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