<PAGE> 1
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 September 30,1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------ --------------
Commission File Number 0 - 23426
---------
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
------- -------
6,167,119 shares of common stock issued and outstanding as of November 12, 1999
- --------- -----------------
<PAGE> 2
REPTRON ELECTRONICS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION Number
Item 1. Financial Statements
Consolidated Statements of Operations --
Three months ended September 30, 1999 and
September 30, 1998 and Nine months ended
September 30, 1999 and September 30, 1998 3
Consolidated Balance Sheets --
September 30, 1999 and December 31, 1998 4
Consolidated Statement of
Shareholders' Equity -- Nine months ended
September 30, 1999 and year ended December 31, 1998 5
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1999 and September
30, 1998 6
Notes to Consolidated Financial Statements -
September 30, 1999 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of the Security
Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 93,559 $ 77,527 $ 251,970 $ 221,998
Cost of goods sold 80,119 66,254 217,525 188,471
----------- ----------- ----------- -----------
Gross profit 13,440 11,273 34,445 33,527
Selling, general and administrative expenses 14,130 12,099 40,353 34,125
----------- ----------- ----------- -----------
Operating loss (690) (826) (5,908) (598)
Interest expense, net 1,964 2,306 6,131 6,003
----------- ----------- ----------- -----------
Loss before income taxes (4,715) (2,343) (9,386) (3,467)
Income tax benefit (990) (1,176) (4,595) (2,676)
----------- ----------- ----------- -----------
Loss before extraordinary item (1,664) (1,956) (7,444) (3,925)
Extraordinary gain on extinguishment
of debt, net of tax 4,527 -- 12,776 --
----------- ----------- ----------- -----------
Net earnings (loss) $ 2,863 $ (1,956) $ 5,332 $ (3,925)
=========== =========== =========== ===========
Net earnings (loss) per common share -
basic and diluted:
Loss before extraordinary item $ (0.27) $ (0.32) $ (1.21) $ (0.64)
Extraordinary gain .74 -- 2.08 --
----------- ----------- ----------- -----------
Net earnings (loss) per common share -
basic and diluted $ 0.47 $ (0.32) $ 0.87 $ (0.64)
=========== =========== =========== ===========
Weighted average common shares
outstanding - basic and diluted 6,147,119 6,145,936 6,147,119 6,108,324
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE> 4
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
ASSETS
(Unaudited)
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,848 $ 10,065
Accounts receivable - trade, net 59,393 49,503
Inventories, net 77,169 69,331
Prepaid expenses and other 872 9,296
Deferred tax benefit 995 2,295
------- -------
Total current assets 141,277 140,490
PROPERTY, PLANT & EQUIPMENT - AT COST, NET 35,439 38,273
EXCESS OF COST OVER NET ASSETS ACQUIRED, NET 24,033 25,527
OTHER ASSETS 2,923 5,794
------- -------
$203,672 $210,084
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade 35,963 25,542
Current portion of long-term obligations 4,031 3,866
Accrued expenses 5,728 9,183
Deferred revenue - 70
Income taxes payable 1,909 -
------- -------
Total current liabilities 47,631 38,661
LONG-TERM OBLIGATIONS, less current portion 108,583 129,297
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,
6,147,119 shares 61 61
Additional paid-in capital 21,676 21,676
Retained earnings 25,721 20,389
------- -------
47,458 42,126
------- -------
$203,672 $210,084
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 5
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands, except share data)
Common Stock Total
------------------------- Additional Share-
Shares Par Paid In Retained holders'
Outstanding Value Capital Earnings Equity
----------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1997 6,088,369 $ 61 $ 21,378 $ 33,536 $ 54,975
Exercise of stock
options 58,750 -- 298 -- 298
Net loss -- -- -- (13,147) (13,147)
--------- --------- --------- --------- ---------
Balance at
December 31, 1998 6,147,119 61 21,676 20,389 42,126
Net earnings (unaudited) -- -- -- 5,332 5,332
--------- --------- --------- --------- ---------
Balance at
September 30, 1999
(unaudited) 6,147,119 $ 61 $ 21,676 $ 25,721 $ 47,458
========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of this financial statement
5
<PAGE> 6
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Nine months ended
September 30,
(Unaudited)
----------------------
1999 1998
-------- --------
<S> <C> <C>
Increase (decrease) in cash and cash equivalents:
Cash flows from operating activities:
Net earnings (loss) $ 5,332 $ (3,925)
Adjustments to reconcile net earnings (loss) to
net cash provided by operating activities and
net of acquisitions:
Depreciation and amortization 8,198 7,526
Extraordinary gain (12,776) --
Deferred income taxes (4,595) 113
Loss on disposal of assets -- (218)
Change in assets and liabilities:
Accounts receivable - trade (9,502) 6,298
Inventories (7,469) 5,906
Prepaid expenses and other current assets 8,424 (2,233)
Other assets 228 (1,539)
Accounts payable - trade 10,421 (13,018)
Accrued expenses (3,455) (150)
Deferred revenue (70) (1,280)
Income taxes payable (715) --
-------- --------
Net cash used in operating
activities (6,435) (2,520)
-------- --------
Cash flows from investing activities:
Net cash paid for acquisitions -- (31,006)
Purchases of property, plant and equipment (2,541) (3,054)
Proceeds from the sale of property 99 597
-------- --------
Net cash used in investing activities (2,442) (33,463)
-------- --------
Cash flows from financing activities:
Proceeds from exercise of stock options -- 298
Net proceeds from note payable to bank 29,302 --
Payments on long term obligations (27,642) (10,899)
-------- --------
Net cash provided by (used in) financing
activities 1,660 (10,601)
-------- --------
Net decrease in cash and cash equivalents (7,217) (46,584)
Cash and cash equivalents at beginning of period 10,065 55,135
-------- --------
Cash and cash equivalents at end of period $ 2,848 $ 8,551
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE> 7
<TABLE>
<CAPTION>
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
Nine months ended
September 30,
(Unaudited)
-----------------
1999 1998
------- -------
<S> <C> <C>
Supplemental cash flow information:
Interest paid $7,561 $ 4,681
====== =======
Income taxes paid $ 690 $ 172
====== =======
</TABLE>
Non-cash investing and financing activities:
No capital leases were entered into during the nine month period ended
September 30, 1998. During the nine month period ended September 30, 1999, the
company incurred approximately $322,000 of obligations under capital leases for
the acquisition of equipment.
Goodwill, related to the 1998 Hibbing acquisition, was reduced approximately
$767,000 during the period ended September 30, 1999.
Net capitalized financing costs of approximately $1.2 million, related to the
year to date repurchase of convertible subordinated bonds, have been written
off during the period ended September 30, 1999, and has been included in the
calculation of the extraordinary item (see note D).
The accompanying notes are an integral part of these financial statements
7
<PAGE> 8
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(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 September 30, 1999 and for the three and nine months ended
September 30, 1999 and September 30, 1998 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 and nine months ended September 30, 1999 are not
necessarily indicative of results that may be expected for the year ending
December 31, 1999. 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 1998 Form 10-K.
NOTE B -- INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
Reptron Distribution:
Inventories $40,489 $37,026
K-Byte Manufacturing:
Work in process 13,177 9,043
Raw Materials 23,503 23,262
------- -------
$77,169 $69,331
======= =======
</TABLE>
8
<PAGE> 9
REPTRON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
September 30, 1999
(Unaudited)
NOTE C -- 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 United States.
Contract Manufacturing manufactures electronic products, according to customer
design, for a select number of customers throughout the country representing a
diverse range of industries. Inter-segment sales include a margin, based on
market pricing, which is eliminated in consolidation.
The following table shows net sales and gross profit by industry segments:
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
(in thousands) (in thousands)
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales
Distribution $ 52,858 $ 36,559 $136,552 $117,858
Contract Manufacturing 40,701 40,968 115,418 104,140
-------- -------- -------- --------
$ 93,559 $ 77,527 $251,970 $221,998
======== ======== ======== ========
Gross Profit
Distribution $ 8,659 $ 7,073 $ 22,689 $ 22,540
Contract Manufacturing 4,781 4,200 11,756 10,987
-------- -------- -------- --------
$ 13,440 $ 11,273 $ 34,445 $ 33,527
======== ======== ======== ========
</TABLE>
NOTE D -- EARLY EXTINGUISHMENT OF DEBT
Reptron extinguished approximately $13.7 million of its convertible
subordinated bonds during the third quarter of 1999. The cash paid to
extinguish these bonds was approximately $5.7 million. This transaction
generated an after tax extraordinary gain of approximately $4.5 million. The
net capitalized financing costs of approximately $424,000 associated with the
extinguished debt was written off during the third quarter of 1999.
Reptron extinguished approximately $38.7 million of its convertible
subordinated bonds in the nine months ended September 30 of 1999. The cash paid
to extinguish these bonds was approximately $16.1 million. This transaction
generated an after tax extraordinary gain of approximately $12.8 million. The
net capitalized financing costs of approximately $1.2 million associated with
the extinguished debt was written off during the third quarter of 1999.
NOTE E - SUBSEQUENT EVENT
On October 27, 1999, Reptron Electronics, Inc.,("Reptron") acquired all of the
assets and assumed stated liabilities of Applied Instruments, of Fremont,
California. This transaction will be recorded as an asset purchase. At closing,
Reptron paid $7.5 million cash and assumed, among other liabilities, $1.4
million of bank debt. Additional purchase consideration may be paid in annual
installments over the next three years based upon Applied Instruments attaining
certain levels of profitability. There is no minimum required annual
installment amount. Each of the annual installments cannot exceed $3.5 million.
Management has determined that the goodwill associated with this transaction
will be amortized over a 20 year life.
In October, 1999, the Company expanded its credit facility with PNC Bank to
$60.0 million from $50.0 million to finance this acquisition.
9
<PAGE> 10
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 Reptron's industry and in the general economy;
competitive factors; risks due to shifts in market demand; the ability of
Reptron to complete acquisitions and integrate; and the risk factors listed
from time to time in Reptron's reports filed with the Securities and Exchange
Commission as well as assumptions regarding the foregoing. The words "believe",
"estimate", "expect", "intend", "anticipate", "plan" 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. Reptron 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
result of various factors. Readers are cautioned not to place undue reliance on
these forward-looking statements.
RESULTS OF OPERATIONS
Net Sales. Third quarter net sales increased $16.0 million, or 20.7%,
from $77.5 million in the third quarter of 1998 to $93.6 million in the third
quarter of 1999. Total net sales for the first nine months of 1999 increased
$30.0 million, or 13.5% from $222.0 million in the first nine months 1998 to
$252.0 million in the first nine months of 1999.
Reptron Distribution third quarter net sales increased $16.3 million,
or 44.6%, from $36.5 million in the third quarter of 1998 to $52.8 million in
the third quarter of 1999. This significant increase in sales resulted
primarily from an improving market for sale of electronic components in the
United States. Additionally, Reptron Distribution has increased its workforce
by approximately 21% in 1999 to help promote sales. The largest customer
represented approximately 7.1% of Reptron Distribution third quarter, 1999 net
sales (4.0% of total Company net sales) and the top ten customers accounted for
approximately 30.9% of Reptron Distribution third quarter 1999 net sales. Sales
of semiconductors accounted for 70.9% of third quarter Reptron Distribution net
sales, with the remaining sales generated from passive components (19.9%) and
electromechanical products (9.2%). Sales generated from the top three Reptron
Distribution vendor lines accounted for approximately $14.7 million, or 27.8%
of Reptron Distribution's 1999 third quarter net sales, as compared with
approximately $11.0 million or 30.2% of Reptron Distribution's 1998 third
quarter net sales.
Reptron Distribution net sales increased $18.6 million, or 15.9%, from
$117.9 million in the first nine months of 1998 to $136.5 million in the first
nine months of 1999. The largest Reptron Distribution customer in the first
nine months of 1999 represented approximately 5.2% of total Reptron
Distribution net sales (2.8% of total Company net sales) and the top ten
customers accounted for 24.9% of total Reptron Distribution net sales. Sales of
semiconductors accounted for 70.9% of first nine months of Reptron Distribution
net sales, with the remaining sales generated from passive components (19.9%)
and electromechanical products (9.2%). Sales generated from the top three
Reptron Distribution vendor lines accounted for approximately $35.0 million, or
25.7% of Reptron Distribution's 1999 first nine months net sales, as compared
with approximately $30.2 million or 25.6% of Reptron Distribution's 1998 first
nine months of net sales.
K-Byte Manufacturing net sales increased $267,000,from $40.9 million
in the third quarter of 1998 to $40.7 million in the third quarter of 1999,
including hibbing Electronics sales. Net sales from Hibbing manufacturing
location, acquired May 29, 1998, were $19.9 million in the third quarter of
1999. Hibbing's net sales for the third quarter of 1998 amounted to
approximately $14.3 million. Net sales generated within the previously existing
K-Byte Manufacturing customer base decreased by approximately $5.9 million in
the third quarter of 1999. The largest K-Byte Manufacturing customer accounted
for approximately 6.9% of third quarter division net sales (3.0% of total
Company net sales). Sales from the Hibbing, Minnesota; Gaylord, Michigan and
Tampa, Florida manufacturing facilities accounted for approximately 49%, 27%,
and 24%, respectively, of K-Byte Manufacturing third quarter net sales.
10
<PAGE> 11
K-Byte Manufacturing net sales increased $11.2 million, or 10.8%, from
$104.1 million in the first nine months of 1998 to $115.4 million in the first
nine months of 1999. However, 1999 sales include nine months of activity from
Hibbing Electronics' operations which was acquired in May, 1998. The largest
K-Byte customer accounted for approximately 7.6%, of total first half 1999
division net sales (3.6% of total Company net sales). Sales from the Hibbing,
Minnesota; Tampa, Florida and Gaylord, Michigan manufacturing facilities
accounted for approximately 43%, 26% and 31%, respectively, of total K-Byte
Manufacturing sales in the first nine months of 1999.
Gross Profit. Total third quarter gross profit increased $2.1 million,
or 19.2%, from $11.2 million in the third quarter of 1998 to $13.4 million in
the third quarter of 1999. The gross margin of Reptron decreased from 14.5% in
the third quarter of 1998 to 14.4% in the third quarter of 1999. Total gross
profit increased $918,000, or 2.7%, from $33.5 million in the first nine months
of 1998 to $34.4 million in the first nine months of 1999. The gross margin
decreased from 15.1% in the first nine months of 1998 to 13.7% in the first
nine months of 1999.
Reptron Distribution third quarter gross profit increased $1.6
million, or 22.4%, from $7.1 million in the third quarter of 1998 to $8.7
million in the third quarter of 1999. The gross margin decreased from 19.3% in
the third quarter of 1998 to 16.4% in the third quarter of 1999. This decrease
in gross margin is due primarily to industry wide pressures on component
pricing and shifts in customer sales mix. Reptron Distribution's first nine
months gross margin decreased from 19.1% in the first nine months of 1998 as
compared to 16.6% in the first nine months of 1999,for similar reasons.
K-Byte Manufacturing gross profit increased $581,000, or 13.8%, from
$4.2 million in the third quarter of 1998 to $4.8 million in the third quarter
of 1999 and its gross margin increased from 10.3% in the third quarter of 1998
to 11.7% in the third quarter of 1999. K-Byte Manufacturing first nine months
gross profit increased $769,000 or 7.0% from $6.8 million in 1998 to $7.0
million in 1999 and its gross margin decreased from 10.7% in the first nine
months of 1998 to 9.3% in the first nine months of 1999. This decrease in gross
margin is reflective of under-absorption of fixed manufacturing overhead and
increased depreciation and amortization expenses at current sales levels.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses increased $2.0 million, or 16.7%, from $12.1 million in
the third quarter of 1998 to $14.1 million in the third quarter of 1999. These
expenses, as a percentage of net sales, decreased from 15.6% in the third
quarter of 1998 to 15.1% in the third quarter of 1999. First nine months
selling, general and administrative expenses increased $6.2 million or 18.2%
from $34.1 million in the first nine months of 1998 to $40.3 million in the
first nine months of 1999. First nine months selling, general and
administrative expenses as a percentage of net sales increased from 15.3% in
the first nine months of 1998 to 16.0% in the first nine months of 1999. This
increase is primarily attributed to the Hibbing operating expenses since the
May, 1998 acquisition, the addition of sales staff and other infrastructure,
primarily for Reptron Distribution, and the increase in variable expenses
associated with increased sales.
Interest Expense. Net interest expense decreased $342,000, or 14.8%,
from $2.3 million in the third quarter of 1998 to $2.0 million in the third
quarter of 1999. First three quarters net interest expense increased $128,000,
or 2.1%, from $6.0 million in the first three quarters of 1998 to $6.1 million
in the first three quarters of 1999. The increase is primarily attributed to
the acquisition of Hibbing Electronics in May, 1998, and was in part offset by
the 1999 bond repurchases.
LIQUIDITY AND CAPITAL RESOURCES
Reptron primarily finances its operations through operating cash
flows, subordinated notes, bank credit lines, capital equipment leases, and
short-term financing through supplier credit lines.
Operating activities for the nine months of 1999 used cash of
approximately $6.4 million. This decrease in liquidity resulted primarily from
an operating loss of $7.4 million, an increase in accounts receivable of $9.5
million, an increase in inventories of $7.5 million. an increase in deferred
income taxes of $4.6 million, and a decrease in accrued expenses of $3.5
million. These items were offset by an increase in accounts payable of $10.4
million, a decrease in prepaid expense and other current assets of $8.4
million.
During the first nine months of 1999, Reptron expended approximately
$16.1 Million in connection with the repurchase of $38.7 million of convertible
subordinated bonds, generating a net after tax extraordinary gain of
approximately $12.8 million.
11
<PAGE> 12
Capital expenditures totaled approximately $2.5 million in the first
three quarters of 1999. These capital expenditures were primarily for the
acquisition of software, manufacturing equipment and building improvements. The
cash reserves of Reptron were used to fund these purchases.
On October 27, 1999, Reptron Electronics, Inc. ("Reptron") acquired
all of the assets and assumed stated liabilities of Applied Instruments, of
Fremont, California. At closing, Reptron paid $7.5 million cash and assumed,
among other liabilities, $1.4 million of bank debt. Additional purchase
consideration may be paid in annual installments over the next three years
based upon Applied Instruments attaining certain levels of profitability. There
is no minimum required annual installment amount. Each of the annual
installments cannot exceed $3.5 million. Management has determined that the
goodwill associated with this transaction will be amortized over a 20 year
life.
In October, 1999, the Company expanded its credit facility with PNC
Bank to $60.0 million from $50.0 million to finance this acquisition.
Reptron believes that cash generated from operations, available cash
reserves and available credit facilities will be sufficient for Reptron to meet
its capital expenditures and working capital needs for its operations as
presently conducted. However, Reptron'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. While
there can be no assurance that such financing will be available in amounts and
on terms acceptable to Reptron, Reptron believes that such financing would
likely be available on acceptable terms.
YEAR 2000 STATEMENT
The Year 2000 issue encompasses the required recognition of computer
hardware and software systems and computer controlled devices, including
equipment used in Reptron's manufacturing and distribution operations, to
properly acknowledge the change from Year 1999 to Year 2000. The failure of any
hardware and software systems or equipment to timely and accurately recognize
such change could result in partial or complete systems failure. In the normal
course of business, Reptron relies on products and services from critical
vendors, customers and other third parties whose computer systems must also be
Year 2000 compliant in order for Reptron to realize the uninterrupted flow of
its business operations. Reptron is actively taking steps to ensure that its
systems and equipment will be Year 2000 compliant, including assessing the
scope of work, prioritizing, certifying compliance, and testing compliance.
Reptron is also actively assessing the Year 2000 compliance status of its
primary vendors, customers and other third party service providers.
Substantially all of the critical systems and equipment utilized in
Reptron Distribution, Reptron's central corporate operations and K-Byte
Manufacturing, including Hibbing, have been tested for Year 2000 compliance as
of September 30, 1999. Those tests have demonstrated the critical operating
systems of Reptron Distribution and Reptron's central corporate operations to
be Year 2000 compliant Further, testing to date has supported the
representations previously made by primary third party software providers to
K-Byte Manufacturing regarding their software Year 2000 computability.
While Reptron is actively seeking assurances of Year 2000 compliance
from each of its key suppliers, customers and other third-parties with whom
Reptron conducts business, this assessment primarily relies upon such
third-parties' representations of Year 2000 compliance. A lack of response or
inadequate or inaccurate information from such third parties could materially
affect Reptron's assessment of Year 2000 readiness Reptron continues to assess
the responses to its inquiries regarding Year 2000 compatibility received from
its key suppliers, customers and other third parties.
12
<PAGE> 13
To date, the costs incurred by Reptron to address Year 2000 issues
have been immaterial, and Reptron expects that the costs to complete Year 2000
compliance certification, testing and verification will also be immaterial.
Where appropriate, Reptron is in the process of developing contingency plans in
areas it determines that Year 2000 readiness is insufficient. However, no
assurances can be given that Reptron's Year 2000 efforts and testing procedures
are appropriate, adequate or complete. In addition, Reptron is unable to fully
determine the effect of a failure of its own systems or those of any
third-party with whom it conducts business, but any significant failures could
have a material adverse effect on Reptron's financial condition, results of
operations and cash flows.
13
<PAGE> 14
REPTRON ELECTRONICS, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of the Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Distribution Agreement between Advantech Technologies and
Reptron Electronics, Inc. dated September 7, 1999
10.2 Distribution Agreement between Samsung displays and
Reptron Electronics, Inc. dated July 2, 1999
27 Financial Data Schedule (for SEC use only)
b. Reports on Form 8-K
None
14
<PAGE> 15
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: November 12, 1999
-------------------
REPTRON ELECTRONICS, INC.
(Registrant)
By: /s/ Michael Branca
------------------------
Michael Branca
Chief Financial Officer
(Principal Financial and
Accounting Officer)
15
<PAGE> 1
EXHIBIT 10.1
Advantech Technologies
Distributor Agreement
This agreement is made as of September 10, 1999 between Advantech Technologies,
Inc. with offices at 15375 Barranca Parkway, Suite A-106, Irvine, CA 92618
(hereinafter referred as "Advantech") and Reptron Distribution with corporate
offices located at 14401 McCormick Drive, Tampa, FL 33626 (hereinafter referred
as the "Distributor").
1. Appointment and Acceptance
Advantech appoints Distributor as its non-exclusive agent to sell products
(enumerated in Paragraph 3, "Products" hereof) in the territory (defined in
Paragraph 2, "territory" hereof); and Distributor accepts the appointment and
agrees to sell Advantech products.
2. Territory
The Distributor's territory shall consist of the states as set forth in Exhibit
C.
3. Products
The products included under this Agreement shall consist of all Advantech
products (as set forth in Exhibit A). Advantech reserves the right to change
its product offering from time to time, without changing this Agreement,
provided notice of such changes is given to the Distributor at least sixty (60)
days prior to their effective date.
4. Quota Commitment and Review
The Distributor commits to a total net purchase amount as its annual sales
quota. The first year quota commitment is as set forth the in Exhibit B.
Distributor's quota performance will be reviewed on a quarterly basis.
5. Prices
The Distributor is granted to purchase products based on Advantech prevailing
Distributor Price (as set forth in Exhibit A). All prices stated are for F.O.B.
Santa Clara, CA, and are exclusive of any beyond factory charges such as taxes,
duties, freight, insurance, etc. Advantech reserves the right to change its
prices from time to time. Advantech agrees to give Distributor thirty (30) days
advance notice of any official price change, which notice shall include the
proposed effective date. All orders received by Advantech after the effective
date will be invoiced at the new price.
6. Payment Terms
Advantech standard payment term is Net 30 days subject to credit, review and
approval. For late payment, Advantech will charge interest on overdue invoices
and may stop shipment to the Distributor until all over due invoices are paid.
7. Additional Obligations of Distributor
(a) Make its best efforts to promote the sales of Advantech products in
the territory through all necessary sales and marketing activities.
(b) Shall not handle any competitor's products without prior
notification to Advantech.
1
<PAGE> 2
(c) The Distributor shall not, without Advantech's prior written
approval, alter or enlarge any guarantees concerning Advantech products.
(d) The Distributor shall indemnify, save and hold harmless and defend
Advantech from and against all claims, losses, and liabilities, including
without limitation, attorneys fees, costs and expenses, arising out of damage
to property, or injury to, or death of, persons, occasioned by, or alleged to
be occasioned by, the acts or omissions, negligent or otherwise, of the
Distributor or any of the Distributor's sales engineers, employees, or
contractors, including without limitation, in connection with carrying out the
Distributor's obligations under this Agreement.
8. Additional Obligation of Advantech
(a) Provide sales and marketing supports to the Distributor to promote
the sales of Advantech products.
(b) Provide technical support to the Distributor as is reasonable to
enable Distributor to promote the sales of Advantech products.
(c) Advantech shall indemnify, save and hold harmless and defend the
Distributor from and against all claims, losses, and liabilities, including
without limitation, attorneys fees, costs and expenses, arising out of damage
to property, or injury to, or death of, persons, occasioned by, or alleged to
be occasioned by, the acts or omissions, negligent or otherwise, of Advantech,
or its employees, or contractors, including without limitation, in connection
with carrying out Advantech's obligations under this Agreement.
(d) Advantech shall, except as provided elsewhere herein, defend or
settle any claim made or any suit brought against the Distributor so far as it
is based on an allegation that any Products furnished hereunder infringe any
patent or trademark whatsoever, provided that Distributor notifies Advantech
promptly in writing of any such suit or action, and provided that Distributor
gives information, assistance, and sole authority to Advantech to defend or
settle the case.
9. Account Protection
Due to-the non-exclusive nature of this Agreement, the Distributor understands
that it is the Distributor's obligation to notify Advantech of all accounts
Distributor is working on, and to register all accounts with Advantech. An
account shall be registered with Advantech only after it has been accepted,
entered into Advantech's customer database, and given the corresponding
Distributor's sales code. The Distributor will receive protection on all
registered accounts for a period of 12 months, and have an on-going rolling
window of 12 months, based on updated activity and notes entered into the
Advantech customer database. Advantech will provide Distributor with a monthly
status update of all accounts registered in Advantech's customer database.
10. "Finder's Fee" Based Special Project
From time to time, the Distributor may be involved in a special project that
requires Advantech's direct participation in the project due to extreme cost or
technical requirements. Under these conditions, Distributor can choose to work
with Advantech for such project on a "finder's fee" basis. Advantech and
Distributor will determine the commission rate together on a case by case
basis.
1 1. Copyright and Trademark
(a) Distributor will respect the copyrights of Advantech's products and
will not duplicate any material or parts unless authorized by Advantech with a
written agreement.
(b) Distributor agrees, during the term of this agreement and six (6)
months within the termination of this agreement, not to manufacture any of the
covered products directly or indirectly, itself or through any subsidiary,
affiliated concern, joint venture, agent or employee.
2
<PAGE> 3
(c) Distributor will respect Advantech's right on its trademarks and
company logo. Distributor may use Advantech trademarks and company logo for the
purpose of promoting the sales of Advantech products. However, Distributor
shall not use Advantech trademarks or company logo without prior consent from
Advantech.
12. Product Warranty
The term of product warranty shall be Fifteen (1 5) months from the date of
shipment by Advantech to the Distributor. All products are warranted to be free
of defective material and workmanship. Any product that is found to be
defective within the warranty period will, at the option of Advantech, be
replaced or repaired. This warranty does not apply to any products that have
been repaired or altered by other than Advantech authorized service personnel,
or which have been subjected to misuse, abuse, accident or improper
installation. Advantech's liability shall in no event exceed the original
product's purchase price.
13. Confidentiality
(a) The Distributor shall use its utmost endeavors to assure that its
officers, employees, agents and consultants retain in the utmost confidence and
do not disclose, directly or indirectly, to any person, firm, or corporation,
or use for any purpose other than the purpose of this agreement, without the
prior written consent of Advantech, any confidential Information of Advantech.
The "confidential Information" shall include any proprietary or trade secret
information contained in the Product, or any know-how or technical information
related to the Product or any marketing or financial information related to the
Product or Advantech, which Advantech has provided to the Distributor and which
is not publicly available.
(b) Advantech agrees that during the term of this agreement that
Distributor may provide Advantech with certain proprietary or confidential
information. Advantech agrees to keep such information confidential and will
not disclose such information to any third party without obtaining prior
written consent from Distributor and agrees not to use such information for any
purpose other than the performance of its obligations under this agreement.
(c) The parties agree that the obligations of confidentiality shall
remain in effect during the term of this agreement and for one (1) year after
termination of this agreement.
14. Term of Agreement
The term of this Agreement shall be twelve (12) months commencing on the
effective date of this Agreement first above written unless sooner terminated
in accordance with the paragraph "Termination". Thereafter, this Agreement
shall be automatically renewed on an annual basis unless terminated in
accordance with the Paragraph 15, "Termination".
15. Termination
(a) Either party, with or without cause, may terminate this agreement
at any time upon thirty (30) days written notice. Additional thirty (30) days
will be added for each year of tenure up to 90 days.
(b) This agreement may be terminated by either party without notice in
the event of change in the ownership, insolvency, bankruptcy, assignment for
the benefits of creditors, filing for a plan of arrangement, or any similar
condition of the other party.
(c) Neither party shall be liable to the other for any damage or loss
sustained by reason of, or resulting from the termination or expiration of this
Agreement, but the termination or expiration of this Agreement shall not affect
any liability incurred or accrued prior thereto.
3
<PAGE> 4
16. Arbitration
(a) It is mutually agreed that the parties shall be free to bring any
and all differences in interpretation of this Agreement and disputes to the
attention of the other at any time without prejudicing their harmonious
relationship and operations hereunder; and their facilities shall be available
at all times for the prompt and effective adjustment of any and all such
differences and disputes, either by mail, telephone, or personal meeting under
friendly and courteous circumstances.
(b) A failure to reach an adjustment of any difference, or to settle
any dispute or claim that may arise, except as otherwise provided in this
Agreement, shall thereupon make the same a matter for arbitration hereunder,
upon the written request of any one party to the other, and such arbitration
shall be in accordance with the Commercial Arbitration Rules, then in effect,
of The American Arbitration Association. It is understood that a judgment on an
award rendered, which may include an award of damages, may be entered in any
court having jurisdiction thereof.
17. Amendment and Severability
This Agreement may be amended only in writing and upon mutual consent of the
parties hereto and supersedes any and all other agreements, written or oral,
between them. If any provision of this Agreement or the application of any
provision hereof to any person or circumstance is held invalid, the remainder
of this Agreement and the application of said provision to the other persons or
circumstances shall not be affected, unless the provision held invalid shall
substantially impair the benefit of the remaining portions of this Agreement.
18. Construction of Agreement
This Agreement sets forth the entire agreement and understanding between the
parties and supersedes all prior discussions, agreements and understandings of
any kind and every nature between them; and no party hereto shall be bound by
any condition, definition, warranty or representation other than as is
expressly provided for in this Agreement. Anything not expressly included
herein is expressly prohibited.
The validity, performance, construction and effect of this Agreement shall be
governed by the laws of the State of California (where Advantech has its
principal place of business) without giving effect to principles of conflicts
of law.
IN WITNESS HEREOF, the parties hereto have executed this Agreement the day and
year first above written.
Advantech Technologies, Inc Distributor
By /s/ Thomas Chen 09-09-99 By /s/ Jack Killoren 09-07-99
- --------------------------- -----------------------------
Thomas Chen Jack Killoren
General Manager Executive Vice President
4
<PAGE> 5
Exhibit A
Products
All Embedded and Panel PC products listed on most current Embedded Products
Group price sheet.
5
<PAGE> 6
Exhibit B
Sales Quota
The Distributor's sales quota shall be $500,000.
6
<PAGE> 7
Exhibit C
Distributor Territories
ATLANTA 3040 Business Park, Suite H Norcross GA 30071-1425 (T: 770-446- 1300 /
F: 770-446-2991). BALTIMORE 8945 Guilford Road, Suite 1 10 Columbia MD
21046-2620 (T: 410-290-5113 / F: 410-290-7650).
BOSTON 20 Blanchard Road Burlington MA 01 803-5155 (T: 781-273-2800 / F:
781-229-2815).
CHICAGO 1000 E. State Parkway, Suite C Schaumburg IL 60173-4592 (T: 847-
882-1700 / F: 847-882-8904).
CLEVELAND 31225 Bainbridge Road, Suite N Solon OH 44139-2230 (T: 440-349- 1415
/ F: 440-349-1634).
DALLAS 1840 N. Greenville Ave. Suite 156 Richardson TX 75081 972-231-4305 (T:
972-231-4523).
DETROIT 34403 Glendale Livonia MI 48150-1364 (T: 734-525-2700 / F: 734-
525-3209).
FT. LAUDERDALE 3320 N.W. 53rd Street, Suite 206 Ft. Lauderdale FL 33309-6324
(T: 954-735-1112/F: 954-735-1121).
HARTFORD 6 Capital Drive Wallingford CT 06492-2318 (T: 203-265-3134/ F:
203-265-6765).
HUNTSVILLE 4835 University Square, Suite 12 Huntsville AL 35816-1845 (T:
205-722-9500 / F: 205-722-9565).
IRVINE 15265 Alton Parkway, Ste. 1 00 Irvine CA 92618-2321 (T: 949-450- 0300 /
F: 949-450-0227)
LONG ISLAND 95 Oser Avenue, Suite A Hauppauge NY 11 788-3812 (T: 516-952- 3196
/ F: 516-952-3896).
LOS ANGELES 30497 Canwood Street, Ste. 1 00 Agoura Hills CA 91301-4331 (T:
818-991-4597/ F: 818-991-4154).
MINNEAPOLIS 3750 Annapolis Lane North, Suite 155 Plymouth MN 55447-5438 (T:
612-559-0000 / F: 612-553-0753).
PHILADELPHIA 12 Stow Road Suite 130 Marlton NJ 08053 (T: 856-810- 3400).
PORTLAND 1800 NW 169th Place, Suite 300 B Beaverton OR 97006-7304 (T:
503-629-2082 F: 503-629-8645). RALEIGH 5954-A Six Forks Road Raleigh NC
27609-3895 (T: 919-870-/ F: 919-870-521 0). SALEM (Modules) 13-15 Delaware Dr.,
Unit 1 Salem NH 03079 (T: 603-898-/ F: 603-898-6907).
SAN DIEGO 9570 Ridgehaven Court, Ste. B San Diego CA 92123 (T: 619-505- 0036 /
F: 619-505-4102).
SAN JOSE 1811 Zanker Road San Jose CA 95112-4213 (T: 408-453-9933J F:
408-453-9941).
SEATTLE 8312 - 154th Avenue N.E. Redmond WA 98052-3864 (T: 42@-702-9166 / F:
425-869-2663).
TAMPA (Corporate Sales) 14401 McCormick Drive Tampa FL 33626-3046 (T:
813-855-4656 / F: 813-855-7660).
7
<PAGE> 1
Exhibit 10.2
SAMSUNG DISPLAYS DEVICES, INC
DISTRIBUTOR AGREEMENT
This agreement is made on June 24,1999, by and between Samsung Display Devices
Inc., a California corporation, having its main office and principal place of
business at 18600 Broadwick Street, Rancho Dominguez, CA 90220 (hereinafter
referred to as IISDDIII or "Samsung,,), and Reptron Electronics Inc. located at
14401 McCormick Drive, Tampa, FL 33626 (herein after referred to as
"Distributor") .
WHEREAS, SDDI is engaged in the business of manufacturing and selling Liquid
Crystal Displays; and
WHEREAS, DISTRIBUTOR wishes to act as a distributor of such products sold by
SDDI;
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained, the parties hereto agree as follows;
1. Appointment
SDDI hereby appoints DISTRIBUTOR a non-exclusive distributor of the goods
described in Section 4 (hereinafter referred to as the "Goods"), in accordance
with the provisions of this Agreement.
2. Duties of Distributor
In connection with its appointments, DISTRIBUTOR shall perform the following
duties:
2.1 Use its best efforts to actively promote the sale of the Goods to customers
in the Territory. Such efforts shall include, but not be limited to, promptly
servicing all customer accounts, soliciting new customer accounts, and
cooperating and participating in SDDI's advertising and sales promotional
programs;
2.2 Maintain adequate office and warehouse facilities;
2.3 Maintain an inventory of the Goods, as recommended by SDDI, sufficient to
support the sales plan for each location of DISTRIBUTOR mutually agreed to
periodically between SDDI and DISTRIBUTOR; and
2.4 Make monthly sales analysis reports to SDDI in accordance with the Report &
Audits as defined in Section 19.
3. Territory
While nothing in this Agreement shall restrict the territory within which
DISTRIBUTOR shall be free to distribute the Goods, DISTRIBUTOR's area of
primary responsibility for distribution of the Goods (referred to herein as the
"Territory") shall he U.S.A. SDDI reserves the right to make sales, or
indirectly, to customers located within the Territory.
1
<PAGE> 2
4. Goods
4.1 The Goods subject to this Agreement shall be SDDI's standard products,
Liquid Crystal Displays and other products set forth an SDDI's Standard
Distributor Price List (the "Price List")SDDI reserves the right to amend such
Price List from time to time by issuing a revised Price List to DISTRIBUTOR. In
addition, SDDI may, from time to time, in its absolute discretion and without
thereby incurring any liability to the DISTRIBUTOR with respect to any sales
contract or purchase order therefore placed or otherwise, alter the design or
construction of any Goods, and substitute such altered Goods for the prior
goods in filling orders.
5. ORDERS, DELIVERY, RESCHEDULING, CANCELLATION
5.1 ORDERS; Delivery of Products under this Agreement shall be initiated by
written or electronic purchase orders (or by telephonic orders) confirmed in
writing by DISTRIBUTOR within thirty (30) calendar days. Such orders shall
describe the Products ordered and the quantities thereof, shall request
delivery dates, shall set forth prices and shall provide shipping instructions,
where appropriate. SDOI shall acknowledge each such order in writing at the
earliest possible date, but in any event within fifteen (15) calendar days
following receipt thereof. In such acceptance, SDDI shall confirm the Requested
Shipment Date or specify an Alternative Shipment Date ("Acknowledged Shipment
Date").
5.2 METHOD OF SHIPPING In the absence of specified instructions from
DISTRIBUTOR, the shipping and packaging method will be in the discretion of
SDDI. SDDI shall, consistent with sound business practice, select a method of
shipping and packaging which is suitable for the Product. In the event of any
misdelivery by the Carrier, SDDI shall assist DISTRIBUTOR in tracing the
shipment and obtaining delivery of the Products.
5.3 RESCHEDULING AND CANCELLATION ; DISTRIBUTOR may, prior to thirty (30)
calendar days of the Acknowledged Shipment Date and with written notice at that
time, reschedule the Acknowledged Shipment Date of any order and may cancel it
prior to ninety (90) calendar days of the Acknowledged Shipment Date and with
written notice at that time.
6. Prices
6.1 The prices to DISTRIBUTOR shall be those prices established from time to
time by SDDI as shown on SDDI's Price List. All prices shall be subject to
change or withdrawal at the discretion of SDDI, with or without advance notice.
Notice of any changes in prices shall be given by mailing to DISTRIBUTOR a new
Price List or written advises.
6.2 In case of price increase, SDDI will give the thirty (30) days advance
notice prior to the effective date. Prior to the effective date of a price
increase, Distributor may order Products
2
<PAGE> 3
before the price increase takes effect at the prior (i.e. lower) price.
Furthermore, all Products entered by Distributor prior to notification of a
price increase are exempt from the increase and will be shipped and invoiced at
the price in effect at the time of order placement.
6.3 The exception to the prices set forth on SDDI's Price List will be special
prices for contract sales, which shall be granted case by case by written
advises.
6.4 In the event that it should become necessary, and on a by exception basis
only, Distributor shall be permitted to sell Product to customers on a meet
competition basis where Distributor's current costs are not competitive enough
for Distributor to secure the orders. Upon receipt of the approval from the
SDDI, Distributor shall be entitled to ship from stock a defined quantity and
part number(s) to a specific customer at or below Distributor's cost and issue
a debit to the SDDI for the difference between Distributor's current cost of
the Product (less any prior credits granted by SDDI on such Products) and the
approved new cost issued by the SDDI multiplied by the quantity of such Product
shipped to the specific customer. In order to claim such credit, Distributor
shall submit to SDDI within forty-five (45) calendar days after the sale took
place, a debit note in conjunction with Distributor's monthly Reports as
specified in Paragraph 18. Credits will be applied to future purchases of SDDI
Product or to Distributor's Accounts receivable with SDDI.
7.Payment Terms
Payment terms on all Goods will be net thirty (30) days from date of invoice.
8. Price Reductions and Price reduction Credits
8.1 In the event that SDDI reduces the price of any of its Goods sold to
DISTRIBUTOR, DISTRIBUTOR shall be eligible to receive a credit (to be applied
against future purchases only) on the price of all such Goods held in inventory
by the DISTRIBUTOR at the time the price reduction becomes effective, in an
amount equal to the difference between the value (as defined below) of such
Goods and such reduced price.
8.2 In order to be eligible for such credit, DISTRIBUTOR must furnish SDDI,
within thirty (30) days after the effective date of a price reduction on a
particular item of Goods, a written claim stating the quantity of such item in
its inventory on the effective date of the price reduction.Such claim will be
subject to verification by SDDI.
8.3 As used in this Agreement, the term value shall mean the lesser of (1) the
net price of such Goods Or (2) the actual price of the Goods invoiced to the
DISTRIBUTOR less any price reduction credits granted by SDDI. As used in this
Agreement, the term 11 net price means the net price of such Goods stated in
SDDI's most recent
3
<PAGE> 4
Published Distributor Price List, less any trade discounts, cash
discounts,returns, freight and transportation allowances and credits other than
price reduction credits.
9. Use of SDDI Name
This Agreement shall in no way be construed as authorizing DISTRIBUTOR any
rights in, the name of SDDI, the Samsung logo or any other trademark or trade
name of Samsung.
10. Warranty
The Products shall be covered by SDDI's standard warranty terms and provisions,
provided, however, that the warranty coverage shall be no less than the
following:
(i) The warranty period set forth therein shall run for twelve (12) months
following DISTRIBUTOR's shipment of the Product to their customer except as
otherwise expressly provided in such warranty. The date of shipment will not
exceed six (6) months after purchasing the Product from SDDI.
(ii) SDDI shall extend such warranty directly to the customer as if such
customer had purchased the Products directly from SDDI.
(iii) SDDI shall warrant the Products against defects in material and
workmanship under normal use and service, repair or replace at SDDI's cost any
defective Product (or issue a credit or refund, as the case may be, based on
the purchase price paid therefor);and
(iv) SDDI shall pay (or refund the amount of) all freight and shipping charges
for any defective Products returned under this paragraph.
SDDI MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, AS TO
MERCHANTABILITY, FITNESS FOR PARTICULAR PURPOSE, OR ANY OTHER MATTER WITH
RESPECT TO THE GOODS, whether used alone or in combination with other
substances.
11.Advertising and Sales Promotion
11.1 SDDI may, from time to time, at its sole discretion, disclose its
promotional plans, render sales assistance and merchandising advice, or furnish
advertising materials and promotional campaign material to DISTRIBUTOR,
11.2SDDI will contribute an amount equal to one half (1/2) of the cost of
jointly approved promotional and advertising activities designed to stimulate
the sale of SDDI's Goods. Such contribution shall not exceed one percent (1%)
of the actual net price paid to SDDI for Goods sold hereunder.
12. Limitation of Liability Within thirty (30) days after receipt of each
shipment of Goods sold hereunder, DISTRIBUTOR shall examine such Goods for
any damage,
4
<PAGE> 5
defects or shortage. All claims, including for alleged damaged or defective
Goods, shortage, negligence or any other cause whatsoever, shall be deemed
waived unless made in writing received by Sol within sixty (60)days after
DISTRIBUTOR's receipt of the Goods or within thirty (30)days after DISTRIBUTOR
learns of the facts giving rise to the claim,whichever first occurs.
DISTRIBUTOR's exclusive remedy, and SDDI's sole and exclusive liability, shall
be the repair or replacement of such Goods or (at SDDI's sole option) the
issuing of credit therefore in accordance with SDDI's warranty policy appearing
on paragraph 10. IN NO EVENT SHALL SDDI BE LIABLE FOR ANY SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES, WHETHER DISTRIBUTOR'S CLAIM IS FOR BREACH OF
CONTRACT, BREACH OF WARRANTY, NEGLIGENCE OR OTHERWISE.
13. Credit Worthiness
SDDI reserves the right, among other remedies, either to terminate this
agreement or to suspend further deliveries under it in the event DISTRIBUTOR
fails to pay for any shipment when tame becomes due. Should DISTRIBUTOR's
financial situation become unsatisfactory to SDDI, cash payments or
satisfactory security may be required by SDDI for future deliveries and for
Goods already delivered.
14. Returns
The following conditions will apply in the event DISTRIBUTOR desires to return
any returnable Goods to SDDI for credit; 14.1All requests for returns must be
submitted by DISTRIBUTOR to SDDI for approval, to the attention of the Manager
of Distributor Sales. Any returns made without SDDI's prior approval shall be
returned to DISTRIBUTOR at DISTRIBUTOR's expense.
14.2 During the first six (6) months of this Agreement, DISTRIBUTOR may return
to SDDI up to 10096 of the value of DISTRIBUTOR's inventory of Goods, provided,
however, that concurrently with the return of any Goods and as A condition to
such return, DISTRIBUTOR must purchase Goods having a net price (as defined in
subparagraph 8.3) which is at least equal to the amount of the credit granted.
The purchased Goods must be of the same type.
14.3 For each six (6) months period following the first six (6) months of this
Agreement, DISTRIBUTOR's right to return Goods shall be limited to ten percent
(10%) of the total amount billed by SDDI to DISTRIBUTOR during the immediately
preceding six (6) months period, subject to the same purchase requirement set
forth in subparagraph 14.2 above.
14.4 If SDDI approves the return of any Goods, DISTRIBUTOR shall ship such
Goods to SDNI freight prepaid.
14.5 Any credit for returned Goods is subject to the inspection and testing of
such Goods by SDDI. If, in SDDI's judgment, any of such Goods have been
improperly handled or used, no credit or replacement for those Goods will be
allowed.
5
<PAGE> 6
14.6 The credit for any returned Goods shall be equal to the lesser of SDDI's
net price to a DISTRIBUTOR for such Goods as of the day they are received by
SDDI.
14.7 All customs or semi-customs products shall not be included in definition
of "Goods" for purposes of this section 14.
15. Assignment
DISTRIBUTOR shall not assign its rights or delegate its performance hereunder
without the prior written consent of SDDI and any attempted assignment or
delegation without such consent shall be void.
16. Independent Contractor
The relationship between SDDI and DISTRIBUTOR under this Agreement is solely
that of buyer and, seller. DISTRIBUTOR is and shall be an independent
contractor in the performance of the services set forth by this Agreement.
Neither DISTRIBUTOR nor anyone employed by DISTRIBUTOR shall act or purport to
act or be deemed to be the agent, representative, employee or servant of SDDI
- -in performing the services covered by this Agreement. DISTRIBUTOR shall have
no right to enter into contracts or commitments in the name or on behalf of
SDDI or to bind SDDI in any respect whatsoever.
17. Indemnification SDDI will indemnify, defend and otherwise hold harmless,
DISTRIBUTOR , its affiliates and customers from all cost, loss, damage or
liability arising from any proceeding (legal or equitable) or claim brought or
asserted against DISTRIBUTOR, its affiliates or customers, to the extent such
proceeding or claim is based on an allegation that the Products, or any part
thereof, or their distribution or use constitute an infringement of any patent,
copyright, trademark secret or violation of any legislation now or hereafter
enacted, or like or similar claim, if DISTRIBUTOR promptly notifies SDDI of any
such proceeding or claim after it becomes known to DISTRIBUTOR and DISTRIBUTOR
provides all the assistance and cooperation to SDDI that is reasonably
requested including the right of SDDI to select and instruct legal counsel for
the purposes of any defense of DISTRIBUTOR within the meaning of this
provision. SDDI shall not be liable to DISTRIBUTOR under any provision of this
paragraph to the extent that any claim is based upon; (i)a use for which the
Product or part was not designated; or (ii)an alteration of the Product or part
by DISTRIBUTOR or a third party under DISTRIBUTOR's direction and which
alteration has caused the infringement action.
18. Term and Termination
6
<PAGE> 7
This Agreement shall become effective on the date set forth above and shall
remain in effect until terminated by either patty as set forth below.
18.1 DISTRIBUTOR's rights hereunder shall automatically terminate in the
event that it is adjudicated as bankrupt, becomes insolvent or makes an
assignment for the benefit of its creditors.
18.2 Either SDDI or DISTRIBUTOR may terminate this Agreement for any reason
whatsoever, with or without cause, thirty (30) days after written notice
thereof in writing has been given to the other party.
18.3 In the event of a termination pursuant to this Section 18, SDDI shall
offer to repurchase all GOODS (except all custom or semicustom products) which
appear in SDDI's then current Price List and are in DISTRIBUTOR's inventory at
the time of such termination, and which are undamaged and in saleable
condition, on the following terms and conditions:
18.3.1 DISTRIBUTOR shall within thirty (30) days following such termination,
furnish SDDI with an inventory of all Goods which it desires to have SDDI
repurchase pursuant to this subparagraph 18.3. SDDI shall not be obligated to
repurchase any Goods from DISTRIBUTOR if DISTRIBUTOR has not submitted the
inventory report within such thirty (30) day period.
18-3.2 DISTRIBUTOR shall ship such Goods to SDDT freight prepaid to the office
at Rancho Dominguez, California or such other locations as SDDI may designate.
18.3.3 SDDI shall not be obligated to repurchase any Goods which are defective
or not in saleable condition at the time of their receipt by SDDI. In no event
shall SDDI be obligated to repurchase any custom or semicustom products.
18.3.4 The price paid by SDDI for any Goods repurchased shall be the lesser of
SDDI's net price for such Goods as of the date they are received by SDDI or the
value of such Goods.
18.3.5 In the event DISTRIBUTOR terminates this Agreement, or SDDI terminates
this agreement with cause, the price determined pursuant to subparagraph 18.3.4
above shall be reduced by a ten percent (10%) restocking charge. In the event
that SDDI terminates this Agreement without cause, a restocking charge will not
be applied. 18.4Neither SDDI nor DISTRIBUTOR shall, by reason of the
termination or nonrenewal of this Agreement, be liable to the other for
compensation, reimbursement or damages, either on account of present or
prospective profits on sales or anticipated sales, or on account of
expenditures, investments or commitments made in connection with this
Agreement, or in connection with the establishment, development or maintenance
of the business or goodwill of SDDI or DISTRIBUTOR, or on account of any other
cause or matter whatsoever, provided, however, that such termination or
nonrenewal shall not affect the rights or liabilities of the parties with
respect to any breach of this Agreement prior to such termination, any Goods
previously ordered or sold hereunder, or any indebtedness then owing by either
party to the other. The acceptance of any order for the sale of any Goods to
DISTRIBUTOR after the termination or expiration of this Agreement shall not be
construed as a renewal or extension of this Agreement, nor as a waiver of any
such termination or expiration.
7
<PAGE> 8
19. Reports & Audits
DISTRIBUTOR agrees to prepare and forward to SDDI reports as may be reasonably
requested by SDDI, including, without limitation, monthly reports of inventory
on hand by each location, and sales data by each location. Sales data should
include part number, customer, customer address and zip code, quantity, net
cost and extension, net resale and extension, type of transaction, and customer
invoice number. Inventory data should include part number, quantity, quantity
by price, special purchase item, and any bonded or specially segregated stock
(with reason identified). DISTRIBUTOR will also submit monthly reports by
location showing all customer returns for the previous month indicating product
part number, quantity, cost price (net of special cost debits), resale cost,
extension, customer name, zip code and credit memo number, if applicable, and
original invoice number for the purpose the determining the cost. Parties shall
use FIFO or LIFO consistent with DISTRIBUTOR's own accounting method.
DISTRIBUTOR will send this data to SDDI on a timely basis each month and in no
case later than the 10th working day of the following month. If the DISTRIBUTOR
fails to comply, it is considered a material breach of the Agreement. SDDI
reserves the right to have an authorized SDDI representative at SDDI's cost
audit DISTRIBUTOR's records relating to sales and inventory of products,
including, without limitation, records pertaining to any claims submitted by
DISTRIBUTOR for price protection, stock rotation, returned products, ship from
stock and debit, or any other reason DISTRIBUTOR agrees that with reasonable
notice by SDDI, DISTRIBUTOR's will allow SDDI access to all SDDI inventory for
the purpose of inspecting or auditing such inventory at SDDI's request.
20. Excuse of Performance
The obligation of the parties may be suspended by either party in the event of
an act of God, war, riot, fire, explosion, accident, flood, sabotage; lack of
adequate fuel, power, raw materials, labor, containers or transportation
facilities, compliance with governmental requests, laws, regulations, orders or
action; breakage of failure of machinery or apparatus; national defense
requirements, or any other event beyond the reasonable control of such party;
or in the event of labor trouble, strike, lockout, or injunction ( provided
that neither party. Shall be required to settle a labor dispute against its own
best judgement); which event makes impracticable the manufacture,
transportation, acceptance or use of a shipment of Goods or of a material upon
which the manufacture of the goods is dependent. if, because of any such event,
it is impracticable for SDDI to supply the total demand for the Goods, SDDI may
allocate its available supply of Goods, without obligation to purchase similar
goods form other sources, among itself and its customers, including (at SDDI's
option) those not under contract, on such basis as it determined to be
equitable. Deliveries suspended under this Section 18 shall be cancelled
without liability, but this Agreement otherwise remain unaffected.
8
<PAGE> 9
21. Terms and Conditions of Sale
The sales of all Goods pursuant to this Agreement shall be governed by the
terms and conditions set forth in this Agreement and by the terms and
conditions Of sales set forth on SDDI's acknowledgement form issued by SDDI in
response to DISTRIBUTOR's purchase order. In the event of a conflict between
the terms of this Agreement and the terms and conditions set forth on SDDI's
acknowledgement from, the terms of this Agreement shall control. Any terms and
conditions appearing on DISTRIBUTOR's purchase order or any similar document
issued by DISTRIBUTOR shall be wholly inapplicable to any sales made pursuant
to this Agreement.
22. Applicable Law and Jurisdiction
The laws of the State of California shall apply and bind the parties in any and
all questions arising hereunder, regardless of the jurisdiction in which the
question arose or occurred. Any litigation under this Agreement shall be
instituted in the court of competent jurisdiction of the State of California
sitting in Los Angeles, or the US District Court sitting in Los Angeles,
California, and the parties hereby submit to the jurisdiction of such courts
23. Waiver
No wavier by either SDDI or DISTRIBUTOR with respect to any branch or default
shall limit any right or remedy of either party, unless such waiver is
expressed in a writing signed by the party to be bound.
24. Complete Agreement
This Agreement, including the attachments hereto and the documents referred to
herein, constitutes the full understanding of the parties, and a complete and
exclusive statement of the terms of their agreement. Except as otherwise
provided herein, no conditions, understanding or agreement purporting to modify
or vary the terms of this Agreement shall be binding -unless hereafter made in
writing and signed by the party to be bound.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have signed this Agreement.
Company: Reptron Electronic Inc. Samsung Display Devices, Inc.
/s/ Jack Killoren /s/ Young W. Park
- ----------------------------------- -----------------------------
Name: Jack Killoren Young W. Park
Title: Vice President Marketing/Ops President
Name: Young W. Park
Title: Title; PRESIDENT
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,848
<SECURITIES> 0
<RECEIVABLES> 59,979
<ALLOWANCES> 586
<INVENTORY> 77,169
<CURRENT-ASSETS> 141,277
<PP&E> 35,439
<DEPRECIATION> 0
<TOTAL-ASSETS> 203,672
<CURRENT-LIABILITIES> 47,631
<BONDS> 108,583
0
0
<COMMON> 61
<OTHER-SE> 47,397
<TOTAL-LIABILITY-AND-EQUITY> 203,672
<SALES> 251,970
<TOTAL-REVENUES> 251,970
<CGS> 217,525
<TOTAL-COSTS> 257,878
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,131
<INCOME-PRETAX> (12,039)
<INCOME-TAX> (4,595)
<INCOME-CONTINUING> (7,444)
<DISCONTINUED> 0
<EXTRAORDINARY> 12,776
<CHANGES> 0
<NET-INCOME> 5,332
<EPS-BASIC> .87
<EPS-DILUTED> .87
</TABLE>
