UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
-------------------------------------------------
OR
[_] 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 0-14643
---------------------------------------------------------
KENT ELECTRONICS CORPORATION
- --------------------------------------------------------------------------------
Exact name of registrant as specified in its charter)
Texas 74-1763541
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1111 Gillingham Lane, Sugar Land, Texas 77478
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (281) 243-4000
------------------------------
7433 Harwin Drive, Houston, Texas 77036
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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
---------- ------------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
At October 31, 1997, 26,560,979 shares of common stock, no par value, were
issued and outstanding.
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
September 27, March 29,
1997 1997
-------------- ----------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (including temporary
investments of $197,251 at September 27
and $28,728 at March 29)...................... $190,371 $ 25,050
Accounts receivable, less allowance of $1,408
at September 27 and $1,256 at March 29........ 101,331 88,835
Inventories
Materials and purchased products.............. 111,782 91,100
Work in process............................... 6,220 3,394
-------- --------
118,002 94,494
Other........................................... 6,138 4,023
-------- --------
Total current assets........................ 415,842 212,402
PROPERTY AND EQUIPMENT
Land............................................ 7,439 7,439
Buildings....................................... 42,101 38,176
Equipment, furniture and fixtures............... 84,185 68,247
Leasehold improvements.......................... 2,607 2,543
-------- --------
136,332 116,405
Less accumulated depreciation and amortization (30,786) (25,515)
-------- --------
105,546 90,890
DEFERRED INCOME TAXES.............................. 1,230 1,280
OTHER ASSETS....................................... 10,662 4,618
COST IN EXCESS OF NET ASSETS ACQUIRED,
less accumulated amortization of $2,624 at......
September 27 and $2,359 at March 29............. 16,139 16,404
-------- --------
$549,419 $325,594
======== ========
The accompanying notes are an integral part of these statements.
2 of 14
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
September 27, March 29,
1997 1997
-------------- ----------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable............................... $ 63,250 $ 42,317
Accrued compensation........................... 7,650 8,123
Other accrued liabilities...................... 8,090 8,051
Income taxes................................... --- 3,027
-------- --------
Total current liabilities.................. 78,990 61,518
LONG-TERM DEBT.................................... 180,000 ---
LONG-TERM LIABILITIES............................. 2,096 1,709
STOCKHOLDERS' EQUITY
Preferred stock, $1 par value per share;
authorized 2,000 shares; none issued......... --- ---
Common stock, no par value; authorized 60,000
shares; 26,586 shares issued and 26,536
shares outstanding at September 27 and
26,302 shares issued and 26,252 shares
outstanding at March 29...................... 48,683 41,348
Additional paid-in capital..................... 116,773 116,522
Retained earnings.............................. 123,854 105,474
-------- --------
289,310 263,344
Less common stock in treasury - at cost,
50 shares.................................... (977) (977)
-------- --------
288,333 262,367
-------- --------
$549,419 $325,594
======== ========
The accompanying notes are an integral part of these statements.
3 of 14
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited - In thousands, except per share data)
Thirteen Weeks Ended Twenty-Six Weeks Ended
------------------------------ -----------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
-------------- -------------- -------------- -------------
Net sales...................................... $167,487 $124,034 $319,567 $249,178
Cost of sales.................................. 129,579 96,016 246,800 189,254
-------- -------- -------- --------
Gross profit.............................. 37,908 28,018 72,767 59,924
Selling, general and administrative expenses... 22,432 17,934 43,212 35,547
-------- -------- -------- --------
Operating profit.......................... 15,476 10,084 29,555 24,377
Other income (expense)
Interest expense.......................... (131) (362) (138) (666)
Other - net............................... 530 1,271 955 2,838
-------- -------- -------- --------
Earnings before income taxes..... 15,875 10,993 30,372 26,549
Income taxes................................... 6,270 4,141 11,992 10,266
-------- -------- -------- --------
NET EARNINGS..................... $ 9,605 $ 6,852 $ 18,380 $ 16,283
======== ======== ======== ========
Earnings per share............................. $.34 $.25 $.66 $.59
======== ======== ======== ========
Weighted average shares........................ 28,297 27,243 28,030 27,418
======== ======== ======== ========
The accompanying notes are an integral part of these statements.
4 of 14
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In thousands)
Twenty-Six Weeks Ended
------------------------------
September 27, September 28,
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings....................................... $ 18,380 $ 16,283
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization.................. 5,543 3,307
Provision for losses on accounts receivable.... 152 144
Loss on sale of property and equipment......... 4 2
Stock option expense........................... 251 290
Net sales of trading securities................ --- 11,870
Change in assets and liabilities
Increase in accounts receivable.............. (12,648) (16,633)
Increase in inventories...................... (23,508) (11,279)
Increase in other............................ (2,115) (132)
Decrease in deferred income taxes............ 50 104
Increase in other assets..................... (6,044) (3,538)
Increase in accounts payable................. 20,933 2,851
Decrease in accrued compensation............. (473) (5,513)
Increase in other accrued liabilities........ 39 1,133
Decrease in income taxes..................... (3,027) (2,613)
Increase in long-term liabilities............ 387 442
-------- --------
Total adjustments...................... (20,456) (19,565)
-------- --------
Net cash used by operating activities (2,076) (3,282)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures............................... (19,943) (28,741)
Proceeds from sale of property and equipment....... 5 ---
-------- --------
Net cash used by investing activities........ (19,938) (28,741)
(Continued)
5 of 14
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - In thousands)
Twenty-Six Weeks Ended
-----------------------------
September 27, September 28,
1997 1996
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under line of credit agreements of
pooled companies................................. $ --- $ 6,101
Increase (decrease) in long-term debt.............. 180,000 (9)
Issuance of common stock........................... 2,807 274
Purchase of treasury stock......................... --- (977)
Tax effect of common stock issued upon exercise
of employee stock options........................ 4,528 1,511
Distribution to shareholder of pooled company...... --- (457)
-------- --------
Net cash provided by financing activities. 187,335 6,443
-------- --------
NET INCREASE (DECREASE) IN CASH....................... 165,321 (25,580)
Adjustment for change in pooled companies'
fiscal year-ends................................. --- 344
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD...... 25,050 73,431
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............ $190,371 $ 48,195
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for
Interest......................................... $ --- $ 672
Income taxes..................................... $ 12,381 $ 11,338
The accompanying notes are an integral part of these statements.
6 of 14
KENT ELECTRONICS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Policies
- -------------------
The consolidated balance sheet as of September 27, 1997, and the consolidated
statements of earnings and cash flows for the thirteen and twenty-six week
periods ended September 27, 1997 and September 28, 1996, have been prepared by
the Company without audit. In the opinion of management, the financial
statements include all adjustments necessary for a fair presentation. All
adjustments made were of a normal recurring nature. Interim results are not
necessarily indications of results for a full year. For further financial
information, refer to the audited financial statements of the Company and notes
thereto for the fiscal year ended March 29, 1997, included in the Company's Form
10-K/A for that period.
In January 1997, the Company acquired Futronix Corporation and Wire & Cable
Specialties Corporation ("Wire & Cable") in a transaction accounted for as a
pooling of interests. Accordingly, the fiscal 1997 consolidated statements of
earnings and cash flows have been restated to include the operations of Futronix
Corporation and Wire & Cable.
Cash and Cash Equivalents
- -------------------------
Temporary investments may be greater than the cash and cash equivalents balance
because they may be offset by individual bank accounts with a book overdraft
position within the same bank where multiple accounts are maintained.
Convertible Subordinated Notes due 2004
- ---------------------------------------
On September 23, 1997, the Company issued $180 million of 4.5% Convertible
Subordinated Notes due 2004 (the "Notes") in a public offering. On October 2,
1997, during the Company's third quarter of fiscal 1998, an additional $27
million of Notes were issued pursuant to the exercise of the Underwriters' over-
allotment option. The Notes are convertible into Kent common stock at a
conversion price of $49.53 per share, subject to adjustment in certain events.
Interest is payable semiannually and the Notes are redeemable at the option of
the Company at set redemption prices, plus accrued interest, beginning September
6, 2000.
7 of 14
Sales To Major Customers
- ------------------------
For the thirteen and twenty-six week periods ended September 27, 1997, sales to
Compaq Computer Corporation ("Compaq") represented 13.4% and 11.0% of net sales,
respectively. For the thirteen week period ended September 28, 1996, sales to
Compaq represented 10.7% of net sales.
Recent Pronouncement
- --------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"). This
statement is effective for financial statements issued for periods ending after
December 15, 1997 and will require restatement of all prior period comparative
amounts. The new standard eliminates primary and fully diluted earnings per
share and requires presentation of basic and diluted earnings per share together
with disclosure of how the per share amounts were computed. The following table
presents pro forma earnings per share amounts computed using FAS 128.
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------------- ----------------------------
September 27, September 28, September 27, September 28,
1997 1996 1997 1996
------------ ------------ ------------- -------------
Pro forma earnings per share:
Earnings per common share -
basic $ .36 $ .27 $ .69 $ .64
===== ===== ===== =====
Earnings per common share -
assuming dilution $ .34 $ .25 $ .66 $ .59
===== ===== ===== =====
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net sales for the thirteen and twenty-six weeks ended September 27, 1997
increased $43.5 million, or 35.0%, and $70.4 million, or 28.2%, compared to the
same periods a year ago. The sales increase reflected strong internal growth
and was primarily driven by increased demand from existing customers and an
expanded customer base in both the distribution and contract manufacturing
businesses.
8 of 14
Gross profit increased $9.9 million, or 35.3%, for the thirteen weeks and
increased $12.8 million, or 21.4%, for the twenty-six weeks when compared to the
corresponding periods a year ago. Gross profit as a percentage of sales for the
thirteen weeks was 22.6%, remaining the same as the corresponding period of the
previous year. For the twenty-six week period, gross profit as a percentage of
sales decreased to 22.8%, compared to 24.0% a year ago. The increase in gross
profit was primarily due to increased sales, offset by a decrease in the gross
profit percentage in the twenty-six week period. The decrease in gross profit as
a percentage of sales for the twenty-six week period resulted from pricing
pressures and product mix with a lower percentage of certain higher margin
contract manufacturing business.
Selling, general and administrative ("SG&A") expenses declined as a percentage
of sales to 13.4% from 14.5% for the thirteen weeks and to 13.5% from 14.3% for
the twenty-six weeks compared to the corresponding prior year periods. The
decline as a percentage of sales reflects the Company's continued focus on cost
containment to reduce such expenses as a percentage of sales. SG&A expenses
increased $4.5 million, or 25.1%, for the thirteen week period and $7.7 million,
or 21.6%, for the twenty-six week period, compared to the same periods in the
previous year. The increase in SG&A expenses was primarily due to the expenses
necessary to support the growth in the company's existing operations.
Interest expense decreased due to the retirement of all outstanding debt of
Futronix Corporation and Wire & Cable subsequent to acquisition by the Company
in the fourth quarter of fiscal 1997. Also, interest expense includes interest
on the 4.5% Convertible Subordinated Notes due 2004 (the "Notes") for the last
four days of the thirteen and twenty-six week periods ended September 27, 1997.
Other-net consists principally of interest and dividend income generated by cash
and cash equivalents. The decrease in interest and dividend income resulted
from lower average invested cash, cash equivalents and trading securities. The
net proceeds from the Notes were invested only during the last four days of the
thirteen and twenty-six week periods.
9 of 14
Net earnings increased $2.8 million, or 40.2%, and $2.1 million, or 12.9% for
the thirteen and twenty-six week periods, respectively, compared to the same
periods a year ago. The additional profit from the increased sales and the
Company's continued focus on cost containment were the primary reasons for the
improved profitability.
Liquidity and Capital Resources
- -------------------------------
Working capital at September 27, 1997 was $336.9 million, an increase of $186.0
million, or 123.3%, from March 29, 1997. The increase was primarily the result
of net proceeds from the Notes offering, and to a lesser extent, growth in
accounts receivable and inventories in relation to current and future sales
levels.
Included in the Company's working capital at September 27, 1997 are investments
of $197.3 million, an increase of $168.5 million since March 29, 1997, primarily
the result of the Notes offering. The Company's investment strategy is low-risk
and short-term, keeping the funds readily available to meet capital requirements
as they arise in the normal course of business. At September 27, 1997, funds
were invested primarily in a reverse repurchase agreement and an institutional
money market fund. Both are compatible with the Company's stated investment
strategy.
The Company maintains a $25 million line of credit with a bank. As of September
27, 1997, there was no indebtedness outstanding under the line of credit.
The Company intends to apply its capital resources to expand its business by
establishing or acquiring similar distribution and manufacturing operations in
geographic areas that are attractive to the Company, by acquiring new facilities
and by enlarging or improving existing facilities. In addition to the capital
required to purchase existing businesses or to fund start-up operations, the
expansion of the Company's operations at both new and existing locations will
require greater levels of capital to finance the purchase of additional
equipment, increased levels of inventory and greater accounts receivable. The
Company believes that current resources including the net proceeds from the
Notes and the line of credit, along with funds generated from operations, should
be sufficient to meet its current capital requirements.
10 of 14
PART II - OTHER INFORMATION
Items 1, 2, 3 and 5 are not applicable and have been omitted.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
The Company held its Annual Meeting of Shareholders on July 2, 1997. At such
meeting, Messrs. Terrence M. Hunt and David Siegel were elected to serve as
directors of the Company for the next three years. The other directors of the
Company, Messrs. Morrie K. Abramson, Max S. Levit, Richard C. Webb and Alvin L.
Zimmerman, continued in their terms as directors after the meeting. In
addition, the appointment of Grant Thornton LLP as the Company's independent
public accountants for the fiscal year ending March 28, 1998 was ratified.
Votes Against
or Withheld Votes Broker
Proposal Votes For Authority Abstained Non-Votes
-------- --------- --------- --------- ---------
1. Election of Directors:
Terrence M. Hunt 20,220,777 2,598,811 0 0
David Siegel 20,220,775 2,598,813 0 0
2. Approval and ratification
of the appointment of
Grant Thornton LLP as the
Company's independent
public accountants for the
fiscal year ending
March 28, 1998. 22,212,097 18,374 26,667 562,450
Item 6. Exhibits and Reports on Form 8-K.
- -----------------------------------------
(a) Exhibits (All of the following exhibits were filed with the original
quarterly report on Form 10-Q filed on November 10, 1997.):
4.1 - Indenture between Kent Electronics Corporation, as Issuer, and
Texas Commerce Bank National Association, as Trustee, dated as of
September 23, 1997.
10.1 - Amendment to Chief Executive Officer Stock Option Plan and
Agreement between Kent Electronics Corporation and Morrie K.
Abramson dated July 2, 1997.
10.2 - Amendment to K*TEC President Stock Option Plan and Agreement
between Kent Electronics Corporation and Randy J. Corporron dated
July 2, 1997.
11 of 14
10.3 - Amendment to K*TEC General Manager Stock Option Plan and Agreement
between Kent Electronics Corporation and Rodney J. Corporron
dated July 2, 1997.
10.4 - Amendment to 1991 Non-Employee Director Stock Option Plan.
10.5 - Amendment to Amended and Restated 1987 Stock Option Plan.
10.6 - Amendment to Stock Option Plan and Agreement for the Company's
Executive Vice President Sales-Distribution between Kent
Electronics Corporation and Larry D. Olson dated July 2, 1997.
10.7 - Amendment to Stock Option Plan and Agreement for the Company's
Executive Vice President Operations-Distribution between
Kent Electronics Corporation and Mark A. Zerbe dated July 2, 1997.
10.8 - Amendment to Stock Option Plan and Agreement for the Company's
Vice President, Secretary and Treasurer between Kent Electronics
Corporation and Stephen J. Chapko dated July 2, 1997.
10.9 - Amendment to Stock Option Plan and Agreement for the Company's
Vice President, Corporate Controller between Kent Electronics
Corporation and David D. Johnson dated July 2, 1997.
10.10 - Amendment No. 1 to Employment Agreement by and among Morrie K.
Abramson, Rolaine S. Abramson and Kent Electronics Corporation
dated August 18, 1997.
11 - Statement re computation of per share earnings.
27 - Financial Data Schedule.
(b) Reports on Form 8-K:
Not applicable.
12 of 14
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KENT ELECTRONICS CORPORATION
--------------------------------------
(Registrant)
Date: February 3, 1998 By: /s/ MORRIE K. ABRAMSON
----------------------------- --------------------------------
Morrie K. Abramson
Chairman of the Board, Chief
Executive Officer and President
(Principal Executive Officer)
Date: February 3, 1998 By: /s/ STEPHEN J. CHAPKO
----------------------------- ---------------------------------
Stephen J. Chapko
Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary (Principal Financial
Officer)
Date: February 3, 1998 By: /s/ DAVID D. JOHNSON
---------------------------- ---------------------------------
David D. Johnson
Vice President, Corporate
Controller (Principal Accounting
Officer)
13 of 14
EXHIBIT INDEX
-------------
Exhibit numbers are in accordance with the
Exhibit Table in Item 601 of Regulation S-K
-------------------------------------------
Exhibit No. Exhibit Description
- ----------- ---------------------------------------------------------
4.1 Indenture between Kent Electronics Corporation, as Issuer, and
Texas Commerce Bank National Association, as Trustee, dated as of
September 23, 1997.
10.1 Amendment to Chief Executive Officer Stock Option Plan and
Agreement between Kent Electronics Corporation and Morrie K.
Abramson dated July 2, 1997.
10.2 Amendment to K*TEC President Stock Option Plan and Agreement
between Kent Electronics Corporation and Randy J. Corporron dated
July 2, 1997.
10.3 Amendment to K*TEC General Manager Stock Option Plan and Agreement
between Kent Electronics Corporation and Rodney J. Corporron dated
July 2, 1997.
10.4 Amendment to 1991 Non-Employee Director Stock Option Plan.
10.5 Amendment to Amended and Restated 1987 Stock Option Plan.
10.6 Amendment to Stock Option Plan and Agreement for the Company's
Executive Vice President Sales-Distribution between Kent
Electronics Corporation and Larry D. Olson dated July 2, 1997.
10.7 Amendment to Stock Option Plan and Agreement for the Company's
Executive Vice President Operations-Distribution between Kent
Electronics Corporation and Mark A. Zerbe dated July 2, 1997.
10.8 Amendment to Stock Option Plan and Agreement for the Company's Vice
President, Secretary and Treasurer between Kent Electronics
Corporation and Stephen J. Chapko dated July 2, 1997.
10.9 Amendment to Stock Option Plan and Agreement for the Company's Vice
President, Corporate Controller between Kent Electronics
Corporation and David D. Johnson dated July 2, 1997.
10.10 Amendment No. 1 to Employment Agreement by and among Morrie K.
Abramson, Rolaine S. Abramson and Kent Electronics Corporation
dated August 18, 1997.
11 Statement re computation of per share earnings.
27 Financial Data Schedule.
14 of 14