UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31,1998
( ) 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.
- -------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Florida 38-2081116
- ----------------------------- -----------------------------------
State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization
14401 McCormick Drive, Tampa, Florida 33626
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813)854-2351
------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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6,089,619 shares of common stock issued and outstanding as of May 8, 1998.
- --------- -------------
REPTRON ELECTRONICS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Financial Statements
Consolidated Statements of Operations --
Three months ended March 31, 1998 and
March 31, 1997 3
Consolidated Balance Sheets --
March 31, 1998 and December 31, 1997 4
Consolidated Statement of
Shareholders' Equity -- Three months ended
March 31, 1998 and year ended December 31, 1997 5
Consolidated Statements of Cash Flows --
Three months ended March 31, 1998 and March
31, 1997 6
Notes to Consolidated Financial
Statements -- March 31, 1998 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except share and per share data)
Three months ended
March 31,
------------------
1998 1997
------- -------
<S> <C> <C>
Net sales $70,836 $76,251
Cost of goods sold 59,363 62,179
------ ------
Gross profit 11,473 14,072
Selling, general and administrative expenses 10,734 9,250
------ ------
Operating income 739 4,822
Interest expense 1,862 1,228
------ ------
Earnings before income taxes (1,123) 3,594
Income tax provision (benefit) (622) 1,438
------ ------
NET EARNINGS (LOSS) $ (501) $ 2,156
====== ======
Net earnings (loss) per common share - basic $ (0.08) $ 0.36
====== ======
Weighted average common shares outstanding - basic6,088,477 6,070,659
========= =========
Net earnings (loss) per common share - basic $ (0.08) $ 0.35
====== ======
Weighted average common stock equivalent are
anti-diluted 6,088,477 6,212,234
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
March 31, December 31,
1998 1997
------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 55,780 $ 55,135
Accounts receivable - trade, less allowances
for doubtful accounts of $350 39,975 45,033
Inventories 68,718 68,732
Prepaid expenses and other assets 2,456 3,907
Deferred tax benefit 110 110
------- -------
Total current assets 167,039 172,917
PROPERTY, PLANT & EQUIPMENT - AT COST, NET 35,493 35,404
EXCESS OF COST OVER NET ASSETS ACQUIRED, NET 4,211 4,272
OTHER ASSETS 9,411 9,921
------- -------
TOTAL ASSETS $216,154 $222,514
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 22,891 $ 24,782
Current portion of long-term obligations 3,702 3,708
Accrued expenses 2,603 5,574
Deferred Revenue 1,274 1,280
------- -------
Total current liabilities 30,470 35,344
LONG-TERM OBLIGATIONS, less current portion 128,989 129,985
DEFERRED INCOME TAXES 2,210 2,210
SHAREHOLDERS' EQUITY
Preferred Stock - authorized 15,000,000 shares
of $.10 par value; no shares issued - -
Common Stock - authorized 50,000,000 shares
of $.01 par value; issued and outstanding,
6,089,619 and 6,088,369 shares, respectively 61 61
Additional paid-in capital 21,389 21,378
Retained earnings 33,035 33,536
------- -------
TOTAL SHAREHOLDERS' EQUITY 54,485 54,975
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $216,154 $222,514
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
Total
Common Stock Additional Share-
Shares Par Paid-In Retained holders'
Outstanding Value Capital Earnings Equity
----------- ----- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 6,065,519 $61 $21,233 $27,396 $48,690
Exercise of stock
options 22,850 - 145 - 145
Net Earnings - - - 6,140 6,140
--------- -- ------ ------ ------
Balance at
December 31, 1997 6,088,369 61 21,378 33,536 54,975
Exercise of stock
options (Unaudited) 1,250 - 11 - 11
Net Loss
(Unaudited) - - - (501) (501)
--------- -- ------ ------ ------
Balance at
March 31, 1998
(Unaudited) 6,089,619 $61 $21,389 $33,035 $54,485
========= == ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three months ended
March 31,
1998 1997
------- -------
Increase (decrease) in cash and cash equivalents:
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (501) $ 2,156
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,208 1,031
Gain on sale of assets - (2)
Deferred income taxes - 50
Change in assets and liabilities:
Accounts receivable - trade 5,058 (7,553)
Inventories 14 (6,804)
Prepaid expenses and other assets 1,450 (1,951)
Other assets (511) (788)
Accounts payable - trade (1,891) 4,020
Accrued expenses (2,971) (478)
Deferred revenue (6) -
Income taxes payable - (246)
------ ------
Net cash provided by (used in)
operating activities 2,850 (10,565)
------ ------
Cash flows from investing activities:
Purchases of property, plant and equipment (1,210) (3,173)
Proceeds from sale of property, plant and equipment - 2
------ ------
Net cash used in investing activities (1,210) (3,171)
------ ------
Cash flows from financing activities:
Proceeds from exercise of stock options 11 27
Net proceeds from note payable to bank - 14,306
Payments on long term obligations (1,006) (1,026)
------ ------
Net cash provided by financing activities (995) 13,307
------ ------
Net decrease in cash and cash equivalents 645 (429)
Cash and cash equivalents at beginning of period 55,135 479
------ ------
Cash and cash equivalents at end of period $55,780 $ 50
====== ======
Supplemental cash flow information:
Interest paid $ 3,615 $ 1,125
====== ======
Income taxes paid $ - $ 2,425
====== ======
</TABLE>
Non-cash investing and financing activities:
No capital leases were entered into during the three months ended March 31,
1998. The Company incurred approximately $372 of obligations under capital
leases for the acquisition of equipment during the period ended March 31, 1997.
The accompanying notes are an integral part of these financial statements
6
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(Unaudited)
NOTE A -- BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and footnote disclosure required by generally accepted
accounting principles for complete financial statements. The consolidated
financial statements as of March 31, 1998 and for the three months ended
March 31, 1998 and March 31, 1997 are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of the financial position
and operating results for the interim periods. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative of
results that may be expected for the year ending December 31, 1998. The
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto, together with management's
discussion and analysis of financial condition and results of operations,
included in the 1997 Form 10-K.
<TABLE>
<CAPTION>
NOTE B -- INVENTORIES
Inventories consist of the following (in thousands):
March 31, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Reptron Distribution:
Inventories $44,246 $42,126
K-Byte Manufacturing:
Work in process 10,108 10,945
Raw Materials 14,370 15,661
------ ------
$68,718 $68,732
====== ======
</TABLE>
NOTE C - NOTES PAYABLE
On August 11, 1997, the Company issued $115,000,000 of 6 3/4% Convertible
Subordinated Notes, due 2004. The Notes are convertible at any time prior to
maturity, unless repurchased, into shares of common stock at a conversion rate
of approximately 35.09 shares per $1,000 principal amount of the Notes.
Interest on the Notes is payable semi-annually on February 1 and August 1,
commencing February 1, 1998. The Notes are redeemable in whole or in part, at
the Company's option, at any time on or after August 1, 2000. The Notes are
unsecured obligations subordinated to all existing and future Senior
Indebtedness (as defined under the indenture) of the Company (but not other
unsecured obligations of the company unless such obligations constitute senior
indebtedness) and are effectively subordinated to all indebtedness and other
liabilities of the Company's subsidiaries.
7
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
MARCH 31, 1998
(Unaudited)
NOTE D -- FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company has two industry segments: Distribution and Contract
Manufacturing. Distribution purchases a wide variety of electronic
components, including semiconductors, passive products and
electromechanical components, for distribution to manufacturers and
wholesalers primarily throughout the United States. Contract Manufacturing
manufactures electronic products according to customer design, for
customers in various industries, including telecommunications, banking, and
healthcare services.
The following table shows net sales and gross profit by industry segments for
the three months ended March 31, 1998 and March 31, 1997:
<TABLE>
<CAPTION>
Three months ended
March 31,
(in thousands)
------------------
1998 1997
------- -------
<S> <C> <C>
Net Sales
Distribution $40,321 $47,368
Contract Manufacturing 30,515 28,883
------ ------
$70,836 $76,251
====== ======
Gross Profit
Distribution $ 7,798 $ 8,732
Contract Manufacturing 3,675 5,340
------ ------
$11,473 $14,072
====== ======
</TABLE>
8
REPTRON ELECTRONICS, INC
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This document contains certain forward-looking statements that
involve a number of risks and uncertainties. Such forward-looking statements
are within the meaning of that term in Section 27A of the Securities Act of
1933, as amended and Section 21E of the Securities Act of 1934, as amended.
Factors that could cause actual results to differ materially include the
following: business conditions and growth in the Company's industry and in the
general economy; competitive factors; risks due to shifts in market demand; the
ability of the Company to complete acquisitions; and the risk factors listed
from time to time in the Company's reports filed with the Securities and
Exchange Commission as well as assumptions regarding the foregoing. The words
"believe", "estimate", "expect", "intend", "anticipate", and similar
expressions and variations thereof identify certain of such forward-looking
statements, which speak only as of the dates on which they were made. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. Readers are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
indicated in the forward-looking statements as a resuslt of various factors.
Readers are cautioned not to place undue reliance on these forward-looking
statements.
RESULTS OF OPERATIONS
- ---------------------
Net Sales: Total first quarter net sales decreased $5.5 million, or
7.1%, from $76.3 million in the first quarter of 1997 to $70.8 million in
the first quarter of 1998.
Reptron Distribution's 1998 first quarter net sales were $40.3 million as
compared to $47.4 million for the first quarter of 1997. In the first quarter
of 1998, the electronic component market has experienced a marked softness due
to component oversupply and declining average selling prices, and Reptron
Distribution's sales were impacted by this market condition. Sales of
semiconductors, passive components and electromechanical components accounted
for 58.9%, 31.2% and 9.9%, respectively, of Reptron Distribution's 1998 first
quarter net sales, and 75.0%, 19.4% and 5.6%, respectively of the divisions'
1997 first quarter net sales. Reptron Distribution's sales generated from the
top four vendors accounted for approximately $12.8 million, or 31.8% of Reptron
Distribution's 1998 first quarter net sales, as compared with approximately
$18.4 million or 38.9% of Reptron Distribution's 1997 first quarter net sales.
K-Byte Manufacturing net sales increased $1.6 million, or 5.7%, from
$28.9 million in the first quarter of 1997 to $30.5 million in the first
quarter of 1998. K-Byte Manufacturing transacted business with approximately
39 customers with the largest three customers representing approximately 16.0%,
13.1% and 7.5%, respectively, of first quarter 1998 division net sales (6.9%,
5.6% and 3.2% respectively, of total Company first quarter net sales). Sales
from the Tampa, Florida manufacturing facility accounted for approximately
54.7% of K-Byte Manufacturing net sales. The Gaylord, Michigan manufacturing
facility generated approximately 43.2% of K-Byte Manufacturing net sales with
the remaining net sales originating from the Saline, Michigan location.
Gross Profit: Total first quarter gross profit decreased $2.6
million, or 18.5%, from $14.1 million in the first quarter of 1997 to $11.5
million in the first quarter of 1998. The gross profit percentage of the
Company decreased from 18.5% in the first quarter of 1997 to 16.2% in the
first quarter of 1998.
Reptron Distribution's gross profit decreased $934,000, or
10.7%, from $8.7 million in the first quarter of 1997 to $7.8 million in the
first quarter of 1998. The gross margin for the first quarter of 1998
increased from 18.4% in 1997 to 19.3%. This increase in gross margin is
primarily attributed to the shift in product mix described above and increased
value added selling.
K-Byte Manufacturing's gross profit decreased $1.6 million, or 31.2%,
from $5.3 million in 1997 to $3.7 million 1998. The gross margin decreased
from 18.5% in 1997 to 12.0% in 1998. In order to meet the demands of
integrating in new customers in 1997, the Company added significant production
staff which resulted in production inefficiencies and a decline in margins. The
margins for the first quarter of 1998 are negatively impacted as a result.
Selling, General, and Administrative Expense: Selling, general, and
administrative expenses increased $1.4 million, or 16.0%, from $9.3 million in
the first quarter of 1997 to $10.7 million in the first quarter of 1998.
The increase in expense is primarily reflective of investments in senior
management, field application engineers, and the newly established Dallas
branch sales office. These expenses, as a percentage of net sales, decreased
from 12.1% in the first quarter of 1997 to 15.2% in the first quarter of 1998.
9
Interest Expense: Net interest expense increased $634,000, or 51.6%, from
$1.2 million in the first quarter of 1997 to $1.9 million in the first
quarter of 1998. The increase is primarily attributable to the increase in
long term debt as a result of the issuance of $115.0 million of subordinated
convertible notes, offset by interest income of $430,000 on municipal
investments during the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company primarily finances its operations through subordinated notes,
bank credit lines, capital equipment leases, and short-term financing through
supplier credit lines. In August 1997, the Company completed a $115.0 million
subordinated convertible debt offering. The proceeds were used to pay down
indebtedness under the Company's Revolving Credit Facility.
Pursuant to the Company's Amended and Restated Revolving Credit Facility
(the "Credit Facility"), four lenders have made available to the Company a $15
million revolving credit facility through June 30, 1999. The lenders may
advance funds to the Company pursuant to two types of loans, each of which
bears a separate rate of interest. As long as the Company is not in default
under the Credit Facility, and upon notice to the lender, the Company may
convert advances from one type of loan to the other. Borrowings under the
Credit Facility are collateralized by all of the Company's inventory and
accounts receivable. The Credit Facility contains certain financial covenants
including, requiring the Company to maintain a minimum tangible net worth,
maintain various financial ratios and limit the amount of capital expenditures.
In addition, the Credit Facility requires the financial institutions' approval
of dividends in excess of the lesser of $1,000,000 or 25% of net earnings,
thereby restricting the distribution of the retained earnings of the Company.
The Company was in compliance with all financial covenants as of March 31, 1998.
No amounts were outstanding under the Revolving Credit Facility as of
March 31, 1998.
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 $7.1
million as of March 31, 1998. The leases bear interest at rates ranging from
7.4% to 11.1% and expire at various dates through July, 2002.
The Company's operating activities provided cash of approximately $2.9
million in the first quarter of 1998. This increase in liquidity resulted
primarily in a $5.1 million decrease in accounts receivable, and a $1.4 million
decrease in other assets and prepaid expenses. These items were partially
offset by a net loss of $501,000, a $1.9 million decrease in accounts
payable, a $3.0 million decrease in accrued expenses. Reptron Distribution and
K-Byte Manufacturing annualized inventory turns for the first quarter of 1998
were approximately 3.7 times and 3.8 times, respectively. The Company's
accounts receivable collections averaged 51 days as of March 31, 1998.
Capital expenditures totaled approximately $1.2 million in the first
quarter of 1998. These capital expenditures were primarily for the acquisition
of manufacturing equipment.
On December 18, 1997, the Company announced that its Board of Directors
authorized the repurchase of up to 1,000,000 shares of the Company's Common
Stock on the open market. The Company has not yet commenced this stock
repurchase.
On February 24, 1998, the Company announced it had signed a letter of
intent to acquire Hibbing Electronics Corporation, of Hibbing, Minnesota, by
way of a merger with Hibbing's parent company. The Company believes
available cash reserves and credit facilities will be sufficient to fund this
transaction.
The Company believes that cash generated from operations, available cash
reserves, and 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.
10
REPTRON ELECTRONICS, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended March 31, 1998.
11
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated:
-------------------------------
REPTRON ELECTRONICS, INC.
-------------------------
(Registrant)
By:/s/ Michael Branca
-------------------------------
Michael Branca, Chief Financial
Officer (Principal Financial
and Accounting Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF EARNINGS AND THE CONSOLIDATED BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 55780 50
<SECURITIES> 0 0
<RECEIVABLES> 39975 47360
<ALLOWANCES> 350 350
<INVENTORY> 68718 65498
<CURRENT-ASSETS> 167039 117789
<PP&E> 35493 33189
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 216154 157470
<CURRENT-LIABILITIES> 30470 29595
<BONDS> 128989 75417
0 0
0 0
<COMMON> 61 61
<OTHER-SE> 54424 50812
<TOTAL-LIABILITY-AND-EQUITY> 216154 157470
<SALES> 70836 76251
<TOTAL-REVENUES> 70836 76251
<CGS> 59363 62179
<TOTAL-COSTS> 70097 71429
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1862 1228
<INCOME-PRETAX> (1123) 3594
<INCOME-TAX> (622) 1438
<INCOME-CONTINUING> (501) 2156
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (501) 2156
<EPS-PRIMARY> (.08) .36
<EPS-DILUTED> (.08) .35
</TABLE>
