SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/x/ QUARTERLY REPORT UNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended February 29, 1996
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 1-5441.
MARSHALL INDUSTRIES
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(Exact name of registrant as specified in its charter)
California 95-2048764
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9320 Telstar Avenue, El Monte, California 91731-2895
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 307-6000
Common Stock outstanding by class as of February 29, 1996:
Common Stock 17,278,864 shares
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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 / /
Total Number of Pages: 69
The Exhibit Index is at Page 12
MARSHALL INDUSTRIES
CONDENSED BALANCE SHEETS
(000'S OMITTED)
(UNAUDITED)
ASSETS
February 29, May 31
1996 1995
Current Assets:
Cash $ 2,301 $ 3,508
Receivables-net 143,801 137,892
Inventories 241,627 196,097
Deferred income tax benefits 10,216 10,216
Prepaid income taxes 1,130 --
Prepaid expenses 935 507
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Total Current Assets 400,010 348,220
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Property, Plant and Equipment, net of
accumulated depreciation and amortization
of $49,470 at February 29, 1996 and $45,704
at May 31, 1995 41,096 40,661
Note Receivable (Note 3) 30,278 29,050
Other Assets - Net 3,786 5,376
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Total Assets $475,170 $423,307
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-------- --------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt $ -- $ 410
Accounts payable and accrued expenses 105,696 90,616
Income taxes payable -- 2,800
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Total Current Liabilities 105,696 93,826
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Long-Term Debt:
Bank lines of credit 22,000 20,000
Term Loan and other debt 25,000 25,205
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Total Long-Term Debt 47,000 45,205
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Deferred Income Tax Liabilities 4,524 4,524
Shareholders' Investment 317,950 279,752
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Total Liabilities and Shareholders'
Investment $475,170 $423,307
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-------- --------
The accompanying notes are an integral part of these condensed balance sheets.
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MARSHALL INDUSTRIES
CONDENSED INCOME STATEMENTS
(UNAUDITED)
(000'S OMITTED EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
February 29, February 28, February 29, February 28,
1996 1995 1996 1995
------------ ------------ ------------ ------------
Net sales $288,008 $261,623 $859,410 $728,551
Cost of sales 235,788 214,604 702,553 591,155
-------- -------- -------- --------
Gross profit 52,220 47,019 156,857 137,396
Selling, general
and administrative
expenses 31,102 29,083 91,212 87,318
-------- -------- -------- --------
Income from operations 21,118 17,936 65,645 50,078
Interest expense-net 268 594 857 1,561
-------- -------- -------- --------
Income before income
taxes 20,850 17,342 64,788 48,517
Provision for income
taxes 8,600 7,250 26,700 20,300
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Net income $ 12,250 $ 10,092 $ 38,088 $ 28,217
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-------- -------- -------- --------
Net income per share $ .70 $ .58 $ 2.18 $ 1.62
-------- -------- -------- --------
-------- -------- -------- --------
Average number of
shares outstanding 17,504 17,441 17,510 17,435
-------- -------- -------- --------
-------- -------- -------- --------
The accompanying notes are an integral part of these condensed income
statements.
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MARSHALL INDUSTRIES
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000'S OMITTED)
Nine Months Ended
February 29, February 28,
1996 1995
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Cash flows from operating activities:
Net income $38,088 $28,217
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 5,702 5,531
Net increase in current assets
and liabilities (40,717) (16,746)
Accrued interest on note receivable (1,228) (686)
Other operating activities 80 18
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Net cash provided by operating activities 1,925 16,334
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Cash flows from investing activities:
Capital expenditures (4,554) (1,380)
Note Receivable -- (27,954)
Deferred software costs (52) (696)
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Net cash used for investing activities (4,606) (30,030)
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Cash flows from financing activities:
Net borrowings (repayments) under
bank lines of credit 2,000 (12,000)
Term loan borrowings -- 25,000
Net repayments of other long-term debt (615) (930)
Proceeds from exercise of options 89 281
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Net cash provided by financing activities 1,474 12,351
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Net decrease in cash (1,207) (1,345)
Cash at the beginning of the period 3,508 3,694
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Cash at the end of the period $ 2,301 $ 2,349
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-------- --------
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MARSHALL INDUSTRIES
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000'S OMITTED)
(CONTINUED)
Nine Months Ended
February 29, February 28,
1996 1995
------------ ------------
Supplemental disclosure of cash flow
information:
Interest paid during the period $ 1,919 $ 1,479
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Income taxes paid during the period $30,630 $17,224
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------- -------
The accompanying notes are an integral part of these condensed cash flow
statements.
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MARSHALL INDUSTRIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1: GENERAL
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are adequate to
make the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements and the
notes thereto in the Company's annual report on Form 10-K for the year ended
May 31, 1995.
In the opinion of the Company, the unaudited condensed financial statements
reflect all adjustments (consisting of normal recurring accruals) considered
necessary to present fairly the Company's financial position as of February 29,
1996 and the results of its operations for the three month and nine month
periods and its cash flows for the nine month periods ended February 29, 1996
and February 28, 1995.
NOTE 2: ACCOUNTING POLICIES
Reference is made to Note 1 of Notes to Financial Statements in the Company's
annual report on Form 10-K for the summary of significant accounting policies.
NOTE 3: INVESTMENT IN SONEPAR ELECTRONIQUE INTERNATIONAL
As described in Note 6 to the Financial Statements in the Company's Annual
Report on Form 10-K for the year ended May 31, 1995, the Company invested 151
million French Francs (approximately $27.9 million U.S. dollars) in Sonepar
Electronique International, the third largest electronic component distributor
in Europe. This investment is in the form of an interest bearing, convertible
note guaranteed by a major French bank as to default.
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MARSHALL INDUSTRIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
OPERATING RESULTS
Three Months Ended Nine Months Ended
February 29, February 28, February 29, February 28,
1996 1995 1996 1995
------------ ------------ ------------ ------------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 81.9 82.0 81.8 81.1
------- ------- ------- -------
Gross profit 18.1 18.0 18.2 18.9
Selling, general
and adminis-
trative
expenses 10.8 11.1 10.6 12.0
------- ------- ------- -------
Income from
operations 7.3 6.9 7.6 6.9
Interest expense
- net .1 .2 .1 .2
------- ------- ------- -------
Income before
provision for
income taxes 7.2 6.7 7.5 6.7
Provision for
income taxes 3.0 2.8 3.1 2.8
------- ------- ------- -------
Net income 4.2% 3.9% 4.4% 3.9%
------- ------- ------- -------
------- ------- ------- -------
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Three and Nine Month Periods Ended February 29, 1996 and February 28, 1995:
The increase in net sales for the third quarter and the first nine months of
fiscal 1996, as compared to fiscal 1995, was primarily due to an increase in the
sales volume of semiconductor products. Sales of semiconductor products
increased by $30,240,000 and $127,313,000 for the three and nine month periods
ended February 29, 1996, respectively, as compared to the same periods of fiscal
1995. The increase in sales of semiconductor products was mainly the result of
continued strong market demand for such products and increased sales of products
from suppliers added in recent years.
The Company has experienced industry-wide product shortages and excess supplies
from time to time. In recent months, there has been an increase in the
availability of products, particularly memory devices. During this period,
memory devices have experienced significant market pricing pressures.
The decrease in net margins as a percent of sales for the nine months to date
of fiscal 1996, as compared to fiscal 1995, was due to a decline in the margins
on many of the Company's major products. This decline in margins resulted from
market pressures on the pricing of a number of the Company's products, and an
increase in the sales volume of lower margin products. The Company believes
that these conditions affecting margins may continue in the near term. Net
margins as a percent of sales for the third quarter of fiscal 1996, as compared
to fiscal 1995, has remained consistent.
Selling, general, and administrative expenses ("SG&A") increased in dollars
for the third quarter and the first nine months of fiscal 1996 as compared to
fiscal 1995, largely due to higher salary and incentive costs and information
systems enhancements. For the three months ended February 29, 1996, there
was also a change in the staffing mix between years with an increase of
approximately 30 sales people, partially offset by a net reduction in
warehouse and finance clerical staff. In addition, there were increases in
advertising and delivery costs. Primarily due to the increase in sales
volume, but with relatively lower levels of increase in operating costs to
meet this volume increase, SG&A, as a percentage of sales, declined to 10.8%
from 11.1% and 10.6% from 12.0% for the three and nine month periods
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ended February 29, 1996, as compared to the same periods of a
year ago.
The decrease in interest expense for the third quarter and first nine months of
fiscal 1996, as compared to fiscal 1995, was due primarily to lower borrowing
levels in fiscal 1996.
The Company's sources of liquidity at February 29, 1996 consisted principally
of working capital of $294,314,000 and unsecured bank lines of credit of
$55,000,000 of which $22,000,000 was used. The Company believes that its
working capital, borrowing capabilities and additional funds generated from
operations should be sufficient to finance its future operations requirements.
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PART II
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the shareholders during the quarter for
which this report is filed.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
99.1 Change in Control Agreement
Dated February 6, 1996--Gordon S. Marshall
99.2 Change in Control Agreement
Dated February 7, 1996--Robert Rodin
(b) No reports on Form 8-K have been filed during the quarter for which this
report is filed.
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SIGNATURE
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.
MARSHALL INDUSTRIES
April 10, 1996 /s/ Henry W. Chin
------------------------------
Henry W. Chin
Vice President, Finance and
Chief Financial Officer
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Exhibit Index
27 Financial Data Schedule
99.1 Change in Control Agreement
Dated February 6, 1996--Gordon S. Marshall
99.2 Change in Control Agreement
Dated February 7, 1996--Robert Rodin
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