stock in the public market, or the perception that
such sales could occur, could adversely affect the prevailing market price for
the Common Stock and could impair the Company's ability to raise capital through
a public offering of equity securities. See "Shares Eligible for Future Sale."
CONTROL BY PRINCIPAL SHAREHOLDER. Upon consummation of the Offering,
Michael L. Musto, the Company's President and Chief Executive Officer, will
beneficially own approximately 27.0% of the Common Stock (24.0% if the
Underwriters' over-allotment options are exercised in full). As a result, Mr.
Musto will be able to continue to effectively control the Company after
consummation of the Offering. See "Principal and Selling 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."
9
<PAGE> 11
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,500,000 shares of
Common Stock offered by the Company hereby, at an assumed public offering price
of $18.625 per share (the last reported sales price of the Common Stock on the
Nasdaq National Market on April 8, 1997), and after deducting underwriting
discounts and commissions and estimated Offering expenses, are estimated to be
$25,940,625 ($27,710,000 if the Underwriters' over-allotment option from the
Company is exercised in full). The Company will not receive any proceeds from
the sale of Common Stock by the Selling Shareholder. See "Principal and Selling
Shareholders."
The Company intends to use the net proceeds of the Offering to repay,
concurrently with the closing of the Offering, borrowings outstanding under the
Amended and Restated Revolving Credit and Reimbursement Agreement, dated June
29, 1995, as amended (collectively, with prior credit facilities, the "Revolving
Credit Facility"). At April 8, 1997, approximately $57.1 million of borrowings
were outstanding under the Revolving Credit Facility, and such borrowings bore
interest at a weighted average interest rate of 7.2% per year at such date. See
Note E of Notes to Consolidated Financial Statements.
PRICE RANGE OF COMMON STOCK
The Common Stock is included in the Nasdaq National Market under the symbol
"REPT." The following table sets forth, for the periods indicated, the high and
low sales prices of the Common Stock on the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
----- ----
<S> <C> <C>
1994
First Quarter (from March 28, 1994)....................... $13 1/2 $12 1/2
Second Quarter............................................ 13 1/4 10 7/8
Third Quarter............................................. 11 3/8 6 47/64
Fourth Quarter............................................ 12 1/4 8 3/4
1995
First Quarter............................................. $13 7/8 $ 8 3/4
Second Quarter............................................ 16 12 5/8
Third Quarter............................................. 18 1/8 14
Fourth Quarter............................................ 18 1/8 13 1/2
1996
First Quarter............................................. $16 1/2 $12 1/2
Second Quarter............................................ 19 14 3/4
Third Quarter............................................. 18 1/2 15 1/4
Fourth Quarter............................................ 20 3/4 16 1/2
1997
First Quarter............................................. $23 3/4 $18
Second Quarter (through April 8, 1997).................... $20 3/8 $18 1/2
</TABLE>
On April 8, 1997, the last reported sales price of the Common Stock on the
Nasdaq National Market was $18.625 per share. As of February 28, 1997, there
were approximately 130 holders of record of the Common Stock.
10
<PAGE> 12
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock.
After consummation of the Offering, the Company does not intend in the
foreseeable future to declare or pay any cash dividends and intends to retain
earnings, if any, for the future operation and expansion of the Company's
business.
Any determination to declare or pay dividends in the future will be at the
discretion of the Company's Board of Directors and will depend upon the
Company's results of operations, financial condition, any contractual
restrictions, considerations imposed by applicable law and other factors deemed
relevant by the Board of Directors. The Company's Revolving Credit Facility
restricts the payment of annual dividends to the lesser of $1,000,000 or 25% of
net earnings in any fiscal year without the approval of the lenders.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996 on an actual basis and as adjusted to give effect to the
Offering at an assumed public offering price of $18.625 per share (the last
reported sales price of the Common Stock on the Nasdaq National Market on April
8, 1997) and the application of the estimated net proceeds therefrom to the
Company. See "Use of Proceeds" and "Principal and Selling Shareholders." This
table should be read in conjunction with the Consolidated Financial Statements
and Notes included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Revolving Credit Facility................................... $ 48,550 $ 22,609
Long-term obligations(1).................................... 18,795 18,795
Shareholders' equity:
Preferred Stock, $.10 par value;
15,000,000 shares authorized,
no shares issued....................................... -- --
Common Stock, $.01 par value;
15,000,000 shares authorized,
6,065,519 shares issued and outstanding;
7,571,019 issued and outstanding as adjusted(2)........ 61 76
Additional paid-in capital................................ 21,233 47,159
Retained earnings......................................... 27,396 27,396
-------- --------
Total shareholders' equity........................ 48,690 74,631
-------- --------
Total capitalization.............................. $116,035 $116,035
======== ========
</TABLE>
- ---------------
(1) Includes $6.5 million of capitalized lease obligations.
(2) Excludes, as of December 31, 1996, (i) 194,050 shares of Common Stock
issuable upon the exercise of options outstanding, which had a weighted
average exercise price of $6.72 per share and of which 122,038 shares were
exercisable at a weighted average exercise price of $5.33 per share and (ii)
271,200 shares of Common Stock reserved for future issuance under the
Company's Incentive Stock Option Plan. See "Description of Capital Stock."
11
<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 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>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1992 1993 1994 1995 1996
------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net Sales:
Reptron Distribution.................... $48,872 $ 71,346 $ 96,003 $140,146 $168,279
K-Byte Manufacturing.................... 34,541 55,661 68,002 83,198 100,658
------- -------- -------- -------- --------
Total net sales.................... 83,413 127,007 164,005 223,344 268,937
======= ======== ======== ======== ========
Gross Profit:
Reptron Distribution.................... 9,968 15,245 18,780 27,500 34,364
K-Byte Manufacturing.................... 4,613 9,023 11,431 12,663 17,485
------- -------- -------- -------- --------
Total gross profit................. 14,581 24,268 30,211 40,163 51,849
Selling, general and administrative
expenses................................ 11,217 16,455 19,051 26,586 35,023
------- -------- -------- -------- --------
Operating income........................... 3,364 7,813 11,160 13,577 16,826
Interest expense........................... 1,363 1,811 1,474 2,767 4,025
------- -------- -------- -------- --------
Earnings before income taxes............... 2,001 6,002 9,686 10,810 12,801
Income tax provision....................... 807 2,400 3,823 4,324 5,148
------- -------- -------- -------- --------
Net earnings............................... $ 1,194 $ 3,602 $ 5,863 $ 6,486 $ 7,653
======= ======== ======== ======== ========
Net earnings per share..................... $ .27 $ .81 $ 1.03 $ 1.05 $ 1.24
======= ======== ======== ======== ========
Weighted average Common Stock and Common
Stock equivalent shares outstanding..... 4,442 4,442 5,714 6,170 6,179
======= ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............................ $15,660 $28,328 $40,490 $ 75,629 $ 77,231
Total assets............................... 30,710 51,917 70,073 133,738 138,632
Revolving Credit Facility.................. 13,575 24,042 16,491 52,133 48,550
Long-term obligations...................... 2,188 4,755 4,307 12,977 18,795
Shareholders' equity....................... 3,834 7,436 34,415 40,948 48,690
</TABLE>
12
<PAGE> 14
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 represented
approximately 35% of its 1996 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 and 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 primarily 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, were purchased
for a total consideration of $19.5 million, consisting of $12.6 million in cash
and the balance in the form of 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, Reptron Distribution 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% of
Reptron Distribution's 1996 net sales (6.4% of the Company's total net sales in
1996).
Sales for Reptron Distribution and K-Byte Manufacturing are recognized upon
shipment, except for sales from in-plant stores. Sales from in-plant stores,
which represented 19.8% of Reptron Distribution's and 11.2% of K-Byte
Manufacturing's 1996 net sales (16.6% of the Company's total net sales in 1996),
are recognized when the customer picks a product from inventory. In-plant
inventories are tracked using bar-code labeling technology or frequent inventory
counts. Cost of sales for 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.
13
<PAGE> 15
The Company has centralized many of its operations, including finance,
accounting, legal, 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>
YEAR ENDED
DECEMBER 31,
---------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Net Sales:
Reptron Distribution...................................... 58.5% 62.7% 62.6%
K-Byte Manufacturing...................................... 41.5 37.3 37.4
----- ----- -----
Total net sales................................... 100.0 100.0 100.0
===== ===== =====
Gross Profit:
Reptron Distribution...................................... 19.6 19.6 20.4
===== ===== =====
K-Byte Manufacturing...................................... 16.8 15.2 17.4
===== ===== =====
Total gross profit................................ 18.4 18.0 19.3
Selling, general and administrative expenses................ 11.6 11.9 13.0
----- ----- -----
Operating income............................................ 6.8 6.1 6.3
Interest expense............................................ 0.9 1.2 1.5
----- ----- -----
Earnings before income taxes................................ 5.9 4.9 4.8
Income tax provision........................................ 2.3 2.0 2.0
----- ----- -----
Net earnings................................................ 3.6% 2.9% 2.8%
===== ===== =====
</TABLE>
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's 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.
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
14
<PAGE> 16
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 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 gross margin. In
addition, the increase in net sales has resulted in spreading overhead costs
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 primarily 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 electromechanical
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 component distribution division acquisition 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 million to a financially troubled customer. The remainder of
the change in net sales resulted from differing customer requirements in 1995.
15
<PAGE> 17
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 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. 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.
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------
1995 1996
------------------------------------------- -------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <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
Gross profit............ 8,171 9,515 10,729 11,748 11,982 13,199 12,594 14,074
Operating income........ 2,949 3,523 3,692 3,413 3,936 4,183 4,200 4,507
Net earnings............ 1,511 1,778 1,713 1,484 1,519 1,905 2,017 2,212
Net earnings per
share................. $ .25 $ .29 $ .28 $ .24 $ .25 $ .31 $ .33 $ .36
</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 $55 million revolving credit facility through June
30, 1999. This facility has been increased temporarily to $60 million through
April 30, 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 borrowings outstanding under the Revolving Credit
Facility ranged from 7.25% to 8.25% as of December 31, 1996. 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
16
<PAGE> 18
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 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 generated cash of approximately $10.6
million in 1996. This increase in liquidity resulted primarily from net earnings
of $7.7 million, a $4.3 million decrease in inventories, a $1.4 million decrease
in accounts receivable, and a $1.5 million increase in accrued expenses and
income taxes payable. These items were offset by a $6.6 million decrease in
accounts payable. The decrease in inventory resulted primarily from an
improvement in Reptron Distribution's inventory turns from an average of 4.0
times in the fourth quarter of 1995 to 5.3 times in the fourth quarter of 1996.
Pricing for dynamic random access memory components declined significantly in
the fourth quarter of 1995 resulting in excess inventory priced over the market.
This situation was corrected during 1996 primarily through price protection
privileges offered by the Company's vendors. K-Byte Manufacturing inventory
turns decreased from an average of 4.5 times in December 1995 to 3.0 times in
December 1996. The complex process associated with integrating ten new
customers, representing approximately 290 different circuit board assemblies,
into the K-Byte Manufacturing production process is the primary reason for the
reduced inventory turns in December 1996.
The Company's capital expenditures, including capital leases, were
approximately $8.0 million in 1994, $10.2 million in 1995 and $12.8 million in
1996. 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. The Company expects that its capital expenditures for 1997 will
approximate $4.0 million primarily for machinery and equipment for K-Byte
Manufacturing, renovation of the corporate headquarters and an upgrade and
expansion of its management information systems.
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 the 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.
After the application of the net proceeds of the 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
future liquidity and cash requirements will depend on a wide range of factors,
including the level of business in existing operations, expansion of facilities
and possible acquisitions. In particular, if cash flow from operations and
available credit facilities are not sufficient, the Company will be required to
seek additional financing. While there can be no assurance that such financing
would be available in amounts and on terms acceptable to the Company, the
Company believes that such financing likely would be available on acceptable
terms.
17
<PAGE> 19
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 turnkey approach to manufacturing and distribution distinguishes it in the
electronics industry, provides a high level of value to its customers 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, 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 growth 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.
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<PAGE> 20
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 expenditure 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
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:
- Capitalize on the Advantages 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 offering which includes
inventory control programs (e.g., bonded, consigned, just-in-time),
in-plant stores,
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<PAGE> 21
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 generated from value-added
engagements, and management believes the Company is well positioned to
capitalize on this trend. In 1996, approximately 35% of Reptron
Distribution's net sales were generated through value-added services.
- Target Contract 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 into New Geographic Areas and Increase Penetration in Existing
Markets. 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.
Specifically, the Company intends to expand K-Byte Manufacturing within
the Company's western region to better capture 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.
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 sells 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.
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<PAGE> 22
Semiconductors accounted for approximately 75% of Reptron Distribution's
net sales in 1996. 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 Reptron Distribution's 1996 net sales. 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% of Reptron Distribution's 1996 net sales (23.4% of the
Company's total net sales in 1996). 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 module
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 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% of Reptron Distribution's net sales in 1996 (6.4% of the
Company's total net sales in 1996).
Services. Reptron Distribution complements its product offerings with a
wide range of value-added services, including 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).
The Company believes these programs and services are increasingly required by
customers because they allow customers to decrease the number of suppliers they
use and to increase profitability. In 1996, approximately 35% of Reptron
Distribution's 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 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 generally 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 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 distributor agreements with the Company's vendors and, consequently, this
inventory is not subject to 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.
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<PAGE> 23
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 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
1996, this customer accounted for approximately 15.7% of Reptron Distribution's
net sales, 6.9% of K-Byte Manufacturing's net sales and 12.4% of the Company's
total net sales. In 1995, Tellabs, Inc. accounted for approximately 6.4% of
Reptron Distribution's net sales, 9.4% of K-Byte Manufacturing's 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.
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<PAGE> 24
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>
K-BYTE MANUFACTURING
The Company entered 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 were 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 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 contract 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 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
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<PAGE> 25
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 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 ranges from
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
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<PAGE> 26
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. K-Byte Manufacturing served approximately 36 customers in
1996 with the largest three customers representing only 15.9%, 9.9% and 8.9% of
K-Byte Manufacturing's 1996 net sales (6.0%, 3.7% and 3.3% of the Company's
total net sales in 1996). The following table sets forth the number of 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 of 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% of K-Byte Manufacturing's 1996 net sales
with the Gaylord, Michigan plant totaling 36.0% of 1996 net sales, and the
Saline, Michigan, short production run plant accounting for the remaining 3.6%.
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
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<PAGE> 27
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 14 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 will be upgrading
and expanding to a client server based system beginning in 1997. This Windows
based system should 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.
BACKLOG
Backlog of Reptron Distribution as of December 31, 1996 was approximately
$36.6 million, as compared to approximately $49.3 million at December 31, 1995.
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
26
<PAGE> 28
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 picks inventory from the in-plant store. In 1996, 19.8% of Reptron
Distribution's net sales were generated by in-plant stores as compared to 8.9%
in 1995. Backlog for K-Byte Manufacturing totaled $38.8 million as of December
31, 1996 and $27.9 million as of December 31, 1995. 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 sales for any succeeding period.
EMPLOYEES
As of January 1, 1997, the Company employed 1,242 persons, of whom 328 were
dedicated to Reptron Distribution, 889 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 claims, 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.
27
<PAGE> 29
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)....................... 55 President, Chief Executive Officer, and Director
Paul J. Plante............................ 39 Chief Operating Officer, Chief Financial Officer,
Treasurer, and Director
Patrick J. Flynn.......................... 56 President -- K-Byte Manufacturing
Gary G. Bolohan........................... 42 Executive Vice President -- Reptron Distribution
Robert M. Moore........................... 61 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 been
employed by the Company since 1986 as its Vice President of Finance, Chief
Financial Officer and Treasurer. 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.
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 was promoted to Executive Vice President of
Reptron Distribution in 1990. 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 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,
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<PAGE> 30
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.
Directors are elected by the Company's shareholders and serve until their
successors are elected and qualified. Directors are divided into three classes
and serve staggered terms that expire at the 1997, 1998 and 1999 annual meeting
of shareholders. Terms of the directors expire as follows: Ms. Adams in 1997,
Messrs. Alpert and Elson in 1998 and Messrs. Musto and Plante in 1999. Directors
for each class are elected at the annual meeting of shareholders held in the
year in which the term for such class expires and serve thereafter for three
years or until their earlier resignation or removal or until their successors
are elected and qualified.
Directors who are not employees of the Company are paid $6,000 annually
plus $1,000 for each Board meeting attended, and $1,000 for each committee
meeting attended if such meeting occurs on a day other than a scheduled meeting
of the Board of Directors. In addition, the Company has reserved 50,000 shares
of Common Stock for the future grant of stock options to non-employee directors.
During 1995, Barry Alpert was granted options to purchase 5,000 shares of Common
Stock at an exercise price of $14.375 per share. These options vest 50% per year
beginning one year from the option grant date. All directors receive
reimbursement for reasonable out-of-pocket expenses incurred in connection with
meetings of the Board of Directors.
All executive officers are elected annually by and serve at the discretion
of the Board of Directors.
29
<PAGE> 31
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth certain
information concerning the compensation earned during 1994, 1995 and 1996 by the
Company's Chief Executive Officer and its four other most highly compensated
executive officers (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- ALL OTHER
SALARY BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(2) ($) ($)(3)
--------------------------- ---- ------- ------- ------------
<S> <C> <C> <C> <C>
Michael L. Musto............................. 1996 400,000 -- 41
President and Chief Executive Officer 1995 381,000 -- 41
1994 350,000 37,250 40
Paul J. Plante............................... 1996 200,000 -- 941
Chief Operating Officer and 1995 150,000 -- 941
Chief Financial Officer 1994 130,000 20,000 940
Patrick J. Flynn............................. 1996 225,000 -- 941
President -- K-Byte Manufacturing 1995 225,000 -- 941
1994 120,000 105,000 940
Gary G. Bolohan.............................. 1996 225,000 -- 41
Executive Vice President -- Reptron
Distribution 1995 225,000 -- 41
1994 120,000 105,000 940
Michael R. Nichols........................... 1996 200,000 -- 41
Vice President -- Sales 1995 189,000 -- 941
1994 156,000 19,000 490
</TABLE>
- ---------------
(1) The aggregate amount of perquisites and other personal benefits, if any, did
not exceed the lesser of $50,000 or 10% of the total annual salary and
bonus reported for each Named Executive Officer and has therefore been
omitted.
(2) Includes any amount deferred by the Named Executive Officer pursuant to the
Company's 401(k) plan.
(3) Includes $41 annual premium paid by the Company for a $10,000 life insurance
policy for each of the Named Executive Officers. Also includes the amount
contributed by the Company to the account of each Named Executive Officer
under the Company's 401(k) plan.
Aggregated Options Table. The following table sets forth information
concerning options held by the Named Executive Officers at the end of 1996. No
stock options were exercised during 1996.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT
OPTIONS AT FISCAL FISCAL YEAR-
YEAR-END(#) END($)(1)
EXERCISABLE(E)/ EXERCISABLE(E)/
NAME UNEXERCISABLE(U) UNEXERCISABLE(U)
- ---- ------------------- ----------------------
<S> <C> <C>
Michael L. Musto............................... -- --
Paul J. Plante................................. 37,500(E)/12,500(U) $585,938(E)/195,313(U)
Patrick J. Flynn............................... 41,250(E)/13,750(U) $644,531(E)/214,844(U)
Gary G. Bolohan................................ -- --
Michael R. Nichols............................. -- --
</TABLE>
- ---------------
(1) Represents the dollar value of the difference between the value at December
31, 1996 and the option exercise price of unexercised options at December
31, 1996.
30
<PAGE> 32
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Compensation Committee consisted of Messrs. Alpert and
Elson. Mr. Alpert and Mr. Elson are outside directors. Set forth below is a
description of certain transactions and relationships between a Compensation
Committee member and the Company.
The Company leased one of its sales offices (located in Tampa, Florida)
from the brother-in-law of a member of the Board of Directors, Barry M. Alpert.
This lease was entered into in 1994 for a term of two years. In 1994, 1995 and
1996, rent expense on this facility totaled $59,289, $65,781 and $59,752,
respectively, which management believes to be comparable to the rent that would
have been paid to an unrelated party. This lease has now been terminated.
William L. Elson received $178,000, $234,850 and $184,600 in fees for legal
services rendered to the Company during 1994, 1995 and 1996, respectively.
CERTAIN TRANSACTIONS
The Company leases an aircraft from a corporation controlled by Mr. Musto.
The Company is responsible for all costs associated with the operation of the
aircraft, including fuel, maintenance, storage and crew salary and expenses. To
the extent that Mr. Musto uses the aircraft for personal purposes, he reimburses
the Company for the costs associated with such personal use. The Company
believes that the rent paid for the aircraft is comparable to the rent that
would be paid to an unrelated third party. Rent paid for the use of the aircraft
totaled approximately $156,000 in 1994, $74,000 in 1995 and $240,000 in 1996.
The Company leases one of its Reptron Distribution sales offices (located
in Detroit, Michigan) from Michael L. Musto. This facility was the headquarters
of the Company before the relocation to Tampa in 1986. The building includes
office and warehouse space and totals approximately 10,000 square feet. Rent
expense on this facility totaled $69,000 in 1994 and $68,000 in each of 1995 and
1996, which management believes to be comparable to the rent that would have
been paid to an unrelated party. The lease expires in November 1998.
31
<PAGE> 33
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 1, 1997 and as adjusted to reflect
consummation of the Offering 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)
each of the Named Executive Officers, (iii) each of the directors of the
Company, (iv) the Selling Shareholder and (v) 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 SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO THE OFFERING SHARES THE OFFERING
------------------- TO BE -------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT OFFERED NUMBER PERCENT
- --------------------------------------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Michael L. Musto............................... 2,543,115(2) 41.9% 500,000(3) 2,043,115 27.0%
MLM Investment Company Limited Partnership..... 2,194,479 36.1 500,000(3) 1,694,479 22.4
Paul J. Plante(4).............................. 701,456 11.6 -- 701,456 9.3
Patrick J. Flynn(5)............................ 41,250 * -- 41,250 *
Gary G. Bolohan(6)............................. 22,651 * -- 22,651 *
Michael R. Nichols(7).......................... 20,518 * -- 20,518 *
Leigh A. Adams(8).............................. 11,397 * -- 11,397 *
William L. Elson(9)
3000 Town Center, Suite 2690
Southfield, Michigan 48075................... 12,500 * -- 12,500 *
Barry M. Alpert(10)
880 Carillon Parkway
St. Petersburg, Florida 33716................ 2,500 * -- 2,500 *
All directors and executive officers as a group
(9 persons).................................. 3,018,751 49.7% 500,000 2,518,751 33.3%
</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 2,194,479 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) These shares will be sold for the benefit of Michael L. Musto by MLM.
(4) 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.
(5) Represents shares subject to options that are currently exercisable.
(6) Excludes up to 22,650 shares expected to be distributed to Mr. Bolohan from
the Profit Sharing Trust.
(7) Excludes up to 20,517 shares that are expected to be distributed to Mr.
Nichols from the Profit Sharing Trust.
(8) Includes 7,500 shares subject to options that are currently exercisable.
Excludes up to 1,299 shares expected to be distributed to Ms. Adams from
the Profit Sharing Trust.
(9) Includes 5,000 shares subject to options that are currently exercisable.
(10) Represents shares subject to options that are currently exercisable.
32
<PAGE> 34
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 15,000,000 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"). The Company intends to increase the number of
authorized shares of Common Stock to 50,000,000 shares subject to obtaining
shareholder approval. As of February 28, 1997, 6,071,019 shares of Common Stock
were outstanding and such shares were held by approximately 130 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, 500,000 shares of Common Stock are
reserved for issuance under the Company's Incentive Stock Option Plan (the "ISO
Plan"). The Company intends to increase the number of shares available for
issuance under the ISO Plan by 1,000,000 shares subject to obtaining shareholder
approval.
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
33
<PAGE> 35
(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.
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<PAGE> 36
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.
SHARES ELIGIBLE FOR FUTURE SALE
After the completion of the Offering, the Company will have 7,571,019
shares of Common Stock outstanding (7,671,019 if the Underwriters'
over-allotment options are exercised in full). Of those shares, 5,146,018 shares
of Common Stock, including the 2,000,000 shares offered hereby (5,446,018 if the
Underwriters' over-allotment options are exercised in full) will be freely
tradeable without restriction or further registration under the Securities Act,
unless purchased by "affiliates" of the Company as that term is defined in Rule
144 under the Securities Act ("Rule 144"). The remaining 2,425,001 shares will
be held by affiliates of the Company and may not be sold except in compliance
with the registration requirements of the Securities Act or in compliance with
Rule 144. In general, under Rule 144 as currently in effect, any affiliate of
the Company who has beneficially owned Restricted Securities for at least two
years (one year commencing April 29, 1997) would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the outstanding shares of Common Stock (approximately 75,710 shares based upon
the number of shares assumed to be outstanding after the Offering) or the
reported average weekly trading volume in the over-the-counter market for the
four weeks preceding the sale. Sales under Rule 144 are also subject to certain
manner of sale restrictions and notice requirements and to the availability of
current public information concerning the Company. All of such 2,425,001 shares
of Common Stock held by affiliates of the Company shares will be eligible for
sale immediately following consummation of the Offering pursuant to Rule 144,
subject to certain restrictions under Rule 144.
The Company's executive officers and directors, the Selling Shareholder and
the Profit Sharing Trust, which beneficially own an aggregate of 3,018,751
shares of Common Stock, and the Company have agreed with the Underwriters that
they will not, directly or indirectly, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of any
option to purchase or other sale or disposition) any shares of Common Stock
(excluding the shares offered hereby) or other capital stock or any securities
convertible into or exercisable or exchangeable for, or any rights to purchase
or acquire any shares of Common stock or other capital stock of the Company for
a period of 90 days after the date of this Prospectus without the prior written
consent of Prudential Securities Incorporated, on behalf of the Underwriters,
except pursuant to the Company's existing stock option programs. Prudential
Securities Incorporated may, in its sole discretion, at any time and without
notice, release all or any portion of the shares of Common Stock subject to such
agreements. Sales of substantial amounts of Common Stock in the public market,
or the perception that such sales could occur, could adversely affect the
prevailing market price for the Common Stock and could impair the Company's
ability to raise capital through a public offering of equity securities.
No predictions can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the
prevailing market price for the Common Stock. Sales of substantial amounts of
Common Stock, or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Stock and could impair the
Company's future ability to raise capital through an offering of equity
securities.
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<PAGE> 37
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated, Robert W. Baird & Co. Incorporated, Stephens Inc. and
Needham & Company, Inc. are acting as representatives (the "Representatives"),
have severally agreed, subject to the terms and conditions contained in the
Underwriting Agreement, to purchase from the Company and the Selling Shareholder
the number of shares of Common Stock set forth opposite their respective names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
Prudential Securities Incorporated..........................
Robert W. Baird & Co. Incorporated..........................
Stephens Inc................................................
Needham & Company, Inc......................................
---------
Total............................................. 2,000,000
=========
</TABLE>
The Company and the Selling Shareholder are obligated to sell, and the
Underwriters are obligated to purchase, all the shares of Common Stock offered
hereby if any are purchased.
The Underwriters, through their Representatives, have advised the Company
and the Selling Shareholder that: they propose to offer the Common Stock
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters may allow to selected dealers a concession of
$ per share; and that such dealers may reallow a concession of
$ per share to certain other dealers. After the public offering, the
public offering price and the concession may be changed by the Representatives.
The Company and the Selling Shareholder have granted the Underwriters
over-allotment options, exercisable for 30 days from the date of this
Prospectus, to purchase, in the aggregate, up to 300,000 additional shares of
Common Stock at the public offering price, less underwriting discounts and
commissions, as set forth on the cover page of this Prospectus. If the
Underwriters exercise their over-allotment options, the first 200,000 shares
subject to such options will be sold by the Selling Shareholder and the balance
of such shares will be sold by the Company. The Underwriters may exercise such
options solely for the purpose of covering over-allotments incurred in the sale
of the shares of Common Stock offered hereby. To the extent such options to
purchase are exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number set forth next to such Underwriter's name in the
preceding table bears to 2,000,000.
The Company and the Selling Shareholder have agreed to indemnify the
several Underwriters or contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act.
The Company, its officers and directors, the Selling Shareholder and the
Profit Sharing Trust have agreed not to, directly or indirectly, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or other capital stock of the Company or any
securities convertible into, or exercisable or exchangeable for, any shares of
Common Stock or other capital stock of the Company or any right to purchase or
acquire Common Stock or other capital stock of the Company for a period of 90
days after the date of this Prospectus without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, except
pursuant to the Company's existing stock option programs. Prudential Securities
Incorporated may, in its sole discretion, at any time and without prior notice,
release all shares or any portion thereof subject to such agreements.
In connection with the Offering, certain Underwriters and selling group
members (if any) who are qualified registered market makers on the Nasdaq
National Market may engage in passive market making transactions in the Common
Stock on the Nasdaq National Market in accordance with Rule 103 under Regulation
M under the Exchange Act during the business day prior to the pricing of the
Offering before the commencement of offers and sales of Common Stock. Passive
market makers must comply with applicable volume and price limitations and must
be identified as such. In general, a passive market maker must display
36
<PAGE> 38
its bid at a price not in excess of the highest independent bid for such
security; if all independent bids are lowered below the passive market maker's
bid, however, such bid must then be lowered when certain purchase limits are
exceeded.
In connection with the Offering, certain Underwriters and selling group
members (if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company and the Selling Shareholder, and
in such case may purchase Common Stock in the open market following completion
of the Offering to cover all or a portion of such short position. The
Underwriters may also cover all or a portion of such short position, up to
300,000 shares of Common Stock, by exercising the Underwriters' over-allotment
options referred to above. In addition, Prudential Securities Incorporated, on
behalf of the Underwriters, may impose "penalty bids" under contractual
arrangements with the Underwriters whereby it may reclaim from an Underwriter
(or any selling group member participating in the Offering) for the account of
the other Underwriters, the selling concession with respect to Common Stock that
is distributed in the Offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph are required, and, if they are
undertaken, they may be discontinued at any time.
Pursuant to an agreement between Stephens Inc., one of the Representatives,
and Barnett Bank, Inc. ("Barnett"), Stephens Inc. has agreed to pay to Barnett
N.A., Tampa, an affiliate of Barnett, a finder's fee in connection with the
Offering in an amount not to exceed $75,000. Barnett Bank N.A., Tampa is one of
the lenders under the Revolving Credit Facility.
LEGAL MATTERS
Certain legal matters in connection with the sale of the shares of Common
Stock offered hereby will be passed upon for the Company by Holland & Knight
LLP, Tampa, Florida. The validity of the shares of Common Stock offered hereby
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 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 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 Fifth 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,
37
<PAGE> 39
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 quoted 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-1 under the
Securities Act with respect to the shares of Common Stock offered hereby. 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 this 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.
38
<PAGE> 40
REPTRON ELECTRONICS, INC.
INDEX TO CONSOLIDATED 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................................................... F-3
Consolidated Statements of Earnings for the years ended
December 31, 1994, 1995 and 1996....................... F-4
Consolidated Statement of Shareholders' Equity for the
years ended December 31, 1994, 1995 and 1996........... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1994, 1995 and 1996....................... 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> 41
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Reptron Electronics, Inc.
We have audited the accompanying consolidated balance sheets of Reptron
Electronics, Inc. and its wholly owned subsidiary as of December 31, 1995 and
1996, 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, 1995 and 1996, 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> 42
REPTRON ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- --------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $ 224 $ 479
Accounts receivable -- trade, less allowances for doubtful
accounts of $180 and $350, respectively................ 41,234 39,807
Inventories............................................... 63,461 58,694
Prepaid expenses and other................................ 1,842 2,764
Deferred tax benefit...................................... 124 138
-------- --------
Total current assets.............................. 106,885 101,882
PROPERTY, PLANT AND EQUIPMENT -- AT COST, NET............... 20,953 30,869
EXCESS OF COST OVER NET ASSETS ACQUIRED, NET................ 4,385 4,504
OTHER ASSETS................................................ 1,515 1,377
-------- --------
$133,738 $138,632
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable -- trade................................. $ 24,948 $ 18,339
Notes payable to banks.................................... 1,933 --
Current portion of long-term obligations.................. 2,547 3,560
Accrued expenses.......................................... 1,828 2,506
Income taxes payable...................................... -- 246
-------- --------
Total current liabilities......................... 31,256 24,651
NOTES PAYABLE TO BANKS...................................... 50,200 48,550
LONG-TERM OBLIGATIONS, less current portion................. 10,430 15,235
DEFERRED INCOME TAXES....................................... 904 1,506
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 and 6,065,519
shares, respectively................................... 60 61
Additional paid-in capital................................ 21,145 21,233
Retained earnings......................................... 19,743 27,396
-------- --------
40,948 48,690
-------- --------
$133,738 $138,632
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 43
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------
1994 1995 1996
------------ ------------ ------------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Net sales............................................. $ 164,005 $ 223,344 $ 268,937
Cost of goods sold.................................... 133,794 183,181 217,088
--------- --------- ---------
Gross profit..................................... 30,211 40,163 51,849
Selling, general and administrative expenses.......... 19,051 26,586 35,023
--------- --------- ---------
Operating income................................. 11,160 13,577 16,826
Interest expense...................................... 1,474 2,767 4,025
--------- --------- ---------
Earnings before income taxes..................... 9,686 10,810 12,801
Income tax provision.................................. 3,823 4,324 5,148
--------- --------- ---------
NET EARNINGS..................................... $ 5,863 $ 6,486 $ 7,653
========= ========= =========
Net earnings per common share.................... $ 1.03 $ 1.05 $ 1.24
========= ========= =========
Weighted average Common Stock and Common Stock
equivalent shares outstanding....................... 5,713,808 6,170,265 6,179,231
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 44
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
========= === ======= ======= =======
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE> 45
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1995 1996
------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net earnings.............................................. $ 5,863 $ 6,486 $ 7,653
------- -------- -------
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities
Depreciation and amortization.......................... 1,389 2,462 3,638
Gain on sale of assets................................. (24) -- (47)
Deferred income taxes.................................. 369 350 588
Change in assets and liabilities:
Accounts receivable -- trade......................... (2,531) (11,425) 1,427
Inventories.......................................... (7,990) (23,329) 4,344
Prepaid expenses and other........................... (744) (669) (920)
Other assets......................................... (507) (963) (396)
Related party receivable............................. 479 -- --
Accounts payable -- trade............................ (678) 5,842 (6,607)
Accrued expenses..................................... (454) 457 678
Income taxes payable................................. (156) (72) 246
------- -------- -------
Net cash provided by (used in) operating
activities...................................... (4,984) (20,861) 10,604
------- -------- -------
Cash flows from investing activities:
Net cash paid for acquisitions............................ -- (12,629) --
Purchases of property, plant and equipment................ (5,900) (7,642) (7,586)
Proceeds from sale of property, plant and equipment....... -- -- 72
------- -------- -------
Net cash used in investing activities............. (5,900) (20,271) (7,514)
------- -------- -------
Cash flows from financing activities:
Net proceeds from (payments on) note payable to bank...... (7,551) 35,642 (3,582)
Proceeds from long-term obligation........................ 77 7,389 3,409
Payments on long-term obligations......................... (2,586) (1,988) (2,751)
Net proceeds from initial public offering................. 21,054 -- --
Proceeds from exercise of stock options................... 62 47 89
------- -------- -------
Net cash provided by (used in) financing
activities...................................... 11,056 41,090 (2,835)
------- -------- -------
Net increase (decrease) in cash and cash
equivalents..................................... 172 (42) 255
Cash and cash equivalents at beginning of period............ 94 266 224
------- -------- -------
Cash and cash equivalents at end of period.................. $ 266 $ 224 $ 479
======= ======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 46
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
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 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 impact to 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 and $362,000 at December 31, 1995 and 1996, respectively.
F-7
<PAGE> 47
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED ASSETS
The Company evaluates long-lived assets and intangibles held and used for
impairment whenever events or changes in circumstances indicate that the
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 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 the 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 to the 1996
presentation.
F-8
<PAGE> 48
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Cash paid during the year for:
Interest........................................... $1,436 $2,781 $4,879
Income taxes....................................... $3,437 $4,085 $4,269
</TABLE>
The Company incurred approximately $2,061,000, $2,645,000 and $5,209,000 of
obligations under capital leases for the acquisition of equipment during 1994,
1995 and 1996, respectively.
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,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Reptron Distribution:
Inventories............................................... $ 43,647 $ 31,085
K-Byte Manufacturing:
Work in process........................................... 7,421 8,833
Raw materials............................................. 12,393 18,776
-------- --------
$ 63,461 $ 58,694
======== ========
</TABLE>
NOTE D -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Land and buildings.......................................... $ 6,765 $ 6,837
Furniture, fixtures and equipment........................... 18,375 24,908
Leasehold improvements...................................... 1,182 1,275
Construction in progress.................................... 2,564 8,380
-------- --------
28,886 41,400
Less accumulated depreciation and amortization............ 7,933 10,531
-------- --------
$ 20,953 $ 30,869
======== ========
</TABLE>
The Company is constructing a 150,000 square foot manufacturing and
warehouse facility which is expected to be completed in early 1997. Management
estimates total cost of the construction project to be approximately $8,000,000,
exclusive of land costs. During 1995 and 1996, capitalized interest totaled
approximately $170,000 and $820,000, respectively.
F-9
<PAGE> 49
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 (the "Revolving Credit Facility").
Pursuant to the Revolving Credit Facility, four lenders have made available to
the Company a $55 million revolving credit facility. 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
December 31, 1996. 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
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 at December 31 (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <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
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
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
Notes payable collateralized by certain equipment, due in
monthly principal and interest installments of $47,
through November 2001 at interest rates of 7.5% and
7.9%...................................................... 998 2,045
Other....................................................... 536 --
------- -------
12,977 18,795
Less current maturities..................................... 2,547 3,560
------- -------
$10,430 $15,235
======= =======
</TABLE>
F-10
<PAGE> 50
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
The Company has entered into various capital leases for equipment, totaling
approximately $2,061,000 in 1994, $2,645,000 in 1995 and $5,209,000 in 1996. At
December 31, 1995 and 1996, the net book value of equipment under capital leases
is approximately $6,034,000 and $7,215,000, 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
and 1996, respectively, is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Current.............................................. $3,454 $3,974 $4,560
Deferred............................................. 369 350 588
------ ------ ------
$3,823 $4,324 $5,148
====== ====== ======
</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>
YEAR ENDED DECEMBER 31,
-----------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
Statutory federal tax rate.................................. 34.0% 34.0% 35.0%
Effect of marginal federal tax rate......................... -- -- (0.8)
State income taxes of approximately 6.6%, 6.4% and 6.9% in
1994, 1995, and 1996, net of Federal tax benefit.......... 4.3 4.3 4.6
Other....................................................... 1.2 1.7 1.4
---- ---- ----
Effective tax rate.......................................... 39.5% 40.0% 40.2%
==== ==== ====
</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
earnings, management has chosen 35% as the Company's statutory federal tax rate.
F-11
<PAGE> 51
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,
------------------
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets
Accrued vacation.......................................... $ 51 $ 51
Allowance for bad debts................................... 71 138
Other..................................................... 2 23
------- -------
124 212
------- -------
Deferred tax liabilities
Depreciation.............................................. 846 1,399
Other..................................................... 58 181
------- -------
904 1,580
------- -------
Net deferred tax liability.................................. $ (780) $(1,368)
======= =======
</TABLE>
A valuation allowance has not been recorded against the deferred tax assets
for 1995 and 1996.
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 previously mentioned 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. 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. In addition, 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.
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,
- ------------------------
<C> <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 and 1996 was
approximately, $1,519,000, $1,725,000, and $1,555,000 respectively, which
includes $225,000, $142,000 and $308,000 to the Chief Executive Officer of the
Company.
F-12
<PAGE> 52
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 were outstanding as of December
31, 1996 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.
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 for the three years ended December 31, 1996:
<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
=======
</TABLE>
F-13
<PAGE> 53
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 OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ----------------------
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 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, if any, 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 participant's 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 and $82,000 to the Plan in 1995 and 1996,
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 the
form of assumption of specified liabilities. 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.
F-14
<PAGE> 54
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 the
form of 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 and $279,000 as of
December 31, 1994, 1995 and 1996, respectively.
A director of the Company serves as its general counsel and received
approximately $178,000, $235,000 and $185,000 for services rendered during 1994,
1995 and 1996, 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.
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.
F-15
<PAGE> 55
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
-------- -------- --------
(IN THOUSANDS)
<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> 56
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
---------------------------------------------------
1995 MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
- ---- --------- -------- ------------- ------------
<S> <C> <C> <C> <C>
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
</TABLE>
<TABLE>
<CAPTION>
1996
- ----
<S> <C> <C> <C> <C>
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
</TABLE>
NOTE P -- CONCENTRATION OF CREDIT RISK
One customer represented 12.4% of total Company net sales in 1996. 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> 57
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> 58
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> 59
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 60
============================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDER OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE 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 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......................... 3
Risk Factors............................... 6
Use of Proceeds............................ 10
Price Range of Common Stock................ 10
Dividend Policy............................ 11
Capitalization............................. 11
Selected Consolidated Financial Data....... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 13
Business................................... 18
Management................................. 28
Certain Transactions....................... 31
Principal and Selling Shareholders......... 32
Description of Capital Stock............... 33
Shares Eligible for Future Sale............ 35
Underwriting............................... 36
Legal Matters.............................. 37
Experts.................................... 37
Available Information...................... 37
Index to Consolidated Financial Statements
and Schedule............................. F-1
</TABLE>
============================================================
============================================================
2,000,000 Shares
[REPTRON ELECTRONICS, INC. LOGO]
Common Stock
---------------------
PROSPECTUS
---------------------
PRUDENTIAL SECURITIES INCORPORATED
ROBERT W. BAIRD & CO.
INCORPORATED
STEPHENS INC.
NEEDHAM & COMPANY, INC.
April , 1997
============================================================
<PAGE> 61
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 22,216
NASD filing fee............................................. 7,832
Nasdaq additional listing fees.............................. 17,500
Printing and engraving expenses............................. 125,000*
Accounting fees and expenses................................ 125,000*
Legal fees and expenses..................................... 125,000*
Blue Sky fees and expenses.................................. 15,000*
Miscellaneous............................................... 162,452*
--------
Total.................................................. $600,000*
========
</TABLE>
- ---------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Florida corporation. The FBCA provides that, in general, a
business corporation may indemnify any person who is or was a party to any
proceeding (other than an action by, or in the right of, the corporation) by
reason of the fact that he is or was a director or officer of the corporation,
against liability incurred in connection with such proceeding, including any
appeal thereof, provided certain standards are met, including that such officer
or director acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation, and provided further
that, with respect to any criminal action or proceeding, the officer or director
had no reasonable cause to believe his conduct was unlawful. In the case of
proceedings by or in the right of the corporation, the FBCA provides that, in
general, a corporation may indemnify any person who was or is a party to any
such proceeding by reason of the fact that he is or was a director or officer of
the corporation against expenses and amounts paid in settlement actually and
reasonably incurred in connection with the defense or settlement of such
proceeding, including any appeal thereof, provided that such person acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the corporation, except that no indemnification shall be
made in respect of any claim as to which such person is adjudged liable unless a
court of competent jurisdiction determines upon application that such person is
fairly and reasonably entitled to indemnity. To the extent that any officers or
directors are successful on the merits or otherwise in the defense of any of the
proceedings described above, the FBCA provides that the corporation is required
to indemnify such officers or directors against expenses actually and reasonably
incurred in connection therewith. However, the FBCA further provides that, in
general, indemnification or advancement of expenses shall not be made to or on
behalf of any officer or director if a judgment or other final adjudication
establishes that his actions, or omissions to act, were material to the cause of
action so adjudicated and constitute: (i) a violation of the criminal law,
unless the director or officer had reasonable cause to believe his conduct was
lawful or had no reasonable cause to believe it was unlawful; (ii) a transaction
from which the director or officer derived an improper personal benefit; (iii)
in the case of a director, a circumstance under which the director has voted for
or assented to a distribution made in violation of the FBCA or the corporation's
articles of incorporation; or (iv) willful misconduct or a conscious disregard
for the best interests of the corporation in a proceeding by or in the right of
the corporation to procure a judgment in its favor or in a proceeding by or in
the right of a shareholder. Article V of the Company's Bylaws provides that the
Company shall indemnify any director, officer, employee or agent or any former
director, officer, employee or agent to the full extent permitted by Florida
law.
II-1
<PAGE> 62
The underwriters also will agree to indemnify the directors and officers of
the Company against certain liabilities as set forth in Section 8 of the
Underwriting Agreement (see Exhibit 1).
The Company has purchased insurance with respect to, among other things,
any liabilities that may arise under the statutory provisions referred to above.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1 -- Form of Underwriting Agreement+
2 -- Articles of Merger Between the Company and Reptron
Electronics, Inc., a Michigan corporation*
3.1 -- Articles of Incorporation*
3.2 -- Bylaws*
4.1 -- Articles of Incorporation (incorporated by reference to
Exhibit 3.1)
4.2 -- Bylaws (incorporated by reference to Exhibit 3.2)
4.3 -- Form of Stock Certificate*
5 -- Opinion of Holland & Knight LLP+
10.1 -- Distributor Agreement, between NEC Electronics, Inc. and the
Company, dated April 1, 1992*
10.2 -- Distributor Agreement, between Vishay Electronic Components
and the Company, dated March 4, 1993*
10.3 -- Authorized Stocking Distribution Contract, between Fox
Electronics and the Company, dated January 1, 1992*
10.4 -- Domestic Distribution Agreement, between Chips &
Technologies, Incorporated and the Company, dated as of July
1, 1991*
10.5 -- Distributorship Agreement, between Hitachi America, Ltd. and
the Company, dated April 1, 1992*
10.6 -- Authorized Distributor Agreement, between Beckman Industrial
Corp. and the Company, dated November 1, 1993*
10.7 -- Distributor Agreement, between Dennison Manufacturing
Company and the Company, dated August 8, 1977*
10.8 -- Master Distribution Agreement, between Astec America
Incorporated and the Company, dated October 1, 1993*
10.9 -- Distributor Contract, between Toshiba America Electronic
Components, Inc. and the Company, dated June 1, 1991*
10.10 -- Sharp Electronics Corporation Elecom Division Distribution
Agreement, between Sharp Electronics Corporation and the
Company, dated August 1, 1991*
10.11 -- Lite-On Corp. Distributor Agreement, between Lite-On Corp.
and the Company, dated January 1, 1985*
10.12 -- Distributor Agreement, between Diodes Incorporated and the
Company, dated July 15, 1991*
10.13 -- Standard Distributorship Agreement, between Nichicon
(America) Corporation and the Company, dated December 4,
1984*
</TABLE>
II-2
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.14 -- OKI Semiconductor Domestic Distributor Agreement, between
OKI Semiconductor, an Operating Group of OKI America, Inc.
and the Company, dated April 1, 1993*
10.15 -- Authorized Distributor Agreement, between Potter & Brumfeld
and the Company, dated September 30, 1991*
10.16 -- Reptron Electronics, Inc. Amended and Restated Incentive
Stock Option Plan**
10.17 -- Reptron Electronics, Inc. Non-Employee Director Stock Option
Plan**
10.18 -- Reptron Electronics, Inc. Employee Profit Sharing Plan*
10.19 -- Agreement, between the Voice Products Division of Lanier
Worldwide, Inc. and the Company, dated as of May 28, 1992*
10.20 -- Master Purchase Agreement, between Picker International,
Inc. and the Company, dated as of May 19, 1992*
10.21 -- Revolving Credit and Reimbursement Agreement by and among
the Company, certain lenders and NationsBank of Florida,
National Association, as Agent, dated as of March 1, 1995***
10.22 -- Agreement between Diebold Incorporated and the Company,
dated February 27, 1995***
10.23 -- Supply Agreement between the Company and Brandt, Inc., dated
December 1, 1994***
10.24 -- Lease between Michael L. Musto and Donna B. Musto and the
Company, dated as of November 1, 1993*
10.25 -- Form of Asset Purchase Agreement between Cronin Electronics,
Inc. and the Company, dated March 17, 1995***
10.26 -- Distributor Agreement, between Orbit Semiconductor, Inc. and
the Company, dated August 15, 1995*****
10.27 -- Distributor Agreement, between Pericom Semiconductor
Corporation and the Company, dated December 1, 1994*****
10.28 -- Distributor Agreement, between Catalyst Semiconductor, Inc.
and the Company, dated June 28, 1995*****
10.29 -- Distributor Agreement, between Macronix Incorporated and the
Company, dated February 14, 1994*****
10.30 -- Distributor Agreement, between QuickLogic Corporation and
the Company, dated July 1, 1995*****
10.31 -- Distributor Agreement, between Sipex Corporation and the
Company, dated August 1, 1995*****
10.32 -- Distributor Agreement, between Winbond Electronics North
America Corp. and the Company, dated as of August 1, 1993,
and an Extension of Distributor Agreement between the
Company and Winbond Electronics North America Corp., dated
January 2, 1996*****
10.33 -- Amended and Restated Revolving Credit and Reimbursement
Agreement by and among the Company, certain lenders and
NationsBank of Florida, N.A., as Agent, dated June 29,
1995*****
10.34 -- Amendment Agreement No. 1, dated December 15, 1995, to the
Amended and Restated Revolving Credit and Reimbursement
Agreement, dated June 29, 1995*****
10.35 -- Form of Asset Purchase Agreement between Western Micro
Technology, Inc. and the Company, dated May 5, 1995****
10.36 -- Amendment No. 1 to Master Purchase Agreement, dated as of
May 19, 1992 between Picker International, Inc. and K-Byte
Manufacturing Inc., a Division of Reptron Electronics*****
10.37 -- Amendment No. 2, dated March 15, 1996, to the Amended and
Restated Revolving Credit and Reimbursement Agreement, dated
June 29, 1995.******
</TABLE>
II-3
<PAGE> 64
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.38 -- Amendment No. 3, dated September 25, 1996, to the Amended
and Restated Revolving Credit and Reimbursement Agreement,
dated June 29, 1995.******
10.39 -- Amendment No. 4, dated January 31, 1997, to the Amended and
Restated Revolving Credit and Reimbursement Agreement, dated
June 29, 1995.******
21.1 -- Subsidiaries of the Company+
23.1 -- Consent of Holland & Knight LLP (contained in Exhibit 5)
23.2 -- Consent of Grant Thornton LLP
24 -- Powers of Attorney+
27 -- Financial Data Schedule (for SEC use only)+
</TABLE>
- ---------------
* Filed with the Company's Registration Statement on Form S-1, dated
February 8, 1994, Registration No. 33-75040, and incorporated herein by
reference.
** Filed with the Company's Registration Statement on Form S-8, dated
December 22, 1994, Registration No. 33-87854 and incorporated herein by
reference.
*** Filed with the Company's Form 10-K for the year ended December 31, 1994.
**** Filed with report on Form 8-K filed on August 8, 1995.
***** Filed with Company's 10-K for the year ended December 31, 1995.
****** Filed with Company's 10-K for the year ended December 31, 1996.
+ Previously filed.
(b) Financial Schedule: the financial statement schedule filed as part of
this report is listed separately in the Index to Financial Statements and
Schedule beginning on page F-1 of this report.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4), or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the Offering of such securities at that
time shall be deemed to be the initial bona fide Offering thereof.
II-4
<PAGE> 65
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereto duly authorized, in the City of Tampa,
State of Florida, on April 10, 1997.
REPTRON ELECTRONICS, INC.
By: /s/ MICHAEL L. MUSTO *
--------------------------------------
Michael L. Musto
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 1
to this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ MICHAEL L. MUSTO * President, Chief Executive April 10, 1997
- ----------------------------------------------------- Officer and Director
Michael L. Musto (Principal Executive Officer)
/s/ PAUL J. PLANTE * Chief Operating Officer, Chief April 10, 1997
- ----------------------------------------------------- Financial Officer and
Paul J. Plante Director (Principal Financial
and Accounting Officer)
/s/ LEIGH A. ADAMS * Secretary and Director April 10, 1997
- -----------------------------------------------------
Leigh A. Adams
/s/ WILLIAM L. ELSON * Director April 10, 1997
- -----------------------------------------------------
William L. Elson
/s/ BARRY M. ALPERT * Director April 10, 1997
- -----------------------------------------------------
Barry M. Alpert
*By: /s/ PAUL J. PLANTE
- -----------------------------------------------------
Paul J. Plante
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 66
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
1 -- Form of Underwriting Agreement+
2 -- Articles of Merger Between the Company and Reptron
Electronics, Inc., a Michigan corporation*
3.1 -- Articles of Incorporation*
3.2 -- Bylaws*
4.1 -- Articles of Incorporation (incorporated by reference to
Exhibit 3.1)
4.2 -- Bylaws (incorporated by reference to Exhibit 3.2)
4.3 -- Form of Stock Certificate*
5 -- Opinion of Holland & Knight LLP+
10.1 -- Distributor Agreement, between NEC Electronics, Inc. and the
Company, dated April 1, 1992*
10.2 -- Distributor Agreement, between Vishay Electronic Components
and the Company, dated March 4, 1993*
10.3 -- Authorized Stocking Distribution Contract, between Fox
Electronics and the Company, dated January 1, 1992*
10.4 -- Domestic Distribution Agreement, between Chips &
Technologies, Incorporated and the Company, dated as of July
1, 1991*
10.5 -- Distributorship Agreement, between Hitachi America, Ltd. and
the Company, dated April 1, 1992*
10.6 -- Authorized Distributor Agreement, between Beckman Industrial
Corp. and the Company, dated November 1, 1993*
10.7 -- Distributor Agreement, between Dennison Manufacturing
Company and the Company, dated August 8, 1977*
10.8 -- Master Distribution Agreement, between Astec America
Incorporated and the Company, dated October 1, 1993*
10.9 -- Distributor Contract, between Toshiba America Electronic
Components, Inc. and the Company, dated June 1, 1991*
10.10 -- Sharp Electronics Corporation Elecom Division Distribution
Agreement, between Sharp Electronics Corporation and the
Company, dated August 1, 1991*
10.11 -- Lite-On Corp. Distributor Agreement, between Lite-On Corp.
and the Company, dated January 1, 1985*
10.12 -- Distributor Agreement, between Diodes Incorporated and the
Company, dated July 15, 1991*
10.13 -- Standard Distributorship Agreement, between Nichicon
(America) Corporation and the Company, dated December 4,
1984*
10.14 -- OKI Semiconductor Domestic Distributor Agreement, between
OKI Semiconductor, an Operating Group of OKI America, Inc.
and the Company, dated April 1, 1993*
10.15 -- Authorized Distributor Agreement, between Potter & Brumfeld
and the Company, dated September 30, 1991*
10.16 -- Reptron Electronics, Inc. Amended and Restated Incentive
Stock Option Plan**
10.17 -- Reptron Electronics, Inc. Non-Employee Director Stock Option
Plan**
10.18 -- Reptron Electronics, Inc. Employee Profit Sharing Plan*
10.19 -- Agreement, between the Voice Products Division of Lanier
Worldwide, Inc. and the Company, dated as of May 28, 1992*
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.20 -- Master Purchase Agreement, between Picker International,
Inc. and the Company, dated as of May 19, 1992*
10.21 -- Revolving Credit and Reimbursement Agreement by and among
the Company, certain lenders and NationsBank of Florida,
National Association, as Agent, dated as of March 1, 1995***
10.22 -- Agreement between Diebold Incorporated and the Company,
dated February 27, 1995***
10.23 -- Supply Agreement between the Company and Brandt, Inc., dated
December 1, 1994***
10.24 -- Lease between Michael L. Musto and Donna B. Musto and the
Company, dated as of November 1, 1993*
10.25 -- Form of Asset Purchase Agreement between Cronin Electronics,
Inc. and the Company, dated March 17, 1995***
10.26 -- Distributor Agreement, between Orbit Semiconductor, Inc. and
the Company, dated August 15, 1995*****
10.27 -- Distributor Agreement, between Pericom Semiconductor
Corporation and the Company, dated December 1, 1994*****
10.28 -- Distributor Agreement, between Catalyst Semiconductor, Inc.
and the Company, dated June 28, 1995*****
10.29 -- Distributor Agreement, between Macronix Incorporated and the
Company, dated February 14, 1994*****
10.30 -- Distributor Agreement, between QuickLogic Corporation and
the Company, dated July 1, 1995*****
10.31 -- Distributor Agreement, between Sipex Corporation and the
Company, dated August 1, 1995*****
10.32 -- Distributor Agreement, between Winbond Electronics North
America Corp. and the Company, dated as of August 1, 1993,
and an Extension of Distributor Agreement between the
Company and Winbond Electronics North America Corp., dated
January 2, 1996*****
10.33 -- Amended and Restated Revolving Credit and Reimbursement
Agreement by and among the Company, certain lenders and
NationsBank of Florida, N.A., as Agent, dated June 29,
1995*****
10.34 -- Amendment Agreement No. 1, dated December 15, 1995, to the
Amended and Restated Revolving Credit and Reimbursement
Agreement, dated June 29, 1995*****
10.35 -- Form of Asset Purchase Agreement between Western Micro
Technology, Inc. and the Company, dated May 5, 1995****
10.36 -- Amendment No. 1 to Master Purchase Agreement, dated as of
May 19, 1992 between Picker International, Inc. and K-Byte
Manufacturing Inc., a Division of Reptron Electronics*****
10.37 -- Amendment No. 2, dated March 15, 1996, to the Amended and
Restated Revolving Credit and Reimbursement Agreement, dated
June 29, 1995.******
10.38 -- Amendment No. 3, dated September 25, 1996, to the Amended
and Restated Revolving Credit and Reimbursement Agreement,
dated June 29, 1995.******
10.39 -- Amendment No. 4, dated January 31, 1997, to the Amended and
Restated Revolving Credit and Reimbursement Agreement, dated
June 29, 1995.******
21.1 -- Subsidiaries of the Company+
23.1 -- Consent of Holland & Knight LLP (contained in Exhibit 5)
23.2 -- Consent of Grant Thornton LLP
24 -- Powers of Attorney (contained on page II-5 of this
registration statement)+
27 -- Financial Data Schedule (for SEC use only)+
</TABLE>
<PAGE> 68
- ---------------
* Filed with the Company's Registration Statement on Form S-1, dated
February 8, 1994, Registration No. 33-75040, and incorporated herein by
reference.
** Filed with the Company's Registration Statement on Form S-8, dated
December 22, 1994, Registration No. 33-87854 and incorporated herein by
reference.
*** Filed with the Company's Form 10-K for the year ended December 31, 1994.
**** Filed with report on Form 8-K filed on August 8, 1995.
***** Filed with Company's 10-K for the year ended December 31, 1995.
****** Filed with Company's 10-K for the year ended December 31, 1996.
+ Previously filed.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our reports dated February 5, 1997, accompanying the
consolidated financial statements and schedule of Reptron Electronics, Inc.,
contained in the Registration Statement and Prospectus. We consent to the use of
the aforementioned reports in the Registration Statement and Prospectus, and to
the use of our name as it appears under the caption "Experts" and "Selected
Consolidated Financial Data".
GRANT THORNTON LLP
Tampa, Florida
April 9, 1997
