UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-23426
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REPTRON ELECTRONICS, INC.
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(Exact name of registrant as specified in its charter)
Florida 38-2081116
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(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
14401 McCormick Drive, Tampa, Florida 33626
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 854-2351
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Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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Common Stock, $.01 par value None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
The aggregate market value of shares of the registrant's common stock held
by non-affiliates of the registrant as of February 28, 1997, was
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approximately $71,446,800.
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The number of shares of the registrant's common stock issued and outstanding
as of February 28, 1997 was 6,065,519.
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Documents Incorporated by Reference:
Parts of the Company's definitive proxy statement for the Annual Meeting of
the Company's Shareholders to be held on April 15, 1997 are incorporated by
reference into Part III of this Form.
REPTRON ELECTRONICS, INC.
FORM 10-K
Fiscal Year ended December 31, 1996
Item
Number in
Form 10-K PART I Page
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1. Business..................................................... 1
2. Properties................................................... 11
3. Legal Proceedings............................................ 11
4. Submission of Matters to a Vote of Security Holders......... 11
PART II
5. Market for the Registrant's Common Stock and
Related Stockholder Matters................................. 12
6. Selected Financial Data..................................... 13
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 13
8. Financial Statements and Supplementary Data................. 20
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure...................... 20
PART III
10. Directors and Executive Officers of the Registrant.......... 20
11. Executive Compensation...................................... 20
12. Security Ownership of Certain Beneficial Owners
and Management.............................................. 20
13. Certain Relationships and Related Transactions.............. 20
PART IV
14. Exhibits, Financial Statements, Schedule,
and Reports on Form 8-K..................................... 21
PART 1
Item 1. Business
This document contains certain forward-looking statements regarding
future financial condition and results of operations and the Company's
business operations. The words "expect," "estimate," "anticipate,"
"predict," "believe" and similar expressions are intended to identify
forward-looking statements. Such statements involve risks, uncertainties
and assumptions, including industry and economic conditions, customer
actions and other factors discussed in this and the Company's other filings
with the Securities and Exchange Commission. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated.
General
Reptron Electronics, Inc. (the "Company") is an integrated electronics
company operating as a distributor of electronic components and a contract
manufacturer of electronic products. The Company was founded in 1973 as a
distributor of electronic components and, through Reptron Distribution, is
currently a leading national distributor of electronic components. In 1986,
the Company entered the contract manufacturing business through the
acquisition of K-Byte Manufacturing. The Company believes that its two
business activities are complementary and serve to distinguish the Company
from its competitors. See "Notes to Consolidated Financial Statements,
Note N - Financial Information About Industry Segments."
Reptron Distribution is authorized to sell 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, medical, industrial controls and contract manufacturers
(including K-Byte Manufacturing). Currently, Reptron Distribution operates
20 offices located throughout the United States.
K-Byte Manufacturing provides contract electronics manufacturing and
design-for-manufacturability engineering services to original equipment
manufacturers ("OEMs") representing a wide range of industries including
telecommunications, banking and medical services. K-Byte Manufacturing
specializes in high quality, technologically complex printed circuit board
assemblies with computer-automated equipment using surface mount technology
("SMT") and pin-through-hole ("PTH") interconnection technologies for
customers requiring low-to-medium volume production runs. K-Byte
Manufacturing leverages its relationship with Reptron Distribution by
utilizing Reptron Distribution's sales force and by using Reptron
Distribution to obtain better access to electronic components. K-Byte
Manufacturing's facilities are located in Gaylord and Saline, Michigan and
Tampa, Florida.
The Company's overall business strategy is to operate as an integrated
electronics company, providing its customers a wide range of products and
value-added services as well as a single source for their product, material,
assembly and test requirements. The Company believes that K-Byte
Manufacturing provides Reptron Distribution with a significant advantage by
broadening the selection of products and value-added services that can be
offered to Reptron Distribution's customers. Services provided to Reptron
Distribution's customers (some of which are provided through K-Byte
Manufacturing) include component sales, inventory replenishment programs,
in-house stores, component programming, electronic data interchange
("EDI"), concurrent engineering and SMT and PTH manufacturing. Similarly,
Reptron Distribution provides K-Byte Manufacturing with advantages by virtue
of having access to Reptron Distribution's sales force, large customer base,
component allocation and advantages in component purchasing. Accordingly,
the Company believes that the combination of its two divisions distinguishes
the Company in the electronics industry and provides a high level of value
to its customer base.
1
Certain Considerations
Dependence Upon Few Customers and Other Factors Affecting Manufacturing
Operating Results. K-Byte Manufacturing has a limited number of customers,
some of which account for a significant part of its sales. The loss of any
one or more of these major customers, or a reduction in their level of
purchasing, could have a material adverse effect on K-Byte Manufacturing's
business and results of operations. The Company's manufacturing 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 affect on the Company's business and results of operations.
Absence of Long-Term Sales Contracts. The level and timing of purchase
orders placed by K-Byte Manufacturing's customers are affected by a number
of factors, including variation in demand for customers' products, customer
attempts to manage inventory and changes in the customers' manufacturing
strategies. The Company typically does not obtain long-term purchase orders
or commitments but instead works with its customers to develop nonbinding
forecasts of the future volume of orders. Based on such nonbinding
forecasts, the Company makes commitments regarding the level of business
that it will seek and accept, the timing of production schedules and the
levels and utilization of personnel and other resources. A variety of
conditions, both specific to each individual customer and generally
affecting each customer's industry, may cause customers to cancel, reduce or
delay orders that were either previously made or anticipated. Generally,
customers may cancel, reduce or delay purchase orders and commitments
without penalty, except for payment for services rendered, materials
purchased and, in certain circumstances, charges associated with such
cancellation, reduction or delay. Significant or numerous cancellations,
reductions or delays in orders by customers, or any inability by customers
to pay for services provided by the Company or to pay for components and
materials purchased by the Company on such customers' behalf, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Relationships with 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. The
Company does not have long-term distribution contracts with its vendors.
These contracts are non-exclusive and typically are cancelable upon 30 days'
written notice. Although the Company has established close working
relationships for existing product lines with its principal vendors, the
Company's future success will depend, in large part, on maintaining such
relationships and developing new relationships in connection with its
existing and future product lines. The loss of, or significant disruptions
in the relationship with, one or more of Reptron Distribution's principal
vendors could have a material adverse effect on the Company's business and
results of operations.
Integration of 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 of 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 revenue generated from these
customers. The similtaneous start-up of several new customers could have a
material adverse effect on K-Byte Manufacturing's business and results of
operations.
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 materially adversely affect
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 and customer demand for the Company's services may be
materially adversely affected. Any of these events could have a material
adverse effect on the Company's business and results of operations.
2
Dependence Upon Employees. The success of the Company to date has been
largely dependent upon the efforts and abilities of the senior management
staff. The loss of their services for any reason could have a material
adverse effect on the Company. In addition, the Company's workforce is
largely composed of highly trained individuals with long Company tenure.
The Company's future success will be significantly influenced by its ability
to continue to recruit, train and retain a skilled workforce.
Availability of Workforce. The Company has experienced significant
growth in sales and workforce over the past several years. The ability to
continue this growth rate will depend upon several factors, including the
success of recruiting and training a substantial number of new employees.
There can be no assurance that the Company will be able to locate, train and
integrate the additional workforce required to accomplish future growth
plans.
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 profit margins unless and until the Company's vendors reduce the
cost of such components (through price protection rights, if any, outlined
in the vendor agreements) to make them competitive. See "Reptron
Distribution - Vendors."
Expansion Through Acquisitions. The Company may expand the geographic
scope of its operations through the acquisition of distribution businesses
in territories that it has not yet developed. The Company's ability to
achieve this objective depends in part upon locating and acquiring
distribution businesses that have the requisite customer base and vendor
lines. Similarly, the Company may seek to acquire contract manufacturing
businesses located in areas that complement its distribution operations. The
Company may compete for acquisition and expansion opportunities with
entities which have significantly greater resources than the Company. There
can be no assurance that suitable acquisition candidates will be available,
that financing for such acquisitions will be obtainable on terms acceptable
to the Company, that such acquisitions can be consummated or that acquired
businesses can be integrated successfully and profitably into the Company's
operations.
Management of Growth. The Company has grown rapidly in recent years,
with net sales increasing from approximately $25 million in 1986 (when the
Company began implementing its strategy of integrating distribution with
contract manufacturing) to approximately $269 million in 1996. There can be
no assurance that the Company will be able to sustain its historic rate of
revenue growth, continue its recent profitable operations or manage any
future growth successfully. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Competition. The Company faces significant competition in the markets
served by both Reptron Distribution and K-Byte Manufacturing. Some of the
Company's competitors possess substantially greater resources than the
Company. 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. See "Business - Competition."
Environmental Compliance. The Company is subject to a variety of
environmental regulations relating to the use, storage, discharge and
disposal of hazardous chemicals used during its manufacturing process. Any
failure by the Company to comply with current and future regulations could
subject it to liabilities or the suspension of production. In addition,
such regulations could restrict the Company's ability to expand its
facilities or could require the Company to acquire costly equipment or to
incur other significant expenses to comply with environmental regulations.
The Company has not experienced any material adverse effects in the past as
a result of environmental regulations.
3
Reptron Distribution
The Company was founded in 1973 as a distributor of electronic
components. 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
sizable investments in inventories, accounts receivable and personnel. At
the same time, the distributor offers 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 recognize 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
Products. Reptron Distribution represents over 60 vendor lines and
distributes more than 35,000 separate items. The products that the Company
distributes can be broadly divided into three main groups: semiconductors,
passive products and electromechanical components.
Semiconductors accounted for approximately 75% of Reptron Distribution's
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 26 vendors. The Company represents a number of leading semiconductor
manufacturers including Chips & Technologies, Hitachi, NEC, OKI, Orbit
Semiconductor and Sharp. Passive products and electromechanical components
accounted for the remaining 25% of net sales of Reptron Distribution in 1996
. 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 1996 Reptron Distribution net sales (23.4% of total
Company net sales).
In December 1995, Reptron Distribution created a division devoted solely
to selling memory modules. The name of this division is K-Byte Memory
Module and its operating results are combined into Reptron Distribution.
Some of the memory modules sold by this division are designed by the Company
and manufactured by K-Byte Manufacturing. The remainder of the memory
modules are produced by other third parties. 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 profit margins and lower selling, general and
administrative expenses than other electronic component sales generated by
Reptron Distribution. Sales from the memory module division have increased
rapidly and accounted for 10.2% of Reptron Distribution's net sales in 1996.
Services. Reptron Distribution complements its product offerings with a
wide range of customer services, including inventory control programs (e.g.,
bonded, in-plant store, just-in-time, point of use replenishment), component
programming, contract manufacturing services (through K-Byte Manufacturing)
and EDI. 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 sales were generated through some form of value-added service.
The Company believes that an increasing percentage of Reptron Distribution
sales will be generated through its value-added services program as
customers continue to search for ways to reduce costs in the materials
supply chain. The Company has invested significantly in capital equipment
and support staff to help increase 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.
4
It is the policy of most vendors to protect distributors, such as the
Company, against potential write-down of inventories based upon vendors'
price reductions or technological change. Under the terms of most
distributor agreements (including most of Reptron Distribution's
agreements), if the distributor complies with certain conditions, the vendor
is required, pursuant to price protection privileges, to credit the
distributor 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 many distribution agreements (including most of the
Company's agreements), the distributor 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 distributor the total amount of its products carried in
inventory. Most of the components sold through the memory module division
formed in December 1995 (see "Reptron Distribution-Products") are not
supplied under distribution agreements with the Company's vendors, and
consequently, this inventory is not subject to the price protection and
stock rotation privileges previously described.
Marketing. Reptron Distribution has developed a focused sales strategy.
Large key accounts are identified in each market and field sales personnel
are assigned to serve these accounts directly. All other customers in each
market are served by telemarketers from the local market or from the
corporate headquarters. The telemarketers also service customers in regions
of the country where the Company does not have a sales branch office.
Telemarketing sales accounted for approximately 6.2% of Reptron
Distribution's net sales in 1996.
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 confines of
the established offices and by building customer awareness of Reptron
Distribution's name and product line.
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 branch offices. The Company
also created a 16-18 month program for developing product marketing
managers.
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.
This customer, accounts for approximately 15.7% of Reptron Distribution net
sales, 6.9% of K-Byte Manufacturing net sales and 12.4% of total Company net
sales. Reptron Distribution's customers are in diverse industries,
including robotics, telecommunications, computers and computer peripherals,
consumer electronics, medical, industrial controls and contract
manufacturers (including K-Byte Manufacturing).
5
Offices. The Company leases twenty office suites serving as sales
offices for Reptron Distribution. These offices average approximately 2,000
square feet in size and contain a small space for warehousing of inventory
and sales materials. Lease terms on these facilities range from three to
five years and expire at various dates through June 2001. One of these
facilities, located in the Detroit area, is owned by the chief executive
officer of the Company. The table below shows the location of each office
and the date it was established.
Office Date Established
______ ________________
Detroit, Michigan 1973
Chicago, Illinois 1979
Tampa, Florida 1982
Atlanta, Georgia 1985
Ft. Lauderdale, Florida 1985
Minneapolis, Minnesota 1986
Cleveland, Ohio (1) 1988
Huntsville, Alabama 1988
Raleigh, North Carolina 1989
Philadelphia, Pennsylvania (2) 1993
Baltimore, Maryland (2) 1993
San Jose, California 1994
Boston, Massachusetts (3) 1995
Hartford, Connecticut (3) 1995
Hauppauge (Long Island), New York 1995
Irvine, California (4) 1995
Portland, Oregon (4) 1995
San Diego, California (4) 1995
Seattle, Washington (4) 1995
Salem, New Hampshire (5) 1996
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(1) The Company opened an office in Columbus, Ohio in 1976, which was
merged into the Cleveland, Ohio office in 1991.
(2) The Company acquired a distributor with offices in Philadelphia,
Pennsylvania and Baltimore, Maryland in 1993.
(3) The Company acquired a distributor with offices in the Boston,
Massachusetts and Hartford, Connecticut metropolitan areas, in 1995.
(4) The Company acquired a distributor with offices in Boston,
Massachusetts; Irvine, California; Los Angeles, California; Portland,
Oregon; San Diego, California; San Jose, California; and Seattle, Washington
in 1995. The Boston and San Jose operations were combined with the
previously established sales offices in these territories. The Los Angeles
office was merged into the Irvine, California office in late 1995.
(5) The memory module division, K-Byte Memory Module (see "Reptron
Distribution - Products") is located at this office.
K-Byte Manufacturing
The Company entered into the contract manufacturing business through its
acquisition of K-Byte Manufacturing in 1986. 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. The
Company expects the trend towards outsourcing to contribute to continued
growth in the contract manufacturing industry as OEMs continue to outsource
their manufacturing requirements and look to contract manufacturers to
provide additional services. Outsourcing allows OEMs to take advantage of
the manufacturing expertise
6
and capital investments of contract manufacturers, thereby enabling OEMs to
concentrate on their core activities. 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. 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.
Manufacturing specialists enable OEMs to gain access to advanced
manufacturing facilities and equipment, thereby reducing their overall
capital equipment requirements.
- Focused Resources. Because the electronics industry is
experiencing greater levels of competition and more rapid technological
change, many OEMs increasingly seek to focus their resources on
activities and technologies that add greater value. By offering turnkey
manufacturing services and comprehensive electronic assembly,
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, making it difficult for OEMs to
maintain the necessary technological expertise in process development
and control. OEMs desire to work with manufacturing specialists in
order to gain access to their process expertise and manufacturing know-
how.
- 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 manufacturing specialist's volume
procurement capabilities and expertise in inventory management. By
utilizing a manufacturing specialist, OEMs frequently can better manage
inventory costs and increase their return on assets.
Strategy. K-Byte Manufacturing's annual sales have grown to approximately
$101 million in 1996. The Company follows a very specific strategy in its
contract manufacturing business 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, and does not intend to become, a manufacturer of high volume printed
circuit board assemblies for personal computers, consumer oriented products
or the automotive industries, which typically have relatively low gross
profit margins. K-Byte Manufacturing targets customers requiring a high
number of different circuit board assemblies thereby minimizing the exposure
to any one product produced for a specific customer. This market niche
typically generates higher gross profit margins than the high volume sector.
K-Byte Manufacturing focuses on the low-to-medium volume batch business
because of its general reduced volatility. The Company believes that this
policy also assists in attaining its goal of a stable customer base for
K-Byte Manufacturing. K-Byte Manufacturing has access to a significant
number of these types 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.
Establish a Balance Among Customers and Industries Served. The Company
targets customers in the telecommunications, medical devices, banking and
industrial controls/instrumentation industries and seeks to maintain a
7
balance of customers among these industries and within each industry. By
balancing its operations among industries and customers, the Company seeks
to avoid becoming dependent on any one industry or customer. In addition,
the Company believes that the industries that it targets produce products
that generally have longer life cycles, more stable demand and less price
pressure compared to consumer oriented products.
The K-Byte Manufacturing approach to the contract manufacturing industry
has proven to be successful as sales and the customer base have increased
every year since K-Byte Manufacturing was acquired in 1986.
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. K-Byte Manufacturing is a
service operation that complements the value-added services sold by Reptron
Distribution. In certain engagements, the Company completes the assembly of
the customers' products by integrating printed circuit board assemblies into
other elements of the customers' products (sometimes referred to as total
"box build"). Approximately 21% of K-Byte Manufacturing's 1996 revenue was
generated by total box build assembly. K-Byte Manufacturing attempts to
undertake 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 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 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 considers its key competitive advantages to include its
expertise in low-to-medium volume, flexible batch processing, its provision
for value-added services and its material management techniques (as a result
of its integration with Reptron Distribution). Management believes that
K-Byte Manufacturing's expertise in flexible, batch processing
differentiates it from its high-volume competitors due to the difficulty of
economically fulfilling a large number of batch contracts. K-Byte
Manufacturing's focus on low-to-medium volume batch processing, resulted in
the manufacture of approximately 2,000 different types of circuit board
assemblies generating approximately $101 million in net sales in 1996.
K-Byte Manufacturing is able to manage its materials procurement and
inventory management functions in a highly efficient manner through its
relationship with Reptron Distribution. The inherent scheduling and
procurement challenges in low-to-medium volume production of a high 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 which are required
to produce approximately 2,000 different types of circuit board assemblies.
The Company developed this materials procurement competency through its
experience as a component distributor.
8
Marketing and Customers. K-Byte Manufacturing focuses on a very specific
niche within the contract manufacturing industry. Generally, the Company
will pursue opportunities with customers that meet the following criteria:
- Requires low-to-medium volume circuit board assembly.
- Requires a high number of different types of circuit board
assemblies to be produced.
- K-Byte Manufacturing becomes the primary source.
- Operates in growth industries including telecommunications,
medical devices and industrial applications (the Company
specifically avoids the personal computer industry, automotive
industry and consumer products.)
- Desires to invest and commit to a long-term manufacturing
relationship.
- Requires turnkey assembly only with emphasis on engagements
requiring total box build and engineering support services.
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 continuous substantial investment 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 from plants
located in Gaylord and Saline, Michigan and Tampa, Florida. 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 at a
cost of approximately $700,000. The Gaylord facility now totals
approximately 72,000 square feet. The Tampa manufacturing plant was
originally housed in the corporate headquarters facility. In the first
quarter of 1997, the Company completed the construction of a 150,000 square
foot manufacturing and warehouse facility located adjacent to the corporate
headquarters building in Tampa. K-Byte Manufacturing completed the move
into this new facility in the first quarter of 1997. Both of these
manufacturing facilities are highly automated and capable of producing
assemblies and sub-assemblies in high, medium and low volume runs. They 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 approximately $225 million in annual contract
manufacturing net sales based on the types of business currently transacted
by K-Byte Manufacturing.
Competition
Both Reptron Distribution and K-Byte Manufacturing face substantial
competition. Many of the Company's competitors in each division have
significantly greater financial resources and broader name recognition than
the Company. Reptron Distribution faces competition from hundreds of
electronic component distributors of various sizes, locations and market
focuses (e.g., military, commercial, consumer) and competes principally on
the basis of product selection and value-added customer service. Vendor
representation and product diversity create a segmentation among
distributors. Reptron Distribution has several primary competitors that
carry similar significant Japanese semiconductor vendors. Reptron
Distribution attempts to differentiate itself from these competitors through
its wide offering of value-added services including contract manufacturing
(through K-Byte Manufacturing).
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 primary bases of competition in its markets are manufacturing
flexibility, price, manufacturing quality, advanced manufacturing technology
and reliable delivery. Many contract manufacturers
9
operate high-volume facilities and focus on target markets, such as the
computer industry, that K-Byte Manufacturing does not directly seek to
serve. The Company believes that by focusing on low-to medium-volume
productions, by manufacturing products using Reptron Distribution's product
line and by leveraging Reptron Distribution's sales force and customer base,
K-Byte Manufacturing can compete effectively.
Management Information Systems
The Company has made significant investments in computer hardware,
software and Management Information Systems ("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 written in a fourth
generation language. 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 twenty sales offices to the
corporate headquarters. In 1996, Reptron Distribution significantly
upgraded the software which operates its main warehouse in Tampa, Florida.
This upgrade combines bar code technology with sophisticated conveyor
systems and random 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 two businesses purchased in 1995 and is
expected to be sufficient for the Company's growth strategy. K-Byte
Manufacturing operates an integrated MRP II package which 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 strategy.
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 converting its present hardware and software systems
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. The internet address is: http://
www.reptron.com.
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 on the date on
which the backlog is computed. A growing percentage of Reptron
Distribution's sales are generated through its in-plant store value-added
program (See "Business-Reptron Distribution-Services"). These orders are
not included in backlog as the booking and billing are both recorded when
the customer pulls inventory from the in-plant store. In 1996, 19.8% of
Reptron Distribution's sales were generated by in-plant stores as compared
to 8.9% in 1995. Backlog for K-Byte Manufacturing totaled $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 representative of revenues 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.
10
Item 2. Properties
The Company occupies a number of facilities located throughout the United
States. Currently, it operates three manufacturing facilities, twenty sales
offices, one main warehouse and a corporate headquarters facility.
Owned facilities. 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. The Tampa sales office and telemarketing operations for
Reptron Distribution are also located in this facility. The Company also
owns a 150,000 square foot facility located on property adjacent to the
corporate headquarters facility. The Tampa K-Byte Manufacturing plant and
the main warehouse for Reptron Distribution occupy this 150,000 square foot
facility. This new building was completed in the first quarter of 1997 at a
cost of approximately $8.0 million, exclusive of land costs. These two
buildings, located in Tampa, Florida, have been financed through a portion
of the Company's long-term revolving credit facility (see "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources"). The debt outstanding on these
facilities totaled approximately $9.3 million as of December 31, 1996.
The Company also owns a 72,000 square foot K-Byte Manufacturing facility
in Gaylord, Michigan. This plant was constructed in 1988 and a 22,000
square foot addition was completed in the fourth quarter of 1995. The
Gaylord facility is subject to two mortgages totaling approximately
$983,000.
Leased facilities. The Company leases a 15,000 square foot facility in
Saline, Michigan which houses a K-Byte Manufacturing plant designed to
service smaller production runs. The Company also leases twenty office
suites serving as sales offices for Reptron Distribution. These offices
average approximately 2,000 square feet in size and contain a small space
for warehousing inventory and sales materials. Lease terms on these offices
range from three to five years and expire at various dates through June,
2001. One of these locations, in the Detroit area, is owned by the Chief
Executive Officer of the Company.
Item 3. 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 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.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the fiscal year ending December 31, 1996.
11
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The Company's common stock is traded on The NASDAQ National Market System
under the symbol "REPT". The following table sets forth for the periods
indicated, the high and low closing prices of the common stock as reported
by The NASDAQ National Market System.
Fiscal 1995 High Low
- ----------- ---- ---
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
Fiscal 1996 High Low
- ----------- ---- ---
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
On February 28, 1997, the last sale price of the common stock as reported
by The NASDAQ National Market System was $22 3/4 per share.
As of February 28, 1997 there were approximately 130 holders of record of
the Company's common stock and approximately 2,000 beneficial shareholders.
The Company has never declared or paid dividends on its common stock.
The Company does not intend for 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. The Company's current
line of credit restricts the payment of dividends to the lesser of $1.0
million or 25% of net income in any fiscal year without the approval of the
lenders.
12
Item 6. Selected Financial Data
<TABLE>
The following table summarizes selected financial data of the Company and should be read in conjunction
with Financial Statements and Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein.
Year Ended December 31,
----------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ---------
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
Operating Statement Data:
Net sales, Reptron Distribution $ 48,872 $ 71,346 $ 96,003 $ 140,146 $ 168,279
Net sales, 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
Gross profit, 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 taxes 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 number of shares
used in computing above amounts 4,442,069 4,442,069 5,713,808 6,170,265 6,179,231
========= ========= ========= ========= =========
</TABLE>
<TABLE>
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
Long-term obligations, including
note payable and current portion 15,763 28,797 20,798 65,110 67,345
Shareholders' equity 3,834 7,436 34,415 40,948 48,690
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion contains certain forward-looking statements regarding
future financial condition and results of operations and the Company's
business operations. The words "expect," "estimate," "anticipate,"
"predict," "believe" and similar expressions are intended to identify
forward-looking statements. Such statements involve risks, uncertainties
and assumptions, including industry and economic conditions, customer
actions and other factors discussed in this and the Company's other filings
with the Securities and Exchange Commission. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual outcomes may vary materially from those indicated.
13
General
Reptron Electronics, Inc. is an integrated electronics company operating
as a distributor of electronic components and a contract manufacturer of
electronic products.
Reptron Distribution has 20 sales offices, located throughout the United
States, which are supported from the corporate headquarters in Tampa. The
Tampa headquarters maintains centralized operations including corporate
product marketing, component programming, MIS, warehousing and division
senior management. Each branch sales office is connected to the Tampa
headquarters electronically by computer data lines.
Reptron Distribution sales are recognized upon shipment. Net sales from
Reptron Distribution to K-Byte Manufacturing are eliminated for Financial
Statement presentation. Cost of sales for Reptron Distribution includes
only the costs of materials (electronic components). Selling, general and
administrative expenses include salaries, sales commissions, fringe
benefits, telephone, training, rent, insurance, travel, entertainment, and
all other costs required to operate the division, including corporate
overhead charges.
In 1986, the Company began implementing its current strategy of
integrating contract manufacturing with electronics distribution with its
acquisition of K-Byte Manufacturing, which primarily offers contract
manufacturing services to its customers on a turnkey basis pursuant to
customer designs. In turnkey contracts, K-Byte Manufacturing purchases the
electronic components and other material used in assembly and charges for
these items in addition to its labor and manufacturing costs. For strategic
reasons, K-Byte Manufacturing does not pursue consignment business, in which
the customer supplies the product material and pays only for labor and
manufacturing costs. The Company believes that by retaining total
responsibility for material procurement it can achieve greater control of
the manufacturing process and can leverage the strengths of Reptron
Distribution. K-Byte Manufacturing's contracts with customers address the
customer's obligations relative to cancellation, component price increases,
engineering change notices, inventory (stores, work-in-process and vendor
stock) and payment terms.
K-Byte Manufacturing sales are recognized upon shipment. Cost of goods
sold for K-Byte Manufacturing includes the cost of materials, labor and
manufacturing overhead. K-Byte Manufacturing's selling, general and
administrative expenses include management and administrative salaries,
travel, entertainment, office expenses and corporate overhead charges.
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, and costs associated with these centralized
functions are allocated to each division through corporate overhead charges.
Additionally, each division can 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, that can expand as a result of internal growth and
acquisitions. Management believes this centralization also helps the
Company in its continuous efforts to reduce overhead expenses relative to
sales and thereby increase profitability.
14
Results of Operations
The following table sets forth, for the periods indicated, the percentage
of the Company's 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:
Year Ended December 31,
------------------------------
1994 1995 1996
-------- -------- --------
Net sales, Reptron Distribution .............. 58.5% 62.7% 62.6%
Net sales, 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%
======== ======== ========
Gross profit, 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 .............................. .9 1.2 1.5
-------- -------- --------
Earnings before income taxes ................. 5.9% 4.9% 4.8%
======== ======== ========
Net Earnings ................................. 3.6% 2.9% 2.8%
======== ======== ========
1996 Compared to 1995
Net Sales. Total net sales increased $45.6 million, or 20.4%, from
$223.3 million in 1995 to $268.9 million in 1996.
Reptron Distribution net sales increased $28.2 million, or 20.1%, from
$140.1 million in 1995 to $168.3 million in 1996. Net sales generated from
locations added as a result of the 1995 acquisitions of Cronin Electronics
and Western Micro Technology totaled approximately $30.4 million during
1996, of which approximately $7.0 million represents an increase for the
period that these locations did not operate during 1995. The memory module
division, established in December, 1995, generated an increase in net sales
of approximately $17.2 million. Approximately $800,000 of the net sales
increase was generated by a new sales branch. The remainder of the net
sales increase, approximately $3.2 million, or 2.3%, was generated by sales
offices with greater than twelve months of sales history with Reptron
Distribution. The largest customer of the Company, Tellabs, Inc., is a
customer of both Reptron Distribution and K-Byte Manufacturing. This
customer, accounts for approximately 15.7% of Reptron Distribution net
sales, 6.9% of K-Byte Manufacturing net sales and 12.4% of total Company net
sales. The highest volume sales office accounted for 21.4% of total Reptron
Distribution net sales.
Sales of semiconductors accounted for 74.8% of 1996 Reptron
Distribution's net sales, with the remaining sales generated from passive
components (20.2%) and electromechanical components (5%). The percentage of
1996 revenue 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. Reptron Distribution's major vendor lines
remained relatively stable in 1996, with sales generated from the top four
vendors accounting 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. Sales to new customers
accounted for approximately $4.5 million of increased sales in 1996. The
remainder of the increase in net sales, approximately $13.0 million, was
generated by the previously existing K-Byte Manufacturing customer
15
base. K-Byte Manufacturing transacted business with approximately 35
customers in 1996 with the largest three customers representing
approximately 16.1%, 10.1% and 8.9%, respectively, of K-Byte Manufacturing
1996 net sales (6.0%, 3.7% and 3.3% of total Company net sales). Sales to
customers in the telecommunications industry accounted for 22.3% of K-Byte
Manufacturing 1996 net sales, while sales to customers in the banking
industry accounted for 20.2% of net sales, and sales to the medical industry
accounted for 15.1% of net sales.
The Tampa, Florida manufacturing plant accounted for 60.4% of 1996 K-Byte
Manufacturing net sales, with the Gaylord, Michigan plant totaling 36.0% of
net sales and the Saline, Michigan, short production run plant accounting
for the remaining 3.6%.
Gross Profit. Total gross profit increased $11.6 million, or 29.1%, from
$40.2 million in 1995 to $51.8 million in 1996. The gross profit percentage
for the Company increased from 18.0% in 1995 to 19.3% in 1996.
Reptron Distribution's gross profit increased $6.9 million, or 25.0%,
from $27.5 million in 1995 to $34.4 million in 1996 and the gross profit
percentage increased from 19.6% in 1995 to 20.4% in 1996. Fourth quarter
gross profit percentage increased from 19.0% in 1995 to 20.8% in 1996. This
increase in gross profit percentage was generated despite the negative
impact of lower margin sales generated by the memory module division. Sales
in this niche are characterized by high volumes, lower gross profit margins
and lower selling and administrative expenses than other electronic
component sales generated by Reptron Distribution. The increase in fourth
quarter and annual gross profit margins in 1996 is primarily the result of
an increase in the percentage of sales that were generated from Reptron
Distribution's value-added services. Value-added sales generally carry
higher gross profit percentages than traditional electronic component sales.
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. The gross profit
percentage increased from 15.2% in 1995 to 17.4% in 1996. Fourth quarter
gross profit percentage increased from 14.3% in 1995 to 18.7% in 1996.
Price reductions for many types of electronic components used by K-Byte
Manufacturing have helped improve annual and fourth quarter gross profit
margins. In addition, the increase in net sales has resulted in higher
fixed overhead cost absorption allowing for higher gross profit 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. The Western Micro
Technology and Cronin Electronics acquisitions accounted for approximately
$1.1 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 $1.2 million, or 45.5%,
from $2.8 million in 1995 to $4.0 million in 1996. This increase resulted
primarily from an increase in the average outstanding working capital debt
of approximately $16.0 million or 46.7% from $34.3 million during 1995 to
$50.3 million during 1996. The Western Micro Technology and Cronin
Electronics acquisitions resulted in cash expenditures totaling
approximately $12.6 million. These acquisitions, along with substantial
increases in net sales, have required significantly higher amounts of
working capital bank debt.
16
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 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 Cronin Electronics and Western Micro Technology acquisitions 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. No single branch office accounted for greater than 12.6% of
Reptron Distribution net sales and the largest customer represented 6.4% of
Reptron Distribution net sales (4.0% of total Company net sales).
Sales of semiconductors accounted for 73.8% of 1995 Reptron
Distribution's net sales, with the remaining sales generated from passive
components (21.0%) and electromechanical components (5.2%). The percentage
of 1995 revenue generated by semiconductor sales increased in the second
half of 1995, primarily as a result of the purchase of Western Micro
Technology. Western Micro Technology generated all of its revenue from
semiconductor sales prior to the acquisition. Reptron Distribution's major
vendor lines remained relatively stable in 1995 with sales generated from
the top five vendors increasing $39.3 million in 1995. Sales from new
vendor lines accounted for $9.0 million of 1995 Reptron Distribution net
sales.
K-Byte Manufacturing 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. K-Byte transacted business with approximately 25
customers in 1995 with the largest three customers representing
approximately 15.1%, 9.4% and 8.1%, respectively, of K-Byte Manufacturing
1995 net sales (5.6%, 3.5% and 3.0% of total Company net sales). Sales to
customers in the telecommunications industry accounted for 27.9% of K-Byte
Manufacturing 1995 net sales, while sales to customers in the banking
industry accounted for 20.4% of net sales, and sales to the medical industry
accounted for 10.6% of net sales.
The Tampa, Florida manufacturing plant accounted for 58.7% of 1995 K-Byte
Manufacturing net sales, with the Gaylord, Michigan plant totaling 36.8% of
net sales and the Saline, Michigan, short production run plant accounting
for the remaining 4.5%. The percentage of K-Byte Manufacturing net sales
generated from the Tampa, Florida facility increased 6.2% in 1995 resulting
primarily from three new customers placing orders with this plant.
Gross Profit. Total gross profit increased $10.0 million, or 32.9%, from
$30.2 million in 1994 to $40.2 million in 1995. The gross profit percentage
for the Company 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 the gross profit
percentage remained unchanged at 19.6% in both 1994 and 1995. However,
fourth quarter gross profit percentage decreased from 19.9% in 1994 to 19.0%
in 1995. This fourth quarter reduction resulted primarily from
semiconductor sales generated on the West Coast from the Western Micro
Technology acquisition because this region is characterized by higher sales
volumes at lower gross profit margins. Additionally, pricing for certain
memory components decreased in the fourth quarter resulting in lower gross
profit margins.
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. The gross profit
percentage decreased from 16.8% in 1994 to 15.2% in 1995. The decrease in
K-Byte gross profit margins resulted primarily from a change in the mix of
business and continues to reflect a very competitive industry.
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 Western Micro
Technology and Cronin Electronics acquisitions accounted for approximately
$3.4 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.
17
Interest Expense. Interest expense increased $1.3 million, or 87.7%,
from $1.5 million in 1994 to $2.8 million in 1995, primarily as a result of
higher levels of working capital debt incurred in 1995. The Western Micro
Technology and Cronin Electronics acquisitions resulted in cash expenditures
totaling approximately $12.6 million. These acquisitions, along with
substantial increases in net sales, have required significantly higher
amounts of working capital bank debt. Borrowings under the bank credit line
increased from $16.0 million on December 31, 1994 to $52.1 million on
December 31, 1995.
Currency Fluctuation
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 substantial
adverse effects from currency fluctuations to date.
Liquidity and Capital Resources
Since 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 March 28, 1994, the
Company completed its initial public offering of common stock. On April 5,
1994, the Company received net proceeds totaling $21.1 million from the
offering, which was used to reduce the bank credit line.
The Company is a party to an Amended and Restated Revolving Credit and
Reimbursement Agreement dated June 29, 1995 (the "Credit Agreement").
Pursuant to the Credit Agreement, 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 Credit Agreement, 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 Credit Agreement ranged from 7.25% to 8.25% as of December
31, 1996. Borrowings under the Credit Agreement are collateralized by all
of the Company's inventory and accounts receivable. The Credit Agreement
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 Credit Agreement
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 Credit
Agreement is scheduled to terminate on June 30, 1999 but may be extended by
agreement.
The Company has entered into various capital lease transactions with several
leasing companies to finance capital expenditures, primarily in 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 at 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 increase in Reptron Distribution's inventory turns from a
fourth quarter average of 4.0 times in 1995 to 5.3 times in 1996. K-Byte
Manufacturing inventory turns decreased from a fourth quarter average of 4.0
times in 1995 to 3.5 times in 1996. The complex process associated with
integrating ten new customers, representing over 290 different circuit board
assemblies, into the K-Byte Manufacturing production process is the primary
reason for the reduced inventory turns in 1996. The Company's accounts
receivable collections averaged 51 days as of December 31, 1996.
The Company's capital expenditures, including capital leases, were
approximately $8.0 million in 1994, $10.3 million in 1995 and $12.7 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 (see "Properties").
These items accounted for approximately $4.0 million of the 1994 capital
expenditures total. In 1995, the
18
Company added 22,000 square feet onto 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 will be used as the main warehouse for Reptron Distribution and the
Tampa K-Byte Manufacturing facility. These items accounted for
approximately $2.8 million of the 1995 capital expenditures total. The
continuing construction of the 150,000 square foot building accounted for
approximately $3.5 million of the 1996 capital expenditures. Reptron
Distribution warehouse equipment represented approximately $600,000 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 capital
leases and bank financing.
In 1995, the acquisitions of Cronin Electronics and the electronic
components distribution business of Western Micro Technology was financed
through a combination of cash and assumption of specified liabilities. Of
the approximately $6.2 million and $13.3 million total consideration,
respectively, approximately $12.6 million was in cash with the remainder in
the form of assumption of specified liabilities. The cash payment was
funded by the bank credit line.
The Company believes that cash generated from operations and available
credit facilities will be sufficient for the Company to meet its capital
expenditures and working capital needs for its operations as presently
conducted. 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.
19
Item 8. Financial Statements and Supplementary Data
The financial statements required by this Item are contained in pages F-1
through F-23 of this Report.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this Item is incorporated by reference to the
definitive proxy statement to be filed by the Company for the Annual Meeting
of Shareholders to be held April 15, 1997.
Item 11. Executive Compensation
Information required by this Item is incorporated by reference to the
definitive proxy statement to be filed by the Company for the Annual Meeting
of Shareholders to be held April 15, 1997.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this Item is incorporated by reference to the
definitive proxy statement to be filed by the Company for the Annual Meeting
of Shareholders to be held April 15, 1997.
Item 13. Certain Relationships and Related Transactions
Information required by this Item is incorporated by reference to the
definitive proxy statement to be filed by the Company for the Annual Meeting
of Shareholders to be held April 15, 1997.
20
REPTRON ELECTRONICS, INC.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Page
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-22
Schedule II -- Valuation and Qualifying Accounts for
the years ended December 31, 1994, 1995 and 1996 F-23
F-1
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
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
December 31,
1995 1996
-------- --------
<S> <C> <C>
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
======= =======
The accompanying notes are an integral part of these statements.
F-3
</TABLE>
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands except share and per share data)
Year Ended December 31,
----------------------------------
1994 1995 1996
---------- ---------- ----------
<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 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
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands, except share data)
Total Additional
Shares Par Paid-In Retained Shareholders'
Outstanding Value Capital Earnings Equity
----------- ----- -------- -------- --------
<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
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended December 31,
--------------------------
1994 1995 1996
------- ------- -------
<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 obligations 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
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 an integrated electronics
company operating as a national distributor of electronic components
("Reptron Distribution") and a contract manufacturer of electronic products
("K-Byte Manufacturing"). Reptron Distribution is authorized to sell over
60 vendor lines of semiconductors, passive products and electromechanical
components to customers representing diverse industries throughout the
country. K-Byte Manufacturing produces electronic products for a select
number of customers throughout the country representing a diverse range of
industries.
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.
F-7
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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.
7. Impairment of Assets
--------------------
The Company's policy is to periodically review and evaluate whether there
has been a permanent impairment in the value of long-lived assets, certain
identifiable intangibles and goodwill. Factors considered in the valuation
include current operating results, trends and anticipated undiscounted
future cash flows. There have been no impairment losses in 1994, 1995 or
1996.
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 bank credit line, 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.
F-8
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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, and are not included as the pro-forma affect 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.
NOTE B - STATEMENTS OF CASH FLOWS
Supplemental disclosures of cash flow information (in thousands):
<TABLE>
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):
Fair value of assets acquired $ 19,467
Cash paid (12,629)
-------
Liabilities assumed $ 6,838
=======
F-9
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
NOTE C - INVENTORIES
Inventories consist of the following (in thousands):
December 31,
------------------
1995 1996
-------- --------
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
====== ======
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following (in thousands):
December 31,
----------------
1995 1996
------ ------
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
====== ======
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-10
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
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 "Credit Agreement").
Pursuant to the Credit Agreement, 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 Credit Agreement, 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 Credit Agreement ranged from 7.25% to 8.25% as of December
31, 1996. Borrowings under the Credit Agreement are collateralized by all
of the Company's inventory and accounts receivable. The Credit Agreement
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 Credit Agreement
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 Credit
Agreement 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-tern borrowings on December 31, 1996.
F-11
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
NOTE F - LONG-TERM OBLIGATIONS
Long-term obligations consist of the following at December 31 (in thousands):
<TABLE>
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 an 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-12
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
NOTE F - LONG-TERM OBLIGATIONS - Continued
At December 31, 1996, aggregate maturities of long-term obligations are as
follows (in thousands):
Year ending December 31,
------------------------
1997 $ 3,560
1998 3,755
1999 2,871
2000 2,622
2001 2,018
Thereafter 3,969
------
$18,795
======
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):
December 31,
------------------------------
1994 1995 1996
------ ------ ------
Current $3,454 $3,974 $4,560
Deferred 369 350 588
----- ----- -----
$3,823 $4,324 $5,148
===== ===== =====
F-13
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
NOTE G - INCOME TAXES - Continued
The Company's effective tax rate differs from the statutory U. S. federal
income tax rate as a result of the following:
Year Ended December 31,
-----------------------
1994 1995 1996
------ ------ ------
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%
==== ==== ====
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.
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):
December 31
-----------------
1995 1996
------ ------
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)
===== ======
A valuation allowance has not been recorded against the deferred tax assets
for 1995 and 1996.
F-14
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 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 CEO 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 CEO
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):
Year ending December 31,
------------------------
1997 $1,167
1998 870
1999 544
2000 221
2001 73
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 CEO of the Company.
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.
F-15
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
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>
Range Weighted Weighted
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-16
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
NOTE J - EMPLOYEE BENEFITS - Continued
<TABLE>
The following table summarizes information about Common Stock options outstanding at December
31, 1996:
Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Prices at 12/31/96 Contractual Life Price at 12/31/96 Price
- --------------- ----------- ---------------- --------- ----------- --------
(In Years)
<S> <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.
F-17
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
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.
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.
Year Ended December 31,
-----------------------
1994 1995
-------- --------
(in thousands, except share data)
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
F-18
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
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-19
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
NOTE N - FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS - 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.
Year Ended December 31,
----------------------------------
1994 1995 1996
-------- -------- --------
(in thousands)
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
======= ======= =======
F-20
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1995 and 1996
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
1996
----
Net sales $66,551 $66,092 $65,953 $70,341
Gross profit 11,982 13,199 12,594 14,074
Operating income 3,936 4,183 4,200 4,507
Net earnings 1,519 1,905 2,017 2,212
Net earnings per common share $ .25 $ .31 $ .33 $ .36
</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 reduction in their level of purchasing could have a
material impact on the Compnay's business and results of operations.
F-21
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 Annual Report on SEC Form 10-K for the year ended
December 31, 1996, 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-22
SCHEDULE II
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
Valuation and Qualifying Accounts
For the Years Ended December 31, 1994, December 31, 1995 and December 31, 1996
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-23
PART IV
Item 14. Exhibits, Financial Statements, Schedule, and Reports on Form 8-K
(a) The following documents are filed as part of the report:
1. and 2. The financial statements and schedule filed as part
of this report are listed separately in the Index to Financial
Statements and Schedule beginning on page F-1 of this report.
3. For Exhibits see Item 14(c), below. Each management
contract or compensatory plan or arrangement required to be
filed as an exhibit hereto is listed in Exhibits Nos. 10.17,
10.18 and 10.19 of Item 14(c), below.
(b) No reports on Form 8-K have been filed during the period ended
December 31, 1996, by the Company.
(c) List of Exhibits:
Exhibit No. Description
- ----------- -----------
3.1 Articles of Incorporation*
3.2 Bylaws*
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*
21
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 dated as of May 28, 1992*
10.20 Master Purchase Agreement 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. *****
22
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.
23.1 Consent of Grant Thornton LLP
- -----------
* 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 the Company's Form 10-K for the year ended December
31, 1995.
(d) 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.
23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereto duly authorized, in the
City of Tampa, State of Florida, on February 28, 1997.
REPTRON ELECTRONICS, INC.
By:/s/ Michael L. Musto
------------------------------------------
Michael L. Musto, President
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ Michael L. Musto
- ---------------------------
Michael L. Musto President, Chief Executive
Officer, and Director
(Principal Executive Officer) February 28, 1997
/s/ Paul J. Plante
- ----------------------------
Paul J. Plante Chief Financial Officer and
Director (Principal Financial
and Accounting Officer) February 28, 1997
/s/ Leigh A. Adams
- ----------------------------
Leigh A. Adams Secretary and Director February 28, 1997
/s/ William L. Elson
- -----------------------------
William L. Elson Director February 28, 1997
/s/ Barry M. Alpert
- -----------------------------
Barry M. Alpert Director February 28, 1997
24
Supplemental Information to be Furnished with Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
Annual Reports to the Shareholders and proxy materials will be furnished to
the shareholders subsequent to the filing of this annual report on Form 10-
K. The registrant will furnish copies of such materials to the Commission
when they are sent to the shareholders.
25
EXHIBIT 10.38
AMENDMENT AGREEMENT NO. 2
THIS AMENDMENT AGREEMENT NO. 2 (the "Amendment Agreement") is made
and entered into as of this 15th day of March, 1996 by and among REPTRON
ELECTRONICS, INC., a Florida corporation having its principal place of
business in Tampa, Florida (the "Borrower"), NATIONSBANK, NATIONAL
ASSOCIATION (SOUTH) (f/k/a NationsBank of Florida, National Association), a
national banking association in its capacity as agent (the "Agent") for each
of the lenders (the "Lenders") now or hereafter party to the Credit
Agreement (defined below), and each of the undersigned Lenders. Unless the
context otherwise requires, all terms used herein without definition shall
have the respective definitions provided therefor in the Credit Agreement.
W I T N E S S E T H
WHEREAS, the Borrower, the Agent and the Lenders have entered into that
certain Amended and Restated Revolving Credit and Reimbursement Agreement
dated June 29, 1995 whereby the Lenders have made available to the Borrower
(i) a $55,000,000 revolving credit facility, which shall include a letter of
credit facility of up to $500,000 and (ii) a $9,942,917 direct pay letter of
credit facility (together with the exhibits and schedules attached thereto,
as the same has been amended by Amendment Agreement No. I dated as of
December 15, 1995 and as the same may be hereafter amended, restated or
supplemented, the "Credit Agreement"); and
WHEREAS, the Borrower has requested that the Lenders amend the Credit
Agreement;
WHEREAS, upon the terms and conditions contained herein, the Agent
and the Lenders are willing to amend the Credit Agreement in the manner set
forth herein;
NOW, THEREFORE, in consideration of the premises and conditions
herein set forth, it is hereby agreed as follows:
1. Credit Agreement Amendments. Subject to the conditions hereof,
the Credit Agreement is hereby amended, effective as of the date hereof, as
follows:
(a) Section 10.3 of the Credit Agreement is hereby amended by
deleting the words "prior to" from the first line thereof and
inserting, in lieu thereof, the word "after".
(b) Section ll.l(a) of the Credit Agreement is hereby amended
by deleting the date "June 29, 1995" and inserting, in lieu thereof,
the date "September 30, 1995".
(c) Section 11.2(iii) of the Credit Agreement is hereby
amended by deleting the amount "$1,000,000" and inserting, in lieu
thereof, the amount "$1,100,000".
(d) Section 11.6 of the Credit Agreement is hereby amended by
(i) deleting the amount "8,000,000" and inserting, in lieu thereof,
the amount "11,000,000" and (ii) deleting the amount "13,000,000"
and inserting, in lieu thereof, the amount "10,000,000".
(e) From and after the date of this Amendment Agreement,
the term "NationsBank" as defined in the Credit Agreement,
shall no longer mean NationsBank of Florida, National Association,
but shall mean NationsBank, National Association (South) in its
capacity as a Lender and (ii) the term "Agent", as defined in the
Credit Agreement, shall no longer mean NationsBank of Florida,
National Association, but shall mean NationsBank, National
Association (South) in its capacity as the agent for the Lenders.
2. Representations and Warranties. In order to induce the Agent
and NationsBank to enter into this Amendment Agreement, the Borrower hereby
represents and warrants that the Credit Agreement has been re-examined by
the Borrower and that except as disclosed by the Borrower in writing to the
Lenders as of the date hereof:
(a) The representations and warranties made by the Borrower
in Article VIII thereof are true on and as of the date hereof;
(b) There has been no material adverse change in the
condition, financial or otherwise,, of the Borrower and its
Subsidiaries since the date of the most recent financial reports of
the Borrower delivered to the Agent under Section 10.2 thereof, other
than changes in the ordinary course of business;
(c) The business and properties of the Borrower and its
Subsidiaries are not, and since the date of the most recent financial
reports of the Borrower delivered to the Agent under Section 10.2
thereof, have not been, adversely affected in any substantial way as
the result of any fire, explosion, earthquake, accident, strike,
lockout, combination of workers, flood, embargo, riot, activities of
armed forces, war or acts of God or the public enemy, or cancellation
or loss of any major contracts; and
(d) After giving effect to this Amendment Agreement, no
condition exists which, upon the effectiveness of the amendment
contemplated hereby, would constitute a Default or an Event of
Default on the part of the Borrower under the Credit Agreement or the
Notes, either immediately or with the lapse of time or the giving of
notice, or both.
3. Conditions Precedent. The effectiveness of this Amendment
Agreement is subject to the receipt by the Agent of the following:
2
(I) four counterparts of this Amendment Agreement duly
executed by the Borrower and the Required Lenders;
(ii) copies of all additional agreements, instruments
and documents which the Agent may reasonably request, such
documents, when appropriate, to be certified by appropriate
governmental authorities.
All proceedings of the Borrowers relating to the matters provided f or
herein shall be satisfactory to the Lenders, the Agent and their counsel.
4. Entire Agreement. This Amendment Agreement sets forth the
entire understanding and agreement of the parties hereto in relation to the
subject matter hereof and supersedes any prior negotiations and agreements
among the parties relative to such subject matter. No promise, condition,
representation or warranty, express or implied, not herein set forth shall
bind any party hereto, and no one of them has relied on any such promise,
condition, representation or warranty. Each of the parties hereto
acknowledges that, except as in this Amendment Agreement otherwise expressly
stated, no representations, warranties or commitments, express or implied,
have been made by any party to the other. None of the terms or conditions
of this Amendment Agreement may be changed, modified, waived or canceled
orally or otherwise, except by writing, signed by all the parties hereto,
specifying such change, modification, waiver or cancellation of such terms
or conditions, or of any proceeding or succeeding breach thereof.
5. Full Force and Effect of Agreement. Except as hereby
specifically amended, modified or supplemented, the Credit Agreement and all
other Loan Documents are hereby confirmed and ratified in all respects and
shall remain in full force and effect according to their respective terms.
6. Counterparts. This Amendment Agreement may be executed in any
number of counterparts, each of which shall be deemed an original as against
any party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.
7. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS
BE GOVERNED BY THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY
OTHERWISE APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY
(i) SUBMITS TO THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF
FLORIDA FOR THE PURPOSES OF RESOLVING DISPUTES HEREUNDER OR UNDER ANY OF THE
OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY OR FOR PURPOSES OF COLLECTION
AND
(ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
S. Enforceability. Should any one or more of the provisions of
this Amendment Agreement be determined to be illegal or unenforceable as to
one or more of the parties hereto, all other
3
provisions nevertheless shall remain effective and binding on the parties
hereto.
9. Credit Agreement. All references in any of the Loan
Documents to the Credit Agreement shall mean and include the Credit
Agreement as amended hereby.
10. Successors and Assigns. This Amendment Agreement shall
be binding upon and inure to the benefit of each of the Borrower, the
Lenders, the Agent and their respective successors, assigns and legal
representatives; provided, however, that the Borrower, without the prior
consent of the Lenders, may not assign any rights, powers, duties or
obligations hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of
the day and year first above written.
BORROWER:
REPTRON ELECTRONICS, INC.
By:
-------------------------------
Name:
---------------------------
Title:
--------------------------
NATIONSBANK, NATIONAL ASSOCIATION,
(SOUTH) (f/k/a NationsBank of
Florida, National
Association), as Agent for the
Lenders and as Lender
By:
-----------------------------
Name: Nancy Pearson
-------------------------
Title: Senior Vice President
------------------------
PNC BANK, KENTUCKY, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
4
THE SUMITOMO BANK, LIMITED
By:
---------------------------------
Name:Allen L. Harvell, Jr.
------------------------------
Title:Vice President and Manager
-----------------------------
By:
---------------------------------
Name:Brian M, Smith
------------------------------
Title: Sr. Vice President and RM (E)
------------------------------
BARNETT BANK OF TAMPA
By:
----------------------------------
Name:
-------------------------------
Title:
------------------------------
EXHIBIT 10.39
. AMENDMENT AGREEMENT
NO. 3,
TO THE AMENDED AND RESTATED
REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT AGREEMENT NO. 3 TO THE AMENDED AND RESTATED REVOLVING
CREDIT AND REIMBURSEMENT AGREEMENT (the "Amendment Agreement") is made and
entered into as of the 25th day of, September, 1996 by and among REPTRON
ELECTRONICS, INC., a Florida corporation having its principal place of
business in Tampa, Florida (the "Borrower"), NATIONSBANK, NATIONAL
ASSOCIATION (SOUTH) (f/k/a NationsBank of Florida, National Association), a
national banking association ("NationsBank") in its capacity as agent (the
"Agent") for each of the lenders (the "Lenders") now or hereafter party to
the Credit Agreement (defined below) , and each of the undersigned Lenders.
Unless the context otherwise requires, all terms used herein without
definition shall have the respective definitions provided therefor in the
Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders have entered into
that certain Amended and Restated Revolving Credit and Reimbursement
Agreement dated June 29, '1995 whereby the Lenders have made available to
the Borrower (i) a $55,000,000 revolving credit facility, which shall
include a letter of credit facility of up to $500,000 and (ii) a $9,942,917
(as reduced from time to time in accordance with the terms thereof) direct
pay letter of credit facility (together with the exhibits and schedules
attached thereto, as the same has been amended by Amendment Agreement No. 1
dated as of December 15, 1995 and by Amendment Agreement No. 2 dated as of
March 15, 1996, and as the same may be hereafter amended, restated or
supplemented, the "Credit Agreement"); and
WHEREAS, the Borrower has requested that the Lenders amend the Credit
Agreement; and
WHEREAS, upon the terms and conditions contained herein, the Agent
and the Lenders are willing to amend the Credit Agreement in the manner set
forth herein;
NOW, THEREFORE, in consideration of the premises and conditions
herein set forth, it is hereby agreed as follows:
1. Credit Agreement Amendments. Subject to the conditions hereof,
the Credit Agreement is hereby amended, effective as of the date hereof, as
follows:
(a) The Preliminary Statement thereof, in its Section
(1)(iii), is hereby amended by deleting the amount 11 9,942,91711
and inserting, in lieu thereof, the amount and
phrase "$ 9, 94 2, 91 (as reduced from time to time in accordance
with the terms thereof)".
(b) Section 1. 1 thereof is hereby amended to include in
the appropriate alphabetical order the following definition:
"`Consolidated Operating Lease Expense', means the
gross amount of all lease or rental payments, whether or
not characterized as rent, of the Borrower and its
Subsidiaries, excluding payments in respect of
Capitalized Lease Obligations, all determined on a
consolidated basis in accordance with GAAP."
(c) Section 1.1 thereof is hereby further amended as
follows:
(i) The definition of "Applicable L/C Fee" is hereby
amended (A) by deleting the phrases "(i)" and "(ii)
the Consolidated Fixed Charge Ratio," and (B) by
deleting, in its entirety, its existing schedule of
ratios and by inserting, in lieu thereof, the following
schedule:
Applicable
"Consolidated Leverage L/C Fee
--------------------- ----------
(a) Less than or equal to 1 3/4%
.65 to 1.00
(b) Less than or equal to 1 1/2%
.60 to 1.00
(c) Less than or equal to 1 1/4%
.50 to 1.00
(d) Less than or equal to 1%"
.40 to 1.00
(ii) The definition of "Applicable Margin" is hereby amended
(A) by deleting the phrases
"(i)" and "(ii) the Consolidated Fixed Charge Ratio,"
and (B) by deleting, in its entirety, its existing
schedule of ratios and by inserting, in lieu thereof,
the following schedule:
Applicable Margin
Eurodollar Unused
"Consolidated Leverage Loan Fee
--------------------- ---------- ------
(a) Less than or equal to 1 7/8% 1/2%
.65 to 1.00
(b) Less than or equal to 1 5/8% 3/8%
.60 to 1.00
(c) Less than or equal to 1 3/8% 3/10%
.50 to 1.00
(d) Less than or equal to 1 1/8% 11/40%"
.40 to 1.00
2
(iii) The definition of "Consolidated Fixed Charge Ratio" is
hereby amended and restated in its entirety as follows:
"'Consolidated Fixed Charge Ratio', means,
with respect to the Borrower and its Subsidiaries
for the Four-Quarter Period ending on the date of
computation thereof, the ratio of (a) Consolidated
EBITDA plus Consolidated Operating Lease Expense
to (b) Consolidated Fixed Charges."
(iv) The definition of "Consolidated Fixed Charges" is
hereby amended and restated in its entirety as follows:
"`Consolidated Fixed Charges' means, with
respect to the Borrower and its Subsidiaries, for
the period of computation thereof, the sum of,
without duplication, (i) Consolidated Interest
Expense, (ii) Consolidated Operating Lease
Expense, and (iii) required principal payments
during such period of Consolidated Indebtedness."
(v) The definition of "Revolving Credit Termination Date"
is hereby amended by deleting the date "June 30, 1998"
and inserting, in lieu thereof, the date "June 30,
1999".
(vi) The definition of "Total Facilities Commitment" is
hereby amended and restated in its entirety as follows:
"`Total Facilities Commitment' means the
Total Revolving Credit Commitment plus the Direct
Pay Letter of Credit Commitment."
(d) Section ll.l(b) thereof is hereby amended and restated in its
entirety as follows:
"(b) Consolidated Leverage Ratio. The Consolidated Leverage
Ratio as at the end of any Fiscal Quarter to be greater than .65 to
1.00."
(e) Section 11.2(iii) thereof is hereby amended by deleting the
amount "1,100,000" and inserting, in lieu thereof, the amount
"5,000,000."
3
(f) Section 11. 6 thereof is hereby amended by (i) deleting
the phrase "$10,000,000 in Fiscal Year 1996" and inserting, in lieu
thereof, the phrase "$15,000,000 in Fiscal Year 1996", and by (ii)
deleting the phrase "$7,000,000 in any Fiscal Year thereafter." and
inserting, in lieu thereof, the phrase "$10,000,000 in any Fiscal
Year thereafter."
(g) Exhibit G to the Credit Agreement is hereby deleted in
its entirety and replaced by Exhibit A as attached hereto.
2. Representations and Warranties. In order to induce the Agent and
the Lenders to enter into this Amendment Agreement, the Borrower hereby
represents and warrants that the Credit Agreement has been re-examined by
the Borrower and that except as disclosed by the Borrower in writing to the
Lenders as of the date hereof:
(a) The representations and warranties made by the Borrower
in Article VIII thereof are true on and as of the date hereof;
(b) There has been no material adverse change in the
condition, financial or otherwise, of the Borrower and its
Subsidiaries since the date of the most recent financial reports of
the Borrower delivered to the Agent under Sections 10.1 and 10.2
thereof, other than changes in the ordinary course of business;
(c) The business and properties of the Borrower and its
Subsidiaries are not, and since the date of the most recent financial
reports of the Borrower delivered to the Agent under Sections 10.1
and 10.2 thereof, have not been, adversely affected in any
substantial way as the result of any fire, explosion, earthquake,
accident, strike, lockout, combination of workers, flood, embargo,
riot, activities of armed forces, war or acts of God or the public
enemy, or cancellation or loss of any major contracts; and
(d) After giving effect to this Amendment Agreement, no
condition exists which, upon the effectiveness of the amendment
contemplated hereby, would constitute a Default or an Event of
Default on the part of the Borrower under the Credit Agreement or the
Notes, either immediately or with the lapse of time or the giving of
notice, or both.
3. Conditions Precedent. The effectiveness of this
Amendment Agreement is subject to the receipt by the Agent of the
following:
(i) five counterparts of this Amendment Agreement duly
executed by all signatories hereto;
4
(ii) resolutions of the Board of Directors or other
governing body of the Borrower- approving this Amendment
Agreement certified by the Secretary of the Borrower; and
(iii) copies of all additional agreements,
instruments and documents which the Agent may reasonably
request, such documents, when appropriate, to be certified by
appropriate governmental authorities.
All proceedings of the Borrowers relating to the matters provided for herein
shall be satisfactory to the Lenders, the Agent and their counsel.
4. Entire Agreement. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition,
representation or warranty, express or implied, not herein set forth shall
bind any party hereto, and no one of them has relied on any such promise,
condition, representation or warranty. Each of the parties hereto
acknowledges that, except as in this Amendment Agreement otherwise expressly
stated, no representations, warranties or commitments, express or implied,
have been made by any party to the other. None of the terms or conditions
of this Amendment Agreement may be changed, modified, waived or canceled
orally or otherwise, except by writing, signed by all the parties hereto,
specifying such change, modification, waiver or cancellation of such terms
or conditions, or of any proceeding or succeeding breach thereof.
5. Full Force and Effect of Agreement. Except as hereby
specifically amended, modified or supplemented, the Credit Agreement and all
other Loan Documents are hereby confirmed and ratified in all respects and
shall remain. in full force and effect according to their respective terms.
6. Counterparts. This Amendment Agreement may be executed in any
number of counterparts, each of which shall be deemed an original as against
any party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.
7. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY (i) SUBMITS
TO THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR
THE PURPOSES OF RESOLVING DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY OR FOR PURPOSES OF COLLECTION AND
(ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
8. Enforceability. Should any one or more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one
or more of the parties hereto, all other
5
provisions nevertheless shall remain effective and binding on the parties
hereto.
9. Credit Agreement. All references in any of the Loan Documents to
the Credit Agreement shall mean and include the Credit Agreement as amended
hereby.
10. Successors and Assigns. This Amendment Agreement shall be
binding upon and inure to the benefit of each of the Borrower, the Lenders,
the Agent and their respective successors, assigns and legal
representatives; provided, however, that the Borrower, without the prior
consent of the Lenders, may not assign any rights, powers, duties or
obligations hereunder.
[remainder of this page left blank intentionally]
6
IN WITNESS WHEREOF,, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of
the day and year first above written.
BORROWER:
REPTRON ELECTRONICS, INC.
By:
---------------------------------
Name: Paul J. Plante
-----------------------------
Title: Vice President - Finance
----------------------------
Signature Page 1 of 5
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Agent for the Lenders
By:
---------------------------------
Name: Lori Stone
------------------------------
Title: Vice President
----------------------------
NATIONSBANK, NATIONAL ASSOCIATION
(SOUTH), as Lender
By:
----------------------------------
Name: Lori Stone
------------------------------
Title: Vice President
------------------------------
Signature Page 2 of 5
PNC BANK, KENTUCKY, INC.
By:
------------------------------
Name: Ralph A. Phillips
--------------------------
Title: Vice President
--------------------------
Signature Page 3 of 5
THE SUMITOMO BANK, LIMITED
By:
-----------------------------
Name: Allen L. Harvell, Jr.
-----------------------
Title: Vice President & Mgr.
By:
-----------------------------
Name: M. Phillip Freeman
------------------------
Title: Vice Preisdent
-----------------------
Signature Page 4 of 5
BARNETT BANK, N.A.
By:
----------------------------
Name: David Austin
-----------------------
Title: Vice President
----------------------
Signature Page 5 of 5
EXHIBIT A
to Amendment
EXHIBIT G
Compliance Certificate
To: NationsBank, National Association (South) as Agent
901 Main Street, 67th Floor
Dallas, Texas 75202
Attention: Corporate Banking Department Nancy Pearson
With a copy to: NationsBank, National Association (South) as Agent
One Independence Center
101 North Tryon Street
NCl-001-15-04
Charlotte, North Carolina 28255
Telefacsimile: 704/386-9923
Attention: Marie Garcelon, Agency Services
Reference is hereby made to the Amended and Restated Revolving Credit
and Reimbursement Agreement dated as of June 29, 1995 as the same has been
amended by Amendment Agreement No. 1 dated December 15, 1995, by Amendment
Agreement No. 2 dated March 15, 1996, and by Amendment Agreement No. 3 dated
September 25, 1996 (the "Agreement") among Reptron Electronics, Inc. (the
"Borrower"), the Lenders party thereto and NationsBank, National Association
(South) as Agent for the Lenders. Capitalized terms used but not defined
herein shall have the respective meanings therefor set forth in the
Agreement. The undersigned, a duly authorized and acting Authorized
Officer, hereby certifies to you as of -----------------(insert most recent
Fiscal Quarter or Fiscal Year end, the "Determination Date',] as follows':
1. Calculations:
A. Compliance with Section ll.l(a):
- ----------------------------
'If this Certificate is
delivered in connection with an Acquisition pursuant to the Agreement, as
indicated by the signature of the Authorized Representative in the following
space: . then the calculations provided in
this Certificate include applicable financial information and results of
operations on a consolidated historical pro forma basis of both the Person
to be acquired, . [insert name of Person to be acquired] and
the Borrower and its Subsidiaries, all as of and for the period ending on
the Determination Date specified in the compliance certificate most recently
required to be furnished to you pursuant to Section 10.6 of the Agreement.
Consolidated Tangible Net Worth
1. Consolidated Tangible Net Worth required to be maintained as at
the end of the immediately preceding Fiscal Quarter
(At least $34,000,000) $
2. Consolidated Net Income during the current Fiscal
Quarter x 75%. $
3. 100% of aggregate amount of equity offering proceeds since
Closing Date $
4. Sum of A.l. + A.2. + A.3. $
5. Actual Consolidated Tangible
Net Worth $
Required: At least $34,000,000 and any greater amount pursuant to
Section ll.l(a)
B. Compliance with Section ll.l(b). Consolidated Leverage Ratio
1. Consolidated Indebtedness $
2. Consolidated Total Capital $
3. Ratio of B.1. to B.2. to 1.00
----
Required: Line B.3. must not be more than .65 to 1.00
C. Compliance with Section ll.l(c): Consolidated Fixed Charge Ratio
1. Consolidated EBITDA $
2. Plus: Consolidated Operating
Lease Expense $
3. C.l. + C.2. $
4. Consolidated Fixed Charges $
A-2
5. Ratio of C.4. to C.5.
$
Required: Line C.5. must not be less
than 1.25 to 1.00, all calculated on
a rolling Four-Quarter Period basis
D. Compliance with Section ll.l(d): Current
Ratio
1. Consolidated Current Assets
$
2. Consolidated Current Liabilities
$
3. Ratio of D.l. to D.2.
to 1.00
------
Required: Line D.3. must not be less
than 1.50 to 1.00.
E. Compliance with Section 11.3: Guaranties
1. Aggregate amount of Guarantees
(other than
Existing Guaranties)
$
2. Indebtedness outstanding
described in Section 11.2(v)
$
3. E.l. + E.2.
$
Required: Line E.3 must not be greater
than $500,000.
F. Compliance with Section 11.6: Capital
Expenditures
1. Aggregate amount of Capital
Expenditures during current
Fiscal Year
$
Required: Line F.1 must not exceed
$11,000,000 in Fiscal Year 1995,
$15,000,000 in Fiscal Year 1996 (plus any
carryover from Fiscal Year 1995), or
$10,000,000 in any subsequent Fiscal
Year.
G. Compliance with Section 11.9: Restricted
Payments
1. Consolidated Net Income X .25
$
2. Lesser of $1,000,000 and G.l.
$
A-3
3. Restricted Dividend Payments
in current Fiscal Year
$
4. G.2. - G.3.
$
S. Restricted Purchases in
current Fiscal Year
$
Required: Line G.4. must not be
less than 0; Line G.5. must not be
greater than $100,000.
H. Compliance with Section 11.13:
Operating Leases
1. Aggregate obligations
under Operating Leases as of
end of preceding Fiscal Year
$
2. Aggregate annual obligations
under Operating Leases in
effect
during current Fiscal Year
$
3. H.2 - H.1
$
Required: Line H.3. must not be
greater than $1,000,000.
2. No Default
A. To the best knowledge of
the undersigned,
since -------------- (the date of
the last similar
certification), (a) the Borrower
has not defaulted in the keeping,
observance, performance or
fulfillment of any of the Loan
Documents; and (b) no Default or
Event of Default specified in
Article XII of the Agreement has
occurred.
B. If a Default or Event of
Default has occurred
since ------------------ (the date
of the last similar
certification), the Borrower
proposes to take the following
action with respect to such Default
or Event of Default:
-----------------------------------
- --------------------
-----------------------------------
- --------------------
-----------------------------------
- --------------------
(Note, if no Default or Event of Default
has occurred, insert "Not Applicable").
The Determination Date is the date of the last
required
financial statements submitted to the Lenders in
accordance with
Section 10.1 or 10.2, as the case may be, of the
Agreement.
A-4
IN WITNESS WHEREOF, I have executed this
Certificate this----------
day of -------------- 19---.
---------------
- ---------------
Authorized
Officer for
Reptron
Electronics,
Inc.
A-5
Calculation Schedule to Compliance Certificate
, 199
- ----------------------------------- --
[Insert applicable Determination Date]
1. Consolidated EBITDA:
A. Consolidated Net Income
$
B. Plus: Consolidated Interest Expense
$
C. Plus: Accrued income taxes
$
D. Plus: Accrued depreciation
$
E. Plus: Accrued amortization
$
F. Plus: Consolidated EBITDA
(l.A + l.B + l.C + l.D + l.E)
$
Total (to Line C )
$
2. Consolidated Fixed Charges:
A. Consolidated Interest Expense
$
B. Consolidated Operating Lease
Expense
$
C. Principal payments on Consolidated
Indebtedness
$
D. Consolidated Fixed Charges:
(2.A + 2.B + 2.C)
$
Total (to Line C.4)
$
3. Consolidated Indebtedness:
A. Revolver Outstandings
(including Commercial LOCS)
$
B. Capitalized Lease Obligations
$
C. Term Loans (including current
portion) to
include Flexible Term Notes
$
D. Guaranties allowed under
Section 11.3(iii)
$
Total (to Line B.1)
$
A-6
EXHIBIT 10.40
AMENDMENT AGREEMENT NO. 4
TO THE AMENDED AND RESTATED
REVOLVING CREDIT AND REIMBURSEMENT AGREEMENT
THIS AMENDMENT AGREEMENT NO. 4 TO THE AMENDED AND RESTATED REVOLVING
CREDIT AND REIMBURSEMENT AGREEMENT (the "Amendment Agreement") is made and
entered into as of this 31 day of January, 1997 among REPTRON ELECTRONICS,
INC., a Florida corporation having its principal place of business in Tampa,
Florida (the "Borrower"), NATIONSBANK, NATIONAL ASSOCIATION (SOUTH), a
national banking association ("NationsBank") in its capacity as agent (the
"Agent") for each of the lenders (the "Lenders") now or hereafter party to
the Credit Agreement (defined below), and each of the undersigned Lenders.
Unless the context otherwise requires, all terms used herein without
definition shall have the respective definitions provided therefor in the
Credit Agreement.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders have entered into
that certain Amended and Restated Revolving Credit and Reimbursement
Agreement dated June 29, 1995 whereby the Lenders have made available to the
Borrower (i) a $55,000,000 revolving credit facility, which shall include a
letter of credit facility of up to $500,000 and (ii) a $9,942,917 (as
reduced from time to time in accordance with the terms thereof) direct pay
letter of credit facility (together with the exhibits and schedules attached
thereto, as the same has been amended by Amendment Agreement No. 1 dated as
of December 15, 1995, Amendment Agreement No. 2 dated as of March 15, 1996
and Amendment Agreement No. 3 dated as of September 24, 1996 and as the same
may be further amended, restated or supplemented from time to time, the
"Credit Agreement"); and
WHEREAS, the Borrower has requested that the Lenders amend the Credit
Agreement to temporarily increase the Total Revolving Credit Commitment from
$55,000,000 to $60,000,000; and
WHEREAS, upon the terms and conditions contained herein, the Agent
and the Lenders are willing to amend the Credit Agreement to so increase the
Total Revolving Credit Commitment through April 30, 1997;
NOW, THEREFORE, in consideration of the premises and conditions
herein set forth, it is hereby agreed as follows:
l. Credit Agreement Amendment. Subject to the conditions hereof, the
Credit Agreement is hereby amended, effective as of the date hereof, as
follows:
(a) Section 1.1 thereof is hereby amended by amending and
restating the following definitions in their entirety as follows:
"'Overline Notes' means the promissory notes of the
Borrower dated as of January 31, 1997 and payable to
the order of the Lenders in the aggregate original principal amount
of $5,000,000, each substantially in the form attached hereto as
Exhibit O."
"'Overline Termination Date' means (i)April 30, 1997 or
(ii) such earlier date of termination of Lenders' obligations
pursuant to Article XII upon the occurrence of an Event of Default or
(iii) such date as the Borrower may voluntarily permanently terminate
the Revolving Credit Facility by payment in full of all obligations
(including the discharge of all obligations with respect to Letters
of Credit) or (iv) such later date as the Borrower and the Lenders
shall agree in writing pursuant to Section 2.13 hereof."
"'Total Revolving Credit Commitment' means an amount
equal to $55,000,000, as reduced from time to time in accordance with
Section @ hereof; provided, however, that during the period beginning
January 31, 1997 through but not including April 30, 1997, the Total
Revolving Credit Commitment shall be equal to $60,000,000, as reduced
from time to time in accordance with Section 2.7."
(b) Section 2.7(b) thereof is hereby amended and restated in its
entirety as follows:
11 (b) On the Overline Termination Date, the Borrower shall
permanently reduce the Total Revolving Credit Commitment to an amount
not to exceed $55, 000, 000 by payment in full of the Overline Note
to the extent that (i) the sum of the Revolving Credit Debit Balance
(excluding Construction Advances) and the Outstanding Commercial
Letters of Credit exceeds the Unrestricted Total Revolving Credit
Commitment or (ii) the sum of the Revolving Credit Debit Balance
(including Construction Advances) and the Outstanding Commercial
Letters of Credit exceeds the lesser of the Total Revolving Credit
Commitment or the Borrowing Base, after giving effect to such
reduction, together with accrued and unpaid interest on the amounts
prepaid. No such reduction and accompanying prepayment shall result
in the payment of any Eurodollar Loan other than on the last day of
the Interest Period of such Loan unless such prepayment is
accompanied by amounts due, if any, under Section 5.4. Upon such
reduction and accompanying prepayment, the Overline Notes shall be
canceled and returned to the Borrower."
(c) Exhibit Q shall be added to the Credit Agreement as attached
hereto.
2
1. Applicable Commitment Percentages. The parties hereto agree that
the Applicable Commitment Percentages of the Lenders set forth on Exhibit B
to the Credit Agreement shall remain unchanged with respect to the Revolving
Credit Facility.
2. Representations and Warranties. In order to induce the Agent and
the Lenders to enter into this Amendment Agreement, the Borrower hereby
represents and warrants that the Credit Agreement has been re-examined by
the Borrower and that except as disclosed by the Borrower in writing to the
Lenders as of the date hereof:
(a) The representations and warranties made by the Borrower in
Article VIII thereof are true on and as of the date hereof;
(b) There has been no material adverse change in the
condition, financial or otherwise, of the Borrower and its
Subsidiaries since the date of the most recent financial reports of
the Borrower delivered to the Agent under Section 10.2 thereof, other
than changes in the ordinary course of business;
(c) The business and properties of the Borrower and its
Subsidiaries are not, and since the date of the most recent financial
reports of the Borrower delivered to the Agent under Section 10.2
thereof, have not been, adversely affected in any substantial way as
the result of any fire, explosion, earthquake, accident, strike,
lockout, combination of workers, flood, embargo, riot, activities of
armed forces, war or acts of God or the public enemy, or cancellation
or loss of any major contracts; and
(d) After giving effect to this Amendment Agreement, no
condition exists which, upon the effectiveness of the amendment
contemplated hereby, would constitute a Default or an Event of
Default on the part of the Borrower under the Credit Agreement or the
Notes, either immediately or with the lapse of time or the giving of
notice, or both.
3. Conditions Precedent. The effectiveness of this Amendment
Agreement is subject to the receipt by the Agent of the following:
(i) six counterparts of this Amendment Agreement duly
executed by all signatories hereto;
(ii) the Notes, in the form attached hereto as Exhibit
0, executed by the Borrower;
(iii) resolutions of the Board of Directors or other
governing body of the Borrower approving this Amendment
Agreement certified by the Secretary of the Borrower; and
3
(iv) copies of all additional agreements, instruments
and documents which the Agent may reasonably request, such
documents, when appropriate, to be certified by appropriate
governmental authorities.
All proceedings of the Borrowers relating to the matters provided for herein
shall be satisfactory to the Lenders, the Agent and their counsel.
4. Entire Agreement. This Amendment Agreement sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter. No promise, condition,
representation or warranty, express or implied, not herein set forth shall
bind any party hereto, and no one of them has relied on any such promise,
condition, representation or warranty. Each of the parties hereto
acknowledges that, except as in this Amendment Agreement otherwise expressly
stated, no representations, warranties or commitments, express or implied,
have been made by any party to the other. None of the terms or conditions
of this Amendment Agreement may be changed, modified, waived or canceled
orally or otherwise, except by writing, signed by all the parties hereto,
specifying such change, modification, waiver or cancellation of such terms
or conditions, or of any proceeding or succeeding breach thereof.
5. Full Force an Effect of Agreement. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain
in full force and effect according to their respective terms.
6. Counterparts. This Amendment Agreement may be executed in any
number of counterparts, each of which shall be deemed an original as against
any party whose signature appears thereon, and all of which shall together
constitute one and the same instrument.
7. GOVERNING LAW. THIS AMENDMENT AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY THE LAW OF THE STATE OF FLORIDA, WITHOUT REGARD TO ANY WISE
APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THE BORROWER HEREBY (i) SUBMITS
TO THE JURISDICTION AND VENUE OF THE STATE AND FEDERAL COURTS OF FLORIDA FOR
THE PURPOSES OF RESOLVING DISPUTES HEREUNDER OR UNDER ANY OF THE OTHER LOAN
DO S TO WHICH IT IS A PARTY OR FOR PURPOSES OF COLLECTION AND
(ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION.
8. Enforceability. Should any one or-more of the provisions of this
Amendment Agreement be determined to be illegal or unenforceable as to one
or more of the parties hereto, all other provisions nevertheless shall
remain effective and binding on the parties hereto.
4
9 . Credit Agreement. All references in any of the Loan Documents
to the Credit Agreement shall mean and include the Credit
Agreement as amended hereby.
10. Successors and Assigns. This Amendment Agreement shall
be binding upon and inure to the benefit of each of the Borrower, the
Lenders, the Agent and their respective successors, assigns and legal
representatives; provide,' however, that the Borrower, without the prior
consent of the Lenders, may not assign any rights, powers, duties or
obligations hereunder.
(remainder of this page left blank intentionally]
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Agreement to be duly executed by their duly authorized officers, all as of
the day and year first above written.
BORROWER:
REPTRON ELECTRONICS, INC.
By:
--------------------------------
Name: Paul J. Plante
-----------------------------
Title: CFO
-----------------------------
NATIONSBANK, NATIONAL ASSOCIATION
(South), as Agent and a Lender
By:
-------------------------------
Name: Lori Stone
---------------------------
Title: Vice President
---------------------------
PNC BANK, KENTUCKY, INC.
By:
------------------------------
Name: James D. Neil
---------------------------
Title: Vice President
--------------------------
THE SUMITOMO ABNK, LIMITED
By:
---------------------------------
Name: Allen L. Harvell, Jr.
-----------------------------
Title: Vice President and Manager
----------------------------
By:
---------------------------------
Name: M. Phillip Freeman
-----------------------------
Title: Vice President
----------------------------
BARNETT BANK OF TAMPA
By:
---------------------------------
Name: David Austin
-----------------------------
Title: SVP
----------------------------
EXHIBIT O
PROMISSORY NOTE
$[ ] Charlotte, North Carolina
January [ ],
1997
FOR VALUE RECEIVED, REPTRON ELECTRONICS, INC., a Florida corporation
having its principal place of business located in Tampa, Florida (the
"Borrower") , hereby promises to pay to the order of [ ]
(the "Lender"), in its individual capacity, at the office of NationsBank,
National Association (South) , as agent for the Lenders (the "Agent") ,
located at One Independence Center, 101 North Tryon Street, Charlotte, North
Carolina 28255 (or at such other place or places as the Agent may designate)
at the times set forth in the Amended and Restated Revolving Credit and
Reimbursement Agreement dated as of June 29, 1995 among the Borrower, the
financial institutions party thereto (collectively, the "Lenders") and the
Agent(as previously amended and as further amended and supplemented and in
effect from time to time, the "Credit Agreement"; all capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Credit Agreement), in lawful money of the United States of America, in
immediately available funds, the principal amount of [ ]
DOLLARS ($[ ]) and to pay interest from the date hereof on the
unpaid principal amount hereof, in like money, at said office, on the dates
and at the rates provided in the Credit Agreement. All or any portion of
the principal amount of such Loans or other obligations may be prepaid as
provided in the Credit Agreement.
This Note is one of the Notes in the aggregate principal amount of
$60,000,000 referred to in the Credit Agreement and is issued pursuant to
and entitled to the benefits and security of the Credit Agreement to which
reference is hereby made for a more complete statement of the terms and
conditions upon which the Loans evidenced hereby were or are made and are to
be repaid. This Note is subject to certain restrictions on transfer or
assignment as provided in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
this Note upon the occurrence of certain events and for prepayments of
obligations upon the terms and conditions specified therein.
If payment of all sums due hereunder is accelerated under the terms
of the Credit Agreement or under the terms of the other Loan Documents
executed in connection with the Credit Agreement, the then remaining
principal amount and accrued but unpaid interest shall bear interest which
shall be payable on demand at the rates
0-1
per annum set forth in the Credit Agreement, or the maximum rate permitted
under applicable law, if lower, until such principal and interest have been
paid in full. Further, in the event of such acceleration, this Note, and
all other indebtedness of the Borrower to the Lenders shall become
immediately due and payable, without presentation, demand, protest or notice
of any kind, all of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable
attorneys' fees, and interest thereon at the rates set forth above.
Interest hereunder shall be computed on the basis of a 360-day year
for the actual number of days in the interest period.
This Note shall be governed by, and construed in accordance with, the
internal substantive law of the State of Florida without regard to otherwise
applicable choice of laws rules.
All Persons bound on this obligation, whether primarily or
secondarily liable as principals, sureties, guarantors, endorsers or
otherwise, hereby waive to the full extent permitted by law the benefits of
all provisions of law for stay or delay of execution or sale of property or
other satisfaction of judgment against any of them on account of liability
hereon until judgment be obtained and execution issues against any other of
them and returned satisfied or until it can be shown that the maker or any
other party hereto had no property available for the satisfaction of the
debt evidenced by this instrument, or until any other proceedings can be had
against any of them, and also their right, if any, to require the holder
hereof to hold as security for this Note any collateral deposited by any of
said Persons as security. Protest, notice of protest, notice of dishonor,
dishonor, demand or any other formality are hereby waived by all parties
bound hereon.
Notwithstanding any other provision herein, the aggregate interest
rate charged under this Note, including all charges or fees in connection
therewith deemed in the nature of interest under Florida law, shall not
exceed the Highest Lawful Rate (as such term is defined below). If the rate
of interest (determined without regard to the preceding sentence) under this
Note at any time exceeds the Highest Lawful Rate (as defined below), the
outstanding amount of the Loans made hereunder shall bear interest at the
Highest Lawful Rate until the total amount of interest due hereunder equals
the amount of interest which would have been due hereunder if the stated
rates of interest set forth in this Note had at all times been in effect.
In addition, if when the Loans made hereunder are repaid in full the total
interest due hereunder (taking into account the increase provided for above)
is less than the total amount of interest which would have been due
hereunder if the stated rates of interest set forth in this Note had at all
0-2
times been in effect, then to the extent permitted by law, the Borrower
shall pay to the Agent an amount equal to the difference between the amount
of interest paid and the amount of interest which would have been paid if
the Highest Lawful Rate had at all times been in effect. Subject to the
adjustments permitted above, at no time will the interest paid be greater
than the stated rate. Notwithstanding the foregoing, it is the intention of
the Lender and the Borrower to conform strictly to any applicable usury
laws. Accordingly, if the Lender contracts for, charges, or receives any
consideration which constitutes interest in excess of the Highest Lawful
Rate, then any such excess shall be canceled automatically and, if
previously paid, shall at the Lender's option be applied to the outstanding
amount of the Loans made hereunder or be refunded to the Borrower. As used
in this paragraph, the term "Highest Lawful Rate" means the maximum lawful
interest rate, if any, that at any time or from time to time may be
contracted for, charged, or received under the laws applicable to the Lender
which are presently in effect or, to the extent allowed by law, under such
applicable laws which may hereafter be in effect and which allow a higher
maximum nonusurious interest rate than applicable laws now allow.
IN WITNESS WHEREOF, the Borrower has caused this Note to be made,
executed and delivered by its duly authorized representative as of the date
and year first above written, all pursuant to authority duly granted.
REPTRON ELECTRONICS, INC.
WITNESS:
By:
------------------------------
- ------------------- Name:
-------------------------
- ------------------- Title:
-------------------------
0-3
ACKNOWLEDGMENT OF EXECUTION ON BEHALF OF
REPTRON ELECTRONICS, INC.
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
Before me, the undersigned, a Notary Public in and for said State and
County on this [ ] day of January, 1997 A.D., personally appeared Paul J.
Plante, being and by me duly sworn says he works at 14401 McCormick Drive,
Tampa, Florida 33626, known to be the Vice President-Finance of Reptron
Electronics, Inc. (the "Company") , who, being by me duly sworn, says that
by authority duly given by, and as the act of the Company the foregoing and
annexed Note dated January [ ] , 1997, was signed by him as said Vice
President-Finance on behalf of the Company.
Witness my hand and of f official seal this day of January, 1997.
Notary Public
(SEAL)
My commission expires:
0-4
Affidavit of ( )
The undersigned, being first duly sworn, deposes and says that:
1. He is an employee of Smith Helms Mulliss & Moore, L.L.P.,
counsel to NationsBank, National Association (South) and works at 214 North
Church Street, Charlotte, North Carolina 28212.
11. The Note of Reptron Electronics, Inc. to ( ]in
the principal amount of $[ ]dated as of January 1997 was executed before him
and delivered to him on behalf of the Lender in Charlotte, North Carolina.
This the [ ]day of January, 1997.
Name:
Acknowledgment of Execution
STATE OF NORTH CAROLINA )
)SS.:
COUNTY OF MECKLENBURG )
Before me, the undersigned, a Notary Public in and for said
State and County on this [ ] day of January, 1997 A.D., personally appeared
- -------------------------being and by me duly sworn affixed
his signature to the above Affidavit.
Witness my hand and of f official seal this day of January, 1997.
Notary Public
(SEAL)
My commission expires:
0-5
EXHIBIT 23.1
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.,
that are included in the Company's form 10-K for the year ended December 31,
1996. We hereby consent to the incorporation by reference of said reports
in the Registration Statement of Reptron Electronics, Inc., on Form S-8
(File No. 33-87854, effective December 22, 1994).
GRANT THORNTON LLP
Tampa, Floirida
February 5, 1997
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<ARTICLE> 5
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THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF EARNINGS AND THE CONSOLIDATED BALANCE SHEET AND IS
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<MULTIPLIER> 1000
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 479
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<RECEIVABLES> 39807
<ALLOWANCES> 350
<INVENTORY> 58694
<CURRENT-ASSETS> 101882
<PP&E> 41400
<DEPRECIATION> 10531
<TOTAL-ASSETS> 138632
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<COMMON> 61
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