UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 10 1998 (May 29,
1998)
REPTRON ELECTRONICS, INC.
--------------------------------
(Exact name of registrant as specified in its charter)
Florida 33-75040 38-2081116
- --------------------------- ------------------ -----------------
State or other jurisdiction (Commission File (IRS Employer
of incorporation Number Identification
No.)
14401 McCormick Drive
Tampa, Florida 33626
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813)854-2351
-------------
N/A
------------------------------------------------------------
(Former name or former address, if changed since last report)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired:
Report of Independent Public Accountants
Hibbing Electronics Corporation and Subsidiary Consolidated
Financial Statements for the years ended December 31, 1996 and
1997, and the three months ended March 31, 1997 and 1998
(Unaudited).
Notes to Consolidated Financial Statements for the years ended
December 31, 1996 and 1997 (including data applicable to the
unaudited periods).
(b) Pro Forma Financial Information (Unaudited):
Reptron Electronics, Inc. Pro Forma Consolidated
Combined Balance Sheet at March 31, 1998.
Reptron Electronics, Inc. Notes to Pro Forma
Consolidated Combined Balance Sheet at March 31, 1998.
Reptron Electronics, Inc. Pro Forma Consolidated
Combined Statement of Operations for the period ended
December 31, 1997.
Reptron Electronics, Inc. Notes to Pro Forma Consolidated
Combined Statement of Operations for the period
ended December 31, 1997.
Reptron Electronics, Inc. Pro Forma Consolidated
Combined Statement of Operations for the three months
ended March 31, 1998.
Reptron Electronics, Inc. Notes to Pro Forma Consolidated
Combined Statement of Operations for the three months
ended March 31, 1998.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Hibbing Electronics Corporation:
We have audited the accompanying consolidated balance sheets of Hibbing
Electronics Corporation (a Minnesota corporation and a wholly owned
subsidiary of OECO Corporation) and Subsidiary as of December 31, 1996 and
1997, and the related consolidated statements of operations, stockholders'
investment and cash flows for the years then ended. 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 that 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 financial position of Hibbing Electronics
Corporation and Subsidiary as of December 31, 1996 and 1997, and the results
of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota,
January 30, 1998
(except for Notes 2 and 7, as to which
the date is May 29, 1998)
<TABLE>
<CAPTION>
HIBBING ELECTRONICS CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
December 31 March 31,
------------------------ ----------
ASSETS 1996 1997 1998
---------- ------------ ----------
(Unaudited)
CURRENT ASSETS:
<S> <C> <C> <C>
Cash $ 197,534 $ 325,697 $ 165,206
Accounts receivable, net of allowance
for doubtful accounts of $131,000,
$355,000 and $379,000 1,636,234 13,827,421 14,403,853
Inventories 11,410,495 12,851,445 11,740,553
Prepaid expenses and other current assets 595,161 895,956 809,268
---------- ---------- ----------
Total current assets 23,839,424 27,900,519 27,118,880
---------- ---------- ----------
PROPERTY AND EQUIPMENT:
Machinery and equipment 9,895,469 11,516,008 11,628,115
Furniture, fixtures and automobiles 2,065,661 2,494,877 2,504,465
Leasehold improvements 1,063,856 1,226,981 1,226,983
---------- ---------- ----------
13,024,986 15,237,866 15,359,563
Less - Accumulated depreciation and
amortization (7,621,754) (9,249,850) (9,735,541)
---------- ---------- ----------
Property and equipment, net 5,403,232 5,988,016 5,624,022
---------- ---------- ----------
Total assets $29,242,656 $33,888,535 $32,742,902
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current maturities of debt obligations $ 6,627,758 $ 4,184,703 $ 4,234,019
Current maturities of capital lease
obligations 1,016,316 1,219,297 1,260,532
Accounts payable 6,977,491 11,056,203 9,913,135
Accrued liabilities -
Accrued payroll and employee benefits 1,145,166 1,448,848 1,378,598
Other accrued liabilities 351,909 467,784 610,707
Due to Parent 919,144 1,700,238 657,757
---------- ---------- ----------
Total current liabilities 17,037,784 20,077,073 18,054,748
CAPITAL LEASE OBLIGATIONS, less current
maturities 2,147,124 1,305,478 953,346
DEBT OBLIGATIONS, less current maturities 576,257 1,696,485 2,362,033
DEFERRED INCOME TAXES 524,000 240,400 240,400
---------- ---------- ----------
Total liabilities 20,285,165 23,319,436 21,610,527
---------- ---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' INVESTMENT:
Common stock, par value $1 per share;
5,000 shares authorized,issued and
outstanding 5,000 5,000 5,000
Retained earnings 8,952,491 10,564,099 11,127,375
---------- ---------- ----------
Total stockholders' investment 8,957,491 10,569,099 11,132,375
---------- ---------- ----------
Total liabilities and
stockholders' investment $29,242,656 $33,888,535 $32,742,902
========== ========== ==========
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
<TABLE>
<CAPTION>
HIBBING ELECTRONICS CORPORATION AND SUBSIDIARY
Consolidated Statements of Operations
Three Months Ended
Years Ended December 31 March 31
------------------------ ------------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
NET SALES $66,575,542 $76,945,986 $17,083,463 $20,517,805
COST OF SALES 57,555,328 67,159,731 14,946,945 17,852,704
---------- ---------- ---------- ----------
Gross profit 9,020,214 9,786,255 2,136,518 2,665,101
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,615,217 6,586,123 1,410,397 1,736,505
---------- ---------- ---------- ----------
Income from operations 3,404,997 3,200,132 726,121 928,596
INTEREST EXPENSE (862,540) (686,717) (156,841) (181,805)
OTHER INCOME, net 99,565 187,357 5,255 178,485
---------- ---------- ---------- ----------
Income before provision
for income taxes 2,642,022 2,700,772 574,535 925,276
PROVISION FOR INCOME TAXES 866,500 1,089,164 219,000 362,000
---------- ---------- ---------- ----------
Net income $ 1,775,522 $ 1,611,608 $ 355,535 $ 563,276
========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
HIBBING ELECTRONICS CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Investment
Common Stock Total
-------------- Retained Stockholders'
Shares Amount Earnings Investment
------ ------ ---------- -------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 5,000 $5,000 $ 7,176,969 $ 7,181,969
Net income - - 1,775,522 1,775,522
----- ----- ---------- ----------
BALANCE, December 31, 1996 5,000 5,000 8,952,491 8,957,491
Net income - - 1,611,608 1,611,608
----- ----- ---------- ----------
BALANCE, December 31, 1997 5,000 5,000 10,564,099 10,569,099
Net income (unaudited) - - 563,276 563,276
----- ----- ---------- ----------
BALANCE, March 31, 1998
(unaudited) 5,000 $5,000 $11,127,375 $11,132,375
===== ===== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
HIBBING ELECTRONICS CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31 Three Months Ended
------------------------ March 31
1996 1997 1997 1998
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $1,775,522 $ 1,611,608 $ 355,535 $ 563,276
Adjustments to reconcile net income to
net cash provided by operating activities -
Depreciation and amortization 1,550,840 1,847,085 409,865 485,691
Deferred tax benefit (42,800) (525,200) - -
Change in operating items:
Accounts receivable (4,076,970) (2,191,187) 932,860 (576,432)
Inventories 2,715,649 (1,440,950) 3,274,582 1,110,892
Prepaid expenses and other current assets (48,591) (59,195) 67,491 86,688
Accounts payable (1,148,944) 4,078,712 (1,581,311) (1,143,068)
Accrued liabilities 396,050 419,557 556,817 72,673
--------- ---------- --------- ---------
Net cash provided by operating activities 1,120,756 3,740,430 4,015,839 599,720
--------- ---------- --------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment, net (1,184,931) (1,800,572) (337,770) (121,697)
--------- ---------- --------- ---------
FINANCING ACTIVITIES:
Borrowings under line of credit - 17,975,000 1,500,000 11,225,000
Payments under line of credit - (20,500,000) (4,900,000)(11,500,000)
Borrowings under debt obligations 270,000 1,856,875 995,846 1,200,000
Payments under capital lease and debt
obligations (1,566,131) (1,924,664) (627,758) (521,033)
Change in amounts due to Parent, net 698,144 781,094 (700,044) (1,042,481)
--------- ---------- --------- ---------
Net cash used in financing activities (597,987) (1,811,695) (3,731,956) (638,514)
--------- ---------- --------- ---------
Net increase (decrease) in cash (662,162) 128,163 (53,887) (160,491)
CASH, beginning of period 859,696 197,534 197,534 325,697
--------- ---------- --------- ---------
CASH, end of period $ 197,534 $ 325,697 $ 143,647 $ 165,206
========= ========== ========= =========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for -
Interest $ 868,448 $ 727,129 $ 170,421 $ 180,433
========= ========== ========= =========
Income taxes $ 407,444 $ 545,500 $ 163,500 $1,044,000
========= ========== ========= =========
Noncash transactions -
Purchases of equipment under capital lease
obligations $ 758,949 $ 631,297 $ 631,297 $ -
========= ========== ========= =========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
HIBBING ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
December 31, 1996 and 1997
(Including Data Applicable to the Unaudited Periods)
1. Nature of Business and Summary of Significant Accounting Policies:
Organization
Hibbing Electronics Corporation and Subsidiary (the Company) is a wholly
owned subsidiary of OECO Corporation (the Parent). The Company is a
manufacturer of electronic and electromechanical assemblies and provides
electronic manufacturing services, testing, design and circuit board assembly
for the original equipment manufacturing market.
Principles of Consolidation
The consolidated financial statements include Hibbing Electronics Corporation
and its wholly owned subsidiary. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Revenue Recognition
Revenues on product sales are recognized at the time of shipment to
customers.
Major Customers
There were two customers in 1996 and three customers in 1997 and in the three
months ended March 31, 1997 and 1998 that exceeded 10% of net sales. Sales
to these customers were approximately $21,589,000 in 1996, $32,161,000 in
1997, $5,980,000 for the three months ended March 31, 1997, and $5,935,000
for the three months ended March 31, 1998. As of December 31, 1996 and 1997
and March 31, 1998, $4,081,000, $4,641,000 and $5,033,000, respectively, were
included in accounts receivable from these customers.
Inventories
Inventories are stated at the lower of cost or market and include raw
materials, labor and overhead. Cost is determined under the last-in, first-
out (LIFO) method. During 1997, the LIFO inventory valuation exceeded
current or replacement cost; therefore, the Company recorded an inventory
market adjustment to properly state inventory as of December 31, 1997. As a
result,
the Company reversed the LIFO reserve into income in 1997. Inventories
consisted of the following:
December 31
------------------------ March 31,
1996 1997 1998
---------- ---------- ----------
Raw materials $ 8,807,940 $ 9,423,229 $11,105,963
Work in process 2,536,948 3,428,216 634,590
Finished goods 295,607 - -
---------- ---------- ----------
11,640,495 12,851,445 11,740,553
Less - LIFO reserve (230,000) - -
---------- ---------- ----------
$11,410,495 $12,851,445 $11,740,553
========== ========== ==========
Property and Equipment
Property and equipment are stated at cost. Additions and improvements to
equipment are capitalized at cost while repair and maintenance expenditures
are charged to operations as incurred. Depreciation is recorded over the
estimated useful lives of the assets (three to eight years) using the double-
declining-balance method on new machinery and equipment and the straight-line
method on other assets. Leasehold improvements are amortized over the terms
of the related leases.
Income Taxes
The Company utilizes the liability method to account for income taxes, and
deferred taxes are based on the estimated future tax effects of differences
between the financial statement and tax bases of assets and liabilities given
the provisions of the enacted tax laws.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during
the periods presented. Ultimate results could differ from those estimates.
Interim Financial Information (Unaudited)
The accompanying consolidated balance sheet as of March 31, 1998, the
consolidated statements of operations and cash flows for the three months
ended March 31, 1997 and 1998 and the consolidated statement of stockholders'
investment for the three months ended March 31, 1998 are unaudited but, in
the opinion of management, include all adjustments, consisting solely of
normal recurring adjustments necessary for a fair presentation of results for
these interim periods. The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of results to be expected for
the entire fiscal year.
2. Debt and Capital Lease Obligations:
Debt Obligations
Debt obligations are as follows:
December 31
----------------------- March 31,
1996 1997 1998
---------- ---------- ----------
Line of credit $6,000,000 $3,475,000 $3,200,000
Note payable to bank, due in monthly
installments of $21,000, including
interest at the adjusted Eurodollar
rate (9.13% at December 31, 1997),
due June 1, 1999 - 914,465 871,000
Note payable to bank, due in monthly
installments of $18,356, including
interest at 8.25%, repaid October 1997 233,242 - -
Notes payable to bank, due in monthly
installments, including interest
ranging from 7.58% to 10.75%, due
August 1998 through December 2001 970,773 1,433,133 1,293,859
Note payable to bank, due in monthly
installments of $24,330, including
interest at 7.58%, due January 15, 2003 - - 1,167,681
Other - 58,590 63,512
--------- --------- ---------
7,204,015 5,881,188 6,596,052
Less - Current maturities (6,627,758) (4,184,703) (4,234,019)
--------- --------- ---------
$ 576,257 $1,696,485 $2,362,033
========= ========= =========
The following is a schedule of maturities of long-term debt as of March 31,
1998:
1998 (nine months ending December 31, 1998) $3,954,213
1999 1,359,860
2000 526,771
2001 453,111
2002 277,943
Thereafter 24,154
---------
$6,596,052
=========
The Company's line-of-credit agreement expired on May 31, 1998. The
borrowings bore interest at the adjusted Eurodollar rate plus a fixed margin
of 2.65% (8.88% at December 31, 1997 and 8.44% at March 31, 1998). Interest
was payable monthly and the unused portion of the commitment carried a
commitment fee equal to 0.25%. Borrowings under the agreement were limited to
the lesser of $12,000,000 or the borrowing base, as defined ($12,000,000 at
December 31, 1997). In conjunction with the sale of the Company to Reptron
Electronics, Inc. (Reptron) (see Note 7), the outstanding borrowings on the
line of credit and note payable to bank due June 1, 1999 were repaid.
Borrowings under the agreement and notes payable to bank were collateralized
by receivables, inventories and equipment. The Company was required to
maintain certain financial ratios and tangible net worth, as defined. The
Company had complied with, or had obtained waivers to comply with, all
covenants as of December 31, 1997.
Capital Lease Obligations
The Company has capital leases which expire at various times over the next
five years. Equipment includes the following leased property under capital
leases:
December 31
------------------------ March 31,
1996 1997 1998
---------- ---------- ----------
Machinery and equipment $5,380,875 $5,380,875 $5,380,875
Furniture, fixtures and automobiles 587,268 787,901 787,901
--------- --------- ---------
5,968,143 6,168,776 6,168,776
Less - Accumulated amortization (2,352,523) (3,401,785) (3,597,634)
--------- --------- ---------
$3,615,620 $2,766,991 $2,571,142
========= ========= =========
The following is a schedule of future minimum capital lease payments as of
March 31, 1998:
1998 (nine months ending December 31, 1998) $ 983,701
1999 880,382
2000 385,706
2001 106,038
---------
Total minimum capital lease payments 2,355,827
Less - Amount representing interest (141,949)
---------
Present value of minimum capital lease payments $2,213,878
=========
3. Stock Option Plan:
In 1996, the Company implemented a stock option plan (the Plan). The stock
options are to be granted at estimated fair market value as determined by the
board of directors at the date of grant. The stock options generally expire
up to ten years after the date of grant and are exercisable at a rate of 20%
to 25% per year from the date of grant. The stock options granted in 1996 and
1997 have been issued in anticipation of a common stock split (see Note 7).
Shares once acquired may be sold on the open market. The Company retains
right of first refusal; however, the Company is not obligated to reacquire the
shares. The Company accounts for stock options under the provisions of
Accounting Principles Board Opinion No. 25 as a fixed compensation plan, under
which no compensation cost has been recognized. Had compensation cost for the
Plan been determined consistent with Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," the
effect on the Company's reported net income would not have been significant.
Under SFAS No. 123, the fair market value of each option grant is estimated on
the date of grant using the Black-Scholes option pricing model. The following
weighted average assumptions were used for grants in 1996 and 1997:
1996 1997
-------- --------
Assumptions as of the grant date:
Risk-free interest rate 6.3% 6.9%
Expected lives 10 years 10 years
Information regarding stock options is as follows:
Years Ended December 31 Three Months
----------------------------------- Ended March 31,
1996 1997 1998
---------------- ---------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
Outstanding,
beginning of period - $ - 60,800 $ 7.06 88,000 $8.98
Granted 60,800 7.06 27,200 13.27 - -
------ ------ ------
Outstanding,
end of period 60,800 7.06 88,000 8.98 88,000 8.98
====== ====== ======
Exercisable,
end of period - - 12,505 7.06 15,200 7.06
====== ====== ======
Weighted average fair
value of options
granted 3.21 4.21 N/A
4. Income Taxes:
The Company files a consolidated federal income tax return with the Parent.
The provision for federal and state income taxes has been computed as if the
Company filed on a separate basis. Current taxes payable are reflected in due
to Parent in the accompanying consolidated balance sheets.
The provision for income taxes consisted of the following:
Years Ended
December 31
---------------------
1996 1997
-------- ----------
Current:
Federal $904,300 $1,477,414
State 5,000 136,950
Deferred (42,800) (525,200)
------- ---------
$866,500 $1,089,164
======= =========
The deferred tax liability reflected in the accompanying consolidated balance
sheets principally relates to depreciation and certain accruals not deductible
for tax purposes. The effective income tax rate differs from the federal
statutory tax rate primarily as a result of state taxes.
5. Commitments and Contingencies:
Manufacturing Agreement
In 1997, the Company entered into a manufacturing agreement with a customer
whereby the Company has committed to manufacture up to $16.8 million of
printed circuit cards and related products for a period of 18 months at the
Company's cost of production, as defined. In exchange for the production
commitment, the Company acquired the right to use the customer's equipment
during the 18 months and, at the end of that term, the Company has the option
to assume the remaining capital lease obligation from the customer. In
addition, the Company will pay its share of operating expenses related to the
customer's leased facility and will assume various equipment and operating
leases from the customer.
The Company accounted for the right to use the customer's equipment as an
operating lease. The Company will record the sales and cost of sales of
printed circuit cards and related products as the products are shipped.
Operating Leases
The Company's operating leases consist principally of leases on plant
facilities which expire in December 2002. Total rent expense was $553,000,
$1,157,000, $141,000 and $143,000 in 1996, 1997 and for the three months ended
March 31, 1997 and 1998, respectively. Future minimum lease payments under
operating lease commitments as of March 31, 1998 are as follows:
1998 (nine months ending December 31, 1998) $ 633,800
1999 478,000
2000 478,000
2001 478,000
2002 478,000
---------
Total $2,545,800
=========
Retirement Savings Plan
The Company has a voluntary retirement savings plan available to any employee
who has completed six months of qualified service. Employee contributions up
to 4% of wages, as defined, are partially matched by the Company. Company
contributions to this plan totaled approximately $44,000, $51,000, $11,200 and
$16,000 in 1996, 1997 and for the three months ended March 31, 1997 and 1998,
respectively.
Contract Dispute
The Company is involved in a contract dispute with one of its customers
regarding approximately $574,000 of excess inventory purchased by the Company
for the customer. In the opinion of management, the resolution of this
dispute will not have a material adverse effect on the Company's consolidated
financial position or results of operations.
6. Related-Party Transactions:
Intercompany Charges
The Parent pays certain expenses and income taxes on behalf of the Company,
with the related expense reported by the Company. Due to the expense
allocation described above, there can be no assurance that if the Company
operated on a stand-alone basis, a similar cost structure would be achieved.
Amounts due to the Parent are repaid based on available cash flow. Certain
expenses incurred on behalf of the Company are allocated based upon a
percentage of projected sales volume.
Operating Leases
The Minnesota plant facilities are leased from certain officers of the
Company. Rental payments under these leases were , $484,000, $478,000,
$119,500 and $119,500 in 1996, 1997 and for the three months ended March 31,
1997 and 1998, respectively.
7. Event Subsequent to December 31, 1997:
On May 29, 1998, the Parent completed the sale of the Company to Reptron. In
conjunction with the sale of the Company, the stock option holders (see Note
3) received at the closing of the transaction a cash payment equal to the net
stock option value based upon the pro forma recapitalization of the Company as
described below. Before the stock options were granted to certain members of
management and the Company's board of directors, the Company intended to
recapitalize the Company and increase the number of issued and outstanding
shares by approximately 670,000.
REPTRON ELECTRONICS, INC.
PRO FORMA FINANCIAL STATEMENTS
The accompanying pro forma consolidated, combined balance sheet and statements
of operations have been derived from the historical financial statements of
Reptron Electronics, Inc. (the "Company") and Hibbing Electronics Corporation
and subsidiary ("Hibbing"), a wholly-owned subsidiary of OECO Corporation, and
adjusts such information to give effect to the acquisition of Hibbing.
The pro forma consolidated, combined balance sheet as of March 31, 1998
assumes that the acquisition of Hibbing occurred on March 31, 1998. The pro
forma consolidated, combined statement of operations for the year ended
December 31, 1997 and the three months ended March 31, 1998 assume that the
acquisition of Hibbing occurred on January 1, 1997 and January 1, 1998,
respectively.
The pro forma financial information is not necessarily indicative of the
results that would actually have occurred had the transactions been in effect
on the dates and for the periods indicated or which may result in the future.
In the opinion of management, all adjustments have been made to fairly present
the pro forma information. This pro forma information should be read in
conjunction with the notes thereto and the historical financial information.
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET
MARCH 31, 1998
(in thousands, unaudited)
Historical Pro Forma Pro Forma
------------------
ASSETS Reptron Hibbing Adjustments Combined
------- ------- ----------- --------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash & cash equivalents $ 55,780 $ 165 $(29,911) (1) $ 26,034
Accounts receivable - trade,
less allowance for doubtful
accounts 39,975 14,404 (379) (4) 54,000
Inventories 68,718 11,741 (950) (5) 79,509
Prepaid expenses and other
assets 2,456 809 - 3,265
Deferred tax benefit 110 - 2,223 (2) 2,333
------- ------ ------ -------
Total current assets 167,039 27,119 (29,017) 165,141
PROPERTY,PLANT & EQUIPMENT
AT COST, NET 35,493 5,624 - 41,117
EXCESS OF COST OVER NET ASSETS
ACQUIRED, NET 4,211 - 18,951 (7) 23,162
OTHER ASSETS 9,411 - (424) (1) 8,987
------- ------ ------ -------
TOTAL ASSETS $216,154 $32,743 $(10,490) $238,407
======= ====== ====== =======
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 22,891 $ 9,913 $ - $ 32,804
Current portion of
Long-term obligations 3,702 5,495 1,300 (3) 10,497
Accrued expenses 2,603 1,989 - 4,592
Due to parent - 658 (658) (6) -
Deferred revenue 1,274 - - 1,274
------- ------ ------ -------
Total current liabilities 30,470 18,055 642 49,167
LONG-TERM OBLIGATIONS, less
Current portion 128,989 3,315 - 132,304
DEFERRED INCOME TAXES 2,210 241 - 2,451
SHAREHOLDERS' EQUITY
Preferred stock - - - -
Common stock 61 5 (5) (8) 61
Additional paid-in-capital 21,389 - - 21,389
Retained earnings 33,035 11,127 (11,127) (8) 33,035
------- ------ ------ -------
Total shareholders' equity 54,485 11,132 (11,132) 54,485
------- ------ ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $216,154 $32,743 $(10,490) $238,407
======= ====== ====== =======
</TABLE>
REPTRON ELECTORNICS, INC.
NOTES TO PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET
March 31, 1998
(Unaudited)
NOTE A - ACQUISITION
On May 29, 1998, Reptron Electronics, Inc. ("Reptron") acquired all of the
assets and liabilities of Hibbing Electronics Corporation and its subsidiary,
("Hibbing") by way of the purchase of all of the issued and outstanding common
stock of OECO Corporation, the parent of Hibbing. The transaction was valued
at approximately $40.7 million, consisting of the sum of a cash payment of
$29.7 million and debt of approximately $11.0 million. Of the $29.7 million,
approximately $7.4 million was deposited in an escrow account as security for
collection of designated accounts receivable, liquidation of identified
inventory and breach of representations and warranties. In addition, Reptron
assumed certain building and equipment lease obligations. Reptron paid down
approximately $6.7 million of the Hibbing debt at closing, which consisted of
notes payable to bank of $5.8 million and long-term debt of $900,000.
The contingent payments will be made out of the escrow funds on deposit upon
satisfactory disposition of the related accounts receivable and inventory
items.
NOTE B - PRO FORMA ADJUSTMENTS
(1) A summary of the purchase price for the acquisition described in
Note A is as follows:
Cash $29,700
Direct acquisition costs 211
Capitalized acquisition costs 424
------
$30,335
======
(2) Deferred tax benefit due to exercise of stock options and stock
option termination payments.
(3) Dividend paid to OECO April, 1998.
(4) Increase in allowance for doubtful accounts.
(5) Reserve established for inventory on hand for a customer whose
continuation of purchases is uncertain.
(6) Elimination of amounts due to OECO Corporation.
(7) The total purchase price of the Hibbing Electronics Corporation
acquisition was allocated in accordance with the provisions of
APB No. 16 for purchase transactions and accordingly was based
on fair value of net tangible assets acquired with the excess
allocated to goodwill (i.e. no specifically identifiable
intangible asset exists).
Net tangible assets acquired consist of:
Cash $ 165
Accounts receivable 14,025
Inventories 10,791
Prepaid expenses 809
Deferred tax benefit 2,223
Property, plant and equipment 5,624
Accounts Payable - trade (9,913)
Current portion of long-term debt (6,795)
Accrued expenses (1,989)
Long-term obligations, less current portion (3,315)
Deferred income taxes (241)
Intangible assets consist of:
Goodwill 18,951
------
$30,335
======
(8) Elimination of Hibbing equity.
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
PRO FORMA CONSOLIDATED COMBINED STATEMENT OF OPERATIONS
For the year ended December 31, 1997
(in thousands, except share and per share data)
Reptron Hibbing Pro Forma Pro Forma
Actual Actual Adjustments Combined
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales $303,911 $76,946 $ - $380,857
Cost of goods sold 249,754 67,160 - 316,914
------- ------ ------ -------
Gross profit 54,157 9,786 63,943
Selling, general
and administrative expenses 38,156 6,586 653 (1)
(493) (2) 44,902
------- ------ ------ -------
Operating income 16,001 3,200 (160) 19,041
Interest expense, net 6,184 687 1,798 (3) 8,669
Other income - 187 - 187
------- ------ ------ -------
Earnings before income
taxes 9,817 2,700 (1,958) 10,559
Income tax provision 3,677 1,089 (320) (4) 4,446
------- ------ ------ -------
Net earnings $ 6,140 $ 1,611 (1,638) 6,113
======= ====== ====== =======
Net earnings per common
share - basic $ 1.01 $ 1.01
======= =======
Weighted average common
shares outstanding - basic 6,077,084 6,077,084
========= =========
Net earnings per common
share - diluted $ .98 $ .98
======= =======
Weighted average common stock
equivalent shares outstanding
- diluted 6,247,040 6,247,040
========= =========
</TABLE>
NOTES TO PRO FORMA CONSOLIDATED COMBINED STATEMENT OF OPERATIONS
(1) Represents goodwill amortization expense (using a 30 year amortization
period).
(2) Represents non-recurring corporate overhead expenses Hibbing was charged
by OECO Corporation.
(3) Represents additional interest expense prior to Reptron's convertible
debt offering in August, 1997, and lost interest income, post debt
offering, on funds used for acquisition.
(4) Represents income taxes on the net effect the pro forma adjustments as
set forth above, at an effective income tax rate of 40.0%. Note
municipal interest forfeited and goodwill amortization is non-deductible
for income tax purposes.
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
PRO FORMA CONSOLIDATED COMBINED STATEMENT OF OPERATIONS
For the three months ended March 31, 1998 (unaudited)
(in thousands, except share and per share data)
Reptron Hibbing Pro Forma Pro Forma
Actual Actual Adjustments Combined
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
Net Sales $70,836 $20,518 $ - $91,354
Cost of goods sold 59,363 17,853 - 77,216
------ ------ ------- ------
Gross profit 11,473 2,665 - 14,138
Selling, general
and administrative 10,734 1,736 163 (1)
(96) (2) 12,537
------ ------ ------ ------
Operating income 739 929 (67) 1,601
Interest expense, net 1,862 182 284 (3) 2,328
Other income - 178 178
------ ------ ------ ------
Earnings (loss) before income
taxes (1,123) 925 (351) (549)
Income tax provision (benefit) (622) 362 40 (4) (220)
------ ------ ------ ------
Net earnings (loss) $ (501) $ 563 $ (391) $ (329)
====== ====== ====== ======
Net earnings (loss) per
common share - basic $ (.08) $ (.05)
====== ======
Weighted average common
shares outstanding - basic 6,088,477 6,088,477
========= =========
Net earnings (loss) per common
share - diluted $ (.08) $ (.05)
====== ======
Weighted average common stock
equivalent shares outstanding
- diluted 6,088,477 6,088,477
========= =========
</TABLE>
NOTES TO PRO FORMA CONSOLIDATED COMBINED STATEMENT OF OPERATIONS
(1) Represents goodwill amortization expense (using a 30 year amortization
period).
(2) Represents non-recurring corporate overhead expenses Hibbing was charged
by OECO Corporation.
(3) Represents loss of tax exempt interest income on funds used for
acquisition.
(4) Represents income taxes on the net effect of the pro forma adjustments
as set forth above, at an effective income tax rate of 40.0%. Note
municipal interest forfeited and goodwill amortization is non-deductible
for income tax purposes.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REPTRON ELECTRONICS, INC.
-------------------------
(Registrant)
By:
----------------------
Michael Branca,
Chief Financial
Officer
Date: August 10, 1998
