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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1996
Commission File Number: 0-25364
ANICOM, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 36-3885212
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6133 N. RIVER ROAD, SUITE 410, ROSEMONT, ILLINOIS 60018-5171
(Address of principal executive offices, including zip code)
847-518-8700
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
whether the issuer has been subject to such filing requirements for the past 90
days. Yes [ X ] No [ ].
As of November 1, 1996 there were 15,516,072 shares of common stock, par
value $.001, of the registrant outstanding.
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ANICOM, INC.
QUARTER ENDED SEPTEMBER 30, 1996
INDEX
PAGE(S)
PART I - FINANCIAL INFORMATION -------
Item 1. Condensed Financial Statements
Consolidated Balance Sheets as of September 30, 1996 (Unaudited)
and December 31, 1995.................................................... 1
Consolidated Statements of Operations for the three and nine months
ended September 30, 1996 and 1995 (Unaudited)............................ 2
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1996 and 1995 (Unaudited)............................ 3
Notes to Consolidated Financial Statements............................... 4
Item 2. Management's Discussion and Analysis of Financial Conditions
and Results of Operations................................................ 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................................ 14
Item 2. Changes in Securities.................................................... 14
Item 3. Defaults Upon Senior Securities.......................................... 14
Item 4. Submission of Matters to a Vote of Security Holders...................... 14
Item 5. Other Information........................................................ 14
Item 6. Exhibits and Reports on Form 8-K......................................... 14
SIGNATURES............................................................................... 15
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Item 1. FINANCIAL STATEMENTS
ANICOM, INC.
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1996 1995
------------- ------------
(unuadited)
ASSETS
Current assets:
Cash and cash equivalents $ 75,988 $ 3,250
Marketable securities 9,011,554 25,536,282
Accounts receivable, less allowance for doubtful
accounts of $435,000 and $120,000 respectively 26,853,122 6,647,632
Inventories 23,225,327 5,245,893
Prepaid expenses 1,090,321 253,596
Other current assets, primarily deferred taxes 1,360,249 50,794
----------- -----------
Total current assets 61,616,561 37,737,447
----------- -----------
Property and equipment 3,218,295 906,372
Less: accumulated depreciation 491,207 254,472
----------- -----------
2,727,088 651,900
Other assets, primarily goodwill-net 25,418,160 2,779,728
----------- -----------
Total assets $89,761,809 $41,169,075
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $22,165,340 $ 2,552,714
Accrued expenses 2,449,058 489,226
Current portion of long-term debt and capital lease obligation 1,586,545 409,679
----------- -----------
Total current liabilities 26,200,943 3,451,619
----------- -----------
Non-current liabilities 667,638 --
Long-term debt and capital lease obligation, net of current portion 3,149,555 576,529
Commitments and contingencies -- --
Stockholders' equity:
Common stock, par value $.001 per share; 30,000,000 shares authorized
15,515,894 and 12,212,728 shares issued and outstanding respectively 7,562 5,906
Preferred stock, par value $ .01 per share, 1,000,000 shares authorized,
no shares issued and outstanding -- --
Paid-in capital 57,204,585 36,370,738
Retained earnings 2,531,526 764,283
----------- -----------
Total stockholders' equity 59,743,673 37,140,927
----------- -----------
Total liabilities and stockholders' equity $89,761,809 $41,169,075
=========== ===========
The accompanying notes are an integral part of these financial statements.
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ANICOM, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
------------- ---------- ---------- -----------
Net sales $33,221,002 $7,718,948 $76,432,346 $19,917,471
Cost of sales 24,694,110 5,840,815 57,245,233 15,190,457
----------- ---------- ----------- -----------
Gross profit 8,526,892 1,878,133 19,187,113 4,727,014
----------- ---------- ----------- -----------
Selling 3,867,367 828,607 8,904,222 2,019,527
General and administrative 3,552,993 729,485 7,859,633 1,913,430
----------- ---------- ----------- -----------
Total operating expenses 7,420,360 1,558,092 16,763,855 3,932,957
----------- ---------- ----------- -----------
Income from operations 1,106,532 320,041 2,423,258 794,057
----------- ---------- ----------- -----------
Other income (expense):
Interest expense (85,977) (6,857) (196,596) (54,318)
Interest income 110,888 45,784 461,977 118,383
----------- ---------- ----------- -----------
Total other income 24,911 38,927 265,381 64,065
----------- ---------- ----------- -----------
Income before income taxes 1,131,443 358,968 2,688,639 858,122
Provision for income taxes 388,896 151,600 921,396 352,998
----------- ---------- ----------- -----------
Net Income $ 742,547 $ 207,368 $ 1,767,243 $ 505,124
=========== ========== =========== ===========
Earnings per common share: $ 0.06 $ 0.04 $ 0.14 $ 0.11
=========== ========== =========== ===========
Weighted average number of common
shares outstanding. 13,142,648 5,461,362 12,654,612 4,751,004
=========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements.
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ANICOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
-------------------------------
1996 1995
------------ -------------
Cash flows from operating activities:
Net income $1,767,243 $ 505,124
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for bad debts 411,212 65,782
Depreciation 260,081 60,318
Amortization 292,307 22,253
Changes in assets and liabilities:
Marketable securities 16,524,728 --
Accounts receivable (6,788,720) (1,467,159)
Inventories (5,344,170) (1,029,580)
Prepaid expenses (570,475) (85,244)
Other current assets (46,853) 7,396
Accounts payable 3,906,038 214,233
Accrued expenses (1,752,527) 16,258
Current portion of long-term debt - (230,470)
---------- ----------
Total adjustments 6,891,621 (2,426,213)
---------- ----------
Net cash provided by (used in) operating
activities 8,658,864 (1,921,089)
---------- ----------
Cash flows from investing activities:
Property and equipment additions (773,512) (287,589)
Cash paid for acquisitions (14,435,989) (600,000)
---------- ----------
Net cash used in investing activities (15,209,501) (887,589)
---------- ----------
Cash flows from financing activities:
Payments on debt and capital lease obligations (12,754,146) (3,462,769)
Payments of S corporation distribution -- (163,032)
Proceeds from issuance of debt 4,190,000 700,000
Proceeds from common stock offerings, net 15,177,016 6,943,975
Stock options issued 10,505 --
---------- ----------
Net cash provided by financing activities 6,623,375 4,018,174
---------- ----------
Net increase in cash 72,738 1,209,496
Cash beginning of period 3,250 2,750
---------- ----------
Cash end of period $ 75,988 $1,212,246
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 23,430 $ 56,611
========== ==========
Cash paid for income taxes $ 842,080 $ 301,000
========== ==========
The accompanying notes are an integral part of these financial statements.
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ANICOM, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated condensed unaudited financial statements do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying unaudited financial statements contain all
adjustments (consisting solely of normal recurring accruals) necessary to
present fairly the financial position of Anicom, Inc. (the "Company") as of
September 30, 1996, the results of its operations and its cash flows for the
nine months and three months ended September 30, 1996 and 1995. Reported interim
results of operations are based in part on estimates which may be subject to
adjustment. In addition, these interim quarterly results of operations are not
necessarily indicative of those expected for the year.
These financial statements should be read in conjunction with the Company's
audited consolidated financial statements included in the Company's Annual
Report on Form 10-KSB as filed with the Securities and Exchange Commission on
February 21, 1996.
2. DESCRIPTION OF BUSINESS
The Company is a specialist in the sale and distribution of multimedia
wiring products. The Company sells to a wide array of businesses, including
contractors, systems integrators, security/fire alarm companies, regional Bell
operating companies, distributors, utilities, telecommunications and sound
companies, construction companies, universities and governmental agencies
throughout the United States and other parts of North America. The Company
generally sells to its customers on an unsecured basis.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The accompanying consolidated financial statements consist of Anicom, Inc.
and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
maturities of three months or less to be cash equivalents.
MARKETABLE SECURITIES
Management determines the appropriate classification of its investment in
debt securities at the time of purchase and reevaluates such determination
at each balance sheet date. At December 31, 1995 and September 30, 1996 the
Company's portfolio of marketable securities is accounted for as trading
securities, is valued at fair value and consists primarily of preferred
stock and municipal bonds with varying maturities and short term liquidity.
These securities are rated A1, P1 or AAA as the Company attempts to reduce
its credit risk. Based on the type of investment, cost and fair value are
the same at December 31,1995 and September 30, 1996.
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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined by the weighted average method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are computed using the straight-line method over the estimated useful
lives of the assets or terms of the lease for leasehold improvements,
generally 3 to 7 years.
Major renewals and improvements are capitalized. Expenditures for
maintenance and repairs are expenses as incurred. Upon retirement or
other disposition of property, the cost and related accumulated
depreciation are removed from the accounts and any gain or loss is
recognized.
OTHER ASSETS PRIMARILY GOODWILL
Goodwill arising from business combinations is amortized using the
straight-line method over forty years. The Company's criteria for
periodically evaluating the recoverability of goodwill includes operating
performance and undiscounted cash flows of the operating business units.
REVENUE RECOGNITION
Sales and related cost of sales are recognized upon shipment of products.
INCOME TAXES
The Company applies an asset and liability approach to accounting for
income taxes. Deferred tax assets and liabilities are established for
the expected future tax consequences of temporary differences between the
financial statement and tax bases of assets and liabilities, using tax
rates in effect for the year in which the differences are expected to
reverse.
EARNINGS PER SHARE
The computation of income per common share is based on the weighted
average number of common shares and common equivalents outstanding during
each period.
4. COMMON STOCK
On September 25, 1996, the number of authorized shares of common stock
was increased from 10,000,000 to 30,000,000 following approval of such action
by the Company's stockholders at a special meeting. Following such action, a
stock split in the form of a 100% stock dividend was declared for holders of
record as of October 1, 1996, payable October 7, 1996. All periods presented
have been restated to retroactively reflect the 100% stock dividend.
On September 16, 1996, the Company completed a private placement of
2,423,080 shares of its common stock at $ 6.50 per share. Net proceeds
to the Company after related costs and expenses were approximately $ 15,180,000.
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4. COMMON STOCK, CONTINUED
On November 27, 1995, the Company completed a follow-on public offering of
6,000,000 shares of its common stock at $ 4.50 per share. On November 29, 1995,
the underwriters exercised their overallotment option to purchase 900,000 shares
of the Company's common stock. Net proceeds to the Company, after underwriting
discounts and other offering costs and expenses were approximately $28,600,000.
On March 1, 1995, the Company completed an initial public offering of
2,400,000 shares of its common stock at $3.00 per share. On March 15, 1995, the
underwriters exercised their over-allotment option to purchase 360,000
additional shares of the Company's common stock. Net proceeds to the Company
after underwriting discounts and other offering costs were approximately
$7,000,000. In connection with the offering, the Company reincorporated in the
State of Delaware. All references to the number of shares, per share
information and stockholders in the financial statements reflect the number of
shares authorized and issued after the reincorporation.
5. LONG-TERM DEBT
Long-term debt consists of the following:
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
Non-collateralized loans payable to former shareholders of
acquired companies:
6.75% due July 28, 1996 and 1997......................... $ 200,000 $397,327
6.5% due October 27, 1996 to 1998........................ 500,000 500,000
6.55% due March 12, 1997 to 1999......................... 3,000,000 --
8.50% due in annual installments of $106,656............. 622,222 --
6% due May 30, 1997 to 1999.............................. 250,553 --
Capital lease obligation................................. 139,334 64,265
Other.................................................... 23,991 24,616
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4,736,100 986,208
Less current portion........................... 1,586,545 409,679
---------- --------
$3,149,555 $576,529
========== ========
Maturities of long term debt are as follows:
1997............... $1,586,545
1998............... 1,381,310
1999............... 1,380,031
2000............... 127,694
2001............... 106,667
Thereafter......... 153,853
----------
$4,736,100
==========
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5. LONG-TERM DEBT, CONTINUED
At December 31,1995, the Company maintained a revolving line of credit
with a bank amounting to $4,000,000. The line of credit bore interest at the
bank's Base Rate. The credit agreement has been replaced with a new $10
million credit facility dated February 6, 1996. This credit facility bears
interest at an annual rate to be determined from time to time based upon either
LIBOR plus 1.00% or the bank's Base Rate minus .50%. The facility is unsecured
and contains customary financial covenants. The facility will expire on July
31, 1998.
During the quarter ended September 30, 1996 the Company initiated
borrowings of $ 4,190,000 which were repaid with the proceeds of the private
placement.
6. INCOME TAXES
The following is a reconciliation of the provision for income taxes,
computed at the federal statutory rate to the reported provision for income
taxes for the three and nine months ended September 30:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
------------------------ -----------------------
Computed income taxes at federal statutory rate.. $384,691 $122,000 $914,137 $291,800
State income tax, net of federal benefit......... 52,273 29,600 124,215 61,198
Non-deductible expenses.......................... (40,055) - (37,517) -
Non-taxable income............................... (8,013) - (79,439) -
------------------- -------------------
$388,896 $151,600 $921,396 $352,998
=================== ===================
7. STOCK OPTIONS AND WARRANTS
In January 1995, the Company adopted stock option plans that authorize
the granting of options to (i) officers and key employees, and (ii) directors
to purchase unissued common stock of the Company subject to certain
conditions, such as continued service. The option price of options granted
under these plans, is equal to the fair market value at the date of grant.
These plans authorized the granting of options to purchase up to 1,200,000 and
100,000 shares of common stock, respectively. In February 1996, the Company
adopted the 1996 Employee Stock Incentive Plan to increase the total number of
shares of common stock available for grant to officers and key employees of the
Company from 1,200,000 shares to 2,400,000 shares. The adoption of the 1996
plan was approved by stockholders in May 1996. In May 1996, the Company
amended the directors stock option plan to increase the number of shares of
common stock available for grant to directors from 100,000 shares to 200,000
shares. This amendment was approved by stockholders in September 1996.
During 1995, the Company granted stock options to purchase 421,200 shares
of common stock. During the first three quarters of 1996, stock options to
purchase 848,000 shares of common stock were granted.
In connection with the initial public offering, the Company issued
warrants to purchase up to 240,000 shares of common stock at an exercise price
of $3.60 to the representatives of the underwriters. The warrants are
exercisable for a five year period commencing February 22, 1996.
In connection with the purchase of Morgan Hill, warrants to purchase
36,364 shares were issued at an exercise price of $ 5.50 which vest equally
over three years beginning October 2, 1995.
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8. COMMITMENTS
The Company has entered into employment agreements with certain officers.
In the event of a change in control, as defined, the employment agreements
provide for severance payments if employment is terminated. The aggregate
base salary payable to these officers under the employment agreements in 1996
is $734,000. In the event of a change in control, the Company may become
obligated to make payments to these officers of up to approximately $4,500,000.
In connection with the purchase of Northern Wire & Cable, Inc.
("Northern"), the Company entered into employment agreements with certain
former employees of Northern, two of whom became officers of the Company. The
aggregate base salary payable to these two officers under their employment
agreements is $440,000 in each of the years 1996 through 2000.
9. ACQUISITIONS
On July 31, 1995, the Company acquired Pinnacle Wire and Cable, Inc.
("Pinnacle") of Columbus, Ohio, by a merger of Pinnacle into the Company. The
purchase price was $1.4 million payable in cash, notes and common stock.
On October 2, 1995, the Company acquired Morgan Hill Supply Co., Inc.
("Morgan Hill") of Kingston, New York, through the purchase of all issued and
outstanding shares of common stock of Morgan Hill. The purchase price was
$1.5 million payable in cash, notes and common stock.
On February 22, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of Medisco, Inc. ("Medisco") of Indianapolis,
Indiana, a distributor of wire and cable products. The purchase price was
$837,000 payable in cash.
On March 12, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of Northern Wire & Cable, Inc. of Troy,
Michigan. Northern is a specialist in the sale and distribution of wire,
cable, fiber optics and connectivity products for structured wiring, power
cables, cable assemblies for automation, computers and robotics and value-added
services for the Industrial Management and Technology market. Northern had
branches in Cleveland, Atlanta, Tampa and Las Vegas. The purchase price was
$13.3 million payable in cash, notes and common stock. In connection with the
acquisition, the Company assumed $5.6 million of bank indebtedness of Northern
which was paid in full at closing.
On May 30, 1996, the Company acquired substantially all of the assets and
assumed certain liabilities of Southern Alarm Supply Co., Inc. ("Southern") of
Nashville, Tennessee. Southern is a specialist in the sale and distribution of
ancillary security devices and wire. The purchase price was $350,000 payable in
cash and common stock.
On September 1, 1996, the Company acquired Norfolk Wire & Electronics,
Inc. ("Norfolk") through the purchase of all issued and outstanding shares of
common stock. Norfolk, a distributor of voice and data products has locations
in Virginia, New Jersey and Maryland. The purchase price was $8,000,000 payable
in cash and common stock. At the closing the Company paid in full $2.6 million
of bank indebtedness of Norfolk.
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9. ACQUISTIONS, CONTINUED
On September 3, 1996, the Company acquired substantially all of the assets
and assumed certain liabilities of Western Wire and Alarm Products, Inc.
("Western") of Denver Colorado. Western is a specialist in the sale and
distribution of ancillary security devices and wire. The purchase price was
$300,000 payable in cash and common stock. In connection with the acquisition
the Company paid in full $50,000 of bank indebtedness of Western.
All acquisitions have been accounted for under the purchase method. The
operating results of the acquisitions are included in the Company's
consolidated results of operations from the dates of acquisition. The following
unaudited pro forma consolidated financial information assumes the acquisitions
occurred on January 1, 1995. The results do not purport to be indicative of
what would have occurred had the acquisitions been made at the period
presented, or of the results which may occur in the future.
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
---------------------------------
Net sales............................. $109,167,320 $93,478,961
Operating income...................... 2,383,674 2,802,346
Net income............................ 1,546,704 1,602,475
Earnings per common share............. $ .12 $ .12
10. SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
A summary of the noncash investing and financing activities related to the
acquisition of Pinnacle, Medisco, Northern, Southern, Norfolk and Western
during the nine months ended September 30, 1996 and 1995, is as follows:
1996 1995
------------ ---------
Assets acquired...................................................... $28,729,000 $ 996,091
=========== =========
Liabilities assumed.................................................. $26,673,077 $ 917,800
=========== =========
Business integration liabilities..................................... $ 2,728,000 --
=========== =========
Deferred tax asset resulting from business integration liabilities... $ 1,000,000 --
=========== =========
Subordinated loans issued............................................ $ 3,000,000 $ 400,000
=========== =========
Common stock issued.................................................. $ 5,660,000 $ 400,000
=========== =========
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following table sets forth selected income statement data of the
Company expressed as a percentage of net sales for the periods indicated:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- --------------------
1996 1995 1996 1995
--------- ---------- ---------- --------
INCOME STATEMENT DATA:
Net sales......................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold................................ 74.3 75.7 74.9 76.3
----- ----- ----- -----
Gross profit...................................... 25.7 24.3 25.1 23.7
OPERATING EXPENSES:
Selling expenses................................. 11.6 10.7 11.6 10.1
General and administrative expenses.............. 10.7 9.5 10.3 9.6
----- ----- ----- -----
Income from Operations............................ 3.4 4.1 3.2 4.0
Interest (expense)................................ (.3) -- (.3) (.3)
Interest income................................... .3 .6 .6 .6
----- ----- ----- -----
Income before income taxes........................ 3.4 4.7 3.5 4.3
Provision for Income taxes........................ 1.2 2.0 1.2 1.8
----- ----- ----- -----
Net income........................................ 2.2% 2.7% 2.3% 2.5%
===== ===== ===== =====
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996
The net sales of $33.2 million for the quarter ended September 30, 1996,
represented a 330% increase over net sales of $7.7 million for the quarter
ended September 30, 1995. Net sales of $76.4 million for nine months ended
September 30, 1996, represented a 284% increase over net sales of $19.9 million
for the nine months ended September 30, 1995. These increases reflect
increased sales attributable to acquisitions completed in the fourth quarter of
1995 and in 1996 as well improved sales productivity per sales person, and
expanded breadth and depth of the Company's product offering. The most
significant growth in the products offered by the Company have continued to be
voice and data communication products and fiber optics.
The Company's gross profit increased by 354% to $8.5 million in the third
quarter of 1996, as compared to $1.9 million in the third quarter of 1995.
Gross profit increased by 306% to $19.2 million in the first nine months of
1996, as compared to $4.7 million in the first nine months of 1995. These
improvements are primarily due to acquisitions completed in the fourth quarter
of 1995 and in 1996. Gross profit as a percentage of net sales was 25.7% for
the third quarter of 1996, as compared to 24.3% for the third quarter of 1995.
For the nine months ended September 30, 1996, gross profit as a percentage of
net sales was 25.1%, as compared to 23.7% for the same nine months in 1995.
The margin improvement was the result of expanding markets and economic
efficiencies in purchasing due primarily to higher net sales.
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Selling expenses for the three months ended September 30, 1996, were
$3.9 million as compared to $829,000 for the three months ended September 30,
1995. Selling expenses for the nine months ended September 30, 1996, were 8.9
million as compared to 2.0 million for the nine months ended September 30,
1995. Selling expenses as a percentage of net sales for the third quarter of
1996, increased to 11.6%, as compared to 10.7% in the third quarter of 1995.
Selling expenses as a percentage of net sales for the nine months of 1996,
increased to 11.6% as compared to 10.1% for the first nine months of 1995.
These increases reflect the effect of historically higher sales expenses of
Northern Wire & Cable although the percentage for the third quarter of 1996,
remains consistent with the sales expense as a percentage of net sales achieved
in the second quarter of 1996 ( 11.8% and 11.6% respectively).
General and administrative expenses as a percentage of net sales increased
to 10.7% for the three months ended September 30, 1996, as compared to 9.5% for
the comparable period in 1995. For the nine months ended September 30, 1996
general and administrative expenses as a percentage of net sales increased to
10.3%, as compared to 9.6% for the same period in 1995. The increase is
primarily due to historically higher warehouse and distribution costs at
Northern Wire & Cable related to industrial cable processing, amortization of
goodwill from the acquisitions, and other costs that occurred in connection
with the Company's integrated growth strategy.
Interest expense for the third quarter of 1996, increased to $85,977 as
compared to $6,857 in the third quarter of 1995. Net interest expense for the
first nine months of 1996, increased to $196,596 as compared to $54,318 in the
first nine months of 1995. The Company's issuance of subordinated notes and
assumption of certain liabilities of acquired companies contributed to the
increase in interest expense.
Interest income increased to $110,888 for the third quarter of 1996, as
compared to $45,784 for the same period in 1995. For the nine months ended
September 30, 1996, interest income increased to $461,977, as compared to
$118,383, for the same period in 1995. These increases are due primarily to
interest from the investment of funds from the follow-on offering in November
1995 and the private placement of equity in September 1996.
Net income of $742,547 for the third quarter increased approximately 258%
as compared to $207,368 for the same 1995 period. Net income for the first nine
months of 1996, increased approximately 250% to $1,767,243 as compared to
$505,124 for the period ended September 30, 1995. The increases were due to
higher sales volume and improvements in the gross margin. Earnings per share
for the three months ended September 30, 1996, were $.06 per share (based on
13,143,000 weighted average shares outstanding), as compared to $.04 per share
(based on 5,461,000 weighted average shares outstanding) for the comparable
1995 period. Earnings per share for the nine months ended September 30, 1996,
were $.14 per share (based on 12,655,000 weighted average shares outstanding),
as compared to $.11 per share (based on 4,751,000 weighted average shares
outstanding) for the comparable 1995 period.
Effective October 1996, the company declared a stock split in the form
of a 100% stock dividend. The weighted average shares outstanding for each of
the periods discussed above have been restated to give effect to the stock
dividend. The weighted average shares outstanding in the first nine months of
1996, increased significantly (approximately 166%) over the weighted average
shares outstanding in the first nine months of the prior year. This increase
was due to the issuance of shares in the Company's follow-on offering in
November 1995, shares issued for acquisitions in 1996 and the private placement
of equity in September of 1996.
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LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had working capital of approximately
$35.4 million as compared to working capital of $6.1 million on September 30,
1995. The Company's primary ongoing cash requirements relate to the
implementation of its integrated growth strategy.
On September 17, 1996, the Company completed the sale and issuance of
1,211,540 shares of common stock in a private placement that raised
approximately $15.8 million before expenses. At a special meeting held on
September 25, 1996, the Company's stockholders authorized an increase in common
stock from 10,000,000 shares to 30,000,000 shares. Following the stockholders
meeting, the Company declared a stock split in the form of a 100% stock
dividend. The record date for the stock dividend was October 1, 1996.
The Company has available a $10.0 million unsecured revolving credit
facility with Harris Trust & Savings Bank. The credit agreement expires on
July 31, 1998, with an interest rate of LIBOR plus 1.00% or the lender's
Domestic Base Rate (as defined) minus 0.50%. The credit agreement contains
customary representations, warranties and covenants by the Company. As of
September 30, 1996, the Company had no amount outstanding under the revolving
credit facility.
On February 22, 1996, the Company acquired substantially all the assets
and assumed certain liabilities of Medisco, Inc. of Indianapolis, Indiana.
Anicom used $837,000 of cash to fund the transaction.
On March 12, 1996, the Company acquired substantially all the assets and
assumed certain liabilities of Northern Wire & Cable, Inc. of Troy, Michigan.
Anicom used $14.6 million of cash to fund the transaction, $9.0 million at
closing and approximately $5.6 million to pay off Northern's bank credit
facility.
On May 30, 1996, the Company acquired substantially all the assets and
assumed certain liabilities of Southern Alarm Supply, Inc., of Nashville,
Tennessee. Anicom used $100,000 of cash to fund the transaction.
On September 1, 1996, the Company acquired all the issued and outstanding
shares of common stock of Norfolk Wire & Electronics, Inc. of Virginia Beach,
Virginia. Anicom used $6.6 million of cash to fund the transaction, $4.0
million at closing and approximately $2.6 million to pay off Norfolk's bank
credit facility.
On September 3, 1996, the Company acquired substantially all the assets
and assumed certain liabilities of Western Wire & Alarm Products, Inc. of
Denver Colorado. Anicom used $250,000 of cash to fund the transaction,
$200,000 at closing and approximately $50,000 to pay off Western's bank credit
facility.
The Company believes that during the remainder of fiscal 1996, existing
cash and cash flows from operations supplemented, if necessary, by draws on the
line of credit will be sufficient to fund current operations and its integrated
growth strategy. The Company also believes it has the financial flexibility,
if necessary, to further increase the revolving credit facility in connection
with acquisitions that may occur in 1996 and 1997.
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INFLATION
Although the operations of the Company are influenced by general economic
conditions, the Company does not believe that inflation had a material effect
on the results of the operations during the nine months, or the quarter ended
September 30, 1996.
SEASONALITY
The Company experienced, and the Company expects to experience in future
years, a modest decrease in the level of activity among many of its customers
in the fourth quarter, primarily due to the Thanksgiving and Christmas
holidays.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a special meeting of the Company's stockholders held on
September 25, 1996, as described in the Company's proxy statement dated
August 28, 1996, the following proposals were submitted to a vote of the
stockholders: (i) approval of an amendment to the Company's Certificate of
Incorporation to increase the Company's total authorized common stock; (ii)
approval of the Amended and Restated Anicom, Inc. 1995 Directors Stock Option
Plan; and (iii) approval of the Company's delisting its Common Stock from the
Chicago Stock Exchange.
At the special meeting, the stockholders approved the amendment to the
Company's Certificate of Incorporation. 5,606,401 votes were cast in favor of
such Amendment and 61,938 votes were cast against such Amendment.
At the special meeting, the stockholders approved the Amended and
Restated Anicom, Inc. 1995 Directors Stock Option Plan. 5,072,303 votes
were cast in favor of the Amended and Restated Anicom, Inc. 1995 Directors Stock
Option Plan and 572,315 votes were cast against the Amended and Restated Anicom,
Inc. 1995 Directors Stock Option Plan.
At the special meeting, the stockholders also approved the Company's
delisting its Common Stock from the Chicago Stock Exchange. 4,133,930 votes
were cast in favor of the Company's delisting its Common Stock from the Chicago
Stock Exchange and 16,905 votes were cast against the Company's delisting its
Common Stock from the Chicago Stock Exchange.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.3 Certificate of Amendment of Certificate of Incorporation
of the Company
10.12 Form of Amended and Restated 1995 Directors Stock Option
Plan
27 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K, dated August 30, 1996 (Norfolk Wire & Electronics, Inc.)
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ANICOM, INC.
---------------------------------------
(Registrant)
Date: November 14, 1996 By: /s/ SCOTT C. ANIXTER
--------------------
Scott C. Anixter
Co-Chairman and Chief Executive
Officer
(Principal Executive Officer)
Date: November 14, 1996 By: /s/ DONALD C. WELCHKO
---------------------
Donald C. Welchko
Chief Financial Officer
(Principal Financial and Accounting
Officer)
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