EXHIBIT 99.2
IN THE UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
WEST PALM BEACH DIVISION
)
In re: ) Case No. 03-35966-BKC-PGH
)
REPTRON ELECTRONICS, INC., ) Chapter 11
)
Debtor. )
)
____________________________________)
FIRST AMENDED DISCLOSURE STATEMENT FOR SECOND
AMENDED PLAN OF REORGANIZATION OF REPTRON ELECTRONICS, INC.
DECEMBER 17, 2003
IMPORTANT DATES
Date by which Ballots must be received: JANUARY 9, 2004
Date by which objections to Confirmation of the Plan must be filed and served:
JANUARY 9, 2004
Hearing on Confirmation of the Plan: JANUARY 14, 2004
THE FIRST AMENDED DISCLOSURE STATEMENT DATED NOVEMBER 17, 2003 (THE
"DISCLOSURE STATEMENT") WAS APPROVED BY THE BANKRUPTCY COURT ON
DECEMBER 17, 2003. ATTACHED TO THE DISCLOSURE STATEMENT IS THE SECOND
AMENDED PLAN OF REORGANIZATION DATED DECEMBER 17, 2003 (THE "PLAN").
PLEASE READ BOTH DOCUMENTS CAREFULLY BEFORE VOTING ON THE PLAN. A
BALLOT IS ENCLOSED. THE DEBTOR AND THE CREDITORS COMMITTEE URGE YOU TO
VOTE TO ACCEPT THE PLAN.
TEW CARDENAS, LLP
Counsel to the Debtor
Thomas R. Lehman, P.A.
Lynn Maynard Gollin, Esq.
201 South Biscayne Blvd.
Miami Center, Suite 2600
Miami, Florida 33131-4336
Tel.: 305 536-1112
Fax : 305 536-1116
Case No. 03-35966-BKC-PGH
FIRST AMENDED DISCLOSURE STATEMENT OF REPTRON ELECTRONICS, INC.
Reptron Electronics, Inc. (the "Debtor") transmits this First Amended
Disclosure Statement (the "Disclosure Statement") pursuant to section 1125 of
the Bankruptcy Code, 11 U.S.C. Sections 101 et seq., to each known holder of an
Allowed Claim against or Equity Interest in the Debtor in Classes 3, 4, and 5
and to certain other persons who may request a copy. The purpose of this
Disclosure Statement is to provide information deemed adequate by the United
States Bankruptcy Court for the Southern District of Florida (the "Bankruptcy
Court") for each holder of an Allowed Claim or Equity Interest who is impaired
to make an informed decision in exercising its rights to vote for acceptance or
rejection of the Second Amended Plan of Reorganization dated December 17, 2003,
as amended at any time (the "Plan"), and filed by the Debtor with the Court. The
Plan provides for a restructuring of the Debtor's outstanding debt and equity to
increase its liquidity as described below and in the Plan.
THE DEFINITIONS IN ARTICLE ONE OF THE PLAN ARE INCORPORATED BY
REFERENCE IN THIS DISCLOSURE STATEMENT. DEFINED TERMS ARE CAPITALIZED. A HEARING
ON CONFIRMATION OF THE PLAN IS SCHEDULED FOR JANUARY 14, 2004, 9:30 A.M.,
E.S.T., AT THE UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF
FLORIDA. PARTIES IN INTEREST HAVE A RIGHT TO ATTEND AND PARTICIPATE AT THIS
HEARING. YOUR OBJECTION TO THE PLAN MUST BE IN WRITING, FILED AND SERVED SO AS
TO BE RECEIVED BY 4:00 P.M., E.S.T., ON JANUARY 9, 2004, IN ORDER TO BE HEARD AT
THE HEARING. THIS HEARING DATE MAY BE ADJOURNED TO A DIFFERENT DATE WITHOUT
FURTHER WRITTEN NOTICE PROVIDED.
A VOTE FOR ACCEPTANCE OF THE PLAN BY THOSE HOLDERS OF A CLAIM OR
INTEREST WHO ARE ENTITLED TO VOTE IS IMPORTANT. THE MANAGEMENT OF THE DEBTOR
RECOMMENDS THAT THE HOLDERS OF ALLOWED CLAIMS AND INTERESTS VOTE IN FAVOR OF THE
PLAN, AS THEY BELIEVE THE PLAN IS IN THE BEST INTERESTS OF CREDITORS AND
INTEREST HOLDERS. ACCORDINGLY, CREDITORS AND INTEREST HOLDERS ARE URGED TO VOTE
IN FAVOR OF THE PLAN. VOTING INSTRUCTIONS ARE SET FORTH AT PAGES 11 THROUGH 15
OF THIS DISCLOSURE STATEMENT. TO BE COUNTED, YOUR BALLOT MUST BE DULY COMPLETED,
EXECUTED AND RECEIVED BY 4:00 P.M., E.S.T., ON JANUARY 9, 2004. CREDITORS AND
INTEREST HOLDERS ARE URGED TO READ THE ENTIRE PLAN AND DISCLOSURE STATEMENT
BEFORE VOTING.
For the Plan to be confirmed, the Plan must be accepted by at least one
non-insider impaired Class of Claims or Interests. A Claim or Interest that will
not be repaid in full or as to which the legal rights are altered is impaired. A
holder of an impaired Claim or Interest is entitled to vote to accept or reject
the Plan if such impaired Claim or Interest has been Allowed under section 502
of the Bankruptcy Code, or temporarily allowed for voting purposes under Rule
3018 of the Bankruptcy Rules. For a Class of Claims or Interests to vote to
accept the Plan, votes representing at least two-thirds in amount and more than
one-half in number of Claims or Interests voted in that Class must be cast in
favor of acceptance of the Plan.
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As more completely described below, the Debtor is seeking acceptances
from Holders of Allowed Claims or Interests in the following Classes:
CLASS 3 - TRADE CREDITORS
CLASS 4 - GENERAL UNSECURED CLAIMS
CLASS 5 - COMMON EQUITY INTERESTS
Section 1129 of the Bankruptcy Code provides that, so long as one
impaired Class of Claims accepts a plan (excluding any acceptance by the
Debtor's "insiders," as defined in section 101(31) of the Bankruptcy Code), a
debtor may seek confirmation, despite the rejection of the plan by one or more
impaired Classes. This is typically called a "cramdown" plan. If an impaired
Class rejects the Plan, no Claim or Equity Interest junior to the most senior
rejecting Class may retain or receive property pursuant to the Plan unless the
senior rejecting Class is paid in full or such junior Class provides a new
contribution to the Debtor. For the Plan to be confirmed over the objections of
a rejecting Class, the Court must find that the Plan does not unfairly
discriminate against, and is fair and equitable to, the rejecting Class. The
Debtor does not anticipate that it will need to seek Confirmation under the
cramdown provisions, however, it believes it can successfully do so, if
required. In the event that any Class of Claims or Interests designated herein
as unimpaired is held to be impaired and therefore entitled to vote, the Debtor
in its discretion may deem such Class to have been rejected, and may seek to
confirm its Plan under section 1129(b) in lieu of soliciting votes.
THIS DISCLOSURE STATEMENT DESCRIBES VARIOUS TRANSACTIONS CONTEMPLATED
UNDER THE PLAN AND DESCRIBES CERTAIN OTHER DOCUMENTS AND FINANCIAL INFORMATION
BUT IS NOT A SUBSTITUTE FOR THE PLAN, OR SUCH OTHER DOCUMENTS AND FINANCIAL
INFORMATION. THE DESCRIPTIONS CONTAINED IN THIS DISCLOSURE STATEMENT, THE PLAN
AND CERTAIN OTHER DOCUMENTS AND FINANCIAL INFORMATION WHICH ARE EXHIBITS TO THIS
DISCLOSURE STATEMENT ARE QUALIFIED BY SUCH EXHIBITS, WHICH SHOULD BE READ IN
THEIR ENTIRETY. THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE LEGAL, BUSINESS,
FINANCIAL, OR TAX ADVICE. YOU ARE URGED TO STUDY THE PLAN IN FULL AND TO CONSULT
WITH YOUR COUNSEL AND TAX ADVISORS ABOUT THE PLAN AND ITS IMPACT UPON YOUR LEGAL
RIGHTS, INCLUDING POSSIBLE TAX CONSEQUENCES. PLEASE READ THIS DISCLOSURE
STATEMENT AND ITS EXHIBITS CAREFULLY BEFORE VOTING ON THE PLAN. THE TERMS OF THE
PLAN SHALL GOVERN IN CASE OF ANY INCONSISTENCY BETWEEN THE PLAN AND THIS
DISCLOSURE STATEMENT.
THIS DISCLOSURE STATEMENT MAY NOT BE RELIED UPON FOR ANY PURPOSE OTHER
THAN TO DETERMINE WHETHER TO VOTE IN FAVOR OF OR AGAINST THE PLAN, AND NOTHING
CONTAINED HEREIN SHALL CONSTITUTE AN ADMISSION OF ANY FACT OR OF LIABILITY BY
ANY PARTY, OR BE ADMISSIBLE IN ANY PROCEEDING INVOLVING THE DEBTOR OR INVOLVING
ANY LEGAL EFFECTS OF THE REORGANIZATION OF THE DEBTOR OR CLAIMANTS HOLDING
CLAIMS OR EQUITY INTEREST HOLDERS HOLDING INTERESTS. CERTAIN OF THE INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT, BY ITS NATURE, IS
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FORWARD LOOKING, CONTAINS PROJECTIONS WHICH MAY PROVE TO BE WRONG, OR WHICH MAY
BE DIFFERENT FROM ACTUAL RESULTS.
AS TO CONTESTED MATTERS, INFORMATION IN THIS DISCLOSURE STATEMENT IS
NOT TO BE CONSTRUED AS ADMISSIONS OR STIPULATIONS IN ANY LEGAL PROCEEDING, BUT
RATHER AS STATEMENTS MADE IN SETTLEMENT NEGOTIATIONS.
THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS BEEN
SUBMITTED BY THE DEBTOR'S MANAGEMENT, EXCEPT WHERE OTHER SOURCES ARE IDENTIFIED.
THE MANAGEMENT OF THE DEBTOR AUTHORIZES NO REPRESENTATIONS CONCERNING THE
DEBTOR, THE VALUE OF ITS PROPERTIES OR THE PLAN OTHER THAN THOSE IN THIS
DISCLOSURE STATEMENT AND ACCOMPANYING DOCUMENTS OR, SUBSEQUENT TO A FILING BY
THE DEBTOR UNDER THE BANKRUPTCY CODE, BY THE COURT. YOU SHOULD NOT RELY ON ANY
REPRESENTATIONS OR INDUCEMENTS MADE BY ANY PERSON TO SECURE YOUR VOTE OTHER THAN
THOSE CONTAINED IN THIS DISCLOSURE STATEMENT. THE MANAGEMENT OF THE DEBTOR
BELIEVES THAT THE CONTENTS OF THIS DISCLOSURE STATEMENT ARE COMPLETE AND
ACCURATE IN ALL MATERIAL RESPECTS. HOWEVER, NEITHER THE DEBTOR'S MANAGEMENT, NOR
ANY OTHER PARTY THAT CONSENTS TO THIS DISCLOSURE STATEMENT WARRANTS OR
REPRESENTS THAT THE INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT IS
WITHOUT INACCURACY. IN PARTICULAR, THE FEASIBILITY OF THE PLAN IS SUBJECT TO A
NUMBER OF ASSUMPTIONS WHICH MAY BE ALTERED BY EVENTS AND FORCES BEYOND THE
DEBTOR'S CONTROL.
THE SECURITIES DESCRIBED IN THIS DISCLOSURE STATEMENT WILL BE ISSUED
WITHOUT REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY SIMILAR FEDERAL, STATE OR LOCAL LAW, GENERALLY IN
RELIANCE ON THE EXEMPTIONS SET FORTH IN SECTION 1145 OF THE BANKRUPTCY CODE.
THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION" OR THE "SEC")
NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED
IN THIS DISCLOSURE STATEMENT.
THE STATEMENTS AND FINANCIAL INFORMATION CONTAINED IN THIS DISCLOSURE
STATEMENT HAVE BEEN MADE AS OF THE DATE OF THIS DISCLOSURE STATEMENT UNLESS
OTHERWISE SPECIFIED. HOLDERS OF CLAIMS AND INTERESTS REVIEWING THIS DISCLOSURE
STATEMENT SHOULD NOT INFER AT THE TIME OF SUCH REVIEW THAT THERE HAVE BEEN NO
CHANGES IN THE FACTS SET FORTH IN THIS DISCLOSURE STATEMENT UNLESS SO SPECIFIED.
ALTHOUGH THE DEBTOR HAS ENDEAVORED TO ENSURE THE ACCURACY OF THE FINANCIAL
INFORMATION PROVIDED IN THIS DISCLOSURE STATEMENT, THE FINANCIAL INFORMATION
CONTAINED IN THIS DISCLOSURE STATEMENT HAS NOT BEEN AUDITED EXCEPT FOR THE
FINANCIAL STATEMENTS INCLUDED IN
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THE DEBTOR'S ANNUAL REPORT ON FORM 10-K INCLUDED AS EXHIBIT 2 TO THIS DISCLOSURE
STATEMENT.
THE PROJECTIONS PROVIDED IN THIS DISCLOSURE STATEMENT HAVE BEEN
PREPARED BY THE DEBTOR'S MANAGEMENT. THESE PROJECTIONS, WHILE PRESENTED WITH
NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF ESTIMATES AND
ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY MANAGEMENT, MAY NOT BE
REALIZED AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC,
COMPETITIVE, INDUSTRY, REGULATORY, MARKET AND FINANCIAL UNCERTAINTIES AND
CONTINGENCIES, MANY OF WHICH ARE BEYOND THE REORGANIZED DEBTOR'S CONTROL. THE
DEBTOR CAUTIONS THAT NO REPRESENTATIONS CAN BE MADE AS TO THE ACCURACY OF THESE
PROJECTIONS OR AS TO THE REORGANIZED DEBTOR'S ABILITY TO ACHIEVE THE PROJECTED
RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE. FURTHER, THE EVENTS
AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE ON WHICH THESE PROJECTIONS
WERE PREPARED MAY BE DIFFERENT FROM THOSE ASSUMED OR, ALTERNATIVELY, MAY HAVE
BEEN UNANTICIPATED, AND THUS THE OCCURRENCE OF THESE EVENTS MAY AFFECT FINANCIAL
RESULTS IN A MATERIALLY ADVERSE MANNER. THE PROJECTIONS, THEREFORE, MAY NOT BE
RELIED UPON AS A GUARANTY OR OTHER ASSURANCE OF THE ACTUAL RESULTS THAT WILL
OCCUR.
FOR NON U.S. HOLDERS ONLY: THE DISTRIBUTION OF THIS DISCLOSURE
STATEMENT AND THE ISSUE OR TAKING UP OF THE SECURITIES DESCRIBED IN THIS
DISCLOSURE STATEMENT MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS OUTSIDE
THE UNITED STATES. NO ACTION HAS BEEN TAKEN BY THE DEBTOR THAT WOULD PERMIT AN
OFFER OF ANY SECURITIES ISSUED UNDER THE PLAN OR POSSESSION OR DISTRIBUTION OF
THIS DISCLOSURE STATEMENT IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS
REQUIRED. PERSONS INTO WHOSE POSSESSION THIS DISCLOSURE STATEMENT COMES ARE
REQUIRED BY THE DEBTOR TO INFORM THEMSELVES ABOUT AND TO OBSERVE SUCH
RESTRICTIONS. IN ADDITION, THE DEBTOR RECOMMENDS THAT HOLDERS OR POTENTIAL
HOLDERS OF SECURITIES UNDER THE PLAN CONSULT WITH THEIR OWN ADVISORS CONCERNING
ANY LIMITATIONS ON THEIR RIGHT TO TRANSFER SUCH SECURITIES. THIS DISCLOSURE
STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR ISSUE, OR THE SOLICITATION OF
ANY OFFER TO BUY OR SUBSCRIBE FOR ANY SECURITIES BY ANY PERSON IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. TO THE EXTENT
THAT THE DEBTOR IS REQUIRED TO COMPLY WITH CERTAIN REQUIREMENTS OF JURISDICTIONS
IN WHICH HOLDERS OF SECURITIES OF THE DEBTOR RESIDES DUE TO THE PARTICIPATION OF
HOLDERS IN SUCH JURISDICTIONS IN ANY VOTE WITH RESPECT TO THE PLAN, THE DEBTOR
SHALL NOT BE REQUIRED TO TAKE SUCH PARTICIPATION INTO ACCOUNT.
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TABLE OF CONTENTS
Page
----
DISCLOSURE STATEMENT OF ELECTRONICS, INC................................................................ ii
EXHIBITS................................................................................................ ix
I. OVERVIEW....................................................................................... 11
A. Proposed Restructuring......................................................................... 11
B. Summary of Proposed Distributions.............................................................. 11
C. Voting Instructions and Confirmation of the Plan............................................... 11
D. Confirmation of the Plan With and Without Necessary Acceptances................................ 14
E. Confirmation Hearing........................................................................... 14
II. THE COMPANY/INDUSTRY........................................................................... 15
A. Business - General............................................................................. 15
B. The Electronic Manufacturing Services Industry................................................. 15
C. The Debtor's Electronic Manufacturing Services Business........................................ 16
D. The Debtor's Properties........................................................................ 19
E. Summary of Pre-Petition Capital Structure of the Debtor........................................ 19
1. Congress Loan Agreement.................................................................... 19
2. Other Secured Debt......................................................................... 20
(a) Gaylord Facility Claim.................................................................. 20
(b) Hibbing Facility Claim.................................................................. 20
(c) Tampa Facility Claim.................................................................... 20
(d) Transamerica Claim...................................................................... 21
(e) Miscellaneous Secured Claims............................................................ 21
3. Old Notes.................................................................................. 21
4. Non-Trade Vendor Unsecured Indebtedness.................................................... 22
F. Events Precipitating Chapter 11 Petition....................................................... 22
1. The Weak Economy and Affect on Debtor's Operations......................................... 22
3. Sale of Distribution Business.............................................................. 24
4. Sale of Module Division.................................................................... 24
5. Reptron Officers' Agreements to Terminate Employment....................................... 24
6. Merger of Lake Superior Merger/Hibbing Electronics Corp into Reptron....................... 25
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G. Significant Events of the Chapter 11 Case........................................................................ 25
1. DIP Facility and Amendments to Financing Statement........................................................... 25
2. Engagement of Professionals.................................................................................. 26
3. First Day Motions............................................................................................ 27
4. Shortened Claims Bar Date.................................................................................... 28
5. Motions to Reject Executory Contracts and Commercial Leases.................................................. 28
6. U.S. Trustee's Motion to Transfer Venue of the Debtor's Case................................................. 29
7. ACI/Consumer Rebate.......................................................................................... 29
8. Administrative Expense Claims Bar Date....................................................................... 29
9. Record Date for Voting Purposes/Use of Master Ballots for Benefical Holders of Notes and Equity Interests.... 30
10. Post-Petition Date Operations................................................................................ 30
11. Power Memory Reclamation Motion.............................................................................. 30
H. Historical Financial Statements.................................................................................. 30
I. Management Discussion of Financial Results for Years Ended December 31, 2000, 2001 and 2002...................... 31
III. SUMMARY OF THE PLAN.............................................................................................. 31
A. General Features of the Plan..................................................................................... 31
B. Unclassified Claims.............................................................................................. 31
1. Administrative Expense Claims................................................................................ 31
2. DIP Financing Claim.......................................................................................... 33
3. Priority Tax Claims.......................................................................................... 33
C. Classified Claims................................................................................................ 33
1. Class 1 - Other Priority Claims.............................................................................. 33
2. Class 2A - the Gaylord Facility Claim........................................................................ 33
3. Class 2B - the Hibbing Facility Claim........................................................................ 34
4. Class 2C - the Tampa Facility Claim.......................................................................... 34
5. Class 2D - the Transamerica Claim............................................................................ 34
6. Class 2E - Miscellaneous Secured Claims...................................................................... 34
7. Class 2F - DIP Lender Letter of Credit Claim................................................................. 34
8. Class 3 - Trade Vendor Claims................................................................................ 34
9. Class 4 - General Unsecured Claims........................................................................... 35
10. Class 5 - Common Equity Interests............................................................................ 35
11. Class 6 - Other Equity Interests............................................................................. 35
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12. Executory Contracts and Leases...................................................................... 35
D. Plan Implementation..................................................................................... 36
1. Transactions Contemplated by the Plan............................................................... 36
2. Continuation of Business Operations................................................................. 36
3. Management.......................................................................................... 36
(a) Existing Management.............................................................................. 36
(b) Proposed Board of Directors and Management....................................................... 37
(c) Proposed Management Stock Option Plan............................................................ 38
(d) Proposed Severance Payments...................................................................... 38
4. Exit Facility....................................................................................... 38
5. Discharge of The Debtor............................................................................. 39
6. Terms and Injunctions or Stays...................................................................... 39
7. Exculpation......................................................................................... 39
8. Releases............................................................................................ 40
9. Conditions to Closing............................................................................... 40
10. Waiver of Conditions Precedent...................................................................... 41
11. Letter of Credit Obligations........................................................................ 41
E. Objections to Claims.................................................................................... 41
1. Disputed Claims..................................................................................... 41
2. No Distributions Pending Allowance.................................................................. 41
3. Distributions After Allowance....................................................................... 41
IV. FEASIBILITY OF THE PLAN................................................................................. 42
A. Long-Term Feasibility................................................................................... 42
B. Alternatives to the Plan and Liquidation Analysis....................................................... 43
1. Best Interests and Cramdown Test.................................................................... 43
2. Liquidation Value of the Debtor..................................................................... 44
V. RETENTION OF JURISDICTION............................................................................... 45
VI. SECURITIES LAWS MATTERS................................................................................. 47
A. Bankruptcy Code Exemptions from Registration Requirements............................................... 47
B. Resales of New Issued Common Stock or New Notes......................................................... 47
VII. CERTAIN RISK FACTORS TO BE CONSIDERED................................................................... 48
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A. Risk of Non-Confirmation of the Plan, Best Interests and Cramdown Test.................................. 48
B. Risk that the Debtor will be unable to obtain an Exit Facility.......................................... 49
C. Risk of Non-Occurrence of the Effective Date............................................................ 49
D. Risk of Competitive Conditions.......................................................................... 49
E. Risk Related to Projected Financial Information......................................................... 49
F. Risk Relating to Reorganized Debtor's Ability to Service Debt........................................... 50
G. Risk Relating to Listing New Issued Common Stock on an Exchange......................................... 50
H. Other Risk Factors...................................................................................... 50
VIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN..................................................... 50
A. Consequences to Holders of General Unsecured Claims..................................................... 51
1. Recapitalization Treatment.......................................................................... 51
2. Recognition of Income or Loss....................................................................... 52
3. Treatment of Amounts Attributable to Interest....................................................... 52
4. Market Discount..................................................................................... 52
B. Consequences to Holders of Common Equity Interests...................................................... 53
C. Consequences to Holders of Other Equity Interests....................................................... 53
D. Consequences to the Debtor.............................................................................. 53
1. Cancellation of Indebtedness Income................................................................. 53
2. Limitation of NOL Carryovers and other Tax Attributes............................................... 54
3. U.S. Federal Alternative Minimum Tax................................................................ 55
4. Deductions of Accrued Interest...................................................................... 55
E. Importance of Obtaining Professional Assistance......................................................... 55
IX. CONCLUSION.............................................................................................. 55
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EXHIBITS TO FIRST AMENDED DISCLOSURE STATEMENT
EXHIBIT 1 - Second Amended Plan of Reorganization
EXHIBIT 2 - 2002 Annual Report on Form 10-K
EXHIBIT 3 - Projections for Reorganized Reptron through 2008
EXHIBIT 4 - Liquidation Analysis
EXHIBIT 5 - Balance Sheet of Reorganized Debtor on Effective Date
EXHIBIT 6 - Going Concern Valuation of Debtor's Business
EXHIBIT 7 - Debtor Post-Petition Operations for the Period October 28 to
November 30, 2003
EXHIBIT 8 - Congress Financial Corp. November 17, 2003 Exit Financing Commitment
Letter
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I. OVERVIEW
A. Proposed Restructuring
The Plan is premised on the restructuring of the Debtor's unsecured
debt and equity structure. Specifically, existing Old Noteholders and other
General Unsecured Creditors will receive a combination of 100% of New Notes and
95% of New Common Stock. The New Notes will have a maturity of five (5) years
and will bear interest at the rate of 7% per annum during the first two (2)
years following issuance and 8% per annum thereafter. Interest will be paid
semi-annually in Cash. The principal will all be due at maturity. New Notes in
the amount of $30 Million will be issued by the Reorganized Debtor under the New
Indenture on the Initial Distribution Date in accordance with the terms of the
Plan and the Intercreditor Agreement. Common Equity Interest holders will
receive a pro rata share of 5% of New Common Stock. Other Equity Interests will
be cancelled. Secured and Priority Claims will be paid in full or reinstated, as
provided herein.
B. Summary of Proposed Distributions
The following table summarizes distributions to be made under the
proposed Plan. This is a brief summary only and should not be used as a
substitute for reviewing the Plan. For a more complete description, claimants
are advised to review "Classified Claims," Section [III.C] of this Disclosure
Statement, "Classification of Claims Against and Interests in the Debtor,"
Section 3 of the Plan and "Treatment of Claims and Interests," Article IV of the
Plan.
Classification of Claims Against and Interests in The Debtor
CLASS DESCRIPTION STATUS
- -----------------------------------------------------------------------------------------
1 Other Priority Claims Unimpaired, not entitled to vote
- -----------------------------------------------------------------------------------------
2A Gaylord Facility Claim Unimpaired, not entitled to vote
- -----------------------------------------------------------------------------------------
2B Hibbing Facility Claim Unimpaired, not entitled to vote
- -----------------------------------------------------------------------------------------
2C Tampa Facility Claim Unimpaired, not entitled to vote
- -----------------------------------------------------------------------------------------
2D Transamerica Claim Unimpaired, not entitled to vote
- -----------------------------------------------------------------------------------------
2E Miscellaneous Secured Claims Unimpaired, not entitled to vote
- -----------------------------------------------------------------------------------------
2F DIP Lender Letter of Credit Claim Unimpaired, not entitled to vote
- -----------------------------------------------------------------------------------------
3 Trade Vendor Claims Impaired, entitled to vote
- -----------------------------------------------------------------------------------------
4 General Unsecured Claims Impaired, entitled to vote
- -----------------------------------------------------------------------------------------
5 Common Equity Interests Impaired, entitled to vote
- -----------------------------------------------------------------------------------------
6 Other Equity Interests Impaired, deemed to reject, not
entitled to vote
- -----------------------------------------------------------------------------------------
C. Voting Instructions and Confirmation of the Plan
The ballot to be used to vote to accept or reject the Plan, together
with a postage paid return envelope, is enclosed with all copies of this
Disclosure Statement mailed to impaired creditors and Equity Interest holders
whom the Debtor believes are entitled to vote. If you have Claims or Interests
in more than one Class, you will receive a separate ballot for each Class of
Claims or Interests. You must mark each ballot separately. BEFORE VOTING, YOU
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SHOULD READ THIS DISCLOSURE STATEMENT, ITS EXHIBITS, INCLUDING THE PLAN, AND THE
VOTING INSTRUCTIONS ACCOMPANYING THE BALLOT IN THEIR ENTIRETY. You should use
only the ballot(s) sent to you with this Disclosure Statement to cast your vote
for or against the Plan. YOU SHOULD COMPLETE, DATE AND SIGN YOUR BALLOT(S) AND
FILE IT IN PERSON OR BY OVERNIGHT, EXPRESS OR FIRST CLASS MAIL.
IN ORDER TO BE COUNTED, BALLOTS MUST BE RECEIVED BY THE DEBTOR AT THE
ADDRESS LISTED ON THE BALLOT BY 4:00 O'CLOCK P.M., E.S.T., ON JANUARY 9, 2004.
ANY QUESTIONS CONCERNING WHETHER YOU HAVE RECEIVED THE CORRECT BALLOT, OR
CONCERNING THE BALLOT IN GENERAL, OR INQUIRIES IF NO BALLOT IS ATTACHED TO YOUR
DISCLOSURE STATEMENT, SHOULD BE ADDRESSED TO MS. JEAN ST. JOHN, TEW CARDENAS,
LLP, 201 SOUTH BISCAYNE BOULEVARD, SUITE 2600, MIAMI, FLORIDA 33131, (305)
536-1112. IDENTIFY YOURSELF AS CALLING OR WRITING CONCERNING REPTRON
ELECTRONICS, INC. ONLY CREDITORS AND EQUITY INTEREST HOLDERS WHO RETURN THEIR
EXECUTED BALLOTS BY THE DEADLINE WILL HAVE THEIR VOTES COUNTED. IF A BALLOT IS
EXECUTED AND RETURNED WITHIN THE DEADLINE, BUT IS NOT VOTED FOR OR AGAINST THE
PLAN, IT WILL NOT BE COUNTED. THE DEBTOR SHALL HAVE NO RESPONSIBILITY FOR
CONTACTING YOU IF THERE ARE ERRORS OR OMISSIONS IN THE BALLOTS It RECEIVES.
IN ACCORDANCE WITH BANKRUPTCY RULE 3017(D), THE DEBTOR WILL SEND
BALLOTS TO INTERMEDIARIES HOLDING CLAIMS FOR OR ACTING ON BEHALF OF BENEFICIAL
HOLDERS OF CLAIMS OR INTERESTS (COLLECTIVELY, THE "INTERMEDIARIES"). EACH
INTERMEDIARY SHALL BE ENTITLED TO RECEIVE, UPON REQUEST MADE TO THE DEBTOR PRIOR
TO DECEMBER 23, 2003, REASONABLY SUFFICIENT COPIES OF BALLOTS TO DISTRIBUTE TO
THE BENEFICIAL OWNERS OF THE CLAIMS AND INTERESTS FOR WHICH IT IS AN
INTERMEDIARY, AND THE DEBTOR SHALL BE RESPONSIBLE FOR AND SHALL PAY EACH SUCH
INTERMEDIARY'S REASONABLE COSTS AND EXPENSES ASSOCIATED WITH THE DISTRIBUTION OF
COPIES OF BALLOTS TO THE BENEFICIAL OWNERS OF SUCH CLAIMS AND INTERESTS AND THE
TABULATION OF THE BALLOTS.
The Bankruptcy Court has established December 17, 2003 as the record
date for determining the holders of Old Notes and holders of Common Equity
Interests entitled to vote on the Plan. Only holders of Allowed Claims or
Interests in impaired Classes are entitled to vote on the Plan. An impaired
Class accepts the Plan if at least two-thirds in amount and more than one-half
in number of the Allowed Claims or Interests in the Class that are actually
voted are cast in favor of the Plan. Holders of Allowed Claims or Interests that
do not vote are not counted as having voted either for or against the Plan.
If the voting members of an impaired Class(1) do not vote for the Plan,
but the Class nonetheless votes for the Plan by at least the requisite
majorities, the Plan at a minimum must
(1) A Class that is not impaired under the Plan is conclusively presumed to have
accepted the Plan. Solicitation of acceptance from unimpaired Creditors thus is
not required and is not being undertaken. In this case, classes 1, 2A, 2B, 2C,
2D, 2E, and 2F are conclusively presumed to have accepted the Plan.
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provide that each member of the Class will receive property of a value, as of
the Closing Date, that is not less than the amount such Class members would
receive or retain if the Debtor were liquidated under chapter 7 of the
Bankruptcy Code. The Debtor believes this requirement is met with respect to
every Class proposed under the Plan. See "Alternatives to the Plan and
Liquidation Analysis," Section IV.B.
THE BAR DATE FOR FILING PROOFS OF CLAIM WAS SHORTENED BY ORDER OF THE
BANKRUPTCY TO DECEMBER 31, 2003. The Debtor may object to Proofs of Claim filed
by certain holders of Claims or Interests, may object to certain Claims listed
in their Schedules, and/or may seek to equitably subordinate certain Claims.
PERSONS WHOSE CLAIMS ARE DISPUTED AT THE DEADLINE FOR VOTING MAY VOTE ON OR
OTHERWISE PARTICIPATE IN DISTRIBUTIONS UNDER THE PLAN ONLY TO THE EXTENT THAT
THE COURT ALLOWS THEIR CLAIMS. THE COURT MAY TEMPORARILY ALLOW A CLAIM FOR
VOTING PURPOSES, BUT THE BURDEN IS ON THE HOLDER OF A CLAIM TO WHICH AN
OBJECTION HAS BEEN FILED OR WHICH IS DISPUTED IN THE SCHEDULES TO BRING SUCH A
MOTION. The Debtor's Schedules, which list the amounts and characterization of
Claims against and Interests in the Debtor, can be inspected at the United
States Bankruptcy Court for the Southern District of Florida, Fort Lauderdale
Division, 299 East Broward Boulevard, Fort Lauderdale, Florida 33301.
YOUR BALLOT DOES NOT SET FORTH A CLAIM AMOUNT. WHETHER OR NOT YOU FILL
IN AN AMOUNT, THE DEBTOR WILL ONLY COUNT YOUR BALLOT IN THE AMOUNT OF YOUR
ALLOWED CLAIM ON JANUARY 9, 2004, OR INTEREST ON DECEMBER 17, 2003. YOU MAY NEED
TO FILE A MOTION TO ESTIMATE YOUR CLAIM FOR VOTING PURPOSES IF YOU BELIEVE THE
DEBTOR DISPUTES THE AMOUNT OF YOUR CLAIM.
It is important that all holders of Claims and Interests that are
entitled to vote exercise their right to vote to accept or reject the Plan. Even
if you do not accept the Plan, you may be bound by the Plan if the requisite
holders of Claims and Interests in your Class vote to accept the Plan.
As set forth above, any Claim or Interest as to which an objection has
been filed is not entitled to vote unless the Bankruptcy Court (upon application
of the holder to whose Claim or Interest an objection has been made) temporarily
allows such Claim or Interest in an amount that it deems proper for the purpose
of accepting or rejecting the Plan. Any such application must be heard and
finally determined by the Bankruptcy Court on or before January 9, 2004, the
deadline for casting ballots. A vote may be disregarded if the Bankruptcy Court
determines, after notice and a hearing, that such vote was not solicited or made
in good faith or in accordance with the provisions of the Bankruptcy Code.
The allowance of any Claim or Interest for purposes of voting on the
Plan shall not constitute an allowance of the Claim of Interest for purposes of
receiving any distribution pursuant to the Plan. Similarly, any references in
the Plan or Disclosure Statement to any Claims or Interests shall not constitute
an admission of the existence, nature, extent or the allowance of any Claims or
Interests, unless specifically stated otherwise.
This Plan is the result of extensive negotiation between the Debtor and
the Ad Hoc Committee. See Section II.F.1. below. The Debtor and the Creditors
Committee believe there is
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Case No. 03-35966-BKC-PGH
no alternative Plan possible at this time which would provide a greater return
to creditors and existing shareholders. For this reason, the Debtor and the
Creditors Committee strongly urge you to vote in favor of the Plan.
D. Confirmation of the Plan With and Without Necessary
Acceptances
Under section 1129(b) of the Bankruptcy Code, if one or more Classes of
impaired Claims or Interests do not accept the Plan or are deemed to reject the
Plan, the Bankruptcy Court may confirm the Plan only if the Bankruptcy Court
finds that the Plan (1) was accepted by at least one Class of impaired Claims
(determined without including any acceptance of the Plan by an insider), and (2)
does not discriminate unfairly against and is fair and equitable as to all
non-accepting impaired Classes. These requirements mean that the Bankruptcy
Court must find that, unless all members of a non-accepting impaired Class
receive full payment of their respective Claims, no Class that is junior in
priority to the non-accepting impaired Class may receive anything under the
Plan. The Debtor intends to amend the Plan, if necessary, and seek Confirmation
under this standard if there are non-accepting Classes. In the event that any
Class of Claims designated herein as unimpaired is held to be impaired and
therefore entitled to vote, the Debtor in its discretion may deem such Class to
have been rejected, and may seek to confirm its Plan under section 1129(b) of
the Bankruptcy Code in lieu of soliciting votes.
E. Confirmation Hearing
Section 1128 of the Bankruptcy Code requires the Court, after notice,
to hold a hearing on Confirmation of the Plan (the "Confirmation Hearing").
Section 1128(b) of the Bankruptcy Code provides that any party in interest may
object to Confirmation of the Plan.
The Confirmation Hearing in respect of the Plan has been scheduled for
January 14, 2004, at 9:30 a.m., E.S.T., in the courtroom of the Honorable Paul
G. Hyman, United States Bankruptcy Court, Federal Building, 701 Clematis Street,
West Palm Beach, Florida 33401. The Confirmation Hearing may be adjourned from
time to time by the Bankruptcy Court without further notice except for an
announcement of the adjourned date made at the Confirmation Hearing. Any
objection to Confirmation must be made in writing and specify in detail the name
and address of the objecting party, all grounds for the objection, and the
amount of the Claim or Interest held by the objecting party. Objections must be
accompanied by a memorandum setting forth the law and facts relied upon in
making the objection.
An objection to Confirmation must be filed with the Bankruptcy Court
and served upon all parties who have filed a demand for service under Bankruptcy
Rule 2002(i), and upon the following parties, together with proof of service,
such that the objection is received no later than 4:00 p.m., E.S.T., on January
9, 2004:
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Case No. 03-35966-BKC-PGH
Tew Cardenas LLP Andrews & Kurth L.L.P.
Thomas R. Lehman, Esq. Richard Baumfield, Esq.
Lynn Maynard Gollin, Esq. 450 Lexington Avenue
201 South Biscayne Blvd., Suite 2600 New York, NY 10017
Miami, Florida 33131-4336 Tel.: (212) 850-2800
Tel.: 305 536-1112 Fax: (212) 850-2929
Fax: 305 536-1116
Counsel to the Creditors Committee
Counsel to the Debtor
Heidi A. Feinman, Senior Attorney Greenberg Traurig, P.A.
Office of the U.S. Trustee Brian K. Gart, Esq.
Room 1204 401 East Las Olas Boulevard #2000
51 S. W. First Avenue Fort Lauderdale, Florida 33301
Miami, Florida 33130 Tel.: (954) 786-8212
Tel.: (305) 536-7285 Fax: (954) 759-5512
Fax.: (305) 536-7360
Counsel for CIT Group/Business Credit,
Inc.
II. THE COMPANY/INDUSTRY
A. Business - General
The Debtor was incorporated under the laws of Michigan in 1973 and
reincorporated under the laws of Florida in 1993. The Debtor's principal
executive offices are located at 13700 Reptron Boulevard, Tampa, Florida 33626,
and its telephone number is (813) 854-2000. The Debtor is an electronics
manufacturing services ("EMS") company comprised of Reptron Manufacturing
Services and Reptron Display and Systems Integration.
B. The Electronic Manufacturing Services Industry
The EMS industry has experienced rapid changes over the past several
years as an increasing number of original equipment manufacturers ("OEMs") have
chosen to outsource printed circuit board assemblies and display product
integration and assembly to electronics manufacturing specialists such as
Reptron Manufacturing Services and Reptron Display and System Integration.
Factors driving OEMs to favor outsourcing to electronics manufacturing
specialists include:
- Reduced Time to Market. Because of the intense competitive
pressures and rapidly progressing technology in the
electronics industry, OEMs are faced with increasingly short
product life-cycles and therefore have a growing need to
reduce the time required to bring a product to market. OEMs
can reduce their time to market by using an electronics
manufacturer's established manufacturing expertise and
infrastructure.
- Minimized Capital Investment. As electronic products have
become more technologically advanced, the manufacturing
process has become increasingly automated and highly
intricate, and manufacturers have had to invest in new
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capital equipment at an accelerated rate. By outsourcing to
electronics manufacturing specialists, OEMs are able to lower
their investment in inventory, facilities and equipment,
thereby enabling them to allocate capital to other activities
such as sales and marketing and research and development.
- Focused Resources. Because the electronics industry is
experiencing greater levels of competition and more rapid
technological change, many OEMs increasingly seek to focus
their resources on activities and technologies that add
greater value. By offering turnkey manufacturing services and
comprehensive electronic assembly, electronics manufacturing
specialists permit OEMs to focus on their core business
activities, such as product development and marketing.
- Access to Leading Edge Manufacturing Technology. Electronic
products and electronics manufacturing technology have become
increasingly sophisticated and complex. OEMs desire to work
with electronics manufacturing specialists in order to gain
access to their technological expertise in process development
and control.
- Improved Inventory Management and Purchasing Power.
Electronics industry OEMs are faced with increasing
difficulties in planning, procuring and managing their
inventories efficiently due to frequent design changes, short
product life-cycles, large investments in electronic
components, component price fluctuations and the need to
achieve economies of scale in materials procurement.
Electronics manufacturing specialists are able to manage both
procurement and inventory, and have demonstrated proficiency
in purchasing components at improved pricing.
- Access to Low Cost Manufacturing. The rapid move towards
globalization has caused the electronics industry to be more
competitive than ever before. Therefore, OEMs require access
to low cost manufacturing regions. Many Electronic
Manufacturing Services providers have established facilities
in these low cost regions to facilitate access to low cost
manufacturing.
C. The Debtor's Electronic Manufacturing Services Business
The Debtor's Electronic Manufacturing Services segment includes Reptron
Manufacturing Services and Reptron Display and System Integration. The Debtor
entered the EMS business through an acquisition in 1986. Reptron Manufacturing
Services currently operates from three locations and represents approximately
94% of the total 2002 EMS sales. Reptron Display and System Integration was
acquired in 1999 and operates from a single facility. Reptron Display and
Systems Integration represents approximately 6% of total 2002 EMS sales.
Reptron Manufacturing Services provides turnkey manufacturing services,
including the purchase of customer-specified components from its extensive
network of component suppliers, assembly of components on printed circuit
boards, performance of post-production testing and in certain instances total
box build assembly. Reptron Manufacturing Services attempts to perform as much
of a given manufacturing process as is feasible and generally does not perform
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labor-only, consignment assembly functions unless management believes that such
engagements may provide a direct route to turnkey contracts. Typical
manufacturing engagements include medium to high volume assembly of complex
products.
Reptron Manufacturing Services provides design-for-manufacturability
engineering services as well as surface mount technology ("SMT") conversion, pin
through hole ("PTH") interconnection technologies and printed circuit board
layout services for existing products. Reptron Manufacturing Services also
provides test process design capabilities that include the design and
development of test fixtures and procedures and software for both in-circuit
tests and functional tests of circuit boards, components and products.
The inherent scheduling and procurement challenges in medium volume
production of a large number of different circuit board assemblies requires a
high level of expertise in material procurement. Reptron Manufacturing Services
obtains its electronic components from a wide variety of manufacturers and
distributors, and is able to manage its materials procurement and inventory
management functions.
Reptron Display and Systems Integration performs product assembly
services for products that include flat panel display technology. It provides
various forms of engineering, product burn-in, clean room environments and other
services. The Debtor believes that this total service approach promotes customer
loyalty.
Reptron Manufacturing Services follows a well-defined marketing
strategy, which includes the following key elements:
- Target Customers Requiring Complex Printed Circuit Board
Assemblies. Reptron Manufacturing Services focuses on complex
assemblies in medium-to-high volumes for customers primarily
in the telecommunications, healthcare,
industrial/instrumentation, banking and office products
industries. Reptron Manufacturing Services does not
manufacture extremely high volume printed circuit board
assemblies for the personal computer, consumer products or
automotive industries. Reptron Manufacturing Services targets
customers requiring a high number of different circuit board
assemblies, thereby seeking to minimize its exposure to any
one product made for a specific customer. Reptron
Manufacturing Services focuses on the medium-to-high volume
batch business because of its reduced volatility. Reptron
Manufacturing Services gains access to a significant number of
these kinds of customers through its direct sales force and
independent manufacturer's representatives.
- Target Customer Relationships where Reptron Manufacturing
Services is the Primary Source. Reptron Manufacturing Services
seeks engagements with customers that have decided to
strategically outsource substantially all circuit board
assembly. Consequently, Reptron Manufacturing Services markets
its services as a "partnership" with the customer and
encourages the customer to view Reptron Manufacturing Services
as an extension of its own manufacturing capabilities. Reptron
Manufacturing Services attempts to avoid relationships where
Reptron Manufacturing Services is used as an overflow supplier
to manage peak volume requirements.
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- Maintain a Diverse Customer and Industry Base. Reptron
Manufacturing Services targets customers primarily in the
telecommunications, medical, industrial/instrumentation,
banking and office products industries and seeks to maintain a
diversity of customers among these industries and within each
industry. In addition, Reptron Manufacturing Services believes
that the industries that it targets make products that
generally have longer life cycles, more stable demand and less
price pressure compared to consumer oriented products.
Nevertheless, Reptron Manufacturing Services' customers from
time to time, experience downturns in their respective
businesses resulting in fluctuations in demand for Reptron
Manufacturing Services' services.
- Target Customers Seeking Value-Added Services. Reptron
Manufacturing Services offers a wide variety of services in
addition to circuit board assembly and total product assembly.
Theses services include various forms of engineering and
inventory control programs. Reptron Manufacturing Services
seeks to include its services offering in customer engagements
to avoid a commodity service business model. The Debtor
believes that selling these value-added services promotes
customer longevity and more profitable customer engagements.
The marketing cycle for customers meeting these criteria typically
spans six-to-twelve months. Additionally, the start-up phase for an engagement
may run an additional six months. Typically, during this phase, significant
investments are made by Reptron Manufacturing Services and the customer to
successfully launch a high number of different, complex circuit board
assemblies. Reptron Manufacturing Services works closely with its customers in
all phases of design, start-up and production, and through this cooperative
effort develops a close working relationship with the customer. These
relationships, and the investments made both in time and financial resources by
the customer and Reptron Manufacturing Services, the Debtor believes, promotes
long-term customer loyalty.
Reptron Manufacturing Services seeks to maintain diversity within its
customer base and industries served. During 2002, Reptron Manufacturing
Services' largest three customers represented 22%, 10% and 8%, respectively of
Reptron Manufacturing Services' 2002 net sales. During 2001, Reptron
Manufacturing Services' largest three customers represented 18%, 11% and 6%,
respectively of Reptron Manufacturing Services' 2001 net sales. The following
table sets forth the principle industries and the percentage of Reptron
Manufacturing Services sales derived from various industries for 2002 and 2001.
INDUSTRY 2002 % OF SALES 2001 % OF SALES
- -------------------------- --------------- ---------------
Medical 26% 22%
Semiconductor Equipment 5% 14%
Industrial/Instrumentation 16% 18%
Telecommunications 16% 15%
Banking 14% 21%
Government 11% 0%
Office Products 5% 5%
Other 7% 5%
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D. The Debtor's Properties
Reptron Manufacturing Services operates three plants. These
manufacturing facilities are equipped with advanced SMT assembly equipment and
PTH insertion equipment.
The Gaylord, Michigan 80,000 square foot manufacturing facility (the
"Gaylord Facility") is owned by the Debtor and was constructed in 1988. The
Gaylord Facility accounted for approximately 29% of Reptron Manufacturing
Services' 2002 net sales.
The Tampa, Florida 150,000 square foot manufacturing and corporate
headquarters facility (the "Tampa Facility") is owned by the Debtor and was
completed in the first quarter of 1997. The Tampa Facility is occupied by the
Tampa Reptron Manufacturing Services plant and the Debtor's corporate
headquarters. The Tampa Facility accounted for approximately 33% of 2002 Reptron
Manufacturing Services' net sales.
Reptron Manufacturing Services leases six buildings in Hibbing,
Minnesota, which total 127,000 square feet. These buildings house manufacturing
and administrative offices for the Reptron Manufacturing Services operation. The
leased premises were acquired by the Debtor when it purchased the assets of
Hibbing Manufacturing Corporation. The real property was, and continues to be
owned by a partnership comprised of four individuals who managed the operations
of the Hibbing Manufacturing Corporation and are now employed by Reptron
Manufacturing Services. Additionally, the Debtor owns a 40,300 square foot
building in Hibbing, Minnesota which is occupied by Reptron Manufacturing
Services (the "Hibbing Facility"). The Hibbing Facility and related buildings
accounted for approximately 38% of Reptron Manufacturing Services' 2002 net
sales
Reptron Display and System Integration operates from a 40,000 square
foot leased facility in Fremont, California (the "Fremont Facility"). The
Fremont Facility houses the manufacturing and administrative offices for the
Reptron Display and System Integration operation in Fremont. The lease on the
Freemont Facility expires in July 2004.
E. Summary of Pre-Petition Capital Structure of the Debtor
1. Congress Loan Agreement
As of the Petition Date, the Debtor and Congress Financial Corporation,
as agent for certain lenders identified therein ("Congress"), were parties to
that certain Loan and Security Agreement dated October 10, 2002, as amended (the
"Congress Loan Agreement"), by which Congress initially made available to Debtor
a $60 million revolving credit facility through October 10, 2005. The Congress
Loan Agreement contained certain covenants, including a minimum quarterly
measure of earnings before interest, taxes, depreciation and amortization
("EBITDA"), as defined by the Congress Loan Agreement.
The Debtor did not meet the EBITDA covenants required under the
Congress Loan Agreement for the calendar quarters ending December 31, 2002,
March 31 and June 30, 2003. Additionally, the Debtor was in default of the
Congress Loan Agreement as a result of its default under the Old Notes Indenture
(see below). In August, 2003, the Debtor and Congress executed an agreement with
an effective date of June 30, 2003, which, among other things, reduced the
amount of revolving credit available under the Congress Loan Agreement from $60
million to
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Case No. 03-35966-BKC-PGH
$35 million (the "Forbearance Agreement"). On October 21, 2003, the
Debtor and Congress executed a second agreement, which, among other things,
further reduced the amount of revolving credit available under the Congress Loan
Agreement from $35 million to $20 million (the "Second Amendment"). Although
Congress has not waived the Debtor's existing defaults under the Congress Loan
Agreement, in the Forbearance Agreement, Congress agreed to forbear from
exercising its rights as a secured lender until the earlier of (i) the
occurrence of an additional default under the Congress Loan Agreement or (ii)
October 31, 2003. The Congress Loan Agreement, as amended by the Forbearance
Agreement and the Second Amendment, substitutes the quarterly EBITDA covenant
with a covenant requiring minimum cumulative EBITDA measured monthly commencing
July 31, 2003. The Debtor was in compliance with the minimum cumulative monthly
EBITDA covenant as of September 30, 2003.
Borrowings under the Congress Loan Agreement are collateralized by
substantially all assets of the Debtor including inventory, accounts receivable,
equipment and general intangibles and certain of its real property. The Congress
Loan Agreement limited the amount of capital expenditures and prohibits the
payment of dividends without the lenders' consent. On the Petition Date, there
was approximately $7.6 million outstanding under the Congress Loan Agreement. As
discussed in detail below see Section II.G.1, on October 31, 2003, the Debtor
paid all amounts due and owing under the Congress Loan Agreement and the Release
Agreement pursuant to the Court's Interim Order Approving DIP Financing (the
"Interim DIP Financing Order").
2. Other Secured Debt
(a) Gaylord Facility Claim
On or about July 5, 1988, the Debtor as borrower and Harris Trust of
New York, as Trustee for the Northeast Michigan Development Company, entered
into that certain $361,000 debenture (the "Gaylord Facility Debenture"). All
amounts due and owing under the Gaylord Facility Debenture are guaranteed by the
Small Business Administration and are secured by a Lien on the Gaylord Facility
and certain identified personal property located on the premises. As of
September 30, 2003, there was approximately $170,000 in principal outstanding
under the Gaylord Facility Debenture. The Debtor is current with its obligations
owed to the Gaylord Facility Debenture.
(b) Hibbing Facility Claim
On or about April 1, 2002, the Debtor as buyer and the State of
Minnesota as seller entered into that certain contract for deed (the "Hibbing
Facility Contract"). All amounts due and owing under the Hibbing Facility
Contract are secured by a Lien on the Hibbing Facility. As of September 30,
2003, there was approximately $450,000 outstanding in principal under the
Hibbing Facility Contract. The Debtor is current with its obligations owed
pursuant to the Hibbing Facility Contract.
(c) Tampa Facility Claim
On or about February 29, 2000, the Debtor as borrower and General
Electric Capital Business Asset Funding Corporation as lender entered into that
certain $4 million Commercial Mortgage Agreement and Promissory Note (the "Tampa
Promissory Note"). All amounts due
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Case No. 03-35966-BKC-PGH
and owing under the Tampa Promissory Note are secured by a Lien on the Tampa
Facility. As of September 30, 2003, there was approximately $3,510,000
outstanding in principal under the Tampa Promissory Note. The Debtor is current
with its obligations owed to General Electric Capital Business Asset Funding
Corporation on the Tampa Promissory Note.
(d) Transamerica Claim
The Debtor, as lessee, is a party to that certain December 18, 2000
Master Lease Agreement (the "Master Lease") with Transamerica Equipment
Financial Services Corporation, as assignee of Celtic Leasing Corp (the
"Transamerica Equipment Lease"). All amounts due and owing under the
Transamerica Equipment Lease are secured by the equipment identified on the
schedules to the Master Lease. As of September 30, 2003, there was approximately
$445,000 in principal outstanding under the Transamerica Equipment Lease. The
Debtor is current with its obligations owed to Transamerica Equipment Financial
Services Corporation, as assignee of Celtic Leasing Corp on the Transamerica
Equipment Lease.
(e) Miscellaneous Secured Claims
This class consists of all Secured Claims other than the Congress
Claim, the Transamerica Claim, the Tampa Facility Claim, the Hibbing Facility
Claim and the Gaylord Facility Claim. The Debtor is current with its obligations
owed to each holder of a Miscellaneous Secured Claim. The Miscellaneous Secured
Claims include lease financing agreements with Lease Finance Group, Inc. and
Ikon Office Solutions, Inc. The Debtor believes that the total principal amount
of Allowed Miscellaneous Secured Claims will be approximately $200,000.
There are several former secured creditors of the Debtor which have
neglected to terminate their UCC's. In California those former creditors are:
Winthrop Resources Corporation; Samsung Semi-Conductor, Inc.; and Congress. In
Michigan the former creditors are: National City Bank of Michigan; and Winthrop
Resources Corporation. In Minnesota the former creditor is Winthrop Resources
Corporation. In Florida the former creditors are: Heller Financial Inc.; De Lage
Landen Finance, Inc. f/k/a Data General Corp.; Winthrop Resources Corporation;
Great America Leasing Corporation; BCL Capital; Arrow Electronics, Inc.; and
Agilent Technologies, Inc. The Debtor has paid each of these secured creditors
in full, they will receive no distribution under the Plan, and will be required
to file UCC-9 termination statements as necessary in each of the respective
states (and counties) where their UCC's are on record as being filed.
3. Old Notes
The Debtor and U.S. Bank, as successor to Reliance Trust Company (the
"Old Notes Indenture Trustee"), are parties to that certain Indenture, dated as
of August 4, 1997 (the "Old Notes Indenture"), by which the Debtor issued its
6 3/4% Convertible Subordinated Notes due 2004 (the "Old Notes"). There are
approximately 160 holders of Old Notes, including Old Notes held in "Street
Names." As of September 30, 2003, there was outstanding approximately
$76,315,000 million in principal of Old Notes. The holders of the Old Notes have
the right to convert any portion of the principal amount of the outstanding Old
Notes into shares of the Debtor's common stock at any time prior to the close of
business on August 1, 2004, at a
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Case No. 03-35966-BKC-PGH
conversion rate of 35.0877 shares of common stock per $1,000 principal amount of
the Old Notes (equivalent to a conversion price of approximately $28.50 per
share).
The Debtor failed to make the February 1, 2003 and the August 1, 2003
interest payments due to holders of the Old Notes. The Debtor did not have
adequate liquidity to make these interest payments. Because the Debtor was
unable to make the February 1, 2003 payment on or before March 5, 2003, under
conditions described in the Old Notes and under the Old Notes Indenture, the
outstanding principal indebtedness of the Old Notes could have been accelerated
and become immediately due and payable.
4. Non-Trade Vendor Unsecured Indebtedness
The Debtor believes that there are miscellaneous non-Trade Vendor
General Unsecured Claims (excluding holders of Old Notes) include, service
companies, accountants, lawyers, and other small non-Trade Vendor vendors. Many
of these claimants are owed less than $500.00 each. As of the Petition Date, the
Claims of non-Trade Vendor General Unsecured Claims (excluding holders of Old
Notes) aggregated $600,000 to $1 million. Non-Trade Vendor General Unsecured
Claims shall be treated in Class 4 of the Plan. See Section III(C)(9).
5. Trade Vendor Unsecured Indebtedness
Before the Petition Date and in the ordinary course of its business,
the Debtor incurred certain unsecured debt to suppliers ("Trade Vendor Claims")
to the Debtor of product needed for its manufacturing business ("Trade
Vendors"). The Trade Vendors provide the Debtor with, among other things,
essential parts, equipment, sole source parts, customer specified parts, and
support. As of the Petition Date, there were outstanding approximately $17
million of Trade Vendor Claims against the Debtor, including the Claims of
approximately forty four (44) of the Debtor's most critical vendors (the
"Critical Trade Vendor Claims" and "Critical Trade Vendors", respectively).
F. Events Precipitating Chapter 11 Petition
1. The Weak Economy and Affect on Debtor's Operations
During 2001 and 2002, the United States economy experienced little to
no growth. The electronics industry was particularly hard hit. Many companies in
the electronics industry, including the Debtor, experienced significant
contraction due to adverse market conditions. Although the Debtor put into place
various cost-cutting measures to address these market conditions, these measures
were insufficient to compensate for the significant reductions in its sales and
earnings. As a result, the Debtor was not in compliance with certain covenants
in the Congress Loan Agreement as of December 31, 2002. After the Debtor and
Congress entered into the initial Forbearance Agreement, some of the advance
ratios provided in the Congress Loan Agreement were made more restrictive,
thereby reducing the Debtor's liquidity. As a consequence of the Debtor's
deteriorating financial condition, the Debtor did not have adequate liquidity to
make the interest payment due on February 1, 2003 to the holders of Old Notes.
Because the Debtor was unable to cure this default on or before March 5, 2003,
an "Event of Default" occurred under the Old Notes Indenture giving rise to the
possibility that the outstanding principal amount of the Old Notes could be
accelerated and become immediately due and payable. These defaults, as well as
the Debtor's weakening financial condition, resulted
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Case No. 03-35966-BKC-PGH
in some of the Debtor's Trade Vendors limiting the amount of credit extended to
the Debtor or reduced the time for payment of credit extended, putting
additional pressure on the Debtor's overall financial condition.
2. The Ad Hoc Committee/Pre-Negotiated Plan
After the Debtor failed to make the February 1, 2003 interest payment
due to the holders of the Old Notes, the Ad Hoc Committee was formed to discuss
with the Debtor possible alternatives for restructuring the indebtedness. The Ad
Hoc Committee represented approximately 56% of the total outstanding principal
due under the Old Notes. The Ad Hoc Committee was comprised of Camden Asset
Management, Wachovia, First Pacific and Hal Purkey, each of which is a holder of
Old Notes.(2) The Ad Hoc Committee retained Andrews & Kurth LLP as its legal
counsel ("Andrews & Kurth") and the Debtor engaged Vincent Addonisio of Regency
Strategic Advisors, Inc. to assist in the negotiations with the Ad Hoc
Committee.
On or about July 24, 2003, following extensive negotiations the Debtor
reached an agreement with the Ad Hoc Committee as to a restructuring, the terms
of which (for the most part) are embodied in the Plan. In connection therewith,
the Debtor entered into lock-up agreements with the members of the Ad Hoc
Committee and various other noteholders, who collectively hold approximately $57
million of principal amount of outstanding Old Notes. Pursuant to the lock-up
agreements, the members of the Ad Hoc Committee and the Debtor agreed, among
other things, and subject to certain conditions, that each member of the Ad Hoc
Committee would vote all of their respective Claims in support of the Plan. The
Debtor also agreed to pay the fees and expenses of Andrews & Kurth. Prior to the
Petition Date, the Debtor fulfilled this obligation and paid all attorneys fees
and expenses due for a total approximate sum of $125,000.
The lock-up agreements expired on September 15, 2003.(3) The parties
who signed the agreements have continued to support the Debtor during the
reorganization process although they are no longer bound by the terms of the
lock-up agreements. As such, the Debtor is confident that the that the members
of the Ad Hoc Committee (several of whom now serve as members of the Creditors
Committee) will vote in favor of the Plan.
The Plan contemplates the conversion of a substantial portion of the
Debtor's long-term debt into equity. The Debtor's unsecured debt of
approximately $77 million will be exchanged for 95% of the New Common Shares(4)
of the Debtor and $30 million of New Notes. Common
(2) The Ad Hoc Committee was not a committee approved by the Bankruptcy Court.
(3) The existence of the lock-up agreements is disclosed in this Disclosure
Statement to demonstrate the efforts expended pre-Petition Date to formulate the
terms for a pre-negotiated Plan among the Debtor and the members of the Ad Hoc
Committee, a group that holds $57 million of the total approximate $76 million
principal amount of the Old Notes. The support of the Ad Hoc Committee was
essential to the Debtor's reorganization efforts. Notwithstanding, the existence
of the lock-up agreements should not be relied upon in determining whether to
vote to accept or to reject the Plan.
(4) The Debtor and its consultants estimate the price per share will be $3.70
which amount reflects a 20% discount on the price per share based upon current
trading.
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Case No. 03-35966-BKC-PGH
Equity Interest holders will receive 5% of the New Common Shares in exchange for
their existing shares, which will be cancelled. Secured Creditors will not be
impaired by the Plan. Attached as Exhibit 6 to this Disclosure Statement is the
Debtor's Going Concern Valuation of the Debtor's Business.
3. Sale of Distribution Business
On June 13, 2003, the Debtor sold certain assets of its former
Electronic Components Distribution Division ("ECD") to Jaco Electronics, Inc.
("Jaco") for approximately $9.2 million, consisting of approximately $5.6
million in cash paid to the Debtor at closing and the assumption of certain
liabilities by Jaco totaling approximately $3.6 million. The sale included
substantially all of the assets of ECD (with the exception of receivables) and
consisted primarily of inventory and equipment. Jaco assumed identified accounts
payable of ECD and the obligations under identified assigned contracts. The
proceeds of the sale of ECD were applied to reduce the Debtor's obligations
under the Congress Loan Agreement.
4. Sale of Module Division
On October 27, 2003, the Debtor sold certain assets of its former
Reptron Computer Products division ("RCP") to All Components, Inc. ("ACI") for
net cash at closing of approximately $6,950,000. The Debtor has the ability to
earn an additional $250,000 of goodwill if sales to a new customer exceed $3.5
million in the twelve months following the closing of the transaction. The
Debtor agreed to indemnify ACI up to $1.25 million for (i) breaches of the
Debtor's representations and warranties in its agreement with ACI and (ii) a
potential judgment arising out of an avoidance action filed against ACI. The
indemnity is outstanding for two years from the date of closing. Under the terms
of the parties' agreement, ACI is entitled to hold back for one year $750,000 of
the gross purchase price it was obligated to pay for RCP as collateral for the
Debtor's remaining obligations under the asset purchase and sale agreement,
after which such funds will be due and payable to the Debtor. The sale to ACI
included substantially all of the assets of RCP. The proceeds of the sale of RCP
were applied to reduce the Debtor's obligations under the Congress Loan
Agreement.
5. Reptron Officers' Agreements to Terminate Employment
Leigh A. Lane, Michael L. Musto's daughter served as Reptron's
secretary and was a director from 1994 to 2003. Previously, Ms. Lane has served
in a number of administrative positions, including Operations Manager
(1989-1991) and Corporate Credit Manager (1991-2003). In connection with
Reptron's streamlining of operations, on September 30, 2003 Ms. Lane entered
into a severance agreement with the Debtor ("Lane Agreement"). Pursuant to the
Lane Agreement, Ms. Lane was paid one year of severance in the amount of
$120,000.00 and was released from any non-compete agreements she had with the
Debtor. In exchange, Ms. Lane waived the balance of the severance she was
entitled to receive under her employment agreement and agreed that she will not
be entitled to any recovery under the Plan or otherwise resulting from any
employment or severance agreement between her and the Debtor.
Michael A. Musto, Michael L. Musto's son, was employed for more than 15
years by Reptron pre-Petition Date, most recently in a sales supervisory
position. In connection with Reptron's streamlining of operations, on June 10,
2003 Michael A. Musto entered into a severance agreement with the Debtor ("Musto
Jr. Agreement"). Pursuant to the Musto Jr.
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Agreement, Michael A. Musto was paid one year of severance in the amount of
$201,356.06 and was released from any non-compete agreements he had with the
Debtor. In exchange, Michael A. Musto waived the balance of the severance he was
entitled to receive under his employment agreement and agreed that he will not
be entitled to any recovery under the Plan or otherwise resulting from any
employment or severance agreement between he and the Debtor.
6. Merger of Lake Superior Merger/Hibbing Electronics Corp
into Reptron
On October 14, 2003, Lake Superior Merger Corporation ("Lake
Superior"), a corporation organized under the laws of the state of Florida, and
Hibbing Electronic Corporation ("Hibbing Electronic"), a corporation organized
under the laws of the state of Minnesota, were merged into the Debtor, with the
Debtor being the surviving corporation (the "Lake Superior/Hibbing Electronic
Merger"). Before the Lake Superior/Hibbing Electronic Merger was effected, Lake
Superior was a wholly owned, non-operating subsidiary of the Debtor. Lake
Superior's sole asset was its interest in its wholly owned subsidiary, Hibbing
Electronics, which was the owner of certain equipment located at the Debtor's
Hibbing Facility.
G. Significant Events of the Chapter 11 Case
1. DIP Facility and Amendments to Financing Statement
(a) Interim Order Approving DIP Facility and
Amendment to Financing Agreement
The preservation, maintenance and enhancement of the going concern
value of the Debtor's business are crucial to the Debtor's reorganization.
However, without adequate post-petition financing, the Debtor would have lacked
sufficient working capital to operate. As part of its pre-negotiation of the
Plan, the Debtor entered into discussions, but was unable to reach agreement,
with Congress, the Debtor's largest secured creditor, for Congress to provide
the Debtor with the debtor-in-possession financing it would need during the
Chapter 11 Case. Accordingly, the Debtor sought alternative sources of
debtor-in-possession financing.
After substantial negotiation, the Debtor reached an agreement with the
CIT Group/Business Credit, Inc. ("CIT") to fund the Debtor's post-petition
operations. CIT agreed to provide the Debtor with up to $20 million of
post-Petition Date financing in the form of revolving advances and a letter of
credit sub-line. The Debtor's obligations under the DIP Facility are secured by
first priority liens on and security interests in all of the Debtor's assets
except for the Tampa and Gaylord Facilities. The DIP Facility also is secured by
a junior lien on and security interest in the Debtor's Tampa and Gaylord
Facilities. Such obligations also are entitled to the status of super-priority
administrative claims in the Chapter 11 Case pursuant to sections 364(c)(2) and
507(b) of the Bankruptcy Code, senior to all pre- and post-petition Claims in
the Chapter 11 Case save certain "carve outs" for professional fees and
expenses, Court fees and quarterly fees of the U.S. Trustee pursuant to 28
U.S.C. Section 1930. The ability of the Debtor to incur financing under the DIP
Facility is subject to and limited by a monthly budget approved by CIT and
disclosed to the Bankruptcy Court.
Under the terms of the DIP Facility, the Debtor's initial borrowings
under the DIP Facility were used to pay in full the pre-Petition Date Claims of
Congress and ordinary course of business payments to the Critical Vendors, as
well as to fund the Debtor's operations post-
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Petition Date. On October 30, 2003, the Bankruptcy Court entered an order
approving the terms of the DIP Facility on an interim basis with a cap of $15
million (the "Interim DIP Financing Order"). Thereafter, the Interim DIP
Financing Order was amended by order of the Bankruptcy Court on October 31, 2003
(the "Amended Interim DIP Financing Order").
(b) Final Order Approving DIP Facility and Amendment
to Financing Agreement
On November 13, 2003, the Debtor agreed to amend the DIP Facility to
include, among other things, a provision for additional "Events of Default" (the
"First Amendment to the Financing Agreement"). Pursuant to the First Amendment
to the Financing Agreement, an event of default will occur if an order approving
the Disclosure Statement is not entered on or before December 31, 2003, the
order confirming the Debtor's Plan is not entered on or before February 13,
2004, or the closing on funding of exit financing does not occur on the eleventh
day after the Confirmation Order is entered. The Debtor and CIT consider the
amendment, with respect to the addition of Events of Default under the DIP
Facility, a material change (as that term is defined in the Amended Interim DIP
Financing Agreement). Accordingly, on November 14, 2003, the Debtor filed with
the Bankruptcy Court a Notice of Amendment of the DIP Facility. The final
hearing on approval of the DIP Facility was conducted by the Bankruptcy Court on
November 19, 2003, at which hearing the Bankruptcy Court entered an Order
approving the DIP Facility and Amendments thereto (the "Final DIP Financing
Order").
(c) Third Amendment to Financing Agreement
The Debtor's worker's compensation insurance company, Hartford Fire
Insurance Company ("Hartford") is the beneficiary of a Congress Letter of Credit
(the "Hartford L/C"). The face amount of the Hartford L/C is $950,000. Congress
holds $950,000 in cash collateral to secure the Debtor's obligations to Congress
arising from the issuance of the Hartford L/C. The Hartford L/C expires on
December 31, 2003. If a replacement letter of credit is not issued to Hartford
by an acceptable bank that secures Hartford's pre- and post-Petition Date debt,
the Hartford L/C may be drawn upon or the Debtor's worker's compensation
coverage will be compromised.
CIT agreed to arrange for the issuance of a replacement letter of
credit to Hartford from J.P. Morgan/Chase Bank (the "CIT L/C") to secure
Hartford's pre- and post- Petition Date debt, and upon delivery of the CIT L/C
to Hartford, Hartford will hold a valid, perfected security interest in such CIT
L/C which secures both its pre- and post- Petition Date debt. The Third
Amendment to the Financing Agreement requires the Debtor to provide CIT with
cash collateral equal to 110% of the face amount of the CIT L/C. Once the CIT
L/C is issued and delivered to Hartford, the Debtor will arrange for the
delivery of the original Hartford L/C and a termination letter from Hartford to
Congress which, once received by Congress, will trigger the release of $950,000
of cash collateral. The Debtor filed a motion to approve the third amendment to
the financing agreement and the Court entered an order granting the motion on
December 17, 2003.
2. Engagement of Professionals
On October 30, 2003, the Debtor received Court authorization to retain
Tew Cardenas, L.L.P. as bankruptcy counsel for the Debtor and Chuck Scheiwe of
Pathway Business Consulting, to act as CFO for Reptron and assist the company
through the bankruptcy
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proceeding. On November 19, 2003, Debtor received Court authorization to retain
Holland & Knight LLP and William L. Elson, Esq. as special counsel to the Debtor
to handle tax, and transactional matters in the Chapter 11 Case, and to retain
Grant Thornton as its auditor, tax advisor and financial advisor. On November
17, 2003, the Bankruptcy Court approved the retention of Andrews & Kurth as
counsel for the Creditors Committee, nunc pro tunc, to the Petition Date.
3. First Day Motions
On the Petition Date, the Debtor filed a number of motions (the "First
Day Motions") to help maintain the Debtor's business operation without
interruption, maintain vendor and supplier confidence, and boost employee
morale. The First Day Motions were heard by the Bankruptcy Court on October 30,
2003. A brief discussion of the First Day Motions follows:
a. The Utilities Motion
The Debtor filed a motion prohibiting utilities from altering, refusing
or discontinuing service on account of pre-petition indebtedness, authorizing
the Debtor to pay unpaid pre-petition invoices and establishing procedures for
the provision of additional adequate assurance of payment for future utility
services (the "Utilities Motion"). An interruption in the Debtor's utilities
would have disrupted operations and threatened the Debtor's manufacturing
operations. The Court approved the Utilities Motion by Order entered October 30,
2003.
b. The Cash Management Motion
The Debtor filed a motion for authorization to maintain its existing
corporate bank accounts and to continue using its existing business forms and
cash management systems ("Cash Management Motion"). The transition from
pre-Petition Date bank accounts to post-Petition Date accounts immediately upon
filing for bankruptcy protection and changing and purchasing new invoices and
checks to reflect Reptron was a DIP would have been expensive and a hardship for
the Debtor. Furthermore, CIT the Debtor's depository accounts were all lockbox
accounts and to change those accounts would have caused considerable delay in
the Debtor receiving payments from customers. Thus, the Debtor requested and was
granted preliminary relief by the Court on October 30, 2003 to: maintain its
pre-Petition Date accounts (with the exception of its disbursement operating
accounts which were to be gradually closed); and to preserve its cash management
system. Final relief was granted by the Court on November 19, 2003.
c. Wage/Benefits Motion
The Debtor filed a motion for authorization to pay pre-petition wages,
salaries, benefits and reimbursable expenses and authorizing banks to honor
checks in payment of employee obligations ("Wage/Benefits Motion"). The
Wage/Benefits Motion was necessary to continue the operations of the Debtor
without interruption and to maintain employee morale. The Court granted the
relief requested in the Wage/Benefits Motion at a hearing held October 30, 2003.
d. Critical Trade Vendor Motion
The Debtor filed a motion for authorization to pay certain Critical
Trade Vendor Claims ("Critical Trade Vendor Motion") in the ordinary course of
business and pursuant to customary
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trade terms which existed between the Debtor and the respective vendors
pre-Petition Date. The Critical Trade Vendor Claims the Debtor sought to have
paid in this manner totaled approximately $8.6 million on the Petition Date.
The Debtor believed that finding replacement vendors would be an
arduous and lengthy process. Even if replacement vendors could have been
located, the Debtor would have been unfamiliar with them and the quality of the
goods provided could suffer. Moreover, many of the Debtor's customers have
contractually specified that components originate from certain Trade Vendors.
Thus, the Debtor cannot use alternative vendors and remain in compliance with
its contractual obligations. Based on the Debtor's substantial experience with
its Trade Vendors, the Debtor believed that its contracts with the Trade Vendors
were, and remain at competitive rates and terms and that continuation of
business on the same or better terms will help stabilize the Debtor's business
operations. Furthermore, certain of the Debtor's Trade Vendors are small
businesses for whom the Debtor is a large customer. The Debtor believes that
absent payment of amounts due pre-petition, many of these small businesses would
refuse to continue its business relationship with the Debtor during the Chapter
11 Case and thereafter; thereby impairing the Debtor's ability to operate and
potentially, the success of the Debtor's reorganization.
On October 30, 2003, the Court granted the relief requested in the
Critical Trade Vendor Motion and authorized the Debtor to pay in the ordinary
course of business, in the Debtor's discretion, the $8.6 million owed to
Critical Trade Vendor on their Claims; but only to the extent that each such
Critical Trade Vendor agreed to provide the Debtor with post-petition goods
according to each such Critical Trade Vendor's pre-Petition Date customary trade
terms. A total of $8.4 million of Trade Vendor Claims remain outstanding.
4. Shortened Claims Bar Date
During the October 30, 2003 hearing on First Day Motions, the Debtor
informed the Bankruptcy Court that it was hoped that confirmation of the Plan
would occur before the end of January 2004 and to accomplish this goal, a
shortened claims bar date was needed. The Bankruptcy Court agreed and announced
it would consider a motion to shorten the claims bar date, without the necessity
of a hearing, upon the Debtor's filing of such a motion and order with the
Bankruptcy Court. On November 6, 2003, the Debtor filed a motion for order
shortening the time by which proofs of claim must be filed, establishing a
claims bar date, and directing the clerk of the Bankruptcy Court for the
Southern District of Florida to include the shortened claims bar date in the 341
Meeting Notice (the "Claims Bar Date Motion"). On November 12, 2003, the
Bankruptcy Court entered an Order granting the Debtor the relief sought in its
Claims Bar Date Motion and established the Claims Bar Date for filing proofs of
Claim in the Debtor's Chapter 11 Case with the Clerk of the Bankruptcy Court to
be 4:00 p.m. on December 31, 2003.
5. Motions to Reject Executory Contracts and Commercial Leases
The Debtor is scaling back operations to the extent possible. Prior to
filing for bankruptcy protection, the Debtor leased premises in Nevada from
Northwestern Investment Management Company (the "Nevada Lease"). The Debtor
vacated the premises prior to the Petition Date and turned the keys to the
premises over to Northwestern Investment Management Company. On October 28,
2003, the Debtor filed a motion with the Bankruptcy Court to reject the Nevada
Lease Effective as of the Petition Date. The Debtor's motion to reject the
Nevada Lease was granted by the Court at a hearing conducted on November 19,
2003.
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The Debtor has also filed motions to reject unexpired non-residential
leases of property which the Debtor no longer occupies or has no further need
for the space. Specifically, the unexpired non-residential leases of property
the Debtor is seeking to reject are: the First Industrial, L.P. lease, premises
located in Duluth, Georgia (vacated by Debtor September 30, 2003); the Tampa Bay
Arena, L.P. lease of a suite in the Tampa Bay Arena; the Tampa Tri-County
Flexxspace, Ltd. (the "Tampa Tri-County Lease") , premises located in Tampa,
Florida (vacated by Debtor December 3, 2003); and the FGH Corporate Park Ltd.
Lease, premises located in Huntsville, Alabama (vacated by Debtor November 30,
2002) (collectively, the "Leases").
The Debtor also filed motions to reject employment agreements with Sam
Hall and Richard Dale. Mr. Hall and Mr. Dale were employed by a Reptron division
which was sold pre-Petition Date and their services are not needed by the
Debtor. The final motion to reject filed by the Debtor is the executory contract
with William Kempp. Prior to the Petition Date, Mr. Kempp was a pilot employed
by the Debtor. Mr. Kempp and the Debtor entered into a severance agreement,
which agreement is the subject of the Debtor's motion to reject (collectively,
the respective contracts are referred herein as the "Executory Contracts").
The Debtor's motions to reject the Leases and Executory Contracts are
scheduled for hearing on January 7, 2004.
6. United States Trustee's Motion to Transfer Venue of the
Debtor's Case
On November 13, 2003, the United States Trustee ("U.S. Trustee") filed
a motion with the Bankruptcy Court to transfer the Debtor's Chapter 11 Case to
the United States Bankruptcy Court for the Middle District of Florida or, in the
alternative, motion to dismiss the Chapter 11 Case for improper venue (the
"Venue Motion"). The Debtor disputes that venue of its Chapter 11 Case does not
lie in the Southern District of Florida. The hearing on the Venue Motion is
scheduled for January 24, 2004.
7. ACI/Consumer Rebate
On November 19, 2003 the Debtor filed a motion requesting authorization
for the Debtor to enter into a rebate processing agreement with Continental
Promotion Group Inc. ("Continental") and to pay the Debtor's consumers $600,000
in retail customer rebates (the "Rebate Motion"). After an evidentiary hearing
held on November 26, 2003, the Bankruptcy Court denied the Rebate Motion.
Thereafter, the Debtor made demand upon ACI to promptly pay the consumer
rebates. ACI claims that the Debtor's failure to pay the consumer rebates is a
breach of the October 24, 2003 Asset Purchase Agreement. The Creditors Committee
disputes the Debtor beached the agreement. Recently, the Debtor learned that the
consumer rebates were paid by ACI.
8. Administrative Expense Claims Bar Date
On December 9, 2003, the Debtor filed a motion requesting that the
Bankruptcy Court fix January 9, 2004 (the "Administrative Expense Claim Bar
Date") as the bar date for filing certain administrative expense claims and
approve the form of notice of the administrative expense claims bar date (the
"Administrative Expense Claims Bar Date Motion"). An Administrative Expense
Claim Bar Date is needed for the Debtor to determine amounts necessary for
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confirmation. On December 17, 2003, the Court granted the relief requested by
the Debtor in the Administrative Expense Claims Bar Date Motion.
9. Record Date for Voting Purposes/Use of Master Ballots for
Beneficial Holders of Notes and Equity Interests
On December 10, 2003, the Debtor filed a motion requesting that the
Bankruptcy Court set a record date for voting purposes, approving use of Master
Ballot, and require record holders to provide certain notices of proceedings to
beneficial holders of the Debtor"s notes and equity interests (the "Record
Date/Master Ballot Motion"). The relief requested in the Record Date/Master
Ballot Motion is essential for the purpose of transmitting the Ballots, the
Order Approving the Disclosure Statement, the Disclosure Statement, and the Plan
to holders of beneficial interests in the Old Notes and Common Equity Interests
(the "Solicitation Package"). There are numerous record holders or "Street
Names" representing the beneficial holders. The Debtor cannot obtain the names
and addresses of the beneficial holders; rather only the record holders can
procure this information. Thus, the Solicitation Package must be transmitted to
beneficial holders of notes and equity interests through the record holders. The
record date for voting purposes is December 17, 2003. As such, it may take until
December 23, 2003 for the record holders to obtain a list of beneficial holders
of notes and equity interests as of December 17, 2003. Accordingly, the Debtor
agreed to pay the cost associated with transmitting the Solicitation Packages to
beneficial holders by overnight mail so as to minimize the impact of the short
notice period for voting purposes. On December 17, 2003, the Bankruptcy Court
granted the relief requested in the Debtor's Record Date/Master Ballot Motion.
10. Post-Petition Date Operations
The Debtor's post-Petition Date operations have been successful and
exceeded expectations. See Exhibit 7 to this Disclosure Statement for a
description of the Debtor's post-Petition Date operations.
11. Power Memory Reclamation Motion
Power Memory International USA, Inc. ("Power Memory") filed a motion
for reclamation (the "Reclamation Motion"). The hearing on the Reclamation
Motion was scheduled by the Bankruptcy Court for December 17, 2003. Power Memory
timely filed its reclamation demand upon the Debtor seeking (i) a return of
product delivered; or, alternatively (ii) payment of the amount due for the
product. Thereafter Power Memory filed the Reclamation Motion seeking an Allowed
Claim pursuant 11 U.S.C. Section 546 secured by collateral of the Debtor. In
response, the Debtor negotiated terms for an agreed order wherein Power Memory
shall have an administrative claim, as described under 11 U.S.C. Section 503(b),
allowed in the amount of $242,320.00 without offset or deduction of any other
kind. On December 17, 2003, the Bankruptcy Court approve the terms of the agreed
order.
H. Historical Financial Statements
See the financial statements included in the Debtor's annual report on
Form 10-K for the year ended December 31, 2002 (the "Debtor's 10-K"), which is
attached to this Disclosure Statement as Exhibit 2.
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I. Management Discussion of Financial Results
for Years Ended December 31, 2000, 2001 and 2002
See Item 7 of the Debtor's 10-K, which is attached to this Disclosure
Statement as Exhibit 2.
III. SUMMARY OF THE PLAN
The Debtor has proposed the Plan in good faith, believing that holders
of Claims and Interests will obtain a greater recovery under the Plan than would
be available if the Debtor's assets were liquidated under chapter 7 of the
Bankruptcy Code.
The summary of the Plan contained in this Disclosure Statement is not a
substitute for, and is qualified in its entirety by, the full text of the Plan
itself. ALL CREDITORS, INTEREST HOLDERS, AND THEIR ADVISORS ARE URGED TO READ
THE PLAN CAREFULLY IN ITS ENTIRETY. In the event of any discrepancy between the
Plan and this Disclosure Statement, the terms of the Plan shall govern.
A. General Features of the Plan
The Debtor believes that the Plan is feasible, fair and equitable, and
does not discriminate unfairly among any Claim or Interest holders. The Debtor
has proposed the Plan in good faith.
B. Unclassified Claims
1. Administrative Expense Claims
Except as otherwise provided herein, and subject to CIT's Superpriority
Administrative Expense Claim under the DIP Facility, on the Effective Date, or
as soon as practicable thereafter, except to the extent that a holder of an
Allowed Administrative Expense Claim and the Proponent agree to a different
treatment of such Allowed Administrative Expense Claim, the Reorganized Debtor
shall pay to each holder of an Allowed Administrative Expense Claim Cash in an
amount equal to such Allowed Administrative Expense Claim, provided, however,
that (i) other than Administrative Expense Claims which are Allowed by Order of
the Bankruptcy Court, Claims of Professionals retained by the Debtor, or the
Creditors" Committee whose retention has been approved by the Court, the U.S.
Trustee, and CIT, a holder's Administrative Expense Claim shall not become an
Allowed Administrative Expense Claim unless the holder of the Administrative
Expense files an Administrative Expense Claim with the Bankruptcy Court by
Allowed Administrative Expense by the Administrative Expense Claims Bar Date;
and (ii) Claims representing liabilities incurred in the ordinary course of
business by the Debtor in Possession or liabilities arising under loans or
advances to or other obligations incurred by the Debtor in Possession, whether
or not incurred in the ordinary course of business, shall be assumed and paid by
Reorganized Debtor in the ordinary course of business (including all obligations
owed to the DIP Lender under the DIP Facility), consistent with past practice
and in accordance with the terms and subject to the conditions of any agreements
governing, instruments evidencing or other documents relating to such
transactions.
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With respect to fees due the U.S. Trustee, the Debtor shall pay the
U.S. Trustee the appropriate sum required pursuant to 28 U.S.C. Section
1930(a)(6) within ten (10) days of the entry of the Confirmation Order for
pre-Confirmation Date periods and simultaneously provide the U.S. Trustee an
appropriate affidavit indicating the Cash disbursements for the relevant period.
The Reorganized Debtor shall further pay the U.S. Trustee the appropriate sum
required pursuant to 28 U.S.C. Section 1930(a)(6) based upon all disbursements
of the Reorganized Debtor for post-Confirmation Date periods within the time
period set forth in 28 U.S.C. Section 1930(a)(6), until the earlier of the
closing of the Chapter 11 Case by the issuance of a final decree by the
Bankruptcy Court, or upon the entry of an Order by the Bankruptcy Court
dismissing the Chapter 11 Case or converting the Chapter 11 Case to another
chapter under the Bankruptcy Code, and the party responsible for paying the
post-Confirmation Date U.S. Trustee fees shall provide to the U.S. Trustee upon
the payment of each post-Confirmation payment an appropriate affidavit
indicating all Cash disbursements for the relevant period.
With respect to the Administrative Expense Claims of Professionals, not
later than five (5) business days prior to the Confirmation Date, each
Professional seeking compensation or reimbursement under section 327, 328, 330,
331, 503(b), or 1103 of the Bankruptcy Code shall provide the Debtor and the
Creditors Committee with a written estimate of the amount of its requested
compensation and reimbursement through the Effective Date. On the Effective
Date, the Debtor shall establish the Professional Claims Reserve in an amount
equal to the aggregate amount of such estimated compensation or reimbursements,
unless otherwise previously paid by the Debtor. The funds in the Professional
Claims Reserve shall be used solely for the payment of Allowed Professional Fee
Claims. If a Professional fails to submit an estimate of its fees in accordance
with this Section 8.3, the Reorganized Debtor shall not pay such Professional's
Allowed Professional Fee Claim from the Professional Claims Reserve but rather
shall pay such claim from any other source available to the Reorganized Debtor.
Each Professional retained or requesting compensation in the Chapter 11 Case
pursuant to sections 327, 328, 330, 331, 503(b), or 1103 of the Bankruptcy Code
shall be required to file and serve an application for allowance of final
compensation and reimbursement of expenses in the Chapter 11 Case on or before
ten (10) days after the Effective Date. Objections to any application made under
this section 8.3 shall be filed on or before twenty (20) days after the
Effective Date and served on the Debtor and the Creditors Committee, the United
States Trustee and the requesting Professional. If no objection is filed and
served with respect to a Professional's request for compensation and
reimbursement of expenses, such Professional Fee Claim shall be paid by the
Reorganized Debtor on the twenty-fourth (24th) day after the Effective Date.
Otherwise, such Professional Fee Claim shall be paid by the Reorganized Debtor
at such time as the objection is resolved or settled by Final Order of the
Bankruptcy Court.
Among the known holders of Administrative Expense Claims are Power
Memory, CIT, the Debtor's Professionals, and counsel for the Creditors
Committee. Other Administrative Expense Claims will not be known to the Debtor
until the Administrative Expense Claims Bar Date (January 9, 2004) has passed.
The Debtor estimates the total Administrative Expense Claims (other than CIT's
Superpriority Administrative Expense Claim under the DIP Facility) will exceed
$500,000.
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2. DIP Financing Claim
Except as otherwise provided herein or in the Confirmation Order, on
the Effective Date, the Reorganized Debtor shall pay the DIP Facility Claim in
Cash and the DIP Lenders will release all Liens, Claims and encumbrances against
assets of the Debtor arising from or related to the DIP Facility, except the DIP
Lender's lien on and possession of cash collateral to secure the Debtor's
obligations under the third amendment to the financing agreement and the
Hartford L/C to the extent such obligations continue beyond the Effective Date.
3. Priority Tax Claims
The Debtor believes the total amount of Priority Tax Claims to be
$0.00. However, Dan McAllister, Treasurer for the Hillsborough County, Florida
Tax Collector recorded on April 19, 2003 a Certificate of Tax Lien in the amount
of $749.69 plus accruing interest. The Debtor's records do not reflect this
amount is owed and will object to the Claim.
The treatment for Allowed Priority Tax Claims is that on the Effective
Date, or as soon as practicable thereafter, except to the extent that a holder
of an Allowed Priority Tax Claim agrees to a different treatment of such Allowed
Priority Tax Claim, the Reorganized Debtor shall, at its option, pay to each
holder of an Allowed Priority Tax Claim that is due and payable on or before the
Effective Date either (a) Cash in an amount equal to such Allowed Priority Tax
Claim, or (b) deferred annual Cash payments over a period not exceeding six (6)
years after the date of assessment of such claim, of a value, as of the
Effective Date, equal to the Allowed amount of such Claim. Allowed Priority Tax
Claims that are not due and payable on or before the Effective Date shall be
paid in the ordinary course of business in accordance with the terms thereof.
C. Classified Claims
1. Class 1 - Other Priority Claims
Class 1 shall be comprised of all Priority Claims other than Priority
Tax Claims. The Debtor believes the total amount of Other Priority Claims to be
$0.00. However, the Debtor recently became aware of a possible tax claim of the
Gwinett County Tax Commissioner in Lawranceville, Georgia in the amount of
$1,735.65. The Debtor is making inquiries regarding the validity of this tax
claim.
The treatment for Class 1 Claims is that on the Initial Distribution
Date, or as soon as practicable thereafter, except to the extent that the
Proponent and a holder of an Allowed Other Priority Claim agree to a different
treatment of such Allowed Other Priority Claim, or except to the extent that
such Claim is not due and payable on or before the Initial Distribution Date,
each Allowed Other Priority Claim shall be paid in full, in Cash, and shall be
considered unimpaired in accordance with section 1124 of the Bankruptcy Code.
All Allowed Other Priority Claims which are not due and payable on or before the
Initial Distribution Date shall be paid in the ordinary course of business in
accordance with the terms thereof.
2. Class 2A - the Gaylord Facility Claim
Sub-Class 2A shall be comprised of the Gaylord Facility Claim. The
Gaylord Facility Claim shall be reinstated as of the Initial Distribution Date.
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3. Class 2B - the Hibbing Facility Claim
Sub-Class 2B shall be comprised of the Hibbing Facility Claim. The
Hibbing Facility Claim shall be reinstated as of the Initial Distribution Date.
4. Class 2C - the Tampa Facility Claim
Sub-Class 2C shall be comprised of the Tampa Facility Claim. The Tampa
Facility Claim shall be reinstated as of the Initial Distribution Date, but the
Tampa Facility Claim loan documents shall be modified to allow for a junior
mortgage lien to be granted to the New Indenture Trustee.
5. Class 2D - the Transamerica Claim
Sub-Class 2D shall be comprised of the Transamerica Claim. The
Transamerica Claim shall be reinstated as of the Initial Distribution Date.
6. Class 2E - Miscellaneous Secured Claims
Sub-Class 2E shall be comprised of Miscellaneous Secured Claims. Each
holder of an Allowed Miscellaneous Secured Claim shall, in full satisfaction,
settlement, release, and discharge of and in exchange for such Allowed
Miscellaneous Secured Claim, in the sole discretion of the Reorganized Debtor,
be entitled to any one or a combination of any of the following: (i) on the
Initial Distribution Date or as soon as practicable thereafter, receive Cash in
an amount equal to such Allowed Miscellaneous Secured Claim; (ii) receive
deferred Cash payments totaling at least the Allowed amount of such Allowed
Miscellaneous Secured Claim, of a value, as of the Initial Distribution Date, of
at least the value of such holder's interest in the Estate's interest in the
Collateral securing the Allowed Miscellaneous Secured Claim; (iii) upon
abandonment by the Reorganized Debtor, receive all or a portion of the
Collateral securing such holder's Allowed Miscellaneous Secured Claim; (iv)
receive payments or Liens amounting to the indubitable equivalent of the value
of such holder's interest in the Estate's interest in the Collateral securing
the Allowed Miscellaneous Secured Claim; or (v) receive such other treatment as
the Reorganized Debtor and such holder shall have agreed upon in writing.
7. Class 2F - DIP Lender Letter of Credit Claim
The DIP Lender shall retain its lien in and possession of cash
collateral to secure the Debtor's obligations to the DIP Lender under the
Hartford Letter of Credit, pursuant to the terms of the Third Amendment to the
DIP Financing Agreement, but only to the extent such obligations of the Debtor
continue beyond the Initial Distribution Date.
8. Class 3 - Trade Vendor Claims
Class 3 shall be comprised of all Trade Vendor Claims. The Debtor
believes that payment of Trade Vendor Claims in full is necessary to maintain
ongoing relationships among the Debtor, and its Trade Vendors, thereby
preserving and enhancing the Debtor's going concern value for the benefit of all
creditors. The list of Class 3 Trade Vendor Claims is attached as Exhibit J to
the Plan. Therefore, the total amount of Class 3 Allowed Trade Vendor Claims
will be approximately $8.4 million.
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Thus, on the Initial Distribution Date or as soon as practicable
thereafter, each holder of an Allowed Trade Vendor Claim shall receive Cash in
an amount equal to such Allowed Trade Vendor Claim plus interest, to the extent
that the agreed terms of a Trade Vendor's contractual relationship with the
Debtor entitles such Trade Vendor to collect interest on such amounts. If the
amount of the Trade Vendor Claim is not owed in the ordinary course of business,
or according to other payment terms as agreed between the Debtor and a holder of
a Trade Vendor Claim will be paid in the ordinary course of business, or
according to other payment terms as agreed between the Debtor and holder of the
Trade Vendor Claim, but in any event such payment shall not be made later than
ninety days after the Initial Distribution Date.
9. Class 4 - General Unsecured Claims
Class 4 shall be comprised of General Unsecured Claims. On the Initial
Distribution Date, or as soon as practicable thereafter, each holder of an
Allowed General Unsecured Claim shall receive, in full satisfaction of such
Allowed General Unsecured Claim its Ratable Portion of the General Unsecured
Claim Distribution. However, the holder of an Allowed General Unsecured Claim
may elect to be treated as a Class 3 Trade Vendor Claim, provided such holder
agrees to limit the total payment on its Claim to $500.00.
10. Class 5 - Common Equity Interests
Class 5 shall be comprised of all Common Equity Interests. On the
Initial Distribution Date, Common Equity Interests shall be cancelled and on the
Initial Distribution Date, or as soon as practicable thereafter, each holder of
an Allowed Common Equity Interest shall receive, in full satisfaction of such
Allowed Common Equity Interest its Ratable Portion of the Equity Interest
Distribution.
11. Class 6 - Other Equity Interests
Class 6 shall be comprised of all Other Equity Interests. Other Equity
Interests include, among other things, derivatives such as stock options,
warrants, or swaps. On the Initial Distribution Date, Other Equity Interests
will be cancelled and holders of Other Equity Interests will receive no
distribution under the Plan.
12. Executory Contracts and Leases
Except as otherwise provided in the Plan or in any contract,
instrument, release, indenture, or other agreement or document entered into in
connection with the Plan, as of the Effective Date, the Debtor shall be deemed
to have assumed each executory contract and unexpired lease to which it was a
party, unless such contract or lease (i) was previously assumed or rejected by
the Debtor, (ii) previously expired or terminated pursuant to its own terms,
(iii) is the subject of a motion to reject filed on or before the Effective
Date, or (iv) is identified as a rejected executory contract or a rejected
unexpired lease, as applicable, in Exhibit E to the Plan, as same may be amended
from time to time prior to the Confirmation Hearing by the Debtor with the
consent of the Creditors Committee. The Confirmation Order shall constitute an
order of the Bankruptcy Court under section 365 of the Bankruptcy Code approving
the executory contract and lease assumptions and rejections described above,
effective as of the Effective Date, except for any contract or lease assumed or
rejected prior thereto.
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Each executory contract and unexpired lease that is assumed and relates
to the use, ability to acquire, or occupancy of real property shall include (i)
all modifications, amendments, supplements, restatements, or other agreements
made directly or indirectly by any agreement, instrument, or other document that
in any manner affects such executory contract or unexpired lease and (ii) all
executory contracts or unexpired leases appurtenant to the premises, including
all easements, licenses, permits, rights, privileges, immunities, options,
rights of first refusal, powers, uses, usufructs, reciprocal easement
agreements, vaults, tunnel or bridge agreements or franchises, and any other
interests in real estate or rights in rem related to such premises, unless any
of the foregoing agreements has been rejected pursuant to an order of the
Bankruptcy Court.
D. Plan Implementation
1. Transactions Contemplated by the Plan
The Plan is based on the consummation of the transactions contemplated
therein, as more fully described in Section [II.D] of this Disclosure Statement.
2. Continuation of Business Operations
The Reorganized Debtor will continue to operate following the Effective
Date. The Debtor's projections of the results of their future operations are
contained in Exhibit 3 to this Disclosure Statement.
3. Management
(a) Existing Management
Set forth below is certain information concerning Reptron's executive
officers and directors as of the Petition Date.
YEAR FIRST
BECAME A
NAME POSITION(S) AGE DIRECTOR
---- ------------ --- --------
Michael L. Musto Chief Executive Officer, Director 61 1973
Paul J. Plante President, Chief Operating Officer, Acting Chief 45 1994
Financial Officer, Director
Bonnie Fena President-Reptron Manufacturing Services 55 n/a
Vincent Addonisio Director 48 2000
Bertram Miner Director 66 2002
MICHAEL L. MUSTO. Mr. Musto has been Chief Executive Officer and a
director of Reptron since its inception in 1973. He was President of Reptron
from 1973 to 1999. Prior to
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1973, Mr. Musto worked for nine years in electronic components distribution for
Northland Electronics and Diplomat Electronics.
PAUL J. PLANTE. Mr. Plante was appointed President of Reptron in
December 1999, Chief Operating Officer of Reptron in January 1997, Acting Chief
Financial Officer of Reptron in 2001, and has been a director since 1994. Mr.
Plante has been employed by Reptron since 1986 and previously served as its Vice
President of Finance, Chief Financial Officer and Treasurer (1987-1997). From
1983-1986, he was Controller of K-Byte Manufacturing, which is now part of a
division of Reptron. Prior to 1983, Mr. Plante worked for a regional accounting
firm (1980-83). Mr. Plante is a Certified Public Accountant and is a graduate of
Michigan State University, with a Bachelor of Arts degree in accounting. He also
earned an MBA degree from the University of South Florida. Mr. Plante is
presently compensated at the annual rate of $278,000 plus benefits.
BONNIE FENA. Ms. Fena has served as President of Reptron Manufacturing
Services Division since April 2002. Prior to her current role, she served as the
President of the Reptron Manufacturing Services Hibbing Facility from May 1998
to April 2002. Prior to joining Reptron, Ms. Fena was President of Hibbing
Electronics Corporation (1987 to 1998) and from 1974 to 1987 Ms. Fena served as
Vice President and co-founder of Hibbing Electronics Corporation.
VINCENT ADDONISIO. Mr. Addonisio has been a director of Reptron since
May 2000. Mr. Addonisio serves as President and Chief Executive Officer of
Regency Strategic Advisors, Inc., a position he has held since 2002. Mr.
Addonisio served as an executive of CGI Information Technology Services, Inc.
(formerly IMRglobal Corp.), a provider of information technology services and
solutions from 1998 to 2002. Mr. Addonisio was President of Parker
Communications Network, Inc., a privately-held point of sale marketing network
company, from 1997 to 1998. Mr. Addonisio holds a Bachelor of Science degree in
Accounting from Binghamton University (SUNY) and an MBA from the Georgia
Institute of Technology.
BERTRAM L. MINER. Mr. Miner was appointed to the Reptron Board in
December 2002. Mr. Miner has been a self-employed real estate investor since
1986. Prior to 1986, Mr. Miner was Chief Executive Officer of Quality Health
Care Centers, Inc. from 1975 to 1986, served as a mortgage loan officer for
Percy Wilson & Co. from 1973 to 1974 and practiced law with the law firm of
Baskin, Server & Miner from 1961 to 1973.
(b) Proposed Board of Directors and Management
As of the Effective Date, the board of directors of the Reorganized
Debtor shall be comprised of Michael L. Musto, Paul J. Plante, Hal Purkey,
Steven Scheiwe, Neil Subin and Mark Holliday. Mr. Purkey, Mr. Subin and Mr.
Holliday are holders of Old Notes and will be treated as holders of Allowed
Class 4 Claims under the Plan. They each have significant experience working
with companies emerging from bankruptcy. Mr. Scheiwe is an attorney who has
served on many boards and also has significant experience working with companies
emerging from bankruptcy. Compensation for the directors will be determined by
the Reorganized Debtor's compensation committee pursuant to the Amended and
Restated By-laws. See Exhibit A to the Plan.
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On the Effective Date, the operations of the Reorganized Debtor shall
become the general responsibility of the Board of Directors of the Reorganized
Debtor subject to, and in accordance with, the Amended Certificate of
Incorporation and Amended By-laws. The term of the directors of the Debtor
immediately prior to the Effective Date shall expire on the Effective Date and
those directors shall be replaced by the Board of Directors of the Reorganized
Debtor.
On the Effective Date, the Reorganized Debtor shall enter into the
Plante Employment Contract with Paul J. Plante. Pursuant to the Plan, Mr.
Plante's current employment contract will be rejected and Mr. Plante has agreed
to waive his right to file a Claim for any damages he suffers as a result of the
rejection of such contract against the Debtor's estate, and further, to receive
any distribution or other recovery under the Plan or otherwise. Mr. Plante's
compensation will not be less than his current compensation package. The
specifics of Mr. Plante's compensation package are currently being negotiated.
Other officers will be named by the Reorganized Debtor's board of directors
pursuant to the Amended and Restated By-laws of Reptron Electronics, Inc.
(c) Proposed Management Stock Option Plan
On the Effective Date, the Board of the Reorganized Debtor will adopt a
new stock option plan which may provide for up to ten percent (10%) of the New
Common Stock of the Reorganized Debtor to be distributed to employees,
management and directors in accordance with the terms of such plan. Any such
plan will dilute the equity interests in the Reorganized Debtor held by Class 4
General Unsecured Claimants and Class 5 Common Equity Interest Holders on a pro
rata basis.
(d) Proposed Severance Payments
The Reorganized Debtor will maintain in effect the Debtor's customary
employee severance policies, provided however, that such policies shall not
apply to Michael L. Musto, who currently is a party to an employment agreement
with the Debtor. On the Effective Date, Michael L. Musto will be terminated from
employment with the Debtor and his current employment contract will be rejected
under this Plan. In exchange, Michael L. Musto will receive a $400,000 severance
payment and will continue to have rights to participate under the Reorganized
Debtor's health insurance plan until age 65 at his health insurance plan's
contribution levels as of the Effective Date. Other than the foregoing, Michael
L. Musto will not be entitled to any distribution or other recovery under this
Plan or otherwise for any claim he may have as a result of the rejection of his
employment contract or his termination. The foregoing compromise shall be in
full satisfaction of any and all Claims that Mr. Musto may have against the
Debtor pursuant to his current employment agreement.
4. Exit Facility
On the Effective Date, the Reorganized Debtor shall enter into the Exit
Facility with Congress, all or a portion of which shall be used to make
distributions under the Plan. The terms of the Exit Facility are included in
Exhibit 8 to this Disclosure Statement.
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5. Discharge of the Debtor
Except to the extent otherwise provided herein, the treatment of all
Claims against or Interests in the Debtor hereunder shall be in exchange for and
in complete satisfaction, discharge and release of all Claims against or
Interests in the Debtor of any nature whatsoever, known or unknown, including,
without limitation, any interest accrued or expenses incurred thereon from and
after the Petition Date, or against its estates or properties or interests in
property. Except as otherwise provided herein, upon the Effective Date, all
Claims against and Interests in the Debtor will be satisfied, discharged, and
released in full in exchange for the consideration provided hereunder. Except as
otherwise provided herein, all entities shall be precluded from asserting
against the Debtor or the Reorganized Debtor or their respective properties or
interests in property, any Claims based upon any act or omission, transaction,
or other activity of any kind or nature that occurred prior to the Effective
Date.
6. Terms and Injunctions or Stays
The Debtor's Chapter 11 Case was commenced on October 28, 2003. The
Confirmation Hearing is on January 14, 2004; seventy-eight (78) days after the
Petition Date. The Claims Bar Date is December 31, 2003, just 14 days prior to
the Confirmation Hearing. It will be impossible for the Debtor to review and
file objections to proofs of Claim prior to the Confirmation Hearing and
undoubtedly, other issues will arise post-Confirmation Date which would normally
arise prior to confirmation. As a result, the protections afforded by
injunctions and or stays under section 105 or 362 of the Bankruptcy Code, or
otherwise need to stay in place to allow the Reorganized Debtor the opportunity
to complete the bankruptcy process. Therefore, unless otherwise provided in the
Plan, all injunctions or stays arising under or entered during the Chapter 11
Case under section 105 or 362 of the Bankruptcy Code, or otherwise, and in
existence on the Confirmation Date, shall remain in full force and effect until
the 60th day following the Effective Date.
7. EXCULPATION
THE RELEASED PARTIES (AS DEFINED BELOW) SHALL NOT HAVE OR INCUR, AND
EACH RELEASED PARTY IS HEREBY RELEASED FROM, ANY CLAIM, OBLIGATION, CAUSE OF
ACTION OR LIABILITY TO (i) ONE ANOTHER, (ii) ANY HOLDER OF A CLAIM OR AN EQUITY
INTEREST, (iii) ANY OTHER PARTY IN INTEREST, OR (iv) ANY AGENTS, EMPLOYEES,
REPRESENTATIVES, FINANCIAL ADVISORS, ATTORNEYS, AFFILIATES, SUCCESSORS AND
ASSIGNS OF ANY OF THE FOREGOING PARTIES (THE "RELEASOR PARTIES"), FOR ANY ACT OR
OMISSION IN CONNECTION WITH, RELATING TO OR ARISING OUT OF THIS CHAPTER 11 CASE,
THE SOLICITATION OF VOTES AND PURSUIT OF CONFIRMATION OF THE PLAN, THE
CONSUMMATION OF THE PLAN, THE ADMINISTRATION OF THE PLAN OR THE PROPERTY TO BE
DISTRIBUTED UNDER THE PLAN, THE SOLICITATION AND ISSUANCE OF THE NEW ISSUED
COMMON STOCK AND THE NEW NOTES, AND IN ALL RESPECTS SHALL BE ENTITLED TO RELY
REASONABLY UPON THE ADVICE OF COUNSEL WITH RESPECT TO THEIR DUTIES AND
RESPONSIBILITIES UNDER THE PLAN, PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION
SHALL BE DEEMED TO RELEASE ANY RELEASED PARTY FROM LIABILITY FOR ACTS OR
OMISSIONS THAT ARE THE RESULT OF ACTUAL FRAUD, GROSS NEGLIGENCE, WILLFUL
MISCONDUCT, OR WILLFUL VIOLATION OF THE SECURITIES LAWS OR THE INTERNAL REVENUE
CODE, AND PROVIDED FURTHER, THAT RELEASOR PARTIES NOTE THEIR ACCEPTANCE OF THIS
RELEASE IN THEIR BALLOT. RELEASED PARTIES CONSIST OF THE DEBTOR, THE REORGANIZED
DEBTOR, THE CREDITORS COMMITTEE, THE AD HOC COMMITTEE, THE OLD NOTES INDENTURE
TRUSTEE, AND THE DISBURSING AGENT, AND EACH OF THEIR RESPECTIVE PRESENT OR
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FORMER MEMBERS, PARTNERS, OFFICERS, DIRECTORS, EMPLOYEES, ADVISORS, ATTORNEYS,
REPRESENTATIVES, FINANCIAL ADVISORS, INVESTMENT BANKERS OR AGENTS IN THEIR
CAPACITIES AS SUCH AND ANY OF SUCH PARTIES' SUCCESSORS AND ASSIGNS.
8. RELEASES
AS OF THE EFFECTIVE DATE AND SUBJECT TO ITS OCCURRENCE, EXCEPT AS
OTHERWISE PROVIDED IN THIS PLAN, EACH RELEASED PARTY SHALL HAVE DEEMED TO HAVE
BEEN RELEASED AND DISCHARGED BY (i) THE DEBTOR, ITS ESTATES, AND THE REORGANIZED
DEBTOR, AND (ii) THE RELEASOR PARTIES, FROM ANY AND ALL CLAIMS AND CAUSES OF
ACTION ARISING OUT OF OR BASED UPON SUCH RELEASED PARTIES' SERVICE IN ANY
CAPACITY OR ANY TRANSACTION, EVENT, CIRCUMSTANCE OR OTHER MATTER INVOLVING OR
RELATING TO THE DEBTOR THAT OCCURRED ON OR BEFORE THE EFFECTIVE DATE, PROVIDED
THAT RELEASOR PARTIES NOTE THEIR ACCEPTANCE OF THIS RELEASE IN THEIR BALLOT; AND
PROVIDED FURTHER, HOWEVER, THAT NOTHING IN THIS SECTION SHALL BE DEEMED TO (a)
RELEASE A RELEASED PARTY FROM LIABILITY FOR ACTS OR OMISSIONS THAT ARE THE
RESULT OF ACTUAL FRAUD, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR WILLFUL
VIOLATION OF THE SECURITIES LAWS OR THE INTERNAL REVENUE CODE OR THE CLAIMS, IF
ANY, OF THE UNITED STATES; (b) PREVENT THE DEBTOR OR THE REORGANIZED DEBTOR FROM
OBJECTING TO A CLAIM OR EQUITY INTEREST OF A RELEASED PARTY; (c) PRECLUDE
POLICE, FEDERAL TAX OR REGULATORY AGENCIES FROM FULFILLING THEIR STATUTORY
DUTIES.
EXCEPT AS OTHERWISE PROVIDED HEREIN, THE RELEASOR PARTIES SHALL BE
ENJOINED FROM COMMENCING OR CONTINUING ANY ACTION, EMPLOYMENT OF PROCESS, OR ACT
TO COLLECT, OFFSET OR RECOVER ANY CLAIMS AND CAUSES OF ACTION RELEASED AND
DISCHARGED PURSUANT TO THIS SECTION; PROVIDED, HOWEVER, THAT THE INJUNCTION
PROVIDED FOR IN THIS SECTION SHALL NOT (x) BAR ACTIONS BASED UPON LIABILITY FOR
ACTS OR OMISSIONS THAT ARE THE RESULT OF ACTUAL FRAUD, GROSS NEGLIGENCE, WILLFUL
MISCONDUCT, OR WILLFUL VIOLATION OF THE SECURITIES LAWS OR THE INTERNAL REVENUE
CODE OR THE CLAIMS, IF ANY, OF THE UNITED STATES; (y) PRECLUDE POLICE, FEDERAL
TAX OR REGULATORY AGENCIES FROM FULFILLING THEIR STATUTORY DUTIES; OR (z) BAR
THE CLAIMS, IF ANY, OF THE UNITED STATES.
9. Conditions to Closing
The occurrence of the Effective Date of the Plan is subject to
satisfaction of the following conditions precedent:
(a) The Confirmation Order shall have been
entered by the Bankruptcy Court in a form
and substance reasonably acceptable to the
Debtor and the Creditors Committee and there
shall not be a stay or injunction in effect
with respect thereto.
(b) The Debtor shall have purchased directors
and officers liability insurance for the
Board of Directors of the Reorganized Debtor
in form, substance and amount reasonably
acceptable to the Creditors Committee.
(c) The Reorganized Debtor and the New Notes
Indenture Trustee have executed the Security
Agreement.
(d) The New Notes Indenture Trustee and the
lender(s) under the Exit Facility have
executed the Intercreditor Agreement.
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(e) All conditions to the Exit Facility Lender's
commitment letter have been met or waived.
10. Waiver of Conditions Precedent
Each of the conditions precedent in paragraph 9, other than paragraph
9(a) hereof may be waived, in whole or in part, by the Debtor with the written
consent of the Creditors Committee. Any such waivers of a condition precedent
hereof in paragraph 9 hereof may be effected at any time, without notice,
without leave or order of the Bankruptcy Court and without any formal action.
11. Letter of Credit Obligations
Confirmation of the Plan shall have no impact or effect on the
Reorganized Debtor's remaining obligations to Congress and CIT under the Release
Agreement (as defined in the Plan) and the Hartford Letter of Credit pursuant to
the Third Amendment to Financing Agreement and CIT Credit Agreement. The
Reorganized Debtor shall remain fully liable and obligated with respect to such
agreements until the obligations thereunder are completely fulfilled and the
Letters of Credit have been terminated without a draw or the Letters of Credit
have been replaced; after which the "cash collateral" securing such obligations
will be returned to the Reorganized Debtor.
E. Objections to Claims
1. Disputed Claims
Except as to applications for allowances of compensation and
reimbursement of expenses under sections 330 and 503 of the Bankruptcy Code, the
Debtor or the Reorganized Debtor shall have the exclusive right to make and file
objections to Claims and Interests. All objections shall be litigated to Final
Order; provided, however, that the Debtor or the Reorganized Debtor shall have
the authority to compromise, settle, otherwise resolve, or withdraw any
objections, without approval of the Bankruptcy Court. Unless otherwise ordered
by the Bankruptcy Court, the Debtor or the Reorganized Debtor shall file all
objections to Claims (other than applications for allowances of compensation and
reimbursement of expenses) and Interests and serve such objections upon the
holders of such Claims and Interests as to which the objection is made as soon
as practicable, but in no event later than the Objection Deadline.
2. No Distributions Pending Allowance
Notwithstanding any other provision of the Plan, if any portion of a
Claim is a Disputed Claim or any portion of an Interest is a Disputed Interest,
no payment or distribution provided hereunder shall be made on account of such
Claim or Equity Interest unless and until such Disputed Claim or Disputed
Interest becomes an Allowed Claim or an Allowed Interest.
3. Distributions After Allowance
To the extent that a Disputed Claim or Disputed Interest ultimately
becomes an Allowed Claim or an Allowed Interest, a distribution shall be made to
the holder of such Allowed Claim or Allowed Interest in accordance with the
provisions of the Plan. As soon as practicable after
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the date that the order or judgment of the Bankruptcy Court allowing any
Disputed Claim or Disputed Interest becomes a Final Order, the Disbursing Agent
shall provide to the holder of such Allowed Claim or Allowed Interest the
distribution to which such holder is entitled under the Plan.
Notwithstanding the foregoing, all distributions in respect of the Old
Notes shall be made to the Old Notes Indenture Trustee for delivery to the Old
Noteholders. The fees and expenses of the Old Notes Indenture Trustee shall not
be deducted from any distributions to be made provided that they are fully paid
by the Debtor in Cash on the Effective Date and provided that the Reorganized
Debtor pays in Cash the Old Notes Indenture Trustee's additional fees and
expenses incurred after the Effective Date in connection with making
distributions to the Old Noteholders.
IV. FEASIBILITY OF THE PLAN
A. Long-Term Feasibility
The Bankruptcy Code requires that in order to confirm the Plan, the
Bankruptcy Court must find that confirmation of the Plan is not likely to be
followed by the liquidation or the need for further financial reorganization of
the Reorganized Debtor (the "Feasibility Test"). For the Plan to meet the
Feasibility Test, the Bankruptcy Court must find that the Reorganized Debtor
will likely possess the resources and working capital necessary to operate
profitably and based on reasonable assumptions, will be able to meet its
obligations under the Plan.
For purposes of determining whether the Plan meets the Feasibility
Test, the Debtor has analyzed its ability to meet its obligations under the
Plan. As part of this analysis, the Debtor has prepared projections for the
period ending with the 2008 calendar year which are attached as Exhibit 3 to
this Disclosure Statement.(5) The Debtor believes, based on this analysis, that
the Plan provides a feasible means of reorganization and operation from which
there is a reasonable expectation that, subject to the risks disclosed herein,
the Reorganized Debtor will be able to make all payments required to be made
pursuant to the Plan.
WHILE THE DEBTOR HAS TAKEN GREAT CARE TO ENSURE THE ACCURACY
OF ITS ASSUMPTIONS AND TO PROVIDE REASONABLE PROJECTIONS,
THERE IS NO GUARANTEE OF THE ACCURACY OF THE PROJECTIONS. ALL
OF THE PROJECTIONS HAVE BEEN GENERATED INTERNALLY BY
MANAGEMENT.
PROJECTIONS ARE BY THEIR NATURE FORWARD LOOKING AND SUBJECT
TO MATTERS BEYOND THE DEBTOR'S CONTROL. NEITHER THE DEBTOR,
NOR ANY OTHER PARTY CAN GIVE ANY ASSURANCES THAT THE
PROJECTIONS WILL BE MET. ALTHOUGH GREAT CARE HAS BEEN TAKEN
IN PREPARING THE PROJECTIONS, ABSOLUTELY NO GUARANTEE CAN BE
GIVEN AS TO THEIR ACCURACY.
(5) See also, Exhibit 5 to this Disclosure Statement, a Balance Sheet of
Reorganized Debtor on the Effective Date which was prepared by the Debtor and
its consultants.
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Such forward looking information or statements involve a number of
risks and uncertainties and are within the meaning ascribed to forward looking
statements in section 27A of the Securities Act of 1933, as amended, and section
21E of the Securities Act of 1934, as amended. Factors that could cause actual
results to differ materially include the following: the conditions identified in
the lock-up agreements described below are not timely satisfied, if at all; the
Plan is not confirmed or the Exit Facility is not available; breach of the
Debtor In Possession financing facility; failure of the company's third party
vendors to continue to provide satisfactory credit terms; business conditions
and growth in the company's industry and in the general economy; competitive
factors; risks due to shifts in market demand; risks inherent with predicting
revenue and earnings outcomes; uncertainties involved in implementing
improvements in the manufacturing process; and the risk factors listed from time
to time in the company's reports filed with the Securities and Exchange
Commission as well as assumptions regarding the foregoing. In particular, any
information or statement suggesting the restoration of profitable operating
results are forward looking statements. The words "believe," "estimate,"
"expect," "intend," "anticipate," "plan," "appear," and similar expressions and
variations thereof identify certain of such forward-looking statements, which
speak only as of the dates on which they were made. The company undertakes no
obligation to publicly update or revise any forward-looking information or
statements, whether as a result of new information, future events, or otherwise.
You are cautioned that any such forward looking information or statements are
not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those indicated in the
forward-looking information or statements as a result of various factors. You
are cautioned not to place undue reliance on forward-looking information or
statements.
B. Alternatives to the Plan and Liquidation Analysis
1. Best Interests and Cramdown Test
Notwithstanding acceptance of the Plan by each impaired Class, in order
to confirm the Plan, the Bankruptcy Court must determine that the Plan is in the
best interests of each holder of a Claim or Interest in an impaired Class that
has not voted to accept or is deemed to reject the Plan. Accordingly, if an
impaired Class does not unanimously accept the Plan, the "best interests" test
of section 1129(a)(7) of the Bankruptcy Code requires that the Court find that
the Plan provides to each holder of a Claim or Interest a value at least equal
to the value of the Distribution that such holder would instead receive if the
Debtor was liquidated under chapter 7 of the Bankruptcy Code.
In a liquidation scenario, holders of Class 4 General Unsecured Claims
likely will receive a much smaller distribution and Class 5 Common Equity
Interests and Class 6 Other Equity Interests are not likely to receive any
distribution. As provided for in section 1129(b) of the Bankruptcy Code, if an
impaired Class of Claims or Interests reject the Plan, no Claim or Interest
junior to such Class may retain or receive property pursuant to the Plan, unless
the rejecting Class is paid in full or the junior Class provides substantial
consideration to the Debtor.
Section 1129(b) also provides that a plan cannot be confirmed over the
objections of a rejecting Class unless the Bankruptcy Court finds that the plan
does not unfairly discriminate against, and is fair and equitable to the Claim
holders. This requirement is also satisfied, as the
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holders of Class 4 General Unsecured Claims and Class 5 Common Equity
Interests will receive a greater return under the Plan than they would receive
in the event of a chapter 7 liquidation, while holders of Class 6 Other Equity
Interests will receive no return in either case. Thus, the Debtor may properly
cram down the Plan over the objection of holders of Class 5 Common Equity
Interests, as well as the deemed rejection of Class 6 Other Equity Interests, as
long as Class 4 votes in favor of the Plan.
To estimate the amount members of each impaired Class of Claims or
Interests would receive if the Debtor was liquidated in a chapter 7 case, the
Bankruptcy Court must first determine the aggregate dollar amount that would be
available if the Chapter 11 Case were converted to a chapter 7 liquidation case
under the Bankruptcy Code and the Debtor's assets were liquidated by a chapter 7
trustee (the "Liquidation Value"). The Liquidation Value would consist of the
net proceeds from the disposition of the assets of the Debtor, augmented by the
Claims held by the Debtor and reduced by certain increased costs and Claims that
arise in a chapter 7 liquidation case which do not arise in a chapter 11
reorganization case.
Once the percentage liquidation recoveries of each Class are
ascertained, the value of the Distribution available out of the Liquidation
Value is compared with the value of the property offered to such class under the
Plan to determine if it is in the best interests of the holders of Allowed
Claims or Allowed Interests, as the case may be, in such Class.
2. Liquidation Value of the Debtor
The Debtor has prepared an analysis of the distributions that its
creditors and Interest Holders are likely to receive in a hypothetical chapter 7
liquidation in order to determine whether each Claim or Interest holder will
receive more under the Plan than they would receive under a chapter 7
liquidation. The Debtor's liquidation analysis is attached as Exhibit 4 to this
Disclosure Statement. Although this analysis represents the Debtor's best
judgment, there can be no guarantee that actual results from a liquidation will
be the same as the Debtor's estimate.
The Debtor has estimated, hypothetically, the fair realizable value of
its assets through liquidation in a chapter 7 bankruptcy case as well as the
costs that would be incurred and the additional liabilities that would arise in
such a proceeding. The Debtor has then applied the estimated proceeds of a
liquidation to satisfy creditor Claims in accordance with the distribution
requirements of chapter 7 of the Bankruptcy Code to determine the amount of
distributions each class of Claim and Interest holders would receive in a
liquidation.
Liquidation proceeds of a holder of a Secured Claimant's Collateral,
net of disposition fees and costs, are first distributed to the holder of a
Secured Claim with a Lien on the Collateral from which the proceeds are
generated. The Debtor anticipates that the proceeds of liquidation will be
greater than the Allowed Claims of the holders of Secured Claims. Substantially
all of the Debtor's assets are subject to security interests in favor of holders
of Secured Claims.
Including Cash, Debtor estimates that the fair realizable value, under
a hypothetical chapter 7 liquidation, after deduction of chapter 7 related
costs, ranges from a high of $42.9 million to a low of $38.8 million.
Claims for expenses of administration (other than the costs of the
chapter 7 liquidation directly attributable to the liquidation of the Secured
Claimants' collateral), Claims entitled to
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priority in accordance with the Bankruptcy Code and General Unsecured Claims are
payable out of the remaining proceeds after the Secured Claim holders are paid.
The remaining proceeds after payment to the Secured Claim holders are
distributed as follows:
- Chapter 7 Administrative Claims full recovery
- Chapter 11 Professional Fees/
Costs of Administration full recovery
- General Unsecured Claims between 13.2% and 16.7%
- Interests no recovery
Underlying this liquidation analysis are a number of estimates and
assumptions that are inherently subject to significant uncertainties. These
estimates and assumptions were developed by the Debtor through analysis of
market valuations and transactions, industry experience and the use of other
valuation approaches. There can be no assurance that the recoveries and
estimated liquidation expenses set forth in this analysis would be realized in
an actual liquidation by the Debtor.
The Debtor has approached this liquidation analysis on an asset
liquidation basis because the "best interests of the creditors test" assumes a
hypothetical liquidation of the Debtor in chapter 7. The Debtor's liquidation
analysis assumes that assets would be broken up and sold by a chapter 7 trustee
or its duly appointed advisors, brokers or liquidators, irrespective of the
asset's current deployment.
Based on the information presented the Debtor's projections, the Debtor
believes that the Plan is feasible. Furthermore, the Plan provides a greater
return to all Claim and Interest holders than the returns associated with
chapter 7 liquidation.
V. RETENTION OF JURISDICTION
The Bankruptcy Court shall have exclusive jurisdiction of all matters
arising out of, or related to the Chapter 11 Case, the Plan and the Confirmation
Order pursuant to, and for the purposes of sections 105(a) and 1142 of the
Bankruptcy Code and for, among other things, the following purposes:
A. To hear and determine pending applications for the assumption,
assumption and assignment, or rejection of executory contracts or unexpired
leases and the allowance of Claims or Interests resulting therefrom.
B. To enforce all agreements, assumed, if any, and to recover all
property of the estate wherever located.
C. To determine any and all adversary proceedings, applications
and contested matters, including, without limitation, under sections 544, 545,
548, 549, 550, 551, and 553 of the Bankruptcy Code.
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D. To ensure that distributions to holders of Allowed Claims and
Interests are accomplished as provided herein.
E. To hear and determine any timely objections to Administrative
Expense Claims or to proofs of Claim or Interest, including, without limitation,
any objections to the classification of any Claim, and to allow or disallow any
Disputed Claim or Interest in whole or in part.
F. To determine the validity, extent and priority of all Liens,
if any, against properties of the estates.
G. To determine all assertions of an ownership interest in, the
value of, or title to, any property of the estates.
H. To determine any tax liability of the estates in connection
with the Plan, actions taken, distributions or transfers made thereunder.
I. To enter and implement such orders as may be appropriate in
the event the Confirmation Order is for any reason stayed, revoked, modified, or
vacated.
J. To issue such orders in aid of execution of the Plan, to the
extent authorized by section 1142 of the Bankruptcy Code.
K. To consider any amendments to or modifications of the Plan, or
to cure any defect or omission, or reconcile any inconsistency, in any order of
the Bankruptcy Court, including, without limitation, the Confirmation Order.
L. To hear and determine all applications under sections 330,
331, and 503(b) of the Bankruptcy Code for awards of compensation for services
rendered and reimbursement of expenses incurred prior to the Confirmation Date.
M. To hear and determine disputes arising in connection with the
interpretation, implementation, or enforcement of the Plan, the Confirmation
Order, any transactions or payments contemplated hereby or any agreement,
instrument or other document governing or relating to any of the foregoing.
N. To hear and determine matters concerning state, local, and
federal taxes in accordance with sections 346, 505, and 1146 of the Bankruptcy
Code.
O. To hear and determine any other matter not inconsistent with
the Bankruptcy Code.
P. To hear and determine all disputes involving the existence,
scope, and nature of the discharges granted under the Plan and the Confirmation
Order.
Q. To issue injunctions and effect any other actions that may be
necessary or desirable to restrain interference by any entity with the
consummation or implementation of the Plan.
R. To determine such other matters as may be provided in the
Confirmation Order.
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S. To enter a final decree closing the Chapter 11 Case.
VI. SECURITIES LAWS MATTERS
A. Bankruptcy Code Exemptions from Registration Requirements
In reliance upon section 1145 of the Bankruptcy Code, (x) New Issued
Common Stock, to be issued to holders of General Unsecured Claims and Common
Equity Interests (collectively "Reorganized Debtor Stockholders") and (y) New
Notes, if any, to be issued to holders of General Unsecured Claims ("Reorganized
Debtor Noteholders") on the Effective Date will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act")
and equivalent provisions in state securities laws. Section 1145(a) of the
Bankruptcy Code generally exempts from such registration the issuance of
securities if the following conditions are satisfied: (i) the securities are
issued by a debtor (or its successor) under a plan or reorganization; (ii) the
recipients of the securities hold a claim against, an interest in, or a claim
for an administrative expense against the debtor; and (iii) the securities are
issued entirely in exchange for the recipient's claim against or interest in the
debtor, or are issued principally in such exchange and partly for cash or
property. The Debtor believes that the exchange of (x) New Issued Common Stock
for the General Unsecured Claims and/or Common Equity Interest and (y) New Notes
for the General Unsecured Claims under the circumstances provided in the Plan
will satisfy the requirements of section 1145(a) of the Bankruptcy Code.(6)
B. Resales of New Issued Common Stock or New Notes
The shares of New Issued Common Stock to be issued to Reorganized
Debtor Stockholders and the New Notes to be issued to Reorganized Debtor
Noteholders pursuant to the Plan on the Effective Date will be deemed to have
been issued in a registered public offering under the Securities Act and,
therefore, may be resold by any holder thereof without registration under the
Securities Act pursuant to the exemption provided by section 4(1) thereof,
unless the holder is an "underwriter" with respect to such securities, as that
term is defined in section 1145(b)(1) of the Bankruptcy Code (a "statutory
underwriter"). In addition, such securities generally may be resold by the
recipients thereof without registration under state securities or "blue sky"
laws pursuant to various exemptions provided by the respective laws of the
individual states. However, recipients of securities issued under the Plan are
advised to consult with their own counsel as to the availability of any such
exemption from registration under federal securities laws and any relevant state
securities laws in any given instance and as to any applicable requirements or
conditions to the availability thereof.
Section 1145(b)(i) of the Bankruptcy Code defines "underwriter" for
purposes of the Securities Act as one who (a) purchases a claim with a view to
distribution of any security to be received in exchange for the claim, or (b)
offers to sell securities issued under a plan for the holders of such
securities, or (c) offers to buy securities issued under a plan from persons
receiving such securities, if the offer to buy is made with a view to
distribution of such securities, or (d) is an issuer of the securities within
the meaning of section 2(11) of the Securities Act.
(6) The stock reserved pursuant to the Stock Option Plan is not eligible for
Section 1145 treatment and the Debtor is not seeking in its Plan such treatment
for that stock.
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The term "issuer" is defined in section 2(4) of the Securities Act;
however, the reference contained in section 1145(b)(1)(D) of the Bankruptcy Code
to section 2(11) of the Securities Act purports to include as statutory
underwriters all persons who, directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with, an
issuer of securities. "Control" (as defined in Rule 405 under the Securities
Act) means the possession, direct or indirect, of the power to direct or cause
the direction of the policies of a person, whether through the ownership of
voting securities, by contract, or otherwise. Accordingly, an officer or
director of a reorganized debtor or its successor under a plan of reorganization
may be deemed to be a "control person" of such debtor or successor, particularly
if the management position or directorship is coupled with ownership of a
significant percentage of the reorganized debtor's or its successor's voting
securities. Moreover, the legislative history of section 1145 of the Bankruptcy
Code suggests that a creditor which is distributed at least ten percent (10%) of
the voting securities of a reorganized debtor under its plan of reorganization
may be presumed to be an "underwriter" within the meaning of section 1145(b)(i)
of the Bankruptcy Code.
To the extent that persons deemed to be "underwriters" receive New
Issued Common Stock and/or New Notes pursuant to the Plan (collectively,
"Restricted Holders"), resales by such Restricted Holders would not be exempted
by section 1145 of the Bankruptcy Code from registration under the Securities
Act or other applicable law. Restricted Holders may, however, be able, at a
future time and under certain conditions described below, to sell securities
without registration pursuant to the resale provisions of Rule 144 and Rule 144A
under the Securities Act.
IN VIEW OF THE COMPLEX, SUBJECTIVE NATURE OF THE QUESTION OF WHETHER A
RECIPIENT OF SECURITIES MAY BE AN UNDERWRITER OR AN AFFILIATE OF REORGANIZED
DEBTOR, DEBTOR MAKES NO REPRESENTATIONS CONCERNING THE RIGHT OF ANY PERSON TO
TRADE IN NEW ISSUED COMMON STOCK OR NEW NOTES TO BE DISTRIBUTED PURSUANT TO THE
PLAN. ACCORDINGLY, DEBTOR RECOMMENDS THAT POTENTIAL RECIPIENTS OF SECURITIES
CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY TRADE SUCH
SECURITIES.
VII. CERTAIN RISK FACTORS TO BE CONSIDERED
HOLDERS OF CLAIMS AGAINST AND INTERESTS IN THE DEBTOR SHOULD READ AND
CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER
INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT (AND THE DOCUMENTS
DELIVERED TOGETHER HEREWITH AND/OR INCORPORATED BY REFERENCE HEREIN),
PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN. THESE RISK FACTORS SHOULD
NOT, HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN
CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION.
A. Risk of Non-Confirmation of the Plan, Best Interests and
Cramdown Test
Although the Debtor believes that the Plan will satisfy all
requirements necessary for confirmation by the Bankruptcy Court, there can be no
assurance that the Bankruptcy Court will
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reach the same conclusion. Moreover, there can be no assurance that
modifications to the Plan will not be required for confirmation or that such
modifications would not necessitate the re-solicitation of votes.
B. Risk that the Debtor will be unable to obtain an Exit Facility
Although the Debtor believes that it will be able to obtain an Exit
Facility sufficient to enable the Debtor to make the Cash distributions which
the Plan requires be made on the Effective Date, there can be no assurance that
Debtor will be able to do so. If Debtor fails to obtain an Exit Facility, within
(180) days after the Confirmation Date, the Confirmation Order shall be vacated,
in which event no distributions under the Plan would be made, the Debtor and all
holders of Claims and Interests would be restored to the status quo ante as of
the day immediately preceding the Confirmation Date and the Debtor's obligations
with respect to Claims and Interests would remain unchanged.
C. Risk of Non-Occurrence of the Effective Date
Although the Debtor believes that the Effective Date will occur soon
after the Confirmation Date, there can be no assurance as to the timing of the
Effective Date. If the conditions precedent to the Effective Date set forth in
Article XI of the Plan have not occurred or have been waived by the Debtor
within one hundred eighty (180) days after the Confirmation Date, the
Confirmation Order shall be vacated, in which event no distributions under the
Plan would be made, the Debtor and all holders of Claims and Interests would be
restored to the status quo ante as of the day immediately preceding the
Confirmation Date and the Debtor's obligations with respect to Claims and
Interests would remain unchanged.
D. Risk of Competitive Conditions
The EMS industry is extremely competitive, and the Debtor expects that
competition will intensify in the future. The Debtor faces substantial
competition in each of its business segments. The effects of vigorous
competition could also result in price compression thereby affecting the
Debtor's projected future earnings.
E. Risk Related to Projected Financial Information
The financial projections included in this Disclosure Statement are
dependent upon the successful implementation of the Debtor's business plan and
the validity of the other assumptions contained therein. These projections
reflect numerous assumptions, including confirmation and consummation of the
Plan in accordance with its terms, the anticipated future performance of the
Reorganized Debtor, industry performance, certain assumptions with respect to
competitors of the Reorganized Debtor, general business and economic conditions
and other matters, many of which are beyond the control of the Reorganized
Debtor. In addition, unanticipated events and circumstances occurring subsequent
to the preparation of the projections may affect the actual financial results of
the Reorganized Debtor. Although the Debtor believes that the projections are
reasonably attainable, variations between the actual financial results and those
projected may occur and be material.
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F. Risk Relating to Reorganized Debtor's Ability to Service Debt
The Reorganized Debtor's ability to make scheduled payments of
principal, to pay the interest on, to refinance its indebtedness will depend on
future performance. Future performance is, to a certain extent, subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond their control. While no assurance can be provided, based
upon the current level of operations and anticipated increases in revenues and
cash flow described in the projections included herein, the Debtor believes that
cash flow from operations, available cash, the Exit Facility and sales of
surplus assets will be adequate to fund the Plan and meet its future liquidity
needs.
G. Risk Relating to Listing New Issued Common Stock on an
Exchange
Presently, the Debtor's stock is sold over the counter on The Bulletin
Board. If the New Issued Common Stock qualifies for small cap or the NASDAQ
National Market System, the Reorganized Debtor intends to apply to have its
stock quoted on NASDAQ's small cap or National Market System. There is a risk
that the New Issued Common Stock will not qualify in the future and will not be
listed on an exchange or quoted on an established market. Furthermore, there can
be no assurance that a market will develop for the New Issued Common Stock.
Although the Reorganized Debtor will use reasonable efforts to cause the New
Issued Common Stock to be listed on a national securities exchange, it is
unlikely that the initial listing requirements will be satisfied by the Initial
Distribution Date. Even if such securities are subsequently listed, there is no
assurance that an active market for the New Issued Common Stock (or any other
security issued pursuant to the Plan) will develop or, if any such market does
develop, that it will continue to exist, or as to the degree of price volatility
in any such market that does develop. Accordingly, no assurance can be given as
to the liquidity of the market for the New Issued Common Stock or the price at
which any sales may occur.
H. Other Risk Factors
Other factors that may cause actual results to differ materially from
the Debtor's expectations include economic uncertainty, uncertainties regarding
the collectibility of receivables, and the ongoing war on terrorism.
VIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following is a summary of certain United States federal income tax
consequences of the implementation of the Plan to the Debtor, and to holders of
General Unsecured Claims, and Common Equity Interests that, as a Class, vote in
favor of the Plan. For purposes of this section, references to the Debtor
include Reorganized Debtor, as applicable. This summary is based on the Internal
Revenue Code of 1986, as amended (the "Tax Code"), Treasury Regulations,
judicial authorities, published positions of the IRS and other applicable
authorities, all as in effect on the date of this document and all of which are
subject to change or differing interpretations (possibly with retroactive
effect).
This summary is for informational purposes only and, due to a lack of
definitive judicial or administrative authority or interpretation, substantial
uncertainties exist with respect to various tax consequences of the
implementation of the Plan as discussed herein. No opinion of counsel
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and no rulings or determinations from the Internal Revenue Service (the "IRS")
or any other tax authorities have been sought or obtained with respect to the
tax consequences of the Plan, and the discussion below is not binding upon the
IRS or such other authorities. The Debtor is not making any representations
regarding the particular tax consequences of the confirmation and consummation
of the Plan as to any Claim or Interest holder, and is not rendering any form of
legal opinion as to such tax consequences. No assurance can be given that the
IRS would not assert, or that a court would not sustain, a different position
from any discussed herein. This summary does not address foreign, state or local
tax consequences of the Plan, nor does it purport to address the United States
federal income tax consequences of the Plan to special classes of taxpayers
(e.g., banks and certain other financial institutions, insurance companies,
tax-exempt organizations, persons that are, or hold their Claims or Interests
through pass-through entities, persons whose functional currency is not the
United States dollar, foreign persons, dealers in securities, persons who
received their interests in the Debtor pursuant to the exercise of an employee
stock option or otherwise as compensation and persons holding an Interest in the
Debtor as a hedge against, or that are hedged against, currency risk or that are
part of a straddle, constructive sale or conversion transaction). The following
summary assumes that holders hold their General Unsecured Claims and Common
Equity Interests as capital assets for United States federal income tax
purposes. HOLDERS OF CLAIMS AGAINST AND INTERESTS IN THE DEBTOR ARE URGED TO
CONSULT THEIR OWN TAX ADVISOR REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN
TAX CONSEQUENCES OF THE TRANSACTIONS DESCRIBED HEREIN AND IN THE PLAN.
A. Consequences to Holders of General Unsecured Claims
The United States federal income tax consequences of the Plan to a
holder of General Unsecured Claims will depend upon several factors, including,
but not limited to: (i) the manner in which a General Unsecured Claim was
acquired; (ii) the length of time a General Unsecured Claim has been held; (iii)
whether the holder has taken a bad debt deduction with respect to a General
Unsecured Claim (or any portion thereof); (iv) the amount of original issue
discount the holder has previously included in income with respect to its
General Unsecured Claim; (v) the holder's method of tax accounting; (vi) whether
a General Unsecured Claim constitutes a "security" for United States federal
income tax purposes; and (vii) whether a New Note constitutes a "security" for
United States federal income tax purposes. Therefore, holders of General
Unsecured Claims should consult their tax advisors for information that may be
relevant to their particular situations and circumstances and the particular tax
consequences to them of the Plan.
1. Recapitalization Treatment
Pursuant to the Plan, a holder of a General Unsecured Claim will
receive a combination of New Issued Common Stock and New Notes in exchange for
the holder's Claim. The exchange may be treated as a recapitalization for United
States federal income tax purposes. Such treatment will depend upon whether the
General Unsecured Claim constitutes a "security" for United States federal
income tax purposes. If the General Unsecured Claim is considered a security,
the receipt of New Issued Common Stock and (if the New Notes constitute
"securities" for United States federal income tax purposes) New Notes in
exchange for a General Unsecured Claim pursuant to the Plan should be treated as
part of a recapitalization. The time period of a debt instrument (e.g., the
General Unsecured Claim or the New Notes) is an important factor in
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the determination of whether a particular instrument constitutes a security.
However, the controlling consideration is an overall evaluation of the term and
nature of the debt instrument, degree of participation and continuing interest
in the business, the purpose of the advances, etc.
If the exchange of General Unsecured Claims for New Issued Common Stock
and New Notes is treated as a recapitalization, a holder of a General Unsecured
Claim will not recognize gain or loss with respect to the General Unsecured
Claim exchanged (except to the extent issued for accrued but unpaid interest and
except with respect to the New Notes if the New Notes are not considered
securities for federal income tax purposes). A General Unsecured Claim holder's
aggregate tax basis in the New Issued Common Stock and New Notes received will
be equal to the holder's aggregate tax basis in the General Unsecured Claim
exchanged, increased by the amount of any gain recognized. A General Unsecured
Claim holder's holding period for the New Issued Common Stock and New Notes
received will include the holding period of the holder's General Unsecured
Claim, except to the extent that New Issued Common Stock and New Notes are
issued in respect of a Claim for accrued but unpaid interest and except with
respect to the New Notes if the New Notes are not considered securities for
federal income tax purposes.
2. Recognition of Income or Loss
The satisfaction of a General Unsecured Claim pursuant to the Plan will
be a taxable event with respect to holders of General Unsecured Claims in the
event that such Claims are not securities or if the receipt of New Issued Common
Stock and New Notes is not treated as a recapitalization as discussed above. In
such event, subject to the "market discount" rules described below, a holder of
a General Unsecured Claim will generally recognize capital gain or loss in an
amount equal to the difference, if any, between (i) the fair market value of New
Issued Common Stock and the issue price of the New Notes received in exchange
for the General Unsecured Claim, and (ii) the holder's adjusted tax basis in the
General Unsecured Claim.
3. Treatment of Amounts Attributable to Interest
For United States federal income tax purposes, the proper allocation of
the consideration received pursuant to the Plan in satisfaction of a General
Unsecured Claim between principal and accrued interest on a General Unsecured
Claim is unclear under present law. If any portion of the consideration received
were required to be allocated to accrued interest, such portion would be taxable
to a holder of a General Unsecured Claim as interest income, except to the
extent that the holder has previously included such interest in income and has
not properly written off such interest.
4. Market Discount
If a holder of a General Unsecured Claim purchased its Claim at a price
less than the General Unsecured Claim's "revised issue price" by at least a de
minimis (as defined in the Code) amount, the difference would constitute "market
discount." In such event, any gain recognized by a General Unsecured Claim
holder under the Plan would generally be treated as ordinary interest income to
the extent of the market discount accrued on the General Unsecured Claim during
the holder's period of ownership, unless the holder previously elected to
include market discount in taxable income as it accrued. To the extent that
General Unsecured Claims that were acquired with market discount are exchanged
for New Issued Common Stock and New
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Notes in connection with a recapitalization on a tax-deferred basis (as may
occur here), any market discount that accrued on the General Unsecured Claim but
was not recognized by the holder is carried over to the New Issued Common Stock
and New Notes received therefore, and any gain recognized on the subsequent
sale, exchange, redemption or other disposition of such New Issued Common Stock
and New Notes is treated as ordinary income to the extent of the accrued but
unrecognized market discount with respect to the exchanged Claim.
B. Consequences to Holders of Common Equity Interests
Pursuant to the Plan, a holder of Common Equity Interests will receive
the Equity Interest Distribution in exchange for its Common Equity Interest. For
United States federal income tax purposes, the exchange of the Common Equity
Interest for the Equity Interest Distribution should not be a taxable event,
because the exchange of common stock for common stock of the same company is not
a taxable event under the Code.
C. Consequences to Holders of Other Equity Interests
Because a holder of an Other Equity Interest will receive no
consideration in exchange for the cancellation of such interest, if such holder
has not written off such interest prior to the consummation of the Plan, upon
such consummation such holder may be entitled to write off such interest.
D. Consequences to the Debtor
1. Cancellation of Indebtedness Income
In general, taxpayers must include in gross income any cancellation of
indebtedness ("COD") income realized during the tax year. Taxpayers recognize
COD income in an amount equal to the excess of the adjusted issue price of the
indebtedness cancelled over the amount of cash and fair market value of other
property issued in satisfaction of the indebtedness (with certain exceptions as
provided in section 108). COD income also includes any interest that has been
previously accrued and deducted but remains unpaid at the time the indebtedness
is discharged. Section 108 of the Tax Code provides, however, that when
cancellation of indebtedness occurs in a case under the Bankruptcy Code, gross
income does not include any amount that otherwise would be included in gross
income by reason of the cancellation. Instead, the amount of any COD in a
bankruptcy case will generally be applied to reduce certain tax attributes of
the taxpayer.
The satisfaction of the Trade Vendor Claims pursuant to the Plan will
result in a reduction in the outstanding indebtedness of the Debtor. Because the
Debtor is a debtor in a bankruptcy case, the Debtor will not recognize any COD
income. Rather, the Debtor will reduce certain of its tax attributes by the
amount of COD income excluded from gross income. The attribute reduction is
generally applied to reduce net operating losses ("NOLs") carryovers, certain
tax credits and carryovers, and tax basis of assets. Alternatively, the Debtor
may elect to reduce the basis of its depreciable property prior to reducing its
NOLs and other tax attributes. The reduction in tax attributes will occur on the
first day of the taxable year following the realization of such COD income. An
analysis will need to be performed to determine whether such an election will be
in the Debtor's best interests.
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2. Limitation of NOL Carryovers and other Tax Attributes
Under section 382 of the Tax Code, if a corporation undergoes an
ownership change, its ability to utilize its historic NOLs and certain
subsequently recognized "built-in" losses and deductions are subject to an
annual limitation (the "Section 382 Limitation"). In general, an ownership
change occurs when certain groups of shareholders of a loss corporation have
increased their ownership of its stock by more than 50% points measured over a
given period of time (normally three years). As a general rule, the amount of
the Section 382 Limitation is equal to the value of the corporation's
outstanding stock (with certain adjustments) immediately before the ownership
change, multiplied by the applicable "long-term tax-exempt rate." Subject to
certain limitations, any unused portion of the Section 382 Limitation in a given
year is available in subsequent years.
Section 382 provides an exception to the application of the Section 382
Limitation for corporations under the jurisdiction of a court in a bankruptcy
case (the "Bankruptcy Exception"). If a corporation applies the Bankruptcy
Exception so that the Section 382 Limitation is not applicable, the amount of
pre-change NOLs that may be carried over to a post-change year will be reduced
by the amount of interest payments made during the current taxable year and the
three preceding taxable years in respect of indebtedness which was exchanged for
stock under the Plan. The Debtor should be eligible for the Bankruptcy Exception
if the historic shareholders and certain creditors of the Debtor prior to
consummation of the Plan own at least 50% of the total voting power and total
value of the stock of the Debtor as a result of the consummation of the Plan
number. If Debtor elects to apply the Bankruptcy Exception and is therefore not
subject to the Section 382 Limitation, a second ownership change occurring
within two years after consummation of the Plan will likely result in the
application of the Section 382 Limitation effective as of the consummation of
the Plan if applied in these circumstance, the Section 382 Limitation likely
will eliminate the Debtors' ability to use any NOLs incurred prior to such
second ownership change to offset net taxable income earned or gains recognized
from the sale of assets, in either case, after such second ownership change, and
would also likely eliminate the Debtor's ability to use losses recognized upon
the sale of certain assets after such second ownership change to offset net
taxable income or gains from the sale of other assets.
Notwithstanding the foregoing, Section 382 provides that a corporation
under the jurisdiction of a court in a bankruptcy case may elect out of the
Bankruptcy Exception even if the corporation meets all of its requirements. If
the Debtor elects out of the Bankruptcy Exception, or is otherwise ineligible
for the Bankruptcy Exception, a special rule under Section 382 applicable to a
corporation under the jurisdiction of a court in a bankruptcy case will apply in
calculating the appropriate Section 382 Limitation. Under this special rule, the
Section 382 Limitation will be calculated by reference to the lesser of (i) the
value of the Debtor's stock (with certain adjustments) immediately after the
consummation of the Plan (as opposed to immediately before such consummation) or
(ii) the value of the Debtor's assets (determined without regard to liabilities)
immediately before such consummation. Although such calculation may
significantly increase the Section 382 Limitation, the Debtor's ability to use
the NOLs and recognized built-in losses to offset taxable income generated after
consummation of the Plan would still be substantially limited.
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Case No. 03-35966-BKC-PGH
The Debtor has yet to determine whether it would be eligible for the
Bankruptcy Exception or, assuming that it would be eligible for the Bankruptcy
Exception, whether it would be beneficial to elect its application.
3. U.S. Federal Alternative Minimum Tax
For purposes of computing the Debtor's regular tax liability, all of
its taxable income recognized in a taxable year generally may be offset by NOLs
(to the extent permitted under the Code and subject to various limitations,
including the Section 382 Limitation, as discussed above). Even if all of the
Debtor's regular tax liability for a given year is reduced to zero by virtue of
its NOLs, the Debtor may still be subject to the alternative minimum tax (the
"AMT"). The AMT imposes a tax equal to the amount by which 20% of a
corporation's alternative minimum taxable income ("AMTI") exceeds the
corporation's regular tax liability. AMTI is calculated pursuant to specific
rules in the Tax Code which eliminate or limit the availability of certain tax
deductions and which include as income certain amounts not generally included in
computing the corporation's regular tax liability (any COD income excluded from
the Debtors' regular taxable income, as described above, would also be excluded
from their AMTI). Of particular importance to the Debtor is that a corporation
with a net unrealized built-in loss in its assets must adjust the tax basis of
its assets, on a consolidated basis, to their fair market values for AMT
purposes following a Section 382 ownership change, and in calculating AMTI, only
90% of a corporation's AMTI may be offset by net operating loss carryovers (as
computed for AMT purposes).
4. Deductions of Accrued Interest
As discussed above, the allocation of consideration between principal
and accrued but unpaid interest on the General Unsecured Claims is unclear under
present law. If any portion of the consideration were required to be allocated
to accrued interest to the extent such accrued interest is not deemed
discharged, the Debtor would be entitled to an interest deduction in the amount
of such accrued interest, assuming it has not already deducted such amounts.
E. Importance of Obtaining Professional Assistance
AS INDICATED ABOVE, THE FOREGOING IS INTENDED TO BE A SUMMARY
ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING WITH A
TAX PROFESSIONAL. THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX
CONSEQUENCES OF THE PLAN ARE COMPLEX AND, IN SOME AREAS,
UNCERTAIN. ACCORDINGLY, EACH HOLDER OF AN ALLOWED CLAIM OR
INTEREST IS STRONGLY URGED TO CONSULT HIS TAX ADVISOR
REGARDING THE PARTICULAR TAX CONSEQUENCES OF THE TRANSACTIONS
CONTEMPLATED BY THE PLAN.
IX. CONCLUSION
The Debtor believes that the transactions described herein represent
the best available return to holders of Claims and Interests. Both the Debtor
and the Creditors Committee urge each holder of an impaired Claim or Interest to
vote in favor of the Plan.
55
Case No. 03-35966-BKC-PGH
REPTRON ELECTRONICS, INC.
By: /s/ Paul Plante
Name: Paul Plante
Title: President and COO of Reptron
56
Case No. 03-35966-BKC-PGH
Dated: December 17, 2003.
TEW CARDENAS, LLP
201 South Biscayne Blvd.,
Miami Center, Suite 2600
Miami, Florida 33131-4336
Tel.: 305 536-1112
Fax: 305 536-1116
E-Mail: TRL@Tewlaw.com
E-Mail: LMG@Tewlaw.com
/s/ Thomas R. Lehman
------------------------------------
Thomas R. Lehman, P.A.
Florida Bar No. 351318
Lynn Maynard Gollin, Esq.
Florida Bar No. 621668
[PAGE INTENTIONALLY LEFT BLANK - SIGNATURE PAGE FOLLOWS]
57
EXHIBIT 1
IN THE UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF FLORIDA
WEST PALM BEACH DIVISION
In re: )
) Chapter 11
REPTRON ELECTRONICS, INC., )
) Case No.: 03-35966-BKC-PGH
Debtor. )
________________________________________)
DEBTOR'S MODIFIED SECOND AMENDED PLAN OF
REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
[THE FIRST AMENDED DISCLOSURE STATEMENT WAS APPROVED WITH
RESPECT TO THIS SECOND AMENDED PLAN OF REORGANIZATION BY THE
BANKRUPTCY COURT ON DECEMBER 17, 2003. ACCORDINGLY THE DEBTOR
AND THE CREDITORS COMMITTEE URGES YOU TO VOTE TO ACCEPT THE
PLAN]
TEW CARDENAS LLP
Thomas R. Lehman, P.A.
Lynn Maynard Gollin, Esq.
201 South Biscayne Boulevard
Miami Center, Suite 2600
Miami, Florida 331312
Tel: (305) 536-1112
Fax: (305) 536-1116
Counsel to the Debtor
Dated: January 14, 2004.
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND INTERPRETATIONS................................................................ 1
A. Definitions............................................................................................. 1
B. Interpretation, Application Of Definitions And Rules Of Construction.................................... 10
ARTICLE II PROVISIONS FOR PAYMENT OF ADMINISTRATIVE EXPENSE
CLAIMS, DIP FACILITY CLAIM AND PRIORITY TAX CLAIMS.......................................... 11
2.1. Administrative Expense Claims..................................................................... 11
2.2. DIP Facility Claim................................................................................ 11
2.3. Priority Tax Claim................................................................................ 11
ARTICLE III CLASSIFICATION OF CLAIMS AGAINST AND INTERESTS IN THE DEBTOR................................ 11
3.1. Class 1--Other Priority Claims.................................................................... 11
3.2. Class 2A - Gaylord Facility Claim................................................................. 11
3.3. Class 2B - Hibbing Facility Claim................................................................. 11
3.4. Class 2C - Tampa Facility Claim................................................................... 11
3.5. Class 2D - Transamerica Claim..................................................................... 12
3.6. Class 2E - Miscellaneous Secured Claims........................................................... 12
3.7. Class 2F - DIP Lender Letter of Credit Claim...................................................... 12
3.8. Class 3 -Trade Vendor Claims...................................................................... 12
3.9. Class 4 - General Unsecured Claims................................................................ 12
3.10. Class 5 - Common Equity Interests................................................................. 12
3.11. Class 6 - Other Equity Interests.................................................................. 12
ARTICLE IV PROVISIONS FOR TREATMENT OF CLAIMS AND INITIAL DISTRIBUTION DATE INTERESTS.................. 12
4.1. Other Priority Claims (Class 1)................................................................... 12
4.2. Gaylord Facility Claim (Class 2A)................................................................. 12
4.3. Hibbing Facility Claim (Class 2B)................................................................. 12
4.4. Tampa Facility Claim (Class 2C)................................................................... 12
4.5. Transamerica Claim (Class 2D)..................................................................... 12
4.6. Miscellaneous Secured Claims (Class 2E)........................................................... 12
4.7. DIP Lender Letter of Credit Claim (Class 2F)...................................................... 13
4.8. Trade Vendor Claims (Class 3)..................................................................... 13
ii
4.9. General Unsecured Claims (Class 4)................................................................ 13
4.10. Common Equity Interests (Class 5)................................................................. 13
4.11. Other Equity Interests (Class 6).................................................................. 13
ARTICLE V IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS
IMPAIRED; ACCEPTANCE OR REJECTION OF THE PLAN............................................... 14
5.1. Unimpaired Classes................................................................................ 14
5.2. Impaired Classes.................................................................................. 14
5.3. Classes Deemed to Reject.......................................................................... 14
ARTICLE VI CRAMDOWN.................................................................................... 14
ARTICLE VII MEANS OF IMPLEMENTATION..................................................................... 14
7.1. Distributions..................................................................................... 14
7.2. Authorization to Issue New Securities............................................................. 15
7.3. New Indenture..................................................................................... 15
7.4. Issuance of New Securities........................................................................ 15
7.5. Public Company Status............................................................................. 15
7.6. Cancellation of Existing Securities and Agreements................................................ 15
7.7. Amended Certificate of Incorporation.............................................................. 16
7.8. Stock Option Plan................................................................................. 16
7.9. Board of Directors of Reorganized Debtor.......................................................... 16
7.10. Continued Corporate Existence..................................................................... 16
7.11. Exit Facility..................................................................................... 16
7.12. Plante Employment Contract........................................................................ 17
7.13. Musto Sr. Termination............................................................................. 17
7.14. Musto Jr. Termination............................................................................. 17
7.15. Lane Termination.................................................................................. 17
ARTICLE VIII PROVISIONS GOVERNING DISTRIBUTIONS....................................................... 17
8.1. Date of Distributions............................................................................. 17
8.2. Disbursing Agent.................................................................................. 17
8.3. Compensation of Professionals..................................................................... 17
8.4. Professional Fee Applications..................................................................... 18
8.5. Substantial Contribution Claims................................................................... 18
8.6. Delivery of Distributions......................................................................... 18
8.7. Manner of Payment Under the Plan.................................................................. 19
iii
8.8. Fractional Shares and Notes....................................................................... 19
8.9. Setoffs and Recoupment............................................................................ 19
8.10. Distributions After Effective Date................................................................ 19
8.11. Rights and Powers of Disbursing Agent............................................................. 19
(A) Expenses Incurred on or After the Effective Date............................................... 19
8.12. Old Notes Indenture Trustee's Fees and Expenses................................................... 19
8.13. Record Date for Holders of Claims................................................................. 19
8.14. Reserves.......................................................................................... 20
(A) Disputed General Unsecured Claims.............................................................. 20
(B) Disputed Equity Interest Reserve............................................................... 20
(C) Disputed Priority Claims Reserve............................................................... 20
8.15. Allocation Relating to Old Notes.................................................................. 21
ARTICLE IX PROCEDURES FOR TREATING DISPUTED CLAIMS UNDER THE PLAN...................................... 21
9.1. Disputed Claims................................................................................... 21
9.2. No Distributions Pending Allowance................................................................ 21
9.3. Distributions After Allowance..................................................................... 21
ARTICLE X PROVISIONS GOVERNING EXECUTORY CONTRACTS AND UNEXPIRED LEASES............................... 22
10.1. Assumed Contracts and Leases...................................................................... 22
10.2. Payments Related to Assumption of Contracts and Leases............................................ 22
10.3. Rejected Contracts And Leases..................................................................... 22
10.4. Reservation....................................................................................... 23
10.5. Bar for Rejection Damages......................................................................... 23
10.6. Treatment Under Plan of Rejection Damages......................................................... 23
ARTICLE XI CONDITIONS PRECEDENT TO EFFECTIVE DATE...................................................... 23
11.1. Conditions Precedent to Effective Date of the Plan................................................ 23
11.2. Waiver of Conditions Precedent.................................................................... 24
ARTICLE XII EFFECT OF CONFIRMATION...................................................................... 24
12.1. Vesting of Assets................................................................................. 24
12.2. Preservation of Causes of Action.................................................................. 24
12.3. Binding Effect.................................................................................... 24
12.4. Discharge of Debtor............................................................................... 24
12.5. Term of Injunctions or Stays...................................................................... 24
iv
12.6. Exculpation....................................................................................... 25
12.7. Release........................................................................................... 25
12.8. Indemnification Obligations....................................................................... 25
12.9. Letter of Credit Obligations...................................................................... 26
ARTICLE XIII RETENTION OF JURISDICTION................................................................ 26
ARTICLE XIV MISCELLANEOUS PROVISIONS................................................................. 27
14.1. Payment of Statutory Fees......................................................................... 27
14.2. [Left Intentionally Blank]........................................................................ 27
14.3. Creditors Committee............................................................................... 27
14.4. Exemption from Certain Transfer Taxes............................................................. 28
14.5. Modifications and Amendments...................................................................... 28
14.6. Compliance with Tax Requirements.................................................................. 28
14.7. Preservation of Transferred Claims................................................................ 28
14.8. Severability of Plan Provisions................................................................... 28
14.9. Filing or Execution of Additional Documents....................................................... 29
14.10. Notices........................................................................................... 29
14.11. Governing Law..................................................................................... 30
v
EXHIBIT 1
REPTRON ELECTRONICS, INC.'S MODIFIED SECOND AMENDED PLAN OF
REORGANIZATION UNDER CHAPTER 11 OF THE BANKRUPTCY CODE
The Debtor, Reptron Electronics, Inc., proposes the following Modified
Second Amended Plan of Reorganization, dated as of January 14, 2004, pursuant to
section 1121(a) of the Bankruptcy Code:
ARTICLE I DEFINITIONS AND INTERPRETATIONS
A. DEFINITIONS.
The following terms herein shall have the respective meanings
defined below:
1.1. Ad Hoc Committee means the pre-Petition Date
unofficial committee of certain holders of the Old Notes which was comprised of
Camden Asset Management, L.P., Wachovia Securities, First Pacific Advisors, JMG
Capital Management and Hal Purkey.
1.2. Administrative Expense Claim means any right to
payment constituting a cost or expense of administration of the Chapter 11 Case
allowed under sections 503(b) and 507(a)(1) of the Bankruptcy Code, including,
without limitation, (a) any actual and necessary costs and expenses of
preserving the Debtor's estate, (b) any actual and necessary costs and expenses
of operating the Debtor's business during the Chapter 11 Case in the ordinary
course of business, (c) any indebtedness or obligations incurred or assumed by
the Debtor during the Chapter 11 Case in the ordinary course of business,
including all obligations owed the DIP Lender under the DIP Facility, (d) any
allowances of compensation and reimbursement of expenses to the extent allowed
by Final Order under section 330 or 503 of the Bankruptcy Code, and (e) any fees
or charges assessed against the Debtor's estate under section 1930, title 28,
United States Code. With respect to fees due the U.S. Trustee, the Debtor shall
pay the U.S. Trustee the appropriate sum required pursuant to 28 U.S.C. Section
1930(a)(6) within ten (10) days of the entry of the Confirmation Order for
pre-Confirmation Date periods and simultaneously provide the U.S. Trustee an
appropriate affidavit indicating the Cash disbursements for the relevant period.
The Reorganized Debtor shall further pay the U.S. Trustee the appropriate sum
required pursuant to 28. U.S.C. Section 1930(a)(6) based upon all disbursements
of the Reorganized Debtor for post-Confirmation Date periods within the time
period set forth in 28 U.S.C. Section 1930(a)(6), until the earlier of the
closing of the Case by the issuance of a final decree by the Bankruptcy Court,
or upon the entry of an Order by the Bankruptcy Court dismissing the Case or
converting the Case to another chapter under the Bankruptcy Code, and the party
responsible for paying the post-Confirmation Date U.S. Trustee fees shall
provide to the U.S. Trustee upon the payment of each post-confirmation payment
an appropriate affidavit indicating all Cash disbursements for the relevant
period.
1.3. Administrative Expense Claims Bar Date means January
9, 2004.
1.4. Allowed means with reference to any Claim (a) any
Claim against the Debtor which has been listed by the Debtor in its Schedules as
liquidated in amount and not disputed or contingent and for which no contrary
proof of claim has been filed, (b) any Claim allowed under this Plan, (c) any
Claim which is not Disputed by the Objection Deadline, (d) any
1
Claim that is compromised, settled or otherwise resolved pursuant to the
authority granted to the Reorganized Debtor pursuant to a Final Order of the
Bankruptcy Court, (e) any Claim which, if Disputed, has been Allowed by Final
Order or (f) any Claim which the Reorganized Debtor determines to allow in its
sole and absolute discretion; provided, however, that any Claims allowed solely
for the purpose of voting to accept or reject the Plan pursuant to an order of
Bankruptcy Court shall not be considered "Allowed Claims" hereunder.
1.5. Amended By-Laws means the Amended and Restated
By-laws of the Reorganized Debtor which shall be in substantially the form
annexed hereto as Exhibit A and subject to modification by the Debtor with the
written consent of the Creditors Committee prior to the Confirmation Date.
1.6. Amended Certificate of Incorporation means the
Amended and Restated Certificate of Incorporation of Reorganized Debtor which
shall be in substantially the form annexed hereto as Exhibit B and subject to
modification by the Debtor with the written consent of the Creditors Committee
prior to the Confirmation Date.
1.7. Bankruptcy Code means title 11, United States Code,
as amended from time to time, as applicable to the Chapter 11 Case.
1.8. Bankruptcy Court means the United States Bankruptcy
Court for the Southern District of Florida having jurisdiction over the Chapter
11 Case.
1.9. Bankruptcy Rules means the Federal Rules of
Bankruptcy Procedure as promulgated by the United States Supreme Court under
section 2075, title 28, United States Code, as amended from time to time,
applicable to the Chapter 11 Case, and any Local Rules of the Bankruptcy Court.
1.10. Bar Date means December 31, 2003, the deadline for
filing all proofs of Claims except (i) Claims of governmental units for which
proofs of Claim are filed in accordance with section 502(b)(9) of the Bankruptcy
Code, or (ii) such other date(s) as has been granted by Order of the Bankruptcy
Court with respect to one or more other holders of Claims.
1.11. Board of Directors of Reorganized Debtor means,
initially, Mark Holliday, Michael Musto, Sr., Paul Plante, Hal Purkey, Steven
Scheiwe and Neil Subin.
1.12. Business Day means any day other than a Saturday, a
Sunday or any other day on which the Bankruptcy Court is closed.
1.13. Cash means cash equivalents (including personal
checks drawn on a bank insured by the Federal Deposit Insurance Corporation,
certified checks and money orders) and other readily marketable direct
obligations of the United States of America and certificates of deposit issued
by banks.
1.14. Chapter 11 Case means the case filed by the Debtor
with the Bankruptcy Court under Chapter 11 of the Bankruptcy Code.
2
1.15. Claim means (a) any right to payment from the Debtor,
whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured, known or unknown, or (b) any right to an equitable remedy
for breach of performance if such breach gives rise to a right of payment from
the Debtor, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured,
or unsecured, known or unknown.
1.16. Claims Bar Date means December 31, 2003.
1.17. Class means any group of substantially similar Claims
or Interests classified by the Plan pursuant to section 1129(a)(1) of the
Bankruptcy Code.
1.18. Collateral means any property or interest in property
of the Debtor's estate subject to a Lien to secure the payment or performance of
a Claim which Lien is not subject to avoidance under the Bankruptcy Code.
1.19. Confirmation Date means the date on which the Clerk
of the Bankruptcy Court enters the Confirmation Order on the docket in this
Chapter 11 Case.
1.20. Confirmation Hearing means the hearing to be held by
the Bankruptcy Court regarding confirmation of the Plan, as such hearing may be
adjourned or continued from time to time.
1.21. Confirmation Order means the order of the Bankruptcy
Court confirming the Plan.
1.22. Common Equity Interest means the interest of any
holder of equity securities of the Debtor, represented by any issued and
outstanding shares of common stock in the Debtor as of the Petition Date.
1.23. Creditors Committee means the statutory committee of
unsecured creditors appointed in the Chapter 11 Case pursuant to section 1102 of
the Bankruptcy Code.
1.24. Cure means the distribution of Cash, or such other
property as may be agreed upon by the parties or ordered by the Bankruptcy
Court, with respect to the assumption of an executory contract or unexpired
lease, pursuant to section 365(b) of the Bankruptcy Code, in an amount equal to
all unpaid monetary obligations, without interest, or such other amount as may
be agreed upon by the parties under such executory contract or unexpired lease,
to the extent such obligations are enforceable under the Bankruptcy Code and
applicable non-bankruptcy law.
1.25. Customary Trade Terms means the most favorable trade
terms, practices and programs (including, but not limited to, credit terms,
pricing, cash discounts, timing of payment, allowances, rebates, normal product
mix and availability and other applicable terms and programs) in effect between
a creditor and the Debtor during the one year period prior to the Petition Date
or such other trade terms, practices and programs that are at least as favorable
as those that were in effect during such time.
3
1.26. Debtor means Reptron.
1.27. Debtor in Possession means the Debtor in its capacity
as Debtor in possession in the Chapter 11 Case under sections 1107(a) and 1108
of the Bankruptcy Code.
1.28. DIP Facility means the post-petition credit advances
made from and after the Petition Date, and all other amounts due to the DIP
Lenders, pursuant to that certain Post-Petition Credit Agreement dated October
31, 2003, among Reptron, as borrower and CIT Group/Business Credit, Inc. as
lender, and the Financing Orders, as at any time amended by order of the Court.
1.29. DIP Facility Claim means all Allowed Claims
outstanding under the DIP Facility as of the Effective Date.
1.30. DIP Lender means CIT Group/Business Credit, Inc. as
the lender under the DIP Facility.
1.31. DIP Lender Letter of Credit Claim means the DIP
Lender's claim against the Debtor arising from the DIP Lender having arranged
for the issuance of the Hartford Letter of Credit.
1.32. Disallowed means, when used with respect to a Claim
or Equity Interest, a Claim or Equity Interest that has been disallowed by Final
Order.
1.33. Disbursing Agent means any entity, including the
Debtor, Reorganized Debtor, the Old Notes Indenture Trustee or any other person
as selected by the Debtor to act as disbursing agent, in its capacity as a
disbursing agent under the Plan.
1.34. Disclosure Statement means the disclosure document
dated December 17, 2003 relating to the Plan, including, without limitation, all
exhibits and schedules thereto as approved by the Bankruptcy Court pursuant to
section 1125 of the Bankruptcy Code.
1.35. Disputed means, with respect to a Claim or Equity
Interest, any such Claim or Equity Interest proof of which was filed with the
Bankruptcy Court and (a) which has been or hereafter is listed on the Schedules
as unliquidated, disputed or contingent, and which has not been resolved by
written agreement of the parties or an order of the Bankruptcy Court, or (b) as
to which the Debtor or any other party in interest has interposed a timely
objection on or before the Objection Deadline, which objection has not been
withdrawn or determined by a Final Order; provided, however, that prior to (x)
the time an objection has been filed, and (y) the expiration of the Objection
Deadline with respect to such Claim or Equity Interest, a Claim or Equity
Interest shall be considered a Disputed Claim or Disputed Equity Interest to the
extent that the amount of the Claim or Equity Interest specified in a proof of
Claim or Equity Interest exceeds the amount of the Claim or Equity Interest
scheduled by the Debtor as not disputed, contingent, or unliquidated.
1.36. Disputed Equity Interest Reserve means that reserve
created pursuant to Section 8.13 of the Plan.
4
1.37. Disputed General Unsecured Claims Reserve means that
reserve created pursuant to Section 8.13 of the Plan.
1.38. Disputed Priority Claims Reserve means that reserve
created pursuant to Section 8.13 of the Plan.
1.39. Distribution Record Date means, notwithstanding
Bankruptcy Rule 3021, the record date for all distributions under the Plan shall
be: (i) with respect to the Initial Distribution Date, five (5) calendar days
before the Effective Date; and (ii) with respect to any subsequent distribution,
five (5) calendar days before said distribution.
1.40. Effective Date means the first Business Day on which
all the conditions precedent to the Effective Date specified in Section 11 of
the Plan shall have been satisfied or waived as provided therein, provided,
however, that if a stay of the Confirmation Order is in effect, the Effective
Date shall be the first Business Day after such stay is no longer in effect.
1.41. Equity Interest means either a Common Equity Interest
or an Other Equity Interest.
1.42. Equity Interest Distribution means 5% of the New
Issued Common Stock.
1.43. Exchange Act means the Securities Exchange Act of
1934, as amended.
1.44. Exit Facility means a credit facility sufficient to
repay the DIP Facility Claim and all other Cash distributions that Debtor is
required to make on or about the Effective Date under the terms of the Plan.
1.45. Exit Facility Lender means Congress Financial
Corporation (Florida).
1.46. FBCA means the Business Corporation Act of the State
of Florida, as amended from time to time.
1.47. Final Order means an order or judgment of the
Bankruptcy Court entered by the Clerk of the Bankruptcy Court on the docket in
the Chapter 11 Case, which has not been reversed, vacated, or stayed and as to
which (a) the time to appeal, petition for certiorari, or move for a new trial,
reargument, or rehearing has expired and as to which no appeal, petition for
certiorari or other proceedings for a new trial, reargument, or rehearing shall
then be pending, or (b) if an appeal, writ of certiorari, new trial, reargument,
or rehearing thereof has been sought, such order or judgment of the Bankruptcy
Court shall have been affirmed by the highest court to which such order was
appealed, or certiorari shall have been denied or a new trial, reargument or
rehearing shall have been denied or resulted in no modification of such order,
and the time to take any further appeal, petition for certiorari or move for a
new trial, reargument or rehearing shall have expired, provided, however, that
the possibility that a motion under Rule 60 of the Federal Rules of Civil
Procedure, or any analogous rule under the Bankruptcy Rules, may be filed
relating to such order, shall not cause such order not to be a Final Order.
1.48. Financing Agreement means the Financing Agreement
between the Debtor and the DIP Lender entered into pursuant to the Financing
Orders.
5
1.49. Financing Orders means the Amended Interim Order
Granting Motion Authorizing Post-Petition Financing, Granting Security Interests
and According Super-Priority Administrative Claims Status Pursuant to 11 U.S.C.
Section 364(c) by Reptron Electronics, Inc., dated October 31, 2003, as amended
and the Final Order Authorizing Post-Petition Financing, Granting Security
Interests and According Super-Priority Administrative Claims Status Pursuant to
11 U.S.C. Section 364(c) by Reptron Electronics, Inc., dated November 19, 2003,
as amended.
1.50. Gaylord Facility Claim means all amounts owing under
the $361,000 debenture dated July 5, 1988 between Reptron as borrower and by
Harris Trust of New York as Trustee for the Northeast Michigan Development
Company guaranteed by the Small Business Administration and secured by a Lien on
the facility owned by the Debtor in Gaylord, Michigan and certain identified
personal property located on the premises.
1.51. General Unsecured Claim means any Claim against the
Debtor which is not an Administrative Expense Claim, Priority Tax Claim, Other
Priority Claim, Secured Claim, Miscellaneous Secured Claim, Gaylord Facility
Claim, Hibbing Facility Claim, Tampa Facility Claim, Transamerica Claim or a
Trade Vendor Claim.
1.52. General Unsecured Claim Distribution means 95% of the
New Issued Common Stock and 100% of the New Notes.
1.53. Hartford Letter of Credit means the letter of credit
caused to be issued for the benefit of The Hartford by the DIP Lender pursuant
to the third amendment to Financing Agreement as approved by the Bankruptcy
Court.
1.54. Hibbing Facility Claim means all amounts owing under
the contract for deed dated April 1, 2002 between Reptron as buyer and the State
of Minnesota secured by a lien on the facility owned by the Debtor in Hibbing,
Minnesota.
1.55. Initial Distribution Date means the Effective Date or
as soon as thereafter as the Debtor, in consultation with the Creditors
Committee determine to make the first distribution under the Plan.
1.56. Intercreditor Agreement means that certain
intercreditor agreement, annexed hereto as Exhibit G, subject to modification by
the Debtor with the written consent of the Creditors Committee prior to the
Confirmation Date, by and between the New Notes Indenture Trustee and the
lender(s) under the Exit Facility, effective on the Effective Date.
1.57. Interest means the legal, equitable, contractual and
other rights of any person or entity with respect to any capital stock or other
ownership interest in the Debtor, whether or not transferable, and any option,
warrant or right to purchase, sell, or subscribe for an ownership interest or
other equity security in the Debtor.
1.58. Lane means, Leigh Lane, the Debtor's former Corporate
Credit Manager as of September 30, 2003. She is currently the Corporate
Secretary and a member of the Board of Directors.
6
1.59. Lien means any lien, claim, right, interest or charge
or encumbrance against or upon or other interest in property, the purpose of
which is to secure payment of a debt or performance of an obligation.
1.60. Miscellaneous Secured Claim means a Secured Claim
other than the Transamerica Claim, the Tampa Facility Claim, the Hibbing
Facility Claim and the Gaylord Facility Claim.
1.61. Musto Jr. means, Michael Musto Jr., who ceased being
employed by the Debtor on June 10, 2003.
1.62. Musto Sr. means, Michael Musto Sr., the Debtor's
Chief Executive Officer.
1.63. New Common Stock means that Common Stock, par value
$0.01 per share of Reorganized Debtor, to be issued pursuant to the terms of the
Plan.
1.64. New Indenture means that Indenture by and between
Reorganized Debtor and the New Notes Indenture Trustee, which Indenture shall be
in substantially the form annexed hereto as Exhibit F and subject to
modification by the Debtor with the written consent of the Creditors Committee
prior to the Confirmation Date.
1.65. New Issued Common Stock means those 5,000,000 shares
of New Common Stock of Reorganized Debtor to be issued as of the Initial
Distribution Date pursuant to Section 7.1 of the Plan.
1.66. New Notes means those notes issued by the Reorganized
Debtor in an aggregate amount of the sum of $30 million which shall be issued by
the Reorganized Debtor under the New Indenture on the Initial Distribution Date
in accordance with the terms of this Plan and the Intercreditor Agreement.
1.67. New Notes Indenture Trustee means the entity to be
selected by the Creditors Committee prior to the Confirmation Date to serve as
the indenture trustee for the New Notes.
1.68. Objection Deadline means the latest to occur of (i)
one hundred and eighty (180) days after the Effective Date (or such other date
as has been ordered by the Bankruptcy Court), or (ii) sixty (60) days after a
Claim is deemed timely filed and served on counsel for both the Debtor and the
Creditors Committee.
1.69. Old Notes means the 6 3/4% Convertible Subordinated
Notes due 2004 issued by the Debtor under the Old Notes Indenture.
1.70. Old Notes Indenture means that certain Indenture,
dated as of August 4, 1997, by and between Reptron and the Old Notes Indenture
Trustee relating to the Old Notes.
1.71. Old Notes Indenture Trustee means U.S. Bank as
Indenture Trustee pursuant to the Old Notes Indenture, successor to Reliance
Trust Company.
7
1.72. Other Equity Interest means any interest in the
Debtor other than Common Equity Interests including but not limited to any
option, warrant or right, contractual or otherwise, to acquire a Common Equity
Interest plus any claim of a holder of an interest subject to subordination
under section 510(b) of the Bankruptcy Code as of the Petition Date.
1.73. Other Priority Claim means any Claim other than an
Administrative Expense Claim or a Priority Tax Claim, entitled to priority in
payment under section 507(a) of the Bankruptcy Code.
1.74. Petition Date means October 28, 2003, the date on
which the Debtor commenced the Chapter 11 Case.
1.75. Plan means the Debtor's Modified Second Amended Plan
of Reorganization under Chapter 11 of the Bankruptcy Code dated as of December
17, 2003, including, without limitation, the exhibits and schedules hereto, as
the same may be amended or modified from time to time in accordance with the
provisions of the Bankruptcy Code and the terms hereof.
1.76. Plante means Paul Plante, the Debtor's President and
Chief Operating Officer.
1.77. Plante Employment Contract means the employment
contract to be entered into by the Reorganized Debtor and Plante, as of the
Effective Date, with the written consent of the Creditors Committee prior to the
Confirmation Date.
1.78. Priority Tax Claim means any Claim of a governmental
unit of the kind entitled to priority in payment as specified in sections 502(i)
and 507(a)(8) of the Bankruptcy Code.
1.79. Professional means any professional employed in the
Chapter 11 Case pursuant to section 327 or 1103 of the Bankruptcy Code or
otherwise and the professionals seeking compensation or reimbursement of
expenses in connection with the Chapter 11 Case pursuant to sections 327, 328,
330, 331, 503(b), or 1103 of the Bankruptcy Code.
1.80. Professional Claims Reserve means the Cash reserved
on the Effective Date in accordance with Section 8.3 of the Plan to be held in a
segregated account to be used solely for the payment of Professional Fee Claims
in accordance with the terms of the Plan.
1.81. Professional Fee Claims means a claim of a
Professional for compensation or reimbursement of costs and expenses relating to
services incurred after the Petition Date and prior to the Effective Date.
1.82. Ratable Portion means, with reference to any
distribution on account of any Claim or Equity Interest in any Class, a
distribution equal in amount to the ratio (expressed as a percentage) that the
amount of such Claim or number of shares evidencing such Equity Interest, as
applicable, bears to the aggregate amount of Claims or aggregate number of
outstanding shares of Interests in the same Class.
8
1.83. Registration Rights Agreement means the registration
rights agreement relating to the New Common Stock and New Notes distributed
pursuant to the Plan, to be entered into as of the Effective Date by Reorganized
Debtor, for the benefit of certain holders of shares of New Common Stock and New
Notes, which agreement shall be in substantially the form of, and containing
provisions not less favorable than, the form of agreement annexed hereto as
Exhibit D and subject to modification by the Debtor with the written consent of
the Creditors Committee prior to the Confirmation Date.
1.84. Reinstated means with respect to a Claim (i) the
Debtor shall cure any default with respect to such Claim that occurred before or
after the Petition Date, (ii) the maturity of such Claim shall be Reinstated as
such maturity existed before any such default, (iii) the Holder of such Claim
shall be compensated for any damages incurred as a result of any reasonable
reliance by such holder on any right to accelerate its Claim, and (iv) the
legal, equitable and contractual rights of such holder will not otherwise be
altered.
1.85. Rejection Claim means any Claim against the Debtor
arising from the rejection of any executory contract or unexpired lease,
including any Claim of (a) a lessor for damages resulting from the rejection of
a lease of real property as any such claim shall be calculated in accordance
with section 502(b)(6) of the Bankruptcy Code, or (b) an employee for damages
resulting from the rejection of an employment agreement as any such Claim shall
be calculated in accordance with section 502(b)(7) of the Bankruptcy Code.
1.86. Released Parties means the Debtor, the Reorganized
Debtor, the Creditors Committee, the Ad Hoc Committee, the Old Notes Indenture
Trustee, and the Disbursing Agent, and each of their respective present or
former members, partners, officers, directors, employees, advisors, attorneys,
representatives, financial advisors, investment bankers or agents in their
capacities as such and any of such parties' successors and assigns but excluding
Ernst & Young Corporate Finance, LLC.
1.87. Releasor Parties shall have the meaning set forth in
Section 12.7 hereof.
1.88. Reorganized Debtor means the Debtor as it will be
reorganized as of the Effective Date in accordance with the Plan and the
Confirmation Order.
1.89. Reptron means Reptron Electronics, Inc., a Florida
corporation and a Debtor in the Chapter 11 Case.
1.90. Schedules means the schedules of assets and
liabilities and the statement of financial affairs filed by the Debtor under
section 521 of the Bankruptcy Code, Bankruptcy Rule 1007 and the Official
Bankruptcy Forms of the Bankruptcy Rules as such schedules and statements have
been or may be supplemented or amended through the Confirmation Date.
1.91. Secured Claim means a Claim secured by a Lien on
Collateral but only to the extent of the value of such Collateral (i) as set
forth in the Plan, (ii) as agreed to by the holder of such Claim and the Debtor,
or (iii) as determined by a Final Order in accordance with section 506(a) of the
Bankruptcy Code or, in the event that such Claim is subject to setoff under
section 553 of the Bankruptcy Code, to the extent of such setoff. That portion,
if any, of any secured
9
claim which exceeds the value of the Collateral securing such Claim shall be a
General Unsecured Claim unless otherwise provided in the Plan.
1.92. Securities Act means the Securities Act of 1933, as
amended.
1.93. Security Agreement means that certain security
agreement, annexed hereto as Exhibit G, subject to modification by the Debtor
with the written consent of the Creditors Committee prior to the Confirmation
Date, by and between the Reorganized Debtor and the New Notes Indenture Trustee,
securing a Lien for the benefit of the holders of New Notes on substantially all
of the Reorganized Debtor's assets, provided, however, that (i) such Lien will
be subordinate to any Lien that may exist with respect to the Exit Facility or
Secured Claims and (ii) such Lien will be granted as to particular collateral
only to the extent permitted by the Exit Facility and to the extent it does not
impair or cause a default under the terms of a Secured Claim.
1.94. Stock Option Plan means the Stock Option Plan, which
shall be in substantially the form annexed hereto as Exhibit C, subject to
modification by the Debtor with the written consent of the Creditors Committee
prior to the Confirmation Date, and which shall be subject to modification by
the Debtor with the written consent of the Creditors Committee prior to the
Confirmation Date.
1.95. Tampa Facility Claim means all amounts owing under
the $4,000,000 Promissory Note dated February 29, 2000 between Reptron as
borrower and General Electric Business Assets Funding Corporation as lender
secured by a Lien on the facility owned by the Debtor in Tampa, Florida. The
Tampa Facility Claim Loan documents shall be modified to allow for a junior lien
on the facility to be granted the New Indenture Trustee.
1.96. Trade Vendor Claims means all of the Allowed Claims
of the Debtor's trade suppliers listed on the attached Exhibit J.
1.97. Transamerica Claim means all amounts owing under the
Master Lease Agreement dated December 18, 2000 between Reptron as lessee and
Transamerica Equipment Financial Services Corporation as assignee of Celtic
Leasing Corp as lessor.
B. INTERPRETATION, APPLICATION OF DEFINITIONS AND RULES
OF CONSTRUCTION.
Unless otherwise specified, all section, schedule, or exhibit
references in the Plan are to the respective section in, article of, or schedule
or exhibit to, the Plan, as the same may be amended, waived, or modified from
time-to-time. The words "herein," "hereof," "hereto," "hereunder" and other
words of similar import refer to the Plan as a whole and not to any particular
section, subsection, or clause contained in the Plan. A term used herein that is
not defined herein shall have the meaning assigned to that term in the
Bankruptcy Code. The rules of construction contained in section 102 of the
Bankruptcy Code shall apply to the construction of the Plan. The headings in the
Plan are for convenience of reference only and shall not limit or otherwise
affect the provisions hereof.
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ARTICLE II PROVISIONS FOR PAYMENT OF ADMINISTRATIVE EXPENSE CLAIMS,
DIP FACILITY CLAIM AND PRIORITY TAX CLAIMS
2.1. Administrative Expense Claims. Except as otherwise
provided herein, and subject to the DIP Lender's Superpriority Administrative
Expense Claim under the DIP Facility, on the Effective Date, or as soon as
practicable thereafter, except to the extent that a holder of an Allowed
Administrative Expense Claim and the Debtor agree to a different treatment of
such Allowed Administrative Expense Claim, the Reorganized Debtor shall pay to
each holder of an Allowed Administrative Expense Claim, Cash in an amount equal
to such Allowed Administrative Expense Claim, provided, however, that Allowed
Administrative Expense Claims representing liabilities incurred in the ordinary
course of business by the Debtor or liabilities arising under loans or advances
to or other obligations incurred by the Debtor, whether or not incurred in the
ordinary course of business, shall be assumed and paid by the Reorganized Debtor
in the ordinary course of business, consistent with past practice and in
accordance with the terms and subject to the conditions of any agreements
governing, instruments evidencing or other documents relating to such
transactions.
2.2. DIP Facility Claim. On the Effective Date, the DIP
Facility Claim will be paid in full in Cash, and the DIP Lenders will release
all Liens, Claims and encumbrances against assets of Debtor arising from or
related to the DIP Facility, except the DIP Lender's lien on and possession of
cash collateral to secure the Debtor's obligations pursuant to the Third
Amendment to the DIP Facility under the Hartford Letter of Credit to the extent
such obligations continue beyond the Effective Date.
2.3. Priority Tax Claim. On the Effective Date, or as soon
as practicable thereafter, except to the extent that a holder of an Allowed
Priority Tax Claim agrees to a different treatment of such Allowed Priority Tax
Claim, the Reorganized Debtor shall, at its option, pay to each holder of an
Allowed Priority Tax Claim that is due and payable on or before the Effective
Date either (a) Cash in an amount equal to such Allowed Priority Tax Claim, or
(b) deferred annual cash payments over a period not exceeding six (6) years
after the date of assessment of such claim, of a value, as of the Effective
Date, equal to the Allowed amount of such Claim. Allowed Priority Tax Claims
that are not due and payable on or before the Effective Date shall be paid in
the ordinary course of business in accordance with the terms thereof.
ARTICLE III CLASSIFICATION OF CLAIMS AGAINST AND INTERESTS IN THE
DEBTOR.
3.1. Class 1--Other Priority Claims. This Class shall be
comprised of all Other Priority Claims.
3.2. Class 2A - Gaylord Facility Claim. This sub-Class
shall be comprised of the Gaylord Facility Claim.
3.3. Class 2B - Hibbing Facility Claim. This sub-Class
shall be comprised of the Hibbing Facility Claim.
3.4. Class 2C - Tampa Facility Claim. This sub-Class shall
be comprised of the Tampa Facility Claim.
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3.5. Class 2D - Transamerica Claim. This sub-Class shall
be comprised of the Transamerica Claim.
3.6. Class 2E - Miscellaneous Secured Claims. This
sub-Class shall be comprised of all Miscellaneous Secured Claims.
3.7. Class 2F - DIP Lender Letter of Credit Claim. This
sub-class shall be comprised of the DIP Lender Letter of Credit Claim.
3.8. Class 3 -Trade Vendor Claims. This Class shall be
comprised of all Trade Vendor Claims.
3.9. Class 4 - General Unsecured Claims. This Class shall
be comprised of all General Unsecured Claims other than Trade Vendor Claims.
3.10. Class 5 - Common Equity Interests. This Class shall
be comprised of all Common Equity Interests.
3.11. Class 6 - Other Equity Interests. This Class shall be
comprised of all Other Equity Interests.
ARTICLE IV PROVISIONS FOR TREATMENT OF CLAIMS AND INITIAL
DISTRIBUTION DATE INTERESTS
4.1. Other Priority Claims (Class 1). On the Initial
Distribution Date, or as soon as practicable thereafter, except to the extent
that the Debtor and a holder of an Allowed Other Priority Claim agree to a
different treatment of such Allowed Other Priority Claim, or except to the
extent that such Claim is not due and payable on or before the Initial
Distribution Date, each Allowed Other Priority Claim shall be paid in full, in
cash, and shall be considered unimpaired in accordance with section 1124 of the
Bankruptcy Code. All Allowed Other Priority Claims which are not due and payable
on or before the Initial Distribution Date shall be paid in the ordinary course
of business in accordance with the terms thereof.
4.2. Gaylord Facility Claim (Class 2A). The Gaylord
Facility Claim shall be Reinstated as of the Effective Date.
4.3. Hibbing Facility Claim (Class 2B). The Hibbing
Facility Claim shall be Reinstated as of the Effective Date.
4.4. Tampa Facility Claim (Class 2C). The Tampa Facility
Claim shall be Reinstated as of the Effective Date. The Tampa Facility Claim
Loan documents shall be modified to allow for a junior lien on the facility to
be granted to the New Indenture Trustee.
4.5. Transamerica Claim (Class 2D). The Transamerica Claim
shall be Reinstated as of the Effective Date.
4.6. Miscellaneous Secured Claims (Class 2E). Each holder
of an Allowed Miscellaneous Secured Claim shall, in full satisfaction,
settlement, release, and discharge of and
12
in exchange for such Allowed Miscellaneous Secured Claim, in the sole discretion
of the Reorganized Debtor, be entitled to any one or a combination of any of the
following: (i) on the Effective Date, receive Cash in an amount equal to such
Allowed Miscellaneous Secured Claim, (ii) receive deferred Cash payments
totaling at least the allowed amount of such Allowed Miscellaneous Secured
Claim, of a value, as of the Effective Date, of at least the value of such
holder's interest in the Debtor estate's interest in the Collateral securing the
Allowed Miscellaneous Secured Claim, (iii) upon abandonment by the Reorganized
Debtor, receive all or a portion of the Collateral securing such holder's
Allowed Miscellaneous Secured Claim, (iv) receive payments or Liens amounting to
the indubitable equivalent of the value of such holder's interest in the Debtor
estate's interest in the Collateral securing the Allowed Miscellaneous Secured
Claim, or (v) receive such other treatment as the Reorganized Debtor and such
holder shall have agreed upon in writing.
4.7. DIP Lender Letter of Credit Claim (Class 2F). The DIP
Lender shall retain its lien in and possession of cash collateral to secure the
Debtor's obligations to the DIP Lender under the Hartford Letter of Credit,
pursuant to the terms of the Third Amendment to Financing Agreement, but only to
the extent such obligations of the Debtor continue beyond the Effective Date.
4.8. Trade Vendor Claims (Class 3). On the Initial
Distribution Date or as soon as practicable thereafter, each holder of an
Allowed Trade Vendor Claim shall receive Cash in an amount equal to such Allowed
Trade Vendor Claim plus interest, to the extent that the agreed terms of a Trade
Vendor's contractual relationship with the Debtor entitles such Trade Vendor to
collect interest on such amounts. If the amount of the Trade Vendor Claim is not
owed in the ordinary course of business, the Trade Vendor Claim will be paid in
the ordinary course of business, or according to other payment terms as agreed
between the Debtor and holder of the Trade Vendor Claim, but in any event such
payment shall not be made later than ninety days after the Initial Distribution
Date.
4.9. General Unsecured Claims (Class 4). On the Initial
Distribution Date, or as soon as practicable thereafter, each holder of an
Allowed General Unsecured Claim shall receive, in full satisfaction of such
Allowed General Unsecured Claim its Ratable Portion of the General Unsecured
Claim Distribution. However, the holder of an Allowed General Unsecured Claim
may elect to be treated as a Class 3 Trade Vendor Claim, provided such holder
agrees to limit the total payment on its claim to $500.00.
4.10. Common Equity Interests (Class 5). On the Initial
Distribution Date, Common Equity Interests shall be cancelled and on the Initial
Distribution Date, or as soon as practicable thereafter, each holder of an
Allowed Common Equity Interest shall receive, in full satisfaction of such
Allowed Common Equity Interest its Ratable Portion of the Equity Interest
Distribution.
4.11. Other Equity Interests (Class 6). On the Effective
Date, Other Equity Interests shall be cancelled and holders of Other Equity
Interests shall receive no distribution under the Plan.
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ARTICLE V IDENTIFICATION OF CLASSES OF CLAIMS AND INTERESTS IMPAIRED;
ACCEPTANCE OR REJECTION OF THE PLAN
5.1. Unimpaired Classes. Each of Class 1 (Other Priority
Claims), Class 2A (Gaylord Facility Claim), Class 2B (Hibbing Facility Claim),
Class 2C (Tampa Facility Claim), Class 2D (Transamerica Claim), Class 2E
(Miscellaneous Secured Claims) Class 2F (DIP Lender Letter of Credit Claim), is
unimpaired by the Plan. The holders of Claims in each of the foregoing Classes
are conclusively presumed to have accepted the Plan under section 1126(f) of the
Bankruptcy Code and are not entitled to vote to accept or reject the Plan.
5.2. Impaired Classes. Each of Class 3 (Trade Vendor
Claims), Class 4 (General Unsecured Claims) and Class 5 (Common Equity
Interests) is impaired by the Plan. The holders of Claims and Interests in the
foregoing Classes are entitled to vote to accept or reject the Plan.
5.3. Classes Deemed to Reject. Class 6 (Other Equity
Interests) is impaired by the Plan, and holders of Class 6 Interests are
conclusively presumed to have rejected the Plan. Pursuant to section 1126(g) of
the Bankruptcy Code, holders of Interests in Class 6 and are not entitled to
vote to accept or reject the Plan.
ARTICLE VI CRAMDOWN
6.1 With respect to Class 6 and any other Class that does
not vote to accept the Plan, the Debtor shall seek confirmation of the Plan
under section 1129(b) of the Bankruptcy Code.
ARTICLE VII MEANS OF IMPLEMENTATION
7.1. Distributions. On the Initial Distribution Date, the
Reorganized Debtor shall make or cause to be made to the holders of Allowed
Claims and Allowed Equity Interest the distributions of New Issued Common Stock,
New Notes and Cash as provided in Article 4 hereof. Disputed Claims and Disputed
Interests shall be resolved in accordance with Article 9 hereof and, if a
Disputed Claim or a Disputed Interest becomes an Allowed Claim or and Allowed
Interest by Final Order, distributions shall be made on account of such Claim in
accordance with Article 8 hereof. The issuance of shares of New Issued Common
Stock and New Notes to Holders of Allowed Class 4 Claims and Allowed Class 5
Common Equity Interests shall be exempt from registration under the Securities
Act pursuant to Section 1145 of the Bankruptcy Code. However, to the extent that
Section 1145 of the Bankruptcy Code is inapplicable, the Reorganized Debtor and
certain holders of New Common Stock and New Notes, who may be deemed to be
"underwriters" or "affiliates" for purposes of the Securities Act, shall enter
into the Registration Rights Agreement on or prior to the Effective Date.
14
7.2. Authorization to Issue New Securities. The issuance
of the following securities by the Reorganized Debtor is authorized without
further act or action under applicable law, regulation, order or rule: (a)
5,000,000 shares of New Common Stock; and (b) $30,000,000 in principal amount of
the New Notes; and (c) the shares and options to be issued under the Stock
Option Plan. Pursuant to the terms of the Plan, the Reorganized Debtor will
issue and distribute ninety-five percent (95%) of 5,000,000 shares of New Issued
Common Stock and $30,000,000 face amount of New Notes to holders of Allowed
Class 4 General Unsecured Claims and five percent (5%) of the 5,000,000 shares
of New Issued Common Stock to Allowed Class 5 Common Equity Interests on the
Initial Distribution Date and any subsequent distribution date(s).
The shares of New Issued Common Stock issued under the Plan
are subject to dilution by the exercise of the options to be issued under the
Stock Incentive Plan.
7.3. New Indenture. Prior to the Effective Date,
Reorganized Debtor and the New Indenture Trustee shall execute the New Indenture
and Security Agreement, and such agreements shall become effective on the
Effective Date. The New Notes to be issued under the New Indenture shall be
secured by a Lien pursuant to the Security Agreement.
7.4. Issuance of New Securities. The Amended Certificate
of Incorporation shall initially authorize the Reorganized Debtor to issue a
total of up to 50,000,000 shares of New Common Stock.
7.5. Public Company Status. At the absolute and sole
discretion of the Board of Directors of Reorganized Debtor, after the Effective
Date the Debtor shall use its reasonable efforts to cause the shares of New
Common Stock to be listed on a national securities exchange or quoted in the
national market, smallcap market or OTC bulletin board system of the National
Association of Securities Dealers' Automated Quotation System.
7.6. Cancellation of Existing Securities and Agreements.
On the Initial Distribution Date, except as otherwise provided for herein, (i)
the Old Notes, Interests and any other note, bond, indenture, or other
instrument or document evidencing or creating any indebtedness or obligation of
the Debtor, except such notes or other instruments evidencing indebtedness or
obligations of the Debtor that are Reinstated or Assumed under the Plan, shall
be canceled and have no effect other than the right to participate in the
distributions, if any, provided under the Plan in respect of Claims and
Interests as expressly provided with respect to the applicable Claims or
Interests in Article 4 of the Plan, and (ii) the obligations of the Debtor under
any agreements, indentures or certificates of designations governing the Old
Notes or Interests and any other note, bond, indenture or other instrument or
document evidencing or creating any indebtedness or obligation of the Debtor,
except such notes or other instruments evidencing indebtedness or obligations of
the Debtor that are Reinstated under the Plan, as the case may be, shall be
discharged; provided, however, that the Old Notes Indenture shall continue in
effect solely for the purposes of (x) allowing the Old Notes Indenture Trustee,
to make the distributions to be made on account of the Old Notes under the Plan
as provided in Article IV hereof and (y) permitting the Old Notes Indenture
Trustee to maintain any rights or liens it may have for fees, costs and expenses
under such indenture or other agreement; provided, further, that the provisions
of clause (y) of this paragraph shall not affect the discharge of the Debtor's
15
liabilities under the Bankruptcy Code and the Confirmation Order or result in
any expense or liability to the Reorganized Debtor. The Reorganized Debtor shall
not have any obligations to the Old Notes Indenture Trustee (or to any
Disbursing Agent replacing such Old Notes Indenture Trustee) for any fees, costs
or expenses, except as expressly provided herein; provided, however, that
nothing herein shall preclude the Old Notes Indenture Trustee (or any Disbursing
Agent replacing such Old Notes Indenture Trustee) from being paid or reimbursed
for pre-Petition Date and post-Petition Date fees, costs and expenses from the
distributions until payment in full of such fees, costs or expenses that are
governed by the Old Notes Indenture in accordance with the provisions set forth
therein.
7.7. Amended Certificate of Incorporation. On the
Effective Date or as soon as practicable thereafter, the Reorganized Debtor
shall file with the Secretary of State of Florida, in accordance with the FBCA,
the Amended Certificate of Incorporation. On the Effective Date, the Amended
Certificate of Incorporation shall automatically become effective, and all other
matters provided under this Plan involving the corporate structure of the
Reorganized Debtor, or corporate action by it, shall be deemed to have occurred
and shall be in effect from and after the Effective Date pursuant to the FBCA
without any requirement of further action by the stockholders or the directors
of the Reorganized Debtor, including, without limitation, the approval of the
Stock Option Plan.
7.8. Stock Option Plan. The Reorganized Debtor is entitled
to adopt the Stock Option Plan without the necessity of shareholder approval
required under any applicable law, including, without limitations, section
162(m) of the Internal Revenue Code of 1986, as amended.
7.9. Board of Directors of Reorganized Debtor. The board
of directors of the Debtor will continue to serve in such capacities until and
through the Effective Date. As of the Effective Date, the new Board of Directors
of Reorganized Debtor initially shall consist of Mark Holliday, Michael L.
Musto, Sr., Paul Plante, Hal Purkey, Steven Scheiwe and Neil Subin. On the
Effective Date, the operation of the Reorganized Debtor shall become the general
responsibility of the Board of Directors of Reorganized Debtor subject to, and
in accordance with, the Amended Certificate of Incorporation and Amended
By-Laws. The term of the directors of the Debtor immediately prior to the
Effective Date shall expire on the Effective Date and shall be replaced by the
Board of Directors of Reorganized Debtor.
7.10. Continued Corporate Existence. The Debtor shall
continue to exist after the Effective Date as a separate corporate entity, in
accordance with Florida law and pursuant to the Amended Certificate of
Incorporation and Amended By-Laws. The Amended Certificate of Incorporation and
Amended By-Laws shall satisfy the requirements of the Plan and the Bankruptcy
Code and shall include, among other things, pursuant to section 1123(a)(6) of
the Bankruptcy Code, a provision prohibiting the issuance of non-voting equity
securities.
7.11. Exit Facility. On the Effective Date, the Reorganized
Debtor shall enter into the Exit Facility, all or a portion of which shall be
used to pay the DIP Facility Claim and the other Cash distributions that the
Debtor is required to make on or about the Effective Date under the terms of the
Plan, and execute and deliver to Intercreditor Agreement acceptable to the Exit
Facility Lender.
16
7.12. Plante Employment Contract. On the Effective Date,
the Reorganized Debtor shall enter into the Plante Employment Contract with
Plante. Pursuant to the Plan, Plante's current employment contract shall be
rejected and Plante shall not be entitled to any distribution or other recovery
under this Plan or otherwise for any damages Plante suffers as a result of the
rejection of such contract.
7.13. Musto Sr. Termination. On the Effective Date, Musto
Sr. shall be terminated from employment with the Debtor and Musto's current
employment contract shall be rejected under this Plan. In exchange, Musto Sr.
will receive a $400,000 severance payment and will continue to have rights to
participate under the Reorganized Debtor's health insurance plan until age 65 at
Musto Sr.'s health insurance plan's contribution levels as of the Effective
Date. Other than the foregoing, Musto Sr. shall not be entitled to any
distribution or other recovery under this Plan or otherwise for any claim
ultimately Allowed, if any.
7.14. Musto Jr. Termination. Musto Jr. shall not be
entitled to any recovery under this Plan or otherwise resulting from any
employment or severance agreement between him and the Debtor and any such
agreements shall be rejected as of the Effective Date if not terminated earlier.
In consideration of the foregoing, the Reorganized Debtor shall release Musto
Jr. from any non-compete agreements he had with the Debtor.
7.15. Lane Termination. Lane shall not be entitled to any
recovery under this Plan or otherwise resulting from any employment or severance
agreement between her and the Debtor and any such agreements shall be rejected
as of the Effective Date if not terminated earlier. In consideration of the
foregoing, the Reorganized Debtor shall release Lane from any non-compete
agreements she had with the Debtor.
ARTICLE VIII PROVISIONS GOVERNING DISTRIBUTIONS
8.1. Date of Distributions. Unless otherwise provided
herein, any distributions and deliveries to be made hereunder shall be made on
the Initial Distribution Date. In the event that any payment or act under the
Plan is required to be made or performed on a date that is not a Business Day,
then the making of such payment or the performance of such act may be completed
on the next succeeding Business Day, but shall be deemed to have been completed
as of the required date.
8.2. Disbursing Agent. All distributions under the Plan
shall be made by the Reorganized Debtor as Disbursing Agent or such other entity
designated by the Reorganized Debtor as a Disbursing Agent, including, but not
limited to, the Old Notes Indenture Trustee, on the Initial Distribution Date. A
Disbursing Agent shall not be required to give any bond or surety or other
security for the performance of its duties unless otherwise ordered by the
Bankruptcy Court, and, in the event that a Disbursing Agent is so otherwise
ordered, all costs and expenses of procuring any such bond or surety shall be
borne by the Reorganized Debtor.
8.3. Compensation of Professionals. Not later than five
(5) business days prior to the Confirmation Date, each Professional seeking
compensation or reimbursement under section 327, 328, 330, 331, 503(b), or 1103
of the Bankruptcy Code shall provide the Debtor and the Creditors Committee with
a written estimate of the amount of its requested compensation and
17
reimbursement through the Effective Date. On the Effective Date, the Debtor
shall establish the Professional Claims Reserve in an amount equal to the
aggregate amount of such estimated compensation or reimbursements, unless
otherwise previously paid by the Debtor. The funds in the Professional Claims
Reserve shall be used solely for the payment of Allowed Professional Fee Claims.
If a Professional fails to submit an estimate of its fees in accordance with
this Section 8.3, the Reorganized Debtor shall not pay such Professional's
Allowed Professional Fee Claim from the Professional Claims Reserve but rather
shall pay such claim from any other source available to the Reorganized Debtor.
8.4. Professional Fee Applications. Each Professional
retained or requesting compensation in the Chapter 11 Case pursuant to sections
327, 328, 330, 331, 503(b), or 1103 of the Bankruptcy Code shall be required to
file and serve an application for allowance of final compensation and
reimbursement of expenses in the Chapter 11 Case on or before ten (10) days
after the Effective Date. Objections to any application made under this section
8.3 shall be filed on or before twenty (20) days after the Effective Date and
served on the Debtor and the Creditors Committee, the United States Trustee and
the requesting Professional. If no objection is filed and served with respect to
a Professional's request for compensation and reimbursement of expenses, such
Professional Fee Claim shall be paid by the Reorganized Debtor on the
twenty-fourth (24th) day after the Effective Date. Otherwise, such Professional
Fee Claim shall be paid by the Reorganized Debtor at such time as the objection
is resolved or settled by Final Order of the Bankruptcy Court.
8.5. Substantial Contribution Claims. The Debtor and the
Creditors Committee acknowledge that the Ad Hoc Committee and its counsel,
Andrews Kurth LLP, have made a substantial contribution in this Chapter 11 Case.
The Debtor and the Creditors Committee will not object to the reimbursement of
the reasonable expenses of members of the Ad Hoc Committee (other than fees and
expenses incurred by professionals retained by individual members of the Ad Hoc
Committee) and the reasonable fees and expenses of Andrews Kurth LLP as counsel
for the Ad Hoc Committee incurred during the period commencing on Petition Date
to the date the Creditors Committee was appointed by the United States Trustee.
8.6. Delivery of Distributions. All distributions to any
holder of an Allowed Claim or Allowed Common Equity Interest shall be made (i)
at the address of such holder as set forth on the Schedules filed with the
Bankruptcy Court or on the books and records of the Debtor or its agents, or
(ii) in the case of distributions to holders of Old Notes, at the address
contained in the official records of the Old Notes Indenture Trustee, unless the
Debtor or Reorganized Debtor, as applicable, has been notified in writing of a
change of address, including, without limitation, by the filing of a proof of
claim or proof of interest by such holder that contains an address for such
holder different from the address reflected on such Schedules for such holder.
In the event that any distribution to any holder is returned as undeliverable,
the Disbursing Agent shall use reasonable efforts to determine the current
address of such holder, but no distribution to such holder shall be made unless
and until the Disbursing Agent has determined the then current address of such
holder, at which time such distribution shall be made to such holder without
interest, provided, however, that such distributions shall be deemed unclaimed
property under section 347(b) of the Bankruptcy Code at the expiration of ninety
(90) days from the Initial Distribution Date. After such date, all unclaimed
property or interest in property shall revert to
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the Reorganized Debtor, and the Claim of any other holder to such property or
interest in property shall be discharged and forever barred.
8.7. Manner of Payment Under the Plan. At the option of
the Disbursing Agent, any Cash payment to be made hereunder may be made by a
check or wire transfer or as otherwise required or provided in applicable
agreements.
8.8. Fractional Shares and Notes. No fractional shares of
New Common Stock or New Notes shall be distributed under the Plan. For purposes
of distribution, fractional shares of New Common Stock or New Notes shall be
rounded down to the previous whole number.
8.9. Setoffs and Recoupment. The Debtor may, but shall not
be required to, setoff against, or recoup from, any Claim and the distributions
to be made pursuant to the Plan in respect of such Claim, any claims of any
nature whatsoever that the Debtor may have against the claimant, but neither the
failure to do so nor the allowance of any Claim hereunder shall constitute a
waiver or release by the Debtor of any such claim it may have against such
claimant.
8.10. Distributions After Effective Date. Distributions
made after the Effective Date to holders of Disputed Claims that are not Allowed
Claims as of the Effective Date but which later become Allowed Claims shall be
deemed to have been made on the Initial Distribution Date.
8.11. Rights and Powers of Disbursing Agent. The Disbursing
Agent shall be empowered to (i) effect all actions and execute all agreements,
instruments, and other documents necessary to perform its duties under the Plan,
(ii) make all distributions contemplated hereby, (iii) employ professionals to
represent it with respect to its responsibilities, and (iv) exercise such other
powers as may be vested in the Disbursing Agent by order of the Bankruptcy
Court, pursuant to the Plan, or as deemed by the Disbursing Agent to be
necessary and proper to implement the provisions hereof.
(A) Expenses Incurred on or After the Effective
Date. Except as otherwise ordered by the Bankruptcy Court, the amount
of any reasonable fees and expenses incurred by the Disbursing Agent on
or after the Effective Date (including, without limitation, taxes) and
any reasonable compensation and expense reimbursement claims
(including, without limitation, reasonable attorney fees and expenses)
made by the Disbursing Agent shall be paid in Cash by the Reorganized
Debtor in the ordinary course.
8.12. Old Notes Indenture Trustee's Fees and Expenses. The
Old Notes Indenture Trustee shall be entitled to payment directly from the
Reorganized Debtor on the Effective Date of all fees and reasonable expenses
incurred in accordance with the terms of the Old Notes Indenture and all
additional fees and expenses incurred as acting as Disbursing Agent for the Old
Notes up to a maximum amount of $35,000. These amounts will be paid directly to
the Old Notes Indenture Trustee by the Debtor or Reorganized Debtor on the
Effective Date, or as soon as practicable thereafter, without further order of
the Bankruptcy Court.
8.13. Record Date for Holders of Claims. As of the close of
business on the Initial Distribution Date, the transfer ledgers for the Old
Notes and the Common Equity Interests
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shall be closed and there shall be no further changes in the record holders of
such securities until after the distribution is made. The Debtor, Reorganized
Debtor, and the Disbursing Agent shall have no obligation to recognize any
transfer of Common Equity Interests, Old Notes or other Claims occurring after
the Initial Distribution Date and prior to the distribution and shall be
entitled instead to recognize and deal for all purposes with respect to such
distribution with only those holders of Old Notes, Common Equity Interests and
other Claims as of the close of business on the Initial Distribution Date. With
respect to any subsequent distributions, record holders of Old Notes and the
Common Equity Interests will have the ability to transfer Common Equity
Interests, Old Notes or other Claims.
8.14. Reserves. Before making any distributions under the
Plan, the Reorganized Debtor shall establish the following reserves:
(A) Disputed General Unsecured Claims. The
Reorganized Debtor shall hold in reserve the amount of New Issued
Common Stock and New Notes that would be required to be distributed
under the Plan on account of a General Unsecured Claim but for the fact
that such General Unsecured Claim is not an Allowed Claim, provided,
however, that at the time such General Unsecured Claim is disallowed in
whole or in part by Final Order, settlement or otherwise, the reserve
on account of such Claim for the disallowed amount thereof, shall be
distributed to holders of Allowed Class 4 General Unsecured Claims in
accordance with the terms of the Plan. Notwithstanding the foregoing,
$30 million of New Notes shall be distributed to holders of Old Notes
on the Effective Date or as soon as practicable thereafter. If a Claim
as to which an objection has been filed becomes, in whole or in part,
an Allowed Claim, the Reorganized Debtor shall distribute to the holder
thereof the amount to which it is entitled from the Disputed General
Unsecured Claims Reserve in accordance with the terms of the Plan.
(B) Disputed Equity Interest Reserve. The
Reorganized Debtor shall hold in reserve the amount of New Issued
Common Stock that would be required to be distributed under the Plan on
account of a Common Equity Interest but for the fact that such Common
Equity Interest is not an Allowed Common Equity Interest, provided,
however, that at the time such Common Equity Interest is disallowed in
whole or in part by Final Order, settlement or otherwise, the reserve
on account of such Common Equity Interest for the disallowed amount
thereof, shall be distributed to holders of Allowed Class 5 Common
Equity Interest in accordance with the terms of the Plan. If a Common
Equity Interest as to which an objection has been filed becomes, in
whole or in part, an Allowed Common Equity Interest, the Reorganized
Debtor shall distribute to the holder thereof the amount to which it is
entitled from the Disputed Equity Interest Reserve in accordance with
the terms of the Plan.
(C) Disputed Priority Claims Reserve. The
Disputed Priority Claims Reserve shall consist of the aggregate amount
of Administrative Expense Claims, Priority Tax Claims, and Other
Priority Claims that have not been paid or Allowed as at the
Confirmation Date. At such time as an Administrative Expense Claim,
Priority Tax Claim, or Other Priority Claim is disallowed in whole or
in part by Final Order, settlement or otherwise, the reserve on account
of such Claim for the disallowed amount thereof shall be transferred to
the Reorganized Debtor's operating account to be used by
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the Reorganized Debtor at its discretion in the ordinary course of
business. If an Administrative Expense Claim, Priority Tax Claim or
other priority Claim as to which an objection has been filed becomes,
in whole or in part, an Allowed Claim, the Reorganized Debtor shall
distribute to the holder thereof the amount to which it is entitled
from the Disputed Priority Claims Reserve in accordance with the terms
of the Plan. Any balance remaining in the Disputed Priority Claims
Reserve after all Allowed Administrative Expense Claims, Allowed
Priority Tax Claims, and Allowed Other Priority Claims have been paid
and the Chapter 11 Case are ready to be closed, shall be transferred to
the Reorganized Debtor's operating account to be used by the
Reorganized Debtor at its discretion in the ordinary course of
business.
8.15. Allocation Relating to Old Notes. All distributions
to holders of Old Notes shall be allocated first to the portion of each such
Claim representing the principal amount of the Old Notes and then, to the extent
the consideration exceeds such amount, to the remainder of such Claim.
ARTICLE IX PROCEDURES FOR TREATING DISPUTED CLAIMS UNDER THE PLAN
9.1. Disputed Claims. Except as to applications for
allowances of compensation and reimbursement of expenses under sections 330 and
503 of the Bankruptcy Code, the Debtor or Reorganized Debtor shall have the
exclusive right to make and file objections to Claims and Interests. All
objections shall be litigated to Final Order; provided, however, that the Debtor
or Reorganized Debtor shall have the authority to compromise, settle, otherwise
resolve, or withdraw any objections, without approval of the Bankruptcy Court.
Unless otherwise ordered by the Bankruptcy Court, the Debtor or Reorganized
Debtor shall file all objections to Claims (other than applications for
allowances of compensation and reimbursement of expenses) and Interests and
serve such objections upon the holders of such Claims and Interests as to which
the objection is made as soon as practicable, but in no event later than the
Objection Deadline.
9.2. No Distributions Pending Allowance. Notwithstanding
any other provision hereof, if any portion of a Claim is a Disputed Claim or any
portion of an Equity Interest is a Disputed Equity Interest, no payment or
distribution provided hereunder shall be made on account of such Claim or Equity
Interest unless and until such Disputed Claim or Disputed Equity Interest
becomes an Allowed Claim or an Allowed Equity Interest.
9.3. Distributions After Allowance. To the extent that a
Disputed Claim or Disputed Equity Interest ultimately becomes an Allowed Claim
or an Allowed Equity Interest, a distribution shall be made to the holder of
such Allowed Claim or Allowed Equity Interest in accordance with the provisions
of the Plan. As soon as practicable after the date that the order or judgment of
the Bankruptcy Court allowing any Disputed Claim or Disputed Equity Interest
becomes a Final Order, the Disbursing Agent shall provide to the holder of such
Allowed Claim or Allowed Equity Interest the distribution to which such holder
is entitled under the Plan.
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ARTICLE X PROVISIONS GOVERNING EXECUTORY CONTRACTS AND UNEXPIRED LEASES
10.1. Assumed Contracts and Leases. Except as otherwise
provided in the Plan or in any contract, instrument, release, indenture, or
other agreement or document entered into in connection with the Plan, as of the
Effective Date, the Debtor shall be deemed to have assumed each executory
contract and unexpired lease to which it was a party, unless such contract or
lease (i) was previously assumed or rejected by the Debtor, (ii) previously
expired or terminated pursuant to its own terms, (iii) is the subject of a
motion to reject filed on or before the Effective Date, or (iv) is identified as
a rejected executory contract or a rejected unexpired lease, as applicable,
annexed hereto as Exhibit E and subject to modification by the Debtor with the
written consent of the Creditors Committee prior to the Confirmation Hearing.
The Confirmation Order shall constitute an order of the Bankruptcy Court under
section 365 of the Bankruptcy Code approving the contract and lease assumptions
and rejections described above, as of the Confirmation Date except for any
contract or lease assumed or rejected prior thereto.
Each executory contract and unexpired lease that is assumed
and relates to the use, ability to acquire, or occupancy of real property shall
include (i) all modifications, amendments, supplements, restatements, or other
agreements made directly or indirectly by any agreement, instrument, or other
document that in any manner affects such executory contract or unexpired lease
and (ii) all executory contracts or unexpired leases appurtenant to the
premises, including all easements, licenses, permits, rights, privileges,
immunities, options, rights of first refusal, powers, uses, usufructs,
reciprocal easement agreements, vaults, tunnel or bridge agreements or
franchises, and any other interests in real estate or rights in rem related to
such premises, unless any of the foregoing agreements has been rejected pursuant
to an order of the Bankruptcy Court.
10.2. Payments Related to Assumption of Contracts and
Leases. Any monetary amounts by which each executory contract and unexpired
lease to be assumed pursuant to the Plan is in default shall be satisfied, under
section 365(b)(1) of the Bankruptcy Code, at the option of the Debtor or the
assignee of the Debtor party assuming such contract or lease, by Cure. If there
is a dispute regarding (i) the nature or amount of any Cure, (ii) the ability of
the Reorganized Debtor or any assignee to provide "adequate assurance of future
performance" (within the meaning of section 365 of the Bankruptcy Code) under
the contract or lease to be assumed, or (iii) any other matter pertaining to
assumption, Cure shall occur following the entry of a Final Order resolving the
dispute and approving the assumption or assumption and assignment, as the case
may be.
10.3. Rejected Contracts And Leases. This Plan constitutes
and incorporates a motion by the Debtor to reject, and the Confirmation Order
shall be deemed to be an Order authorizing the rejection, effective as of the
Effective Date, of those executory contracts and unexpired leases to which the
Debtor is a party and which are annexed hereto as Exhibit E and subject to
modification by the Debtor with the written consent of the Creditors Committee
prior to the Confirmation Hearing.
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10.4. Reservation. Except as for those executory contracts
and unexpired leases annexed hereto as Exhibit E, subject to modification by the
Debtor with the written consent of the Creditors Committee prior to the
Confirmation Hearing, none of the executory contracts and unexpired leases to
which the Debtor is a party shall be rejected under the Plan, provided, however,
that the Debtor reserves the right, at any time prior to the Confirmation Date,
to seek to reject any executory contract or unexpired lease to which it is a
party.
10.5. Bar for Rejection Damages. If the rejection by the
Debtor, pursuant to the Plan or otherwise, of an executory contract or unexpired
lease results in a Claim that is not theretofore evidenced by a timely filed
proof of Claim or a proof of Claim that is deemed to be timely filed under
applicable law, then such Claim shall be forever barred and shall not be
enforceable against the Debtor or Reorganized Debtor, or the properties of the
Debtor or Reorganized Debtor, unless a proof of Claim is filed with the
Bankruptcy Court (and served on the Debtor) on or before the later to occur of
the Bar Date or thirty (30) days after entry of an order (which may be the
Confirmation Order) authorizing the rejection of the applicable unexpired lease
or executory contract.
10.6. Treatment Under Plan of Rejection Damages. Unless
otherwise ordered by the Bankruptcy Court, all Allowed Claims arising from the
rejection of executory contracts or unexpired leases shall be treated as Class 4
General Unsecured Claims.
ARTICLE XI CONDITIONS PRECEDENT TO EFFECTIVE DATE
11.1. Conditions Precedent to Effective Date of the Plan.
The occurrence of the Effective Date of the Plan is subject to satisfaction of
the following conditions precedent:
(A) A Confirmation Order shall have been entered
by the Clerk of the Bankruptcy Court which is in form and substance
reasonably acceptable to the Debtor and the Creditors Committee and
there shall not be a stay or injunction in effect with respect thereto.
(B) The Debtor shall have purchased directors
and officers liability insurance for the Board of Directors of
Reorganized Debtor in form, substance and amount reasonably acceptable
to the Debtor and the Creditors Committee.
(C) The Debtor and the New Notes Indenture
Trustee have executed the Security Agreement.
(D) The Debtor will enter in a Registration
Rights Agreement with all necessary parties.
(E) The New Notes Indenture Trustee and the
lender(s) under the Exit Facility have executed the Intercreditor
Agreement.
(F) All conditions to the Exit Facility Lender's
commitment letter have been met or waived.
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(G) Upon satisfaction of these conditions, the
Debtor shall file a notice of the Effective Date of the Plan.
11.2. Waiver of Conditions Precedent. Each of the
conditions precedent in section 11.1, other than 11.1(A) hereof may be waived,
in whole or in part, by the Debtor with the written consent of the Creditors
Committee. Any such waivers of a condition precedent in Section 11.1 hereof may
be effected at any time, without notice, without leave or order of the
Bankruptcy Court and without any formal action.
ARTICLE XII EFFECT OF CONFIRMATION
12.1. Vesting of Assets. On the Effective Date, the Debtor,
its properties and interests in property and its operations shall be released
from the custody and jurisdiction of the Bankruptcy Court, and the estates of
the Debtor shall vest in the Reorganized Debtor free and clear of any and all
Liens, except as otherwise provided herein. From and after the Effective Date,
the Reorganized Debtor may operate its business and may use, acquire and dispose
of property free of any restrictions of the Bankruptcy Code or the Bankruptcy
Rules, subject to the terms and conditions of the Plan.
12.2. Preservation of Causes of Action. Except as provided
herein, in accordance with section 1123(b) of the Bankruptcy Code, the
Reorganized Debtor shall retain all causes of action that the Debtor or the
estate may hold against any person or entity including but not limited to any
causes of action arising from Bankruptcy Code sections 544, 547, 548, 549 or 550
that are not otherwise released under the Plan. Such causes of actions include
those claims listed on Exhibit I - Retained Causes of Action.
12.3. Binding Effect. Except as otherwise provided in
section 1141(d)(3) of the Bankruptcy Code and subject to the occurrence of the
Effective Date, on and after the Effective Date, the provisions of the Plan
shall bind any holder of a Claim against or Equity Interest in the Debtor and
such holder's respective successors and assigns, whether or not the Claim or
Equity Interest of such holder is impaired under the Plan and whether or not
such holder has accepted the Plan.
12.4. Discharge of Debtor. Except to the extent otherwise
provided herein, the treatment of all Claims against or Interests in the Debtor
hereunder shall be in exchange for and in complete satisfaction, discharge and
release of all Claims against or Interests in the Debtor of any nature
whatsoever, known or unknown, including, without limitation, any interest
accrued or expenses incurred thereon from and after the Petition Date, or
against its estate or properties or interests in property. Except as otherwise
provided herein, upon the Effective Date, all Claims against and Interests in
the Debtor will be satisfied, discharged, and released in full exchange for the
consideration provided hereunder. Except as otherwise provided herein, all
entities shall be precluded from asserting against the Debtor or Reorganized
Debtor or their respective properties or interests in property, any other Claims
based upon any act or omission, transaction, or other activity of any kind or
nature that occurred prior to the Effective Date.
12.5. Term of Injunctions or Stays. Unless otherwise
provided in the Plan, all injunctions or stays arising under or entered during
the Chapter 11 Case under section 105 or 362
24
of the Bankruptcy Code, or otherwise, and in existence on the Confirmation Date,
shall remain in full force and effect until the 60th day following the Effective
Date.
12.6. EXCULPATION. THE RELEASED PARTIES SHALL NOT HAVE OR
INCUR, AND ARE HEREBY RELEASED FROM, ANY CLAIM, OBLIGATION, CAUSE OF ACTION OR
LIABILITY TO ONE ANOTHER OR TO ANY HOLDER OF A CLAIM OR INTEREST, OR ANY OTHER
PARTY IN INTEREST, OR ANY OF ITS RESPECTIVE AGENTS, EMPLOYEES, REPRESENTATIVES,
FINANCIAL ADVISORS, ATTORNEYS OR AFFILIATES, OR ANY OF THEIR SUCCESSORS AND
ASSIGNS WHO NOTE THEIR ACCEPTANCE OF THE SECTION 12.7 RELEASE IN THEIR BALLOT,
FOR ANY ACT OR OMISSION IN CONNECTION WITH, RELATING TO OR ARISING OUT OF THIS
CHAPTER 11 CASE, THE SOLICITATION OF VOTES AND PURSUIT OF CONFIRMATION OF THE
PLAN, THE CONSUMMATION OF THE PLAN, THE ADMINISTRATION OF THE PLAN OR THE
PROPERTY TO BE DISTRIBUTED UNDER THE PLAN, THE SOLICITATION AND ISSUANCE OF THE
NEW ISSUED COMMON STOCK AND THE NEW NOTES, AND IN ALL RESPECTS SHALL BE ENTITLED
TO RELY REASONABLY UPON THE ADVICE OF COUNSEL WITH RESPECT TO THEIR DUTIES AND
RESPONSIBILITIES UNDER THE PLAN, PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION
SHALL BE DEEMED TO RELEASE ANY SUCH PERSON FROM LIABILITY FOR ACTS OR OMISSIONS
THAT ARE THE RESULT OF ACTUAL FRAUD, GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR
WILLFUL VIOLATION OF THE SECURITIES LAWS OR THE INTERNAL REVENUE CODE.
12.7. RELEASE. AS OF THE EFFECTIVE DATE AND SUBJECT TO ITS
OCCURRENCE, EXCEPT AS OTHERWISE PROVIDED IN THIS PLAN, EACH RELEASED PARTY SHALL
HAVE DEEMED TO HAVE BEEN RELEASED AND DISCHARGED BY (i) THE DEBTOR, ITS ESTATES,
AND THE REORGANIZED DEBTOR, AND (ii) ANY HOLDER OF A CLAIM OR INTEREST OR ANY
OTHER PARTY IN INTEREST OR ANY OF ITS RESPECTIVE AGENTS, EMPLOYEES,
REPRESENTATIVES, FINANCIAL ADVISORS, ATTORNEYS OR AFFILIATES, OR ANY OF THEIR
SUCCESSORS AND ASSIGNS WHO NOTE THEIR ACCEPTANCE OF THIS RELEASE IN THEIR BALLOT
(ALL SUCH HOLDERS AND OTHER PARTIES LISTED IN THIS SECTION 12.6(i) AND (ii), THE
"RELEASOR PARTIES"), FROM ANY AND ALL CLAIMS AND CAUSES OF ACTION ARISING OUT OF
OR BASED UPON SUCH RELEASED PARTIES' SERVICE IN ANY CAPACITY OR ANY TRANSACTION,
EVENT, CIRCUMSTANCE OR OTHER MATTER INVOLVING OR RELATING TO THE DEBTOR THAT
OCCURRED ON OR BEFORE THE EFFECTIVE DATE; PROVIDED, HOWEVER, THAT NOTHING IN
THIS SECTION SHALL BE DEEMED TO (a) RELEASE A RELEASED PARTY FROM LIABILITY FOR
ACTS OR OMISSIONS THAT ARE THE RESULT OF ACTUAL FRAUD, GROSS NEGLIGENCE, WILLFUL
MISCONDUCT, OR WILLFUL VIOLATION OF THE SECURITIES LAWS OR THE INTERNAL REVENUE
CODE OR THE CLAIMS, IF ANY, OF THE UNITED STATES; (b) PREVENT THE DEBTOR OR THE
REORGANIZED DEBTOR FROM OBJECTING TO A CLAIM OR INTEREST OF A RELEASED PARTY;
(c) PRECLUDE POLICE, FEDERAL TAX OR REGULATORY AGENCIES FROM FULFILLING THEIR
STATUTORY DUTIES. EXCEPT AS OTHERWISE PROVIDED HEREIN, THE RELEASOR PARTIES
SHALL BE ENJOINED FROM COMMENCING OR CONTINUING ANY ACTION, EMPLOYMENT OF
PROCESS, OR ACT TO COLLECT, OFFSET OR RECOVER ANY CLAIMS AND CAUSES OF ACTION
RELEASED AND DISCHARGED PURSUANT TO THIS SECTION; PROVIDED, HOWEVER, THAT THE
INJUNCTION PROVIDED FOR IN THIS SECTION SHALL NOT (x) BAR ACTIONS BASED UPON
LIABILITY FOR ACTS OR OMISSIONS THAT ARE THE RESULT OF ACTUAL FRAUD, GROSS
NEGLIGENCE, WILLFUL MISCONDUCT, OR WILLFUL VIOLATION OF THE SECURITIES LAWS OR
THE INTERNAL REVENUE CODE OR THE CLAIMS, IF ANY, OF THE UNITED STATES; (y)
PRECLUDE POLICE, FEDERAL TAX OR REGULATORY AGENCIES FROM FULFILLING THEIR
STATUTORY DUTIES; OR (z) BAR THE CLAIMS, IF ANY, OF THE UNITED STATES.
12.8. Indemnification Obligations. Subject to the
occurrence of the Effective Date, the obligations of the Reorganized Debtor to
indemnify, defend, reimburse or limit the liability of any current or former
directors or officers of the Debtor against any claims or causes
25
of action as provided in the Debtor's Amended Certificate of Incorporation,
By-Laws, applicable state law or contract or otherwise shall cease.
12.9. Letter of Credit Obligations. Confirmation of the
Plan shall have no impact or effect on the Reorganized Debtor's remaining
obligations to Congress Financial and CIT under the Release Agreement (as
defined in the Final Financing Order) and the Hartford Letter of Credit pursuant
to the Third Amendment to Financing Agreement and the CIT Credit Agreement. The
Reorganized Debtor shall remain fully liable and obligated with respect to such
agreements until the obligations thereunder are completely fulfilled and the
Letters of Credit have been terminated without a draw or the Letters of Credit
have been replaced.
ARTICLE XIII RETENTION OF JURISDICTION
The Bankruptcy Court shall have exclusive jurisdiction of all
matters arising out of, or related to, the Chapter 11 Case, the Plan and the
Confirmation Order pursuant to, and for the purposes of, sections 105(a) and
1142 of the Bankruptcy Code and for, among other things, the following purposes:
(A) To hear and determine pending applications for the
assumption, assumption and assignment, or rejection of executory contracts or
unexpired leases and the allowance of Claims resulting therefrom.
(B) To enforce all agreements, assumed, if any, and to
recover all property of the estate wherever located.
(C) To determine any and all adversary proceedings,
applications and contested matters, including, without limitation, under
sections 544, 545, 548, 549, 550, 551, and 553 of the Bankruptcy Code.
(D) To ensure that distributions to holders of Allowed
Claims and Interests are accomplished as provided herein.
(E) To hear and determine any timely objections to
Administrative Expense Claims or to proofs of Claim or Interests, including,
without limitation, any objections to the classification of any Claim or
Interest, and to allow or disallow any Disputed Claim or Disputed Interest in
whole or in part.
(F) To determine the validity, extent and priority of all
Liens, if any, against properties of the estates.
(G) To determine all assertions of an ownership interest
in, the value of, or title to, any property of the estates.
(H) To determine any tax liability of the estates in
connection with the Plan, actions taken, distributions or transfers made
thereunder.
(I) To enter and implement such orders as may be
appropriate in the event the Confirmation Order is for any reason stayed,
revoked, modified, or vacated.
26
(J) To issue such orders in aid of execution of the Plan,
to the extent authorized by section 1142 of the Bankruptcy Code.
(K) To consider any amendments to or modifications of the
Plan, or to cure any defect or omission, or reconcile any inconsistency, in any
order of the Bankruptcy Court, including, without limitation, the Confirmation
Order.
(L) To hear and determine all applications under sections
330, 331, and 503(b) of the Bankruptcy Code for awards of compensation for
services rendered and reimbursement of expenses incurred prior to the
Confirmation Date.
(M) To hear and determine disputes arising in connection
with the interpretation, implementation, or enforcement of the Plan, the
Confirmation Order, any transactions or payments contemplated hereby or any
agreement, instrument or other document governing or relating to any of the
foregoing.
(N) To hear and determine matters concerning state,
local, and federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code.
(O) To hear and determine any other matter not
inconsistent with the Bankruptcy Code.
(P) To hear and determine all disputes involving the
existence, scope, and nature of the discharges granted under the Plan and the
Confirmation Order.
(Q) To issue injunctions and effect any other actions
that may be necessary or desirable to restrain interference by any entity with
the consummation or implementation of the Plan.
(R) To determine such other matters as may be provided in
the Confirmation Order.
(S) To enter a final decree closing the Chapter 11 Case.
ARTICLE XIV MISCELLANEOUS PROVISIONS
14.1. Payment of Statutory Fees. All fees payable under
section 1930, chapter 123, title 28, United States Code, as determined by the
Bankruptcy Court at the Confirmation Hearing, shall be paid on the Effective
Date. Any such fees accrued after the Effective Date will be paid by the
Reorganized Debtor in the ordinary course of business.
14.2. [Left Intentionally Blank].
14.3. Creditors Committee. Effective as at the close of
business on the Effective Date, the duties of the Creditors Committee shall
terminate, except with respect to applications for Professional Fee Claims and
reimbursement of expenses of the members of the Creditors Committee.
27
14.4. Exemption from Certain Transfer Taxes. Pursuant to
section 1146(c) of the Bankruptcy Code, any transfers from the Debtor to any
other person or entity pursuant to the Plan, including the pledging of any
collateral, or the delivery of any security interests or other instrument of
transfer, the furnishing of any promissory note(s) or other evidence of
indebtedness, in furtherance of, or in connection with this Plan, shall not be
subject to any document recording tax, stamp tax, conveyance fee, intangibles or
similar tax, mortgage tax, stamp act, real estate transfer tax, mortgage
recording tax, or other similar tax or governmental assessment, and the
Confirmation Order shall direct the appropriate state or local governmental
officials or agents to forego the collection of any such tax or governmental
assessment.
14.5. Modifications and Amendments. The Exhibits to both
the Plan and Disclosure Statement can be amended at any time prior to the
Confirmation Date with the written approval of both the Creditors Committee and
the Debtor. To the extent amendments affect the Exit Facility, such amendments
shall require prior written consent of the Exit Facility Lender. In addition the
Debtor with the written consent of the Creditors Committee may alter, amend, or
modify the Plan under section 1127(a) of the Bankruptcy Code at any time prior
to the Confirmation Date. After the Effective Date the Reorganized Debtor may,
under section 1127(b) of the Bankruptcy Code, institute proceedings in the
Bankruptcy Court to remedy any defect or omission or reconcile any
inconsistencies in the Plan or the Confirmation Order, and to accomplish such
matters as may be necessary to carry out the purposes and effects of the Plan so
long as such proceedings do not materially adversely affect the treatment of
holders of Claims or Interests under the Plan, provided, however, that prior
notice of such proceedings shall be served in accordance with the Bankruptcy
Rules or Order of the Bankruptcy Court.
14.6. Compliance with Tax Requirements. In connection with
the consummation of the Plan, the Reorganized Debtor shall comply with all
withholding and reporting requirements imposed by any taxing authority, and all
distributions hereunder shall be subject to such withholding and reporting
requirements.
14.7. Preservation of Transferred Claims. All causes of
action which are currently held by the Debtor will be transferred to and
prosecuted by the Reorganized Debtor at its sole and absolute discretion.
14.8. Severability of Plan Provisions. Except as otherwise
provided herein, in the event that prior to the Effective Date, any term or
provision of the Plan is held by the Bankruptcy Court to be invalid, void or
unenforceable, then if requested by the Debtor or Reorganized Debtor the
Bankruptcy Court shall have the power to alter and interpret such term or
provision to make it valid or enforceable to the maximum extent practicable,
consistent with the original purpose of the term or provision held to be
invalid, void or unenforceable, and such term or provision shall then be
applicable as altered or interpreted. Notwithstanding any such holding,
alteration or interpretation, the remainder of the terms and provisions hereof
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated by such holding, alteration or interpretation. The Confirmation
Order shall constitute a judicial determination and shall provide that each term
and provision hereof, as it may have been altered or interpreted in accordance
with the foregoing, is valid and enforceable in accordance with its terms.
Notwithstanding the foregoing or any other provision of the Plan, to the extent
Section 4
28
of the Plan or any part thereof is held by the Bankruptcy Court to be invalid,
void or unenforceable, then the Plan shall be deemed null and void for all
purposes.
14.9. Filing or Execution of Additional Documents. On or
before the Effective Date, the Debtor or the Reorganized Debtor will file with
the Bankruptcy Court or execute, as appropriate, such agreements and other
documents as may be necessary or appropriate to effectuate and further evidence
the terms and conditions of this Plan.
14.10. Notices. All notices, requests, and demands to or
upon the Debtor to be effective shall be in writing (including by facsimile
transmission) and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when actually delivered or, in the case of
notice by facsimile transmission, when received and telephonically confirmed,
addressed as follows:
Reptron Electronics, Inc.
Attn: Paul J. Plante,
President and Chief Operating Officer
13700 Reptron Boulevard
Tampa, Florida 33626
Tel: (813) 854-2000
Fax: (813) 891-4007
With a copy to:
Tew Cardenas, LLP
Thomas R. Lehman, P. A.
Lynn Maynard Gollin, Esq.
201 South Biscayne Boulevard
Miami Center, Suite 2600
Miami, Florida 331312
Tel: (305) 536-1112
Fax: (305) 536-1116
Counsel to Debtor
29
-and-
Andrews Kurth LLP
Paul N. Silverstein, Esq.
Richard Baumfield, Esq.
450 Lexington Avenue
New York, NY 10017
Tel: (212) 850-2800
Fax: (212) 850-2929
Counsel to the Creditors Committee
14.11. Governing Law. Except to the extent that the
Bankruptcy Code or other federal law is applicable, or to the extent an Exhibit
hereto provides otherwise, the rights, duties and obligations arising under the
Plan shall be governed by, and construed and enforced in accordance with, the
laws of the State of Florida without giving effect to the principles of conflict
of laws thereof.
Dated: January 14, 2004
Respectfully submitted,
TEW CARDENAS, LLP
Attorneys for Reptron Electronics, Inc.
201 S. Biscayne Boulevard
Miami Center, Suite 2600
Miami, FL 33131
Tel. No. 305-536-1112
Fax No. 305-536-1116
By: /s/ Thomas R. Lehman
-------------------------------------
Thomas R. Lehman, P.A.
Florida Bar No. 351318
Lynn Maynard Gollin, Esq.
Florida Bar No. 621668
30
Respectfully submitted,
Reptron Electronics, Inc.
/s/ Paul Plante
---------------------------------
By: Paul Plante
President and COO of Reptron
31
EXHIBITS TO PLAN
Exhibit A: Amended and Restated By-laws of Reptron Electronics, Inc.
Exhibit B: Amended and Restated Certificate of Incorporation of
Reorganized Reptron Electronics, Inc.
Exhibit C: Stock Option Plan
Exhibit D: Registration Rights Agreement
Exhibit E: Rejected Executory Contracts and Leases
Exhibit F: Indenture
Exhibit G: Intercreditor Agreement
Exhibit H: Security Agreement
Exhibit I: Retained Causes of Action
Exhibit J: List of Class 3 Trade Vendor Claims
32
Exhibit 2
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM 10-K/A
(AMENDMENT NO. 1 TO FORM 10-K)
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
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: 0-23426
-----------------------------
REPTRON ELECTRONICS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER.)
FLORIDA 58-1959440
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
13700 REPTRON BOULEVARD, TAMPA, FL 33626
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(813) 854-2351
-----------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE 6 3/4 CONVERTIBLE SUBORDINATED NOTES, DUE 2004
(TITLE OF CLASS) (TITLE OF CLASS)
-----------------------------
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this form 10-K. [ ]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2). Yes [ ] No [X]
The aggregate market value of common stock held by non-affiliates of
the registrant at June 28, 2002 was approximately $10,588,000.
The number of shares of the registrant's Common Stock outstanding at
April 11, 2003 was 6,417,196.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
================================================================================
AMENDMENT NO. 1
TO THE FORM 10-K FILED BY
REPTRON ELECTRONICS, INC. ON APRIL 15, 2003
The following items were omitted from the Form 10-K filed by Reptron
Electronics, Inc. on April 15, 2002, and such Form 10-K is hereby amended by
inserting Items 10, 11, 12 and 13 of Part III as set forth below.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is certain information, as of April 11, 2003,
concerning Reptron's executive officers, continuing directors, and nominees for
election as directors.
YEAR FIRST
BECAME A
NAME POSITION(S) AGE DIRECTOR
- ---- ----------- --- --------
Michael L. Musto(1)................... Chief Executive Officer and Director
(term expiring in 2005) 61 1973
Paul J. Plante....................... President. Chief Operating Officer,
Acting Chief Financial Officer and
Director (term expiring in 2004) 45 1994
Bonnie Fena.......................... President--Reptron Manufacturing
Services 55 --
Leigh A. Lane(1)(2).................. Corporate Credit Manager, Secretary
and Director (director nominee for a
term expiring in 2006) 38 1994
Deborah Casey........................ Vice President--Reptron Computer
Products 47 --
Charlie Crep......................... Vice President--Reptron Manufacturing
Services 53 --
Vincent Addonisio(3)(4).............. Director (director nominee for a term
expiring in 2006) 48 2000
William L. Elson(3).................. Director (term expiring in 2004) 55 1994
Bertram L. Miner(3)(4)............... Director (term expiring in 2005) 66 2002
- -------------------------
(1) Mr. Musto and Ms. Lane serve on Reptron's Stock Option Committee.
(2) Ms. Lane is the daughter of Mr. Michael L. Musto.
(3) Messrs. Addonisio, Elson, and Miner serve on Reptron's Audit Committee.
(4) Messrs. Addonisio and Miner serve on Reptron's Compensation Committee.
MICHAEL L. MUSTO. Mr. Musto has been Chief Executive Officer and a
director of Reptron since its inception in 1973. He was President of Reptron
from 1973 to 1999. Prior to 1973, Mr. Musto worked for nine years in electronic
components distribution for Northland Electronics and Diplomat Electronics.
PAUL J. PLANTE. Mr. Plante was appointed President of Reptron in
December 1999, Chief Operating Officer of Reptron in January 1997, Acting Chief
Financial Officer of Reptron in 2001, and has been a director since 1994. Mr.
Plante has been employed by Reptron since 1986 and previously served as its Vice
President of Finance, Chief Financial Officer and Treasurer (1987-1997). From
1983-1986, he was Controller of K-Byte Manufacturing, which is now part of a
division of Reptron. Prior to 1983, Mr. Plante worked for a regional accounting
firm (1980-83). Mr. Plante is a Certified Public Accountant and is a graduate of
Michigan State University, with a Bachelor of Arts degree in accounting. He also
has an MBA degree from the University of South Florida.
BONITTA FENA. Ms. Fena has served as President of Reptron Manufacturing
Services Division since April 2002. Prior to her current role, she served as the
President of the Reptron Manufacturing Services Hibbing Facility from May 1998
to April 2002. Prior to joining Reptron, Ms. Fena was President of Hibbing
Electronics Corporation (1987 to 1998) and from 1974 to 1987 Ms. Fena served as
Vice President and co-founder of Hibbing Electronics Corporation.
LEIGH A. LANE. Ms. Lane serves as Reptron's secretary and has been a
director since 1994. Ms. Lane has served in a number of administrative
positions, including Operations Manager (1989-1991) and Corporate Credit Manager
(1991-present).
DEBORAH CASEY. Ms. Casey has served as Vice President of Reptron
Computer Services since 1995.
CHARLIE CREP. Mr. Crep has served as Vice President of Reptron
Manufacturing Services since 2001. Prior to his current role, Mr. Crep served as
Vice President of Operations for Reptron's Hibbing, Minnesota facility from 1998
to 2001. From 1985 to 1998, Mr. Crep held a similar position with Hibbing
Electronics, Inc. prior to its acquisition by Reptron in 1998.
VINCENT ADDONISIO. Mr. Addonisio has been a director of Reptron since
May 2000. Mr. Addonisio serves as President and Chief Executive Officer of
Regency Strategic Advisors, Inc. a position he has held since 2002. Mr.
Addonisio served as an executive of CGI Information Technology Services, Inc.
(formerly IMRglobal Corp.), a provider of information technology services and
solutions from 1998 to 2002. Mr. Addonisio served as a director, Chief
Administrative Officer and Executive Vice President until 2002. Mr. Addonisio
was President of Parker Communications Network, Inc., a privately-held point of
sale marketing network company, from 1997 to 1998. Mr. Addonisio holds a
Bachelor of Science degree in Accounting from Binghamton University (SUNY) and
an MBA from the Georgia Institute of Technology.
WILLIAM L. ELSON. Mr. Elson has served as Reptron's outside general
counsel since 1979 and has been a director since 1994. He has practiced law as a
sole practitioner since 1975 and worked for Coopers & Lybrand from 1973 to 1975.
Mr. Elson is a Certified Public Accountant and is a graduate of Wayne State
University, with a J.D. degree and a Bachelor of Science degree in accounting.
Mr. Elson has been of counsel to the law firm of Holland & Knight LLP in Tampa,
Florida since July 2000.
BERTRAM L. MINER. Mr. Miner was appointed to the Reptron Board in
December 2002. Mr. Miner has been a self-employed real estate investor since
1986. Prior to 1986, Mr. Miner was Chief Executive Officer of Quality Health
Care Centers, Inc. from 1975 to 1986, served as a mortgage loan officer for
Percy Wilson & Co. from 1973 to 1974 and practiced law with the law firm of
Baskin, Server & Miner from 1961 to 1973.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
requires directors, executive officers and persons holding more than ten percent
of Reptron's common stock to report their initial ownership of the common stock
and any changes in that ownership to the Securities and Exchange Commission. The
Securities and Exchange Commission has designated specific due dates for these
reports and Reptron must identify in this proxy statement those persons who did
not file these reports when due. Based solely on our review of copies of the
reports received by us and written representations of our directors and
executive officers, we believe that Edward Okay filed one late Form 4 (reporting
four transactions) and one late Form 3 in 2002, and Chris O'Brien and Anthony
Musto each filed a late Form 3 in 2002. Other than these filings, we believe all
directors, executive officers and persons holding more than ten percent of our
common stock were in compliance with their filing requirements.
ITEM 11. EXECUTIVE COMPENSATION
Under rules established by the Securities and Exchange Commission,
Reptron is required to provide certain information concerning total compensation
earned or paid to; (1) Reptron's chief executive officer and (2) the four other
most highly compensated executive officers whose annual salaries and bonuses
exceeded $ 100,000 (the "Named Executive Officers") during 2002.
SUMMARY COMPENSATION TABLE
The following table sets forth certain compensation information for the
Named Executive Officers:
ANNUAL
COMPENSATION(1) SECURITIES
FISCAL ----------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS OPTIONS COMPENSATION(3)
--------------------------- ---- --------- ----- ------- ---------------
Michael L. Musto.............................. 2002 $360,000 $ 0 0 $ 60
Chairman of the Board 2001 380,000 0 0 125
And Chief Executive Officer 2000 400,000 0 0 152
Paul J. Plante................................ 2002 $278,000 $ 0 0 $1,160
President, Chief Operating Officer 2001 299,250 0 0 1,175
and Acting Chief Financial Officer 2000 309,000 60,000 0 602
Bonnie Fena................................... 2002 $230,000 $ 0 0 $1,060
President, Reptron Manufacturing 2001 220,000 0 5,000 1,170
Services 2000 200,000 52,250 500 1,170
Deborah Casey(4).............................. 2002 $150,000 $92,000 2,500 $1,160
Vice President, Reptron 2001 N/A N/A N/A N/A
Computer Products 2000 N/A N/A N/A N/A
Charlie Crep(4)............................... 2002 $142,000 $ 0 0 $1,060
Vice President, Reptron 2001 N/A N/A N/A N/A
Manufacturing Services 2000 N/A N/A N/A N/A
Christopher M. O'Brien(5)..................... 2002 $221,000 $ 0 0 $ 60
Executive Vice President, 2001 155,000 0 10,000 --
Reptron Distribution 2000 -- -- -- --
- ------------
(1) The aggregate amount of perquisites and other personal benefits, if
any, did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported for each Named Executive Officer and has
therefore been omitted.
(2) Includes any amount deferred by the executive pursuant to Reptron's
401(K) plan.
(3) Includes annual premiums paid by Reptron for a $10,000 life insurance
policy for the Named Executive Officers. Also includes amounts
contributed by Reptron to the account of each Named Executive Officer
under Reptron's 401(k) plan.
(4) Ms. Casey and Mr. Crep were not among the Named Executive Officers
during 2000 and 2001.
(5) Mr. O'Brien resigned during 2002. He would have been among the Named
Executive Officers during 2002 if he was employed by the Company on
December 31, 2002.
OPTION GRANTS DURING FISCAL YEAR 2002
The following table sets forth information concerning options granted
to the Named Executive Officers during 2002:
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION FOR
2002 STOCK OPTION GRANTS(1) OPTION TERM(2)
------------------------------------------------------------ ------------------------------
PERCENT OF 2002
OPTIONS GRANTED TO EXERCISE OR EXPIRATION ASSUMED ASSUMED
NAME OPTIONS GRANTED EMPLOYEES BASE PRICE DATE RATE 5% RATE 10%
- ---- --------------- --------- ---------- ---- ------- --------
Michael L. Musto............ 0 0 N/A N/A 0 0
Paul J. Plante.............. 0 0 N/A N/A 0 0
Bonnie Fena................. 0 0 N/A N/A 0 0
Deborah Casey............... 2,500 6% $3.15 2/15/12 $12,828 $20,426
Charlie Crep................ 0 0 N/A N/A 0 0
Christopher M O' Brien...... 0 0 N/A N/A 0 0
- --------------
(1) Each of these options was granted pursuant to the Reptron ISO Plan and
is subject to the terms of such plan. As long as the optionee maintains
continuous employment with Reptron, these options vest over a four year
period at a rate of one-fourth of the shares on each anniversary of the
date of grant.
(2) Potential gains are net of the exercise price but before taxes
associated with the exercise. Amounts represent hypothetical gains that
could be achieved for the respective options if they were exercised at
the end of the option term. The assumed 5% and 10% rates of stock
appreciation are based on appreciation from the exercise price per
share. These rates are provided in accordance with the rules of the SEC
and do not represent Reptron's estimate or projection of the future
price of Reptron's Common Stock. Actual gains, if any, on stock option
exercises are dependent on the future financial performance of Reptron,
overall stock market conditions and the option holders' continued
employment through the vesting period.
OPTION EXERCISES DURING FISCAL YEAR 2002 AND FISCAL YEAR END OPTION VALUES
The following table sets forth information concerning options exercised
by the Named Executive Officers during fiscal year 2002 and the number and value
of options held at fiscal year end. Reptron does not have any outstanding slock
appreciation rights.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS AT
SHARES 2002 DECEMBER 31, 2002(1)($)
ACQUIRED ON VALUE --------------------------- -----------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
Michael L. Musto.......... 0 $0 0 0 N/A N/A
Paul J. Plante............ 0 0 350,000 0 $ 0 $ 0
Bonnie Fena............... 0 0 11,500 4,000 0 0
Deborah Casey............. 0 0 9,250 5,750 0 0
Charlie Crep.............. 0 0 6,500 4,000 0 0
Christopher M. O' Brien... 0 0 0 0 N/A N/A
- ------------
(1) The closing price for Reptron's common stock as reported on Nasdaq on
December 31, 2002 was $0.87. Value is calculated on the basis of the
difference between the option exercise price and $0.87 multiplied by
the number of shares of Reptron's common stock to which the exercise
relates.
EMPLOYMENT AND SEVERANCE CONTRACTS
We are a party to employment agreements with Messrs. Musto and Plante
effective June 5, 1998 and January 5, 1999, respectively. These agreements
continue until terminated (as provided in the agreements), and provide for an
annual base salary and certain other benefits. The annual base salaries for
fiscal 2002 for Messrs. Musto and Plante are $400,000 and $315,000,
respectively. However, Messrs. Musto and Plante, as well as our
entire senior management team, received a temporary ten percent pay reduction
effective July 1, 2001 in response to difficult industry conditions. This
decrease in pay will be restored if and when business conditions improve. Mr.
Musto's employment agreement provides that he is entitled to severance if his
employment is terminated by us for any reason or upon a "change of control" (as
defined in the employment agreement). In such case, Mr. Musto would receive 2.99
times his average annual base compensation. Mr. Plante's employment agreement
provides that he is entitled to severance if his employment is terminated by us
"without cause" or upon a "change of control" (as such terms are defined in the
employment agreement). In such case, Mr. Plante would receive 2.99 times his
average annual base compensation.
COMPENSATION OF DIRECTORS
Directors who are not employees of Reptron are paid $6.000 annually
plus $1.000 for each Board of Directors meeting attended, and $1,000 for each
committee meeting attended if such meeting occurs on a day other than a
scheduled meeting of the Board of Directors. In addition, Reptron reserved
450,000 shares of Reptron's common stock for future issuance upon the exercise
of stock options that may be granted to its non-employee directors. All
directors receive reimbursement of reasonable out-of-pocket expenses incurred in
connection with meetings of the Board of Directors. No director who is an
employee of Reptron receives separate compensation for services rendered as a
director. There were no stock option grants to non-employee directors in 2002.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002, the Compensation Committee consisted of Messrs. Addonisio
and William U. Parfet until Mr. Parfet's resignation in December 2002, at which
time Mr. Miner was appointed the Compensation Committee. All of the members of
the Compensation Committee are outside directors. Under rules established by the
Securities and Exchange Commission, Reptron is required to provide a description
of certain transactions and relationships between any Compensation Committee
member and Reptron. No such transactions occurred during 2002. None of the
members of the compensation committee are current or former officers or
employees of Reptron.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following Report of the Compensation Committee and the performance
graph included elsewhere in this Proxy Statement do not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Reptron filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act Of 1934, as amended, except to the extent Reptron
specifically incorporates this Report or the performance graph by reference in
such filings,
Compensation Policy: Reptron's compensation program for executives
consists of three key elements:
- a base salary
- a performance-based annual bonus
- periodic grants of stock options
The Compensation Committee believes that this three-part approach best
serves the interests of Reptron and its shareholders because it enables Reptron
to meet the requirements of the highly competitive environment in which Reptron
operates while ensuring that executive officers are compensated in a way that
advances both the short- and long-term interests of shareholders. In determining
compensation, consideration is given both to Reptron's overall performance and
to individual performance, taking into account the contributions made by the
executive toward improving Reptron's performance. Consideration is also given to
the executive's position, location and level of responsibility, and the job
performance of the executive in planning, providing direction for, and
implementing Reptron's strategy. The Compensation Committee's primary objective
in establishing compensation programs is to support Reptron's goal of maximizing
the value of shareholders' investment in Reptron.
- Base Salary. Base salaries for Reptron's executive officers,
as well as changes in such salaries, are based upon such
factors as competitive industry salaries; a subjective
assessment of the nature of the position; the contribution and
experience of the executive, and the length of the executive's
service. The Compensation Committee believes that Reptron's
compensation of its executive officers falls within the median
of industry compensation levels. Base salaries are based upon
qualitative and subjective factors, and no specific formula is
applied to determine the weight of each factor.
- Annual Bonus. Payments to Reptron's executive officers under
annual bonus plans are earned through successful completion of
stated objectives, which Reptron has determined to be critical
elements for successful operations. The Chief Executive
Officer and Chief Operating Officer are eligible to receive
annual bonus payments based solely on achieving certain levels
of profitability. Ms. Casey was the only Named Executive
Officer to receive a bonus in 2002.
- Stock Options. Reptron's long term incentives are in the form
of stock option awards. The objective of these awards is to
advance Reptron's and its shareholders' longer term interests
and complement incentives tied to annual performance. These
awards provide rewards to executives upon the creation of
incremental shareholder value and attainment of long term
earnings goals. Stock options only produce value to executives
if the price of Reptron's stock appreciates, thereby directly
linking the interests of our executives with those of our
shareholders. The executive's right to the stock options vests
over a period prescribed by Reptron's Stock Option Committee.
Ms. Casey was the only Named Executive Officer to receive an
option grant in 2002.
Compensation of Reptron's Chief Executive Officer: Mr. Michael L.
Musto's compensation was reduced by 10% effective July 1, 2001 in response to
difficult industry conditions. Mr. Musto's 2001 compensation, when initially
established, was reviewed by the Compensation Committee applying the principles
outlined above in the same manner as they were applied to the other executives
of Reptron. In addition, the Compensation Committee reviews the compensation
paid to chief executive officers of comparable companies and considers those
compensation levels in determining Mr. Musto's compensation. No changes have
been made in Mr. Musto's compensation since July 1, 2001.
Internal Revenue Code Limits on Deductibility of Compensation: Section
162(m) of the Internal Revenue Code generally disallows a lax deduction to
public corporations for compensation over $1,000,000 paid for any fiscal year to
the corporation's chief executive officer and four other most highly compensated
executive officers as of the end of any fiscal year. However, the statute
exempts qualifying performance-based compensation from the deduction limit if
certain requirements are met. Reptron expects no adverse tax consequences under
Section 162(m) for 2001.
Submitted by the Compensation Committee
Vincent Addonisio
Bertram L. Miner
REPTRON STOCK PRICE PERFORMANCE GRAPH
The following graph is a comparison of the cumulative total returns for
Reptron's common stock as compared with the cumulative total return for The
Nasdaq Slock Market (U.S.) Index and the average performance of a group
consisting of Reptron's peer corporations on a line-of-business basis. The
following Corporations make-up our peer group: ACT Manufacturing, Inc., All
American Semiconductor, Pioneer Standard Electronics, Inc., and Plexus
Corporation. The cumulative return of Reptron was computed by dividing the
difference between the price of Reptron's common stock at the end and the
beginning of the measurement period (December 31, 1997 to December 31, 2002) by
the price of Reptron's common stock at the beginning of the measurement period.
The total return calculations are based upon an assumed $100 investment on
December 31, 1997.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG REPTRON ELECTRONICS, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX AND A PEER GROUP
[PERFORMANCE GRAPH]
* $100 invested on 12/31/97 in stock or index including reinvestment of
dividends. Fiscal year ending December 31.
1997 1998 1999 2000 2001 2002
----- ------ ------ ------ ------ -----
Reptron Electronics, Inc. .............................. 100.0 50.00 84.34 59.64 30.06 8.39
Nasdaq Stock Market (U.S.) ............................. 100.0 140.99 261.48 157.77 125.16 86.53
Peer Group ............................................. 100.0 116.34 130.04 155.20 140.63 89.14
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ANA RELATED STOCKHOLDER MATTERS
There were a total of 6,417,196 shares of Reptron common stock
outstanding on April 11, 2003. The following table shows the amount of Reptron
common stock beneficially owned (unless otherwise indicated) as of the close of
business on April 11, 2003 by: (1) any person who is known by Reptron to be the
beneficial owner of more than 5% of the outstanding shares of common stock, (2)
Reptron's directors, (3) the executive officers named in the Summary
Compensation Table below and (4) all directors and executive officers of Reptron
as a group.
SHARES OF REPTRON COMMON
STOCK BENEFICIALLY OWNED
-------------------------
NUMBER PERCENT
--------- -------
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Michael L. Musto(1) ...................................................... 2,145,752 33.4%
Paul J. Plante(2) ........................................................ 406,105 6.3%
Bonnie Fena(3) ........................................................... 66,506 *
Leigh A. Lane(4) ......................................................... 2,500 *
Deborah Casey(5) ......................................................... [10,500] *
Charlie Crep(6) .......................................................... [7,875] *
Vincent Addonisio(7) ..................................................... 27,000 *
William L. Elson(8) ...................................................... 52,300 *
Bertram L. Miner ......................................................... 0 0%
All directors and executive officers as a group(9)(10 persons) ........... 2,718,538 42.4%
SHAREHOLDERS
Milan Mandaric(10) ....................................................... 571,800 8.9%
One Oakwood Boulevard, Suite 200
Hollywood, Florida 33020
Ryback Management Corporation(11) ........................................ 473,684 7.4%
7711 Carondelet Avenue
St Louis, Missouri 63105
Forum Capital Markets LLC(12) ............................................ 468,686 7.3%
53 Forest Ave, 3rd Floor
Old Greenwich, CT 06870
Paradigm Capital Management Inc(13) ...................................... 334,500 5.2%
Nine Elk Street
Albany, New York 12207
Royce & Associates, Inc.(14) ............................................. 345,000 5.4%
1414 Avenue of Americas
New York, New York 10019
Dimensional Fund Advisors, Inc(15) ....................................... 423,638 6.6%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Avenir Corporation(16) ................................................... 412,734 6.4%
1725 K St. NW, Suite 401
Washington, DC 20006
C.L. King & Associates Inc.(17) .......................................... 600,000 9.3%
Nine Elk Street
Albany, New York 12207
Edward J. Okay(18) ....................................................... 649,200 10.1%
7150 Elkhorn Drive
West Palm Beach, Florida 33411
- ----------------------
* Less than 1% of the outstanding common stock.
(1) The number of shares shown in the table includes (i) 2,932 shares held
directly by Mr. Musto; (ii) 280,700 shares issuable to the Michael L.
Musto Revocable Living Trust (the "MLM Trust") upon the conversion of
the 6% Convertible Subordinated Notes due 2004 (the "Notes"), of which
half were purchased by the MLM Trust on January 7, 1999 and half were
purchased on August 26, 1999, which are convertible into shares of
Reptron common stock at the rate of 35.0877 shares of common stock per
$1,000 principal amount of the Notes; (iii) 1,739,720 shares held by
MLM Investment Company Limited Partnership ("MLMLP") of which MLM,
Inc., a Nevada corporation ("MLM, Inc."), is the managing general
partner, Mr. Musto is the president and controlling shareholder of MLM,
Inc., and has sole voting and dispositive power over the shares held by
MLMLP; and (iv) 122,500 shares held by the MLM Trust. Excludes 4,000
shares subject to options that are exercisable by Mr. Musto's mother.
(2) The number of shares shown in the table includes (i) 52,000 shares held
directly by Mr. Plante; (ii) 350,000 shares subject to options that are
exercisable within 60 days of April 11, 2003; and (iii) 4,105 shares
issuable to an IRA for the benefit of Mr. Plante's spouse upon the
conversion of the Notes.
(3) The number of shares shown in the table includes (i) 53,631 shares held
directly by Ms. Fena; and (ii) 12,875 shares subject to options that
are exercisable within 60 days of April 11, 2003.
(4) The number of shares shown in the table includes only shares subject to
options that are exercisable within 60 days of April 11, 2003.
(5) The number of shares shown in the table includes only shares subject to
options that are exercisable within 60 days of April 11, 2003.
(6) The number of shares shown in the table includes only shares subject to
options that are exercisable within 60 days of April 11, 2003.
(7) The number of shares shown in the table includes (i) 2,000 shares held
directly by Mr. Addonisio and (ii) 25,000 shares subject to options
that are exercisable within 60 days of April 11, 2003.
(8) The number of shares shown in the table includes (i) 12,300 shares held
by the William L. Elson P.C. Profit Sharing Plan; and (ii) 40,000
shares subject to options that are exercisable within 60 days of April
11, 2003.
(9) Includes 22,712 shares beneficially owned by Anthony Musto. Mr. Musto
owns 12,714 of the shares directly and the remaining 10,000 shares are
subject to options that are exercisable within 60 days of April 11,
2003. Anthony Musto is the son of Michael L. Musto.
(10) Reptron has reason to believe that Mr. Mandaric beneficially owns
571,800 shares.
(11) The number of shares shown in the table is based upon a Schedule 13G
filed with the Securities and Exchange Commission on February 10, 1999
and are shares issuable upon the conversion of $13,500,000 of the
Notes.
(12) The number of shares shown in the table is based upon a Schedule 13G/A
filed with the Securities and Exchange Commission on February 8, 2000.
(13) The number of shares shown in the table is based upon a Schedule 13G/A
filed with the Securities and Exchange Commission on January 10, 2002.
(14) The number of shares shown in the table is based upon a Schedule 13D
filed with the Securities and Exchange Commission on February 5, 2003.
(15) The number of shares shown in the table is based upon a Schedule 13G/A
filed with the Securities and Exchange Commission on February 14, 2003
(16) The number of shares shown in the table is based upon a Schedule 13G/A
filed with the Securities and Exchange Commission on February 14, 2003
(17) The number of shares shown in the table is based upon a Schedule 13G
filed with the Securities and Exchange Commission on January 8, 2003.
(18) The number of shares shown in the table is based upon a Schedule 13G
filed with the Securities and Exchange Commission on February 11, 2003.
Information regarding equity compensation plans required by this Item
is included in Item 5 of Part II of this report and is incorporated into this
Item by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From time to time, Reptron and its subsidiaries engage in transactions
with companies where one of Reptron's executive officers or directors or a
member of his or her immediate family has a direct or indirect interest. All of
these transactions, including those described below, are in the ordinary course
of business and at competitive rates and prices.
Reptron leased one of its sales offices (located in Detroit, Michigan)
from Michael L. Musto, Reptron's Chief Executive Officer during 2002. The
building includes office and warehouse space and totals approximately 10,000
square feet. Rent expense on this facility totaled $72,000 in 2002. The lease
was terminated on March 1, 2003. The Reptron Manufacturing division leases a
total of 127,000 square feet of manufacturing and administrative offices in
Hibbing, Minnesota, which facility is owned in part by four individuals on the
senior management team of Reptron Manufacturing. Rent expense on these offices
totaled $562,000 in 2002. The lease expires in December 2007.
Mr. Elson, a Director of Reptron, provides legal services to Reptron
and received approximately $218,000 for legal services rendered during 2002. In
addition, Mr. Elson, is also of counsel to the law firm of Holland & Knight LLP
which served as counsel to Reptron during the fiscal year ended December 31,
2002.
Mr. Musto, Reptron's Chief Executive Officer, beneficially owns a
portion of Reptron's 6.75% convertible subordinated notes with a face value of
approximately $8.0 million. In 2002, Mr. Musto received approximately $540,000
in interest payments on these notes. Also, Mr. Plante, Reptron's President,
Chief Operating Officer and Acting Chief Financial Officer, beneficially owns a
portion of Reptron's 6.75% convertible subordinated with a face value of
approximately $117,000. In 2002, Mr. Plante received approximately $8,000 in
interest payments on these notes.
Ms. Lane, a Director of Reptron, also serves as Secretary and Corporate
Credit Manager of Reptron. We are a party to an employment agreement with Ms.
Lane effective January 1, 1997. This agreement continues until terminated (as
provided in the agreement), and provides for an annual base salary and certain
other benefits. The annual base salary for fiscal 2002 was $120,000. However,
Ms. Lane, as well as our entire senior management team, received a temporary ten
percent pay reduction effective July 1, 2001, in response to difficult industry
conditions. This decrease in pay will be restored if and when business
conditions improve. Ms. Lane's employment agreement provides that she is
entitled to severance if her employment is terminated by us for any reason or
upon a "change of control" (as defined in the employment agreement). In such
case, Ms. Lane would receive 2.99 times her average annual base compensation.
Reptron occasionally leases an airplane from a company controlled by
Mr. Musto, Reptron's Chief Executive Officer. The lease is based on a per hour
use charge. During 2002, payments for the use of the airplane were approximately
$120,000.
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this amendment to the Annual Report of Form
10-K/A to be signed on its behalf by the undersigned, thereto duly authorized.
REPTRON ELECTRONICS, INC.
Date: April 30, 2003 By: /s/ MICHAEL L. MUSTO
---------------------------
Michael L. Musto
Chief Executive Officer
CERTIFICATIONS
I, Michael L. Musto, certify that:
1. I have reviewed this annual report on Form 10-K/A of Reptron
Electronics, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made know to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls;
6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: April 30, 2003 /s/ MICHAEL L. MUSTO
-----------------------------------------
Michael L. Musto, Chief Executive Officer
CERTIFICATIONS
I, Paul J. Plante, certify that:
1. I have reviewed this annual report on Form 10-K/A of Reptron
Electronics, Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made know to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls;
6. The registrant's other certifying officer and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: April 30, 2003 /s/ PAUL J. PLANTE
---------------------------------------------
Paul J. Plante, President and Chief Operating
Officer (Principal Accounting Officer)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
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 0-23426
REPTRON ELECTRONICS, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Florida 38-2081116
------- ----------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
13700 Reptron Boulevard, Tampa, Florida 33626
---------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813)854-2351
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class
-------------------
Common Stock, $.01 par value
6 3/4 Convertible Subordinated Notes, due 2004
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes (X) No ( )
The aggregate market value of shares of the registrant's common stock held by
non-affiliates of the registrant as of June 28, 2002 was approximately
$10,588,000.
The number of shares of the registrant's common stock issued and outstanding as
of April 11, 2003 was 6,417,196.
Documents Incorporated by Reference:
Parts of Reptron's definitive proxy statement for the Annual Meeting of
Reptron's Shareholders to be held on June 23, 2003 are incorporated by reference
into Part III of this Form.
1
REPTRON ELECTRONICS, INC.
FORM 10-K
Fiscal Year ended December 31, 2002
Item Number in
Form 10-K Page
- -------------- ----
PART I
1. Business ......................................................................................... 3
2. Properties ....................................................................................... 14
3. Legal Proceedings ................................................................................ 14
4. Submission of Matters to a Vote of Security Holders .............................................. 14
PART II
5. Market For Registrant's Common Stock and Related Stockholder Matters ............................. 15
6. Selected Financial Data .......................................................................... 16
7. Management's Discussion and Analysis of Financial Condition and Results of Operations ............ 17
7a. Quantitative and Qualitative Disclosures About Market Risk ....................................... 24
8. Financial Statements and Supplementary Data ...................................................... 24
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure ............. 24
PART III
10. Directors and Executive Officers of the Registrant ............................................... 24
11. Executive Compensation ........................................................................... 24
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ... 24
13. Certain Relationships and Related Transactions ................................................... 24
14. Controls and Procedures .......................................................................... 25
15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ................................. 26
2
PART I
References to "Reptron", "the Company", "we", "us" and "our" refer to
Reptron Electronics, Inc., and its subsidiaries, unless the context otherwise
requires. This document contains certain forward-looking statements that involve
a number of risks and uncertainties. Such forward-looking statements are within
the meaning of that term in Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended.
Factors that could cause actual results to differ materially include the
following: business conditions and growth in Reptron's industry and in the
general economy; competitive factors; risks due to shifts in market demand; the
ability of Reptron to complete acquisitions; and the risk factors listed from
time to time in Reptron's reports filed with the Securities and Exchange
Commission as well as assumptions regarding the foregoing. The words "believe",
"plans", "estimate", "expect", "intend", "anticipate", and similar expressions
and variations thereof identify certain of such forward-looking statements,
which speak only as of the dates on which they were made. Reptron undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise. Readers are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those indicated in the forward-looking statements as a
result of various factors. Readers are cautioned not to place undue reliance on
these forward-looking statements.
ITEM 1. BUSINESS
GENERAL
We are an electronics manufacturing supply chain services company
providing demand creation distribution of electronic components, custom
logistics and supply chain management services, engineering services, display
integration services and electronic manufacturing services through our two
business segments, Electronic Component Distribution ("ECD") and Electronic
Manufacturing Services ("EMS"). The ECD segment is comprised of Reptron
Distribution and Reptron Computer Products. The EMS segment is comprised of
Reptron Manufacturing Services and Reptron Display and Systems Integration.
Reptron was incorporated under the laws of Michigan in 1973 and
reincorporated under the laws of Florida in 1993. Reptron's principal executive
offices are located at 13700 Reptron Boulevard, Tampa, Florida 33626, and its
telephone number is (813)854-2351.
THE ELECTRONIC MANUFACTURING SERVICES INDUSTRY AND ELECTRONIC COMPONENT
DISTRIBUTION INDUSTRY
Electronics Manufacturing Services. The EMS industry has experienced
rapid changes over the past several years as an increasing number of original
equipment manufacturers ("OEMs") have chosen to outsource printed circuit board
assemblies and display product integration and assembly to electronics
manufacturing specialists such as Reptron Manufacturing Services and Reptron
Display and System Integration. Factors driving OEMs to favor outsourcing to
electronics manufacturing specialists include:
- Reduced Time to Market. Because of the intense competitive pressures
and rapidly progressing technology in the electronics industry, OEMs
are faced with increasingly short product life-cycles and therefore
have a growing need to reduce the time required to bring a product to
market. OEMs can reduce their time to market by using an electronics
manufacturer's established manufacturing expertise and infrastructure.
- Minimized Capital Investment. As electronic products have become more
technologically advanced, the manufacturing process has become
increasingly automated and highly intricate, and manufacturers have
had to invest in new capital equipment at an accelerated rate. By
outsourcing to electronics manufacturing specialists, OEMs are able to
lower their investment in inventory, facilities and equipment, thereby
enabling them to allocate capital to other activities such as sales
and marketing and research and development.
3
- Focused Resources. Because the electronics industry is experiencing
greater levels of competition and more rapid technological change,
many OEMs increasingly seek to focus their resources on activities and
technologies that add greater value. By offering turnkey manufacturing
services and comprehensive electronic assembly, electronics
manufacturing specialists permit OEMs to focus on their core business
activities, such as product development and marketing.
- Access to Leading Edge Manufacturing Technology. Electronic products
and electronics manufacturing technology have become increasingly
sophisticated and complex. OEMs desire to work with electronics
manufacturing specialists in order to gain access to their
technological expertise in process development and control.
- Improved Inventory Management and Purchasing Power. Electronics
industry OEMs are faced with increasing difficulties in planning,
procuring and managing their inventories efficiently due to frequent
design changes, short product life-cycles, large investments in
electronic components, component price fluctuations and the need to
achieve economies of scale in materials procurement. Electronics
manufacturing specialists are able to manage both procurement and
inventory, and have demonstrated proficiency in purchasing components
at improved pricing.
- Access to Low Cost Manufacturing. The rapid move towards globalization
has rendered the electronics industry to be more competitive than ever
before. Therefore, OEMs require access to low cost manufacturing
regions. Electronic Manufacturing Services providers have established
facilities in these low cost regions enabling access to low cost
manufacturing.
Electronic Component Distribution. Most manufacturers of electronic
components rely on independent distributors, such as Reptron, to extend their
marketing operations. As a stocking, marketing and financial intermediary, a
distributor relieves the manufacturer of part of the costs associated with the
stocking and selling of its products, including otherwise potentially sizeable
investments in inventories, accounts receivable and personnel. Additionally, the
use of the distribution business model allows the manufacturer to lower its
fixed expenses, thereby converting selling expenses into variable costs
supported by sales revenue. At the same time, the distributor offers to a broad
range of customers the convenience of diverse inventory, flexible deliveries and
a wide range of value-added services to help manage material procurement
requirements. Manufacturers have historically viewed their distributors as
essential extensions of their marketing organizations and by customers who
recognize the value that distributors add to the total material procurement
process.
In recent years, an increasing portion of electronic component
procurement has been placed through the distribution channel. This trend has
been driven by component manufacturers who place an increasing emphasis on
developing new technology while outsourcing a growing portion of the sales
function to component distributors. Fixed selling expenses are reduced through
their use of the distributor's sales infrastructure.
Customer needs have also contributed to a growing percentage of
component sales placed through distribution. Customers must continue to focus on
reducing operating costs and minimizing their inventory investment in order to
remain competitive. Their need for inventory control programs (kan ban, kitting,
JIT, auto-replenishment, bonding, etc.), component engineering and programming
and frequent schedule changes cannot be accommodated by component manufacturers.
Distributors provide these programs and others as part of their value-added
services offering. In recent years, a larger percentage of distribution sales
are associated with value-added services. At the same time, the distributor has
assumed a larger role in the management of the supply chain.
STRATEGY
Reptron's principal business objective is to expand its presence as an
electronics supply chain services company within specific market segments. In
order to implement its objective, Reptron has formulated a strategy for each of
its business units based upon the following key elements:
- Target Manufacturing Customers in Specific Market Segments. Reptron
Manufacturing Services follows a well-defined strategy in its EMS
business. Reptron Manufacturing Services focuses on complex assemblies
in medium-to-high volumes for commercial and industrial customers.
Additionally, Reptron Manufacturing Services seeks customers that will
utilize its engineering expertise and its ability to assemble
customers' products by integrating printed circuit board assemblies
into other elements of the customers' products (sometimes referred to
as total "box build"). Reptron
4
Manufacturing Services also seeks customer relationships in which
Reptron Manufacturing Services is the primary source and avoids
engagements requiring an overflow supplier. Reptron Manufacturing
Services targets customers in a variety of industries to establish
diversity among the customers and industries served. Primary target
industry segments include medical and industrial instrumentation.
- Leverage Investments Made in its Manufacturing Facilities. Reptron has
invested in facilities that will allow it to expand its business.
Reptron believes its manufacturing facilities can accommodate
approximately $300 million in annual contract manufacturing net sales
based on the types of business currently transacted by Reptron
Manufacturing Services. Reptron Manufacturing Services' 2002 combined
sales totaled approximately $155 million. Consequently, Reptron
believes there is adequate capacity to support future sales growth.
- Focus On Select Technologies For Reptron Distribution. Reptron
Distribution focuses on select technologies including various types of
semiconductors, flat panel displays, power supplies and industrial
printers. We have partnered with approximately thirty suppliers
providing these products. This narrowly focused approach enables
Reptron Distribution to develop superior expertise and service in
these product categories thereby adding value to customers and
suppliers.
CERTAIN CONSIDERATIONS
Credit Agreement. Three lenders have made available to us a $60 million
revolving credit facility (the "Credit Agreement") through October 10, 2005.
Borrowings under the Credit Agreement are collateralized by substantially all
assets of Reptron including inventory, accounts receivable, equipment and
general intangibles and certain of our real property. The Credit Agreement
limits the amount of capital expenditures and prohibits the payment of dividends
without the lender's consent. Amounts outstanding under the Credit Agreement as
of December 31, 2002 were approximately $33.6 million. The Credit Agreement
contains certain covenants including a minimum quarterly measure of earnings
before interest, taxes, depreciation and amortization ("EBITDA") as defined by
the Credit Agreement. Reptron was not in compliance with the minimum quarterly
EBITDA covenant as of December 31, 2002. Additionally, management believes that
Reptron will not meet the EBITDA covenants required under the Credit Agreement
for at least the calendar quarters ending March 31 and June 30, 2003.
Additionally, we are in default of the Credit Agreement as a result of our
default under the 6 3/4 % Convertible Notes due August 11, 2004 (see below). As
a result of these defaults, our lenders could make demand for immediate
repayment of all outstanding advances under the Credit Agreement and exercise
their rights as a secured lender as provided under the Credit Agreement.
Additionally, some of the advance ratios provided under our Credit Agreement
have been made more restrictive, thereby reducing our liquidity. Notwithstanding
our lender's right to make demand for immediate and full repayment of all
outstanding advances under the Credit Agreement, our lenders continue to provide
us financing under the Credit Agreement. Management is working with our lenders
to develop arrangements for our lenders to waive these defaults under the Credit
Agreement as well as negotiating an amendment to the Credit Agreement directed
toward reducing the EBITDA covenants required in future calendar quarters. We
cannot assure you that we will receive the necessary waivers or adjustments to
these covenants. If our lenders were to terminate the Credit Agreement, for any
reason, or substantially reduce the amount of credit available under the Credit
Agreement, it is unlikely that we would be able to continue our operations
without the benefit of protection under the United States Bankruptcy laws, all
of which would have a material adverse effect on our business and financial
condition.
Convertible Notes. As of December 31, 2002, there was outstanding
approximately $76.3 million of Convertible Notes. The holders of the Convertible
Notes have the right to convert any portion of the principal amount of the
outstanding Convertible Notes, at the date of conversion, into shares of our
common stock at any time prior to the close of business on August 1, 2004, at a
conversion rate of 35.0877 shares of common stock per $1,000 principal amount of
the Convertible Notes (equivalent to a conversion price of approximately $28.50
per share). There is no requirement that the holders of the Convertible Notes
convert on or before August 1, 2004. Additionally, the Company has the right to
require the redemption of the Convertible Notes under certain circumstances. We
believe it is extremely unlikely that the Convertible Notes will be either
converted or redeemed given the Company's financial condition and the trading
price for its stock.
The Company failed to make the February 1, 2003 interest payment due to
holders of the Convertible Notes. Reptron does not have adequate liquidity to
make this interest payment and we cannot determine when, if ever, we will have
the ability to do so. Because we were unable to cure this default on or before
March 5, 2003, under identified conditions described in the Notes and under that
certain Trust Indenture between Reptron and Reliance Trust Company (whose
successor in interest is US
5
Bank), dated August 5, 1997 pursuant to which the Notes were issued, the
outstanding principal indebtedness of the Convertible Notes can be currently
accelerated and become immediately due and payable.
Certain holders of the Convertible Notes have formed an ad-hoc
committee to discuss possible alternatives in the restructuring of the
indebtedness and terms of repayment of the restructured debt under the
Convertible Notes. The ad-hoc committee represents approximately 56% of the
total outstanding principal due under the Convertible Notes. The ad-hoc
committee has retained legal counsel and we have engaged a consulting firm to
assist in the negotiations of a restructuring with the ad-hoc committee. If we
fail to reach an agreement, it is likely that the holders of the Convertible
Notes will make demand for payment of the defaulted interest and accelerate and
make demand for full and immediate repayment of the outstanding principal amount
due under the Convertible Notes, all of which would have a material adverse
effect on our business and financial condition. We do not have sufficient
liquidity to satisfy such demands. In such event, it is probable that we would
seek protection under the United States Bankruptcy laws.
Significant Possibility of Substantial Shareholder Dilution in
Connection With the Restructuring of the Indebtedness Represented by the
Convertible Notes. We believe that it is likely that we will be required to
issue a substantial amount of our unissued common stock in exchange for the
agreement of the holders of the Convertible Notes to reduce the amount of the
principal indebtedness due under the Convertible Notes and to restructure the
repayment terms of the restructured indebtedness. It is likely that at the
conclusion of the restructuring of the Convertible Notes, the holders of the
Convertible Notes will own a substantial majority of our issued and outstanding
common stock.
Current Adverse Economic Environment. During 2001 and 2002, the United
States economy experienced little to no growth. Many companies in the
electronics industry experienced significant contraction due to adverse market
conditions. We have continued cost cutting measures, initiated in 2001, that
were directed at addressing these market conditions. There can be no assurance,
however, that these cost cutting measures will be effective or adequate to
compensate for the significant reductions in our sales and earnings. In
addition, the defaults under our Credit Agreement and under the Convertible
Notes have caused some of our vendors to limit the amount of credit extended to
us or reduce the time for payment of credit extended thereby putting additional
pressure on our overall financial condition. If current economic conditions
continue for an extended period of time, we believe that this will have a
material adverse effect on our operating results and financial condition and may
require us to seek protection under the United States Bankruptcy laws.
Dependence upon Key Vendors. Many of the components distributed by
Reptron Distribution are currently manufactured by a relatively small number of
independent vendors. Four vendors collectively accounted for approximately 47%
and 53% of Reptron Distribution's net sales in 2002 and 2001, respectively (16%
and 26% of Reptron's total 2002 and 2001 net sales, respectively). Reptron does
not have long-term distribution contracts with its vendors. These contracts are
non-exclusive and typically are cancelable upon 30 to 90 days written notice.
Additionally, our management believes that vendors are consolidating their
distribution relationships. We believe that our future success will depend, in
large part, on maintaining our existing vendor relationships. The loss of, or
significant disruptions in the relationship with, one or more of Reptron's
principal vendors could have a material adverse effect on Reptron's future
operating results. See "Reptron Distribution - Vendors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Customer Concentration and Related Factors Affecting Operating Results.
Reptron's business units have certain customers that account for a significant
part of their respective net sales. The ten largest ECD customers collectively
represented 37% and 32% of its net sales in 2002 and in 2001 (18% and 19% of
Reptron's total net sales in 2002 and 2001, respectively). Reptron's three
largest EMS customers accounted for approximately 20%, 9% and 8% of its net
sales in 2002, respectively, and 17%, 10% and 6% of its net sales in 2001,
respectively, (11%, 5% and 4% of Reptron's total net sales in 2002,
respectively, and 7%, 4% and 3% of Reptron's total net sales in 2001,
respectively). The loss of one or more of these major customers, or a reduction
in their level of purchasing, could have a material adverse effect on Reptron's
business, results of operations and financial condition. Some of our customers
have expressed concern over the large losses we have incurred and the defaults
under our Credit Agreement and under the Convertible Notes. It is possible that
our major customers could suspend or terminate business activity with us due to
these concerns. This action would have a material adverse effect on our
business.
Reptron Manufacturing Services' operating results are affected by a
number of factors, including fixed plant utilization, price competition, ability
to keep pace with technological developments, the degree of automation that can
be used in an assembly process, efficiencies that can be achieved by managing
inventories and fixed assets, the timing of orders from major customers, the
timing of capital expenditures in anticipation of increased sales, incurring
substantial start-up costs on new assemblies, customer product delivery
requirements and costs and shortages of components and labor. In addition,
because of the limited number of
6
Reptron Manufacturing Services' customers and the corresponding concentration of
its accounts receivable, the insolvency or other inability or unwillingness of
its customers to pay for manufacturing services could have a material adverse
effect on Reptron's operating results. See - "Reptron Distribution - Marketing
and Customers" and "Reptron Manufacturing Services - Marketing and Customers."
The Volume and Timing of Customer Sales May Vary- Reptron Distribution.
The results for Reptron Distribution may vary widely based upon customer demand
and general economic conditions. Consistent with historical periods of economic
downturn in the electronics industry (including the current economic downturn),
in 2001 and 2002 Reptron Distribution experienced a significant reduction in
orders and increases in order cancellations and requests for delayed deliveries
as well as increases in instances of customers being unable to pay for product.
There can be no assurance that Reptron Distribution's contractual arrangements
will adequately compensate it for the loss of sales due to these factors.
Sustained economic downturn in the electronics industry will continue to have a
material adverse effect on Reptron Distribution's operating results and
financial condition.
The Volume and Timing of Customer Sales May Vary - Reptron
Manufacturing Services. The volume and timing of purchase orders placed by
Reptron Manufacturing Services' customers are affected by a number of factors,
including variation in demand for customers' products, customer attempts to
manage inventory, changes in product design or specifications and changes in the
customers' manufacturing strategies. Reptron Manufacturing Services typically
does not obtain long-term purchase orders or commitments but instead works with
its customers to develop nonbinding forecasts of future requirements. Based on
such nonbinding forecasts, Reptron Manufacturing Services makes commitments
regarding the level of business that it will seek and accept, the timing of
production schedules and the levels and utilization of personnel and other
resources. A variety of conditions, both specific to each individual customer
and generally affecting each customer's industry, may cause customers to cancel,
reduce or delay orders that were either previously made or anticipated.
Generally, customers may cancel, reduce or delay purchase orders and commitments
without penalty, except for payment for services rendered or product completed
and, in certain circumstances, payment for materials purchased and charges
associated with such cancellation, reduction or delay. Significant or numerous
cancellations, reductions or delays in orders by customers, or any inability by
customers to pay for services provided by us or to pay for components and
materials purchased by us on such customers' behalf, could have a material
adverse effect on our operating results.
Competition. We face substantial competition. We believe that many of
our competitors have international operations and significantly greater
manufacturing, financial, marketing, research and development resources, and
broader name recognition. Reptron Distribution faces competition from hundreds
of electronic component distributors of various sizes, locations and market
focuses (e.g., military, commercial, consumer) and competes principally on the
basis of product selection, reputation and customer service. We believe that
vendor representation and product diversity create segmentation among
distributors. Reptron Distribution has several primary competitors that carry
similar lines. Reptron Manufacturing Services and Reptron Display and System
Integration compete in a highly fragmented market composed of a diverse group of
EMS providers. Reptron believes that the key competitive factors in its markets
are manufacturing flexibility, price, manufacturing quality, advanced
manufacturing technology and reliable delivery. Additionally, Reptron
Manufacturing Services faces the potential risk that its customers may elect to
produce their products internally, thereby eliminating manufacturing
opportunities for Reptron Manufacturing Services. There can be no assurance that
Reptron will be able to continue to compete effectively with existing or
potential competitors. See " - Competition."
Availability of Components. We rely on third-party suppliers for
electronic components. We believe that component shortages may have a material
adverse effect on Reptron's ability to service its customers. At various times,
there have been shortages of components in the electronics industry and from
time to time the supply of certain electronic components is subject to limited
allocations. If shortages of components should occur, we expect that we may be
forced to delay shipment or to purchase components at higher prices (that may
not be able to be passed on to our customers), which may have a material adverse
effect on customer demand, our ability to service customer needs or our gross
margins. We believe that any of these events could have a material adverse
effect on our operating results.
Dependence Upon Key Personnel. The success of Reptron to date has been
largely dependent upon the efforts and abilities of Reptron's key managerial and
technical employees. The loss of the services of certain of these key employees
or an inability to attract or retain qualified employees could have a material
adverse effect on Reptron.
Volatility of Component Pricing. Reptron Distribution sells a
significant amount of commodity-type components that have historically
experienced volatile pricing. These components include dynamic random access
memory ("DRAM") and static
7
random access memory ("SRAM") products. If market pricing for these components
decreases significantly, Reptron may experience periods when its investment in
component inventory exceeds the market price of such components. Such market
conditions could have a negative impact on sales, gross profit margins, and the
increase in excess inventory. Most of the components sold through the Reptron
Computer Products division are not supplied under distribution agreements and
consequently, this inventory is not subject to those contractual protections
afforded under standard distribution agreements. See "- Reptron Distribution -
Vendors."
Migration of Electronic Manufacturing to Asia. A growing number of
electronic manufacturing service providers have relocated a portion or all of
their manufacturing operations to Asia. In particular, the growth rate in China
has been very strong in recent years to the detriment of other regions of the
world. This trend is driven primarily by high availability of low cost labor. In
order for us to remain competitive in the markets we serve and have targeted, we
will need to expand a portion of our manufacturing capability to Asia. If we are
unable to develop a manufacturing presence in Asia, our ability to effectively
compete will be materially and adversely affected.
ELECTRONIC MANUFACTURING SERVICES (EMS)
Our Electronic Manufacturing Services segment includes Reptron
Manufacturing Services and Reptron Display and System Integration. We entered
into the electronics manufacturing services business through an acquisition in
1986. Reptron Manufacturing Services currently operates from three locations and
represents approximately 94% of the total 2002 EMS sales. Reptron Display and
System Integration was acquired in 1999 and operates from a single facility.
Reptron Display and Systems Integration represents approximately 6% of total
2002 EMS sales.
Manufacturing Operations. Reptron Manufacturing Services provides
turnkey manufacturing services, including the purchase of customer-specified
components from its extensive network of component suppliers (including Reptron
Distribution), assembly of components on printed circuit boards, performance of
post-production testing and in certain instances total box build assembly.
Reptron Manufacturing Services attempts to perform as much of a given
manufacturing process as is feasible and generally does not perform labor-only,
consignment assembly functions unless management believes that such engagements
may provide a direct route to turnkey contracts. Typical manufacturing
engagements include medium to high volume assembly of complex products.
Reptron Manufacturing Services provides design-for-manufacturability
engineering services as well as surface mount technology ("SMT") conversion, pin
through hole ("PTH") interconnection technologies and printed circuit board
layout services for existing products. Reptron Manufacturing Services also
provides test process design capabilities that include the design and
development of test fixtures and procedures and software for both in-circuit
tests and functional tests of circuit boards, components and products.
Reptron Manufacturing Services is able to efficiently manage its
materials procurement and inventory management functions. The inherent
scheduling and procurement challenges in medium volume production of a large
number of different circuit board assemblies requires a high level of expertise
in material procurement. Reptron Manufacturing Services obtains its electronic
components from a wide variety of manufacturers and distributors, some of which
are procured through Reptron Distribution.
Reptron Display and Systems integration performs product assembly
services for products that include flat panel display technology. We provided
various forms of engineering, product burn-in, clean room environments and other
services. This total service approach enables customer loyalty and higher
margins.
Marketing and Customers. Reptron Manufacturing Services follows a
well-defined marketing strategy, which includes the following key elements:
- Target Customers Requiring Complex Printed Circuit Board Assemblies.
Reptron Manufacturing Services focuses on complex assemblies in
medium-to-high volumes for customers primarily in the
telecommunications, healthcare, industrial/instrumentation, banking and
office products industries. Reptron Manufacturing Services does not
manufacture extremely high volume printed circuit board assemblies for
the personal computer, consumer products or automotive industries.
Reptron Manufacturing Services targets customers requiring a high
number of different circuit board assemblies, thereby seeking to
minimize its exposure to any one product made for a specific customer.
Reptron Manufacturing Services focuses on the medium-to-high volume
batch business because of its reduced volatility. Reptron
8
Manufacturing Services gains access to a significant number of these
kinds of customers through its direct sales force and independent
manufacturer's representatives. Additionally, Reptron Manufacturing
Services expands its market and customer development through its
independent sales representatives.
- Target Customer Relationships where Reptron Manufacturing Services is
the Primary Source. Reptron Manufacturing Services seeks engagements
with customers that have decided to strategically outsource
substantially all circuit board assembly. Consequently, Reptron
Manufacturing Services markets its services as a "partnership" with
the customer and encourages the customer to view Reptron Manufacturing
Services as an extension of its own manufacturing capabilities.
Reptron Manufacturing Services attempts to avoid relationships where
Reptron Manufacturing Services is used as an overflow supplier to
manage peak volume requirements.
- Maintain a Diverse Customer and Industry Base. Reptron Manufacturing
Services targets customers primarily in the telecommunications,
medical, industrial/instrumentation, banking and office products
industries and seeks to maintain a diversity of customers among these
industries and within each industry. In addition, Reptron
Manufacturing Services believes that the industries that it targets
make products that generally have longer life cycles, more stable
demand and less price pressure compared to consumer oriented products.
Nevertheless, Reptron Manufacturing Services' customers from time to
time, experience downturns in their respective businesses resulting in
fluctuations in demand for Reptron Manufacturing Services' services.
See "- Certain Considerations - The Volume and Timing of Customer
Sales May Vary."
- Target Customers Seeking Value-Added Services. Reptron Manufacturing
Services offers a wide variety of services in addition to circuit board
assembly and total product assembly. Theses services include various
forms of engineering and inventory control programs. Reptron
Manufacturing Services seeks to include its services offering in
customer engagements to avoid a commodity service business model. We
believe selling these value-added services promotes customer longevity
and more profitable customer engagements.
Our marketing cycle for customers meeting these criteria typically
spans six-to-twelve months. Additionally, the start-up phase for an engagement
may run an additional six months. Typically, during this phase, significant
investments are made by Reptron Manufacturing Services and the customer to
successfully launch a high number of different, complex circuit board
assemblies. Reptron Manufacturing Services works closely with its customers in
all phases of design, start-up and production, and through this cooperative
effort develops a close working relationship with the customer. These
relationships, and the investments made both in time and financial resources by
the customer and Reptron Manufacturing Services, management believes, promotes
long-term customer loyalty.
Reptron Manufacturing Services seeks to maintain diversity within its
customer base and industries served. During 2002, Reptron Manufacturing
Services' largest three customers represented 22%, 10% and 8%, respectively of
Reptron Manufacturing Services' 2002 net sales (11%, 5% and 4%, respectively of
total Reptron net sales). During 2001, Reptron Manufacturing Services' largest
three customers represented 18%, 11% and 6%, respectively of Reptron
Manufacturing Services' 2001 net sales (7%, 4% and 3%, respectively of total
Reptron net sales). The following table sets forth the principle industries and
the percentage of Reptron Manufacturing Services sales derived from various
industries for 2002 and 2001.
2002 2001
---------- ----------
Industry % of Sales % of Sales
- -------------------------- ---------- ----------
Medical 26% 22%
Semiconductor Equipment 5% 14%
Industrial/Instrumentation 16% 18%
Telecommunications 16% 15%
Banking 14% 21%
Government 11% 0%
Office Products 5% 5%
Other 7% 5%
9
Manufacturing Facilities. Reptron Manufacturing Services operates three
plants. These manufacturing facilities are equipped with advanced SMT assembly
equipment and PTH insertion equipment. The Gaylord, Michigan 80,000 square foot
manufacturing facility is owned by us and was constructed in 1988. The Tampa,
Florida 150,000 square foot manufacturing and corporate headquarters facility is
owned by us and was completed in the first quarter of 1997. Reptron
Manufacturing Services leases six buildings in Hibbing, Minnesota, which total
127,000 square feet. These buildings are owned in part by four individuals on
Reptron Manufacturing's senior management team. Additionally, we own a 40,300
square foot building in Hibbing, Minnesota which is occupied by Reptron
Manufacturing Services. Reptron Display and System Integration operates from a
40,000 square foot leased facility in Fremont, California.
The Hibbing, Minnesota manufacturing plant accounted for approximately
38% of Reptron Manufacturing Services' 2002 net sales, with the Tampa, Florida
plant totaling approximately 33% of 2002 net sales, and the Gaylord, Michigan
manufacturing plant totaling approximately 29% of 2002 net sales.
ELECTRONIC COMPONENT DISTRIBUTION (ECD)
Our Electronic Component Distribution segment includes Reptron
Distribution and Reptron Computer Products. Reptron Distribution sells
electronic components primarily to original equipment manufacturers in a wide
variety of industries. We were founded in 1973 in Detroit, Michigan as a
distributor of electronic components. Reptron Distribution now operates in a
significantly reduced network of sales offices, outside sales personnel,
in-house telemarketing sales and customer support personnel which management
believes collectively addresses most of the total available electronic
components market in the United States as well as selected international
markets. Reptron Distribution represented approximately 71% of total 2002 ECD
segment sales.
Reptron Computer Products primarily sells memory modules to retail
stores. This operating unit was formed in 1995 and has grown to represent
approximately 29% of 2002 ECD segment sales.
Products. Reptron Distribution represents over 30 vendor lines and
distributes more than 45,000 separate items. The products that Reptron
distributes can be broadly divided into four main groups: semiconductors, flat
panel displays, passive products and electromechanical components.
Semiconductors accounted for approximately 60% and 65% of Reptron
Distribution's sales in 2002 and 2001, respectively. Reptron Distribution's
product offering includes application specific integrated circuits ("ASICs"), a
variety of memory devices (i.e.., dynamic, static, programmable) and
microprocessors and controllers produced by over 22 vendors. We represent a
number of leading semiconductor manufacturers, including Hitachi, Sharp, OKI and
Samsung. Flat panel displays accounted for approximately 18% and 13% of Reptron
Distribution's sales in 2002 and 2001, respectively. The display product
offering included liquid crystal displays (LCD) and thin film transistor
displays (TFT) as well as various peripheral devices produced by leading
manufacturers including Hitachi, Kyocera, Samsung and Sharp. Passive products
and electromechanical components accounted for the remaining 22% and 22% of
Reptron Distribution sales in 2002 and 2001, respectively. Among these
components are capacitors, resistors, relays, power supplies and industrial
printers manufactured by over 12 vendors, such as Astec, Vishay, Lambda and
Seiko MPD. Reptron Distribution's largest four vendor lines collectively
represented 47% and 53% of Reptron Distribution's sales in 2002 and 2001,
respectively (16% and 26% of Reptron's total net sales in 2002 and 2001,
respectively). See "Certain Considerations-Dependence Upon Key Vendors."
Reptron's Computer Products unit is devoted primarily to selling memory
modules. This business unit employs a separate sales and support staff that
focuses on a different market niche and customer base than is serviced by
Reptron Distribution. This unit sells primarily to retail stores. Other markets
include computer integrators, internet retailing and value-added resellers.
Sales are generally characterized by higher volumes, lower gross profit margins
and lower selling, general and administrative expenses than other electronic
component sales generated by Reptron Distribution. Sales from Reptron Computer
Products accounted for 29% and 15% of ECD net sales in 2002 and 2001,
respectively (14% and 9% of Reptron's total net sales in 2002 and 2001,
respectively).
Services. Reptron Distribution sells primarily to approximately 2,000
customers representing diverse industries including: robotics,
telecommunications, computers and computer peripherals, consumer electronics,
healthcare, industrial controls and contract manufacturing. Services provided to
these customers include component sales, component engineering, inventory
replenishment programs, in-plant stores, component programming, EDI, and other
internet based communications. For its vendors, Reptron Distribution has
developed product promotion, technical seminars, and customer identification
programs that
10
help vendors build recognition of individual products and target and market to
specific types of customers. Reptron Distribution has also developed and hosts
several internet web sites which promote and sell vendor products.
Vendors. In selecting vendors to represent, Reptron Distribution
considers numerous factors, including product demand, availability and
compatibility with existing product lines. Reptron Distribution has
non-exclusive, geographically limited agreements with its franchised vendors for
the sale of their products, which we believe is customary in the industry.
Reptron Distribution's agreements with vendors do not restrict us from selling
similar products manufactured by our vendors' competitors, and typically allow
termination by either party upon 30 to 90 days notice.
Reptron Distribution's franchised vendors generally protect Reptron
against potential write-downs of inventories based upon vendors' price
reductions or technological changes. Under the terms of most of Reptron
Distribution's franchised distributor agreements, if we comply with certain
conditions, the vendor is required, pursuant to price protection privileges, to
credit us for decreases in inventory value resulting from reductions in the
vendor's list prices of the items. In addition, under the stock rotation terms
of Reptron Distribution's franchised distributor agreements, we have the right
to return to the vendor for credit against current obligations or future orders
a specified portion of those inventory items purchased within a designated
period. These return privileges generally do not apply to inventory items
designated by the vendors as non-standard or discontinued. Additionally, the
return privileges may be limited to items purchased within one year. The extent
of these return privileges are customarily tied to the amount of new inventory
purchased over designated periods. Reptron's ability to return product has been
diminished in recent years due to the significant downward trend in our
purchases of inventory from franchised vendors, primarily due to the depressed
status of our industry.
A vendor that elects to terminate a distributor agreement is generally
required to purchase from the distributor the total amount of its products
carried in the distributor's inventory, less a restocking charge. Once again,
vendors generally are not required to accept return of non-standard or
discontinued items as well as items purchased over one year prior to such a
termination. We believe that our distributor agreements are on terms and
conditions consistent with industry standards. Reptron Distribution will, as
well, purchase inventory from non-franchise vendors, which inventory is not
subject to price protection and stock rotation privileges. Most of the
components sold through the Computer Products division are not supplied under
vendor distribution agreements, and consequently, this inventory is not subject
to the price protection and stock rotation privileges.
Marketing and Customers. Reptron Distribution has developed a focused
sales strategy. Large key accounts are identified in each market and field sales
personnel are assigned to serve these accounts directly. All other customers in
each market are served by a corporate sales team which operates from our
corporate headquarters. The corporate sales team also services customers in
regions of the country where we do not have dedicated sales personnel.
Reptron Distribution has approximately 2,000 primary customers located
throughout the United States. Reptron Distribution's customers are in diverse
industries, including robotics, telecommunications, computers and computer
peripherals, consumer electronics, healthcare, industrial controls and contract
manufacturing.
Property and Offices. Reptron owns a 150,000 square foot facility in
Tampa, Florida. A portion of this building houses centralized customer support
personnel, the corporate sales team, management staff and executive offices for
Reptron Distribution. We lease a 71,500 square foot distribution center in Reno,
Nevada where substantially all of Reptron Distribution's shipments originate.
Reptron leases six office suites serving as sales offices for Reptron
Distribution. These offices average approximately 5,000 square feet in size and
contain a small space for warehousing of inventory and sales materials. Lease
terms of these facilities range from 3 to 7 years and expire at various dates
through 2006. In all other areas served by Reptron Distribution, outside sales
personnel and field application engineers work from an office in their home.
During 2002, we closed eleven sales offices converting their respective
geographic areas from the sales office suite operating model to our current home
office approach. The table that follows describes how each geographic market is
served:
11
Locations With Office Suites;
Atlanta, Georgia
Boston, Massachusetts
Chicago, Illinois
Irvine, California
San Jose, California
Tampa, Florida
Robinson Point, Singapore
Locations served by personnel from home offices:
Austin, Texas
Baltimore, Maryland
Cleveland, Ohio
Dallas, Texas
Dayton, Ohio
Detroit, Michigan
Ft. Lauderdale, Florida
Guadalajara, Mexico
Hartford, Connecticut
Hauppauge (Long Island), New York
Huntsville, Alabama
Los Angeles, California
Minneapolis, Minnesota
Philadelphia, Pennsylvania
Portland, Oregon
Raleigh, North Carolina
Rochester, New York
Sacramento, California
San Diego, California
Seattle, Washington
Toronto, Canada
Reptron Computer Products leases a 7,650 square foot packaging and distribution
center in Tampa, Florida. The lease for this facility expires in March, 2007.
Management for this division is located in a 1,500 square foot office suite in
Salem, New Hampshire. This lease expires in December 2003.
COMPETITION
We face substantial competition. Many of our competitors in each
division have international operations and significantly greater manufacturing,
financial, marketing and research and development resources and broader name
recognition than we do. Reptron Distribution faces competition from hundreds of
electronic component distributors of various sizes, locations and market focuses
(e.g. military, commercial, consumer) and competes principally on the basis of
product selection and value-added customer service. Vendor representation and
product diversity create segmentation among distributors. Reptron Distribution
has several primary competitors that carry similar significant Asian
semiconductor vendors, as well as competitors who manufacture electronic
components domestically. Reptron Distribution attempts to differentiate itself
from these competitors through its focus on a select set of technologies where
it can bring superior value to its customers and suppliers based on its
expertise.
Reptron Manufacturing Services competes in a highly fragmented market
composed of a diverse group of EMS providers. Reptron Manufacturing Services
believes that the key competitive factors in its markets are manufacturing
flexibility, price, manufacturing quality, advanced manufacturing technology and
reliable delivery. Many EMS providers operate extremely high-volume facilities
and focus on target markets, such as the computer industry, that Reptron
Manufacturing Services does not seek to serve. Reptron Manufacturing Services
considers its key competitive advantages to include its expertise in
medium-to-high volume, flexible batch processing, its provision of value-added
services and its material management
12
techniques. We believe that Reptron Manufacturing Services' expertise in
flexible, batch processing differentiates it from its high-volume competitors
because of the relative complexity of economically fulfilling a large number of
batch contracts. We also believe that by focusing on medium-to-high volume
production runs Reptron Manufacturing Services competes effectively. See
- -"Certain Considerations -- Competition."
Reptron Display and System Integration competes in a highly fragmented
market composed of a diverse group of display integration and electronic
component distributors that have strategic alliances with display integration
companies. We believe that market reputation combined with a high degree of
technical competency, has allowed Reptron Display and System Integration to
compete effectively in the marketplace.
MANAGEMENT INFORMATION SYSTEMS
We have made significant investments in computer hardware, software and
management information system ("MIS") personnel. The Reptron Distribution,
Reptron Manufacturing Services and Reptron Display and System Integration's MIS
departments collectively employ approximately 23 individuals who are responsible
for hardware upgrades, maintenance of current software and related databases and
augmenting software packages with custom programming. We currently maintain an
internet web page that provides a wide variety of information, as well as, links
to vendors and customers. Our expanded use of web based technologies include
enhanced e-mail and interactive use of the our intranet for data warehouse
applications such as quality documentation, human resources documentation, MIS
systems documentation and interactive corporate forms. We operate within Reptron
Distribution and Reptron Manufacturing Services with UNIX-based software
packages written in a fourth generation language.
The UNIX-based software packages used by Reptron Distribution and
Reptron Manufacturing Services may be operated on a variety of hardware
platforms. Therefore, neither division is restricted to the use of computer
hardware from any one supplier and do not have the constraints associated with
proprietary hardware.
Reptron Distribution operates an integrated distribution software
package that has been greatly enhanced with custom programming. This system
allows management to direct the entire Reptron Distribution operation by
connecting all sales offices to the corporate headquarters.
Reptron Manufacturing Services operates an integrated MRP II package
which has also been greatly enhanced by its MIS staff through custom
programming. This system is used to operate and integrate Reptron Manufacturing
Services' manufacturing plants with central administrative functions.
Reptron Display and System Integration operates on a newly acquired
integrated software package, MAS90. This client-server software has minimal
hardware performance requirements and interfaces with a number of database
formats, allowing the flexibility of utilizing third-party reporting tools.
EMPLOYEES
As of February 28, 2003, we employed 1,317 persons, of whom 221 were
dedicated to Reptron Distribution and Reptron Computer Products, 1,039 were
dedicated to Reptron Manufacturing Services, 45 were dedicated to Reptron
Display and System Integration and 12 were corporate employees. Hourly employees
at the manufacturing plant in Hibbing, Minnesota are covered under a collective
bargaining agreement with the International Brotherhood of Electrical Workers.
The current term of the collective bargaining agreement expires in September
2006.
ITEM 2. PROPERTIES
We occupy a number of facilities located throughout the United States.
Currently, we operate four manufacturing facilities, 6 sales offices, one main
warehouse and a corporate headquarters facility.
Owned facilities. We own a 150,000 square foot facility located in
Tampa, Florida which is occupied by the Tampa Reptron Manufacturing Services
plant, the operations headquarters and centralized customer support center for
Reptron Distribution and the corporate headquarters for the entire Company. We
also own a 80,000 square foot Reptron Manufacturing Services facility in
Gaylord, Michigan. Finally, we own a 40,300 square foot manufacturing building
which is one of seven buildings that forms our manufacturing campus in Hibbing,
Minnesota.
13
Leased facilities: We lease 6 office suites serving as sales offices
for Reptron Distribution. These offices average approximately 5,000 square feet
in size and contain a small space for warehousing inventory and sales materials.
Lease terms on these offices range from three to five years and expire at
various dates through 2006. Additionally, in November 2000 we entered into a
lease for a warehouse facility in Reno, Nevada that is approximately 71,000
square feet for Reptron Distribution. The lease on this facility expires in May
2011. The warehouse and distribution operations were fully transferred to the
Nevada facility in the first half of 2001.
We lease a total of 127,000 square feet of manufacturing and
administrative offices for the Reptron Manufacturing Services operation in
Hibbing, Minnesota. The lease on these buildings expires in December 2007.
We lease a total of 40,000 square feet of manufacturing and
administrative offices for the Reptron Display and System Integration operation
in Fremont, California. The lease on the buildings expires in July 2004.
ITEM 3. LEGAL PROCEEDINGS
We are one of ninety-one defendants in a patent infringement action
commenced in April 2000, in the United States District Court for the District of
Arizona, by the Lemelson Medical, Education & Research Foundation, Limited
Partnership ("Lemelson"). Lemelson alleges that we and the other co-defendants
have infringed various patents that purportedly cover the use of "machine
vision" and "bar code" scanning equipment. Lemelson has asserted similar claims
against other companies in our industry, as well as against companies in other
industries. We understand that Lemelson has entered into licenses with others,
for the patents alleged to be infringed by us. If our defenses of the alleged
claims prove unsuccessful, we cannot ensure that we will be offered a license of
the Lemelson patents. Based on our understanding of the terms that Lemelson has
made available to other licensees, if such a license is negotiated, we believe
that obtaining a license from Lemelson under the same or similar terms would not
have a material adverse effect on our results of operations or financial
condition. However, if a license is effectuated, we cannot ensure that its
terms, or the ultimate resolution of this matter, will not have a material
adverse effect on our operating results or financial condition.
We are, from time to time, involved in other litigation relating to
claims arising out of our operations in the ordinary course of business. We
believe that none of these claims, which were outstanding as of December 31,
2002, should have a material adverse impact on our financial condition or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our shareholders during the
fourth quarter of the fiscal year ending December 31, 2002.
14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our common stock is traded on The NASDAQ SmallCap National Market under
the symbol "REPT". Our common stock began trading of the NASDAQ SmallCap Market
on January 27, 2003. Prior to that, our common stock was traded on the NASDAQ
National Market System. The following table sets forth, for the periods
indicated, the high and low close prices of our common stock as reported by the
NASDAQ National Market and NASDAQ SmallCap Market, as appropriate:
Fiscal 2001 High Low
- -------------- ------ ------
First Quarter $11.75 $ 5.69
Second Quarter $ 8.20 $ 4.02
Third Quarter $ 6.20 $ 2,60
Fourth Quarter $ 4.10 $ 2.41
Fiscal 2002 High Low
- -------------- ------ ------
First Quarter $ 5.00 $ 3.00
Second Quarter $ 3.82 $ 1.61
Third Quarter $ 2.00 $ 0.75
Fourth Quarter $ 0.92 $ 0.36
Fiscal 2003 High Low
- -------------- ------ ------
First Quarter (through April 11, 2003) $ 0.96 $ 0.16
On April 11, 2003, the last sale price of our common stock, as reported
by The NASDAQ SmallCap System was $0.22 per share.
As of April 11, 2003, there were approximately 100 holders of record of
our common stock.
We have never declared or paid dividends on our common stock. We do not
intend, for the foreseeable future, to declare or pay any cash dividends and
intend to retain earnings, if any, for the future operation and expansion of our
business. Our current line of credit prohibits the payment of dividends.
The following table sets forth certain information relating to our equity
compensation plans as of December 31, 2002.
EQUITY COMPENSATION PLAN INFORMATION
Number of Securities
Remaining Available for
Number of Securities to be Future Issuance
Issued Upon Under Equity
Exercise of Weighted Average Compensation
Outstanding Exercise Price Plans (Excluding
Options, Warrants of Outstanding Options, Securities Reflected in
Plan Category and Rights (a) Warrants and Rights(b) Column (a))(c)
- ---------------------- -------------------------- ---------------------- ------------------------
Equity Compensation
Plans Approved by
Shareholders.......... 1,127,438 $ 6.42 1,954,135
Equity Compensation
Plans Not Approved by
Shareholders.......... - $ - -
15
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data of Reptron and
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein.
Year Ended December 31,
----------------------------------------------------------------------
1998 1999 2000 2001 2002
----------- ----------- ----------- ----------- -----------
(In thousands except share and per share data)
OPERATING STATEMENT DATA:
Net sales - Electronic Component Distribution $ 156,507 $ 198,132 $ 345,906 $ 227,259 $ 154,506
Net sales - Electronic Manufacturing Services 146,282 161,085 230,553 171,388 165,101
----------- ----------- ----------- ----------- -----------
Total net sales ............................... $ 302,789 $ 359,217 $ 576,459 $ 398,647 $ 319,607
=========== =========== =========== =========== ===========
Gross profit - Electronic Component Distribution(1) $ 25,081 $ 34,525 $ 63,027 $ 31,174 $ 21,375
Gross profit - Electronic Manufacturing Services(2) 12,847 17,249 30,535 14,981 17,096
----------- ----------- ----------- ----------- -----------
Total gross profit ............................ 37,928 51,774 93,562 46,155 38,471
Selling, general and administrative expenses(3) ... 51,206 55,902 71,543 66,685 56,658
----------- ----------- ----------- ----------- -----------
Operating income (loss) ....................... (13,278) (4,128) 22,019 (20,530) (18,187)
Interest expense, net ............................. 8,339 8,582 11,425 10,754 8,020
----------- ----------- ----------- ----------- -----------
Earnings (loss) before income taxes ........... (21,617) (12,710) 10,594 (31,284) (26,207)
Income tax provision (benefit)(4) ................. (8,470) (4,703) 4,903 (9,460) -
----------- ----------- ----------- ----------- -----------
Net earnings (loss) before extraordinary item (13,147) (8,007) 5,691 (21,824) (26,207)
Extraordinary gain on extinguishment of debt, net - 12,776 - - -
----------- ----------- ----------- ----------- -----------
Net earnings (loss) ........................... $ (13,147) $ 4,769 $ 5,691 $ (21,824) $ (26,207)
=========== =========== =========== =========== ===========
Net earnings (loss) per common share - basic ...... $ (2.15) $ 0.78 $ 0.91 $ (3.42) $ (4.08)
=========== =========== =========== =========== ===========
Weighted average Common Stock shares
Outstanding - basic ........................... 6,118,023 6,151,563 6,252,938 6,389,474 6,416,319
=========== =========== =========== =========== ===========
Net earnings (loss) per common share - diluted .... $ (2.15) $ 0.78 $ 0.83 $ (3.42) $ (4.08)
=========== =========== =========== =========== ===========
Weighted average Common Stock equivalent
shares outstanding - diluted ..................... 6,118,023 6,151,563 6,836,911 6,389,4741 6,416,319
=========== =========== =========== =========== ===========
December 31,
----------------------------------------------------
1998 1999 2000 2001 2002
-------- -------- -------- -------- --------
BALANCE SHEET DATA:
Working capital ........................... $101,829 $ 95,677 $146,708 $100,972 $ 27,076
Total assets .............................. 210,083 215,853 294,606 199,395 156,974
Long-term obligations - including current
portion ................................. 133,163 119,797 162,461 132,704 81,487
Shareholders' equity ...................... 42,126 46,960 53,775 532,172 6,028
(1) Net of inventory writedown of $10.0 million in the second quarter of 2001
and $3.2 million in the fourth quarter of 2002.
(2) Net of inventory writedown of $2.0 million in the second quarter of 2001.
(3) Net of writedown of unamortized loan costs associated with a refinancing,
severance pay associated with reduction in workforce, and costs incurred for
early termination of office leases. All of these items collectively totaled
approximately $1.8 million and were primarily incurred in the fourth quarter of
2002.(4) Net of deferred tax benefit asset of $2.2 million recorded in 2001 and
$10.1 million in 2002.
16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This document contains certain forward-looking statements that involve a
number of risks and uncertainties. Such forward-looking statements are within
the meaning of that term in Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities Exchange Act of 1934, as amended.
Factors that could cause actual results to differ materially include the
following; business conditions and growth in Reptron's industry and in the
general economy; competitive factors; risks due to shifts in market demand; the
ability of Reptron to complete acquisitions; and the risk factors listed from
time to time in Reptron's reports filed with the Securities and Exchange
Commission as well as assumptions regarding the foregoing. The words "believe",
"plans", "estimate", "expect", "intend", "anticipate", and similar expressions
and variations thereof identify certain of such forward-looking statements,
which speak only as of the dates on which they were made. Reptron undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise. Readers are
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those indicated in the forward-looking statements as a
result of various factors. Readers are cautioned not to place undue reliance on
these forword-looking statements.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included elsewhere in this report.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of Reptron's net sales represented by each line item presented, except for
Reptron Distribution and Electronic Manufacturing Services gross profit, which
is presented as a percentage of net sales of the respective segments:
Year ended December 31,
---------------------------
2000 2001 2002
----- ----- -----
Net sales - Electronic Component Distribution 60.0% 57.0% 48.3%
Net sales - Electronic Manufacturing Services 40.0 43.0 51.7
----- ----- -----
Total net sales ............................ 100.0% 100.0% 100.0%
===== ===== =====
Gross profit - Electronic Component Distribution 18.2% 13.7%(1) 13.8%(4)
===== ===== =====
Gross profit - Electronic Manufacturing Services 13.2% 8.7%(2) 10.4%
===== ===== =====
Total gross profit ......................... 16.2% 11.6% 12.0%
Selling, general and administrative expenses ... 12.4 16.7 17.7
----- ----- -----
Operating income (loss) ........................ 3.8 (5.1) (5.7)
Interest expense, net .......................... 2.0 2.7 2.5
----- ----- -----
Earnings (loss) before income taxes ............ 1.8% (7.8)% (8.2)%
Income tax provision (benefit) 0.8 (2.4)(3) -
----- ----- -----
Net earnings (loss) ........................ 1.0% (5.4)% (8.2)%
===== ===== =====
(1) 18.1% excluding a $10.0 million inventory writedown in the second quarter of
2001.
(2) 9.9% excluding a $2.0 million inventory writedown in the second quarter of
2001.
(3) (2.9)% excluding a $2.2 million deferred tax benefit reserve recorded in
2001.
(4) 15.9% excluding a $3.2 million inventory writedown in the fourth quarter of
2002.
17
2002 COMPARED TO 2001
Net Sales. Total net sales decreased $79.0 million, or 19.8%, from $398.6
million in 2001 to $319.6 million in 2002.
ECD total net sales decreased $72.8 million, or 32.0%, from $227.3 million
in 2001 to $154.5 million in 2002. Approximately $83.5 million of this decrease
was from Reptron Distribution, our franchise distribution business that sells
electronic components primarily to original equipment manufacturers ("OEM").
Management believes that this decrease resulted primarily from the continuation
of the industry-wide downturn in the price and sales volume of electronic
components experienced in the United States in 2001 and continuing throughout
2002 as well as our loss of market share. This decrease was partially offset by
an increase of approximately $10.7 million from Reptron Computer Products, our
memory module business which primarily sells DRAM modules through retail stores.
Sales of semiconductors, displays, passive components and electromechanical
components accounted for 72%, 12%, 6%, and 10%, respectively, of 2002 ECD net
sales compared to 70%, 10%, 10%, and 10%, respectively, of 2001 ECD net sales.
Sales generated from the top four ECD vendors accounted for approximately $51
million, or 33% of 2002 ECD net sales, as compared with approximately $102
million or 45% of 2001 ECD net sales.
EMS net sales decreased $6.3 million, or 3.7%, from $171.4 million in 2001
to $165.1 million in 2002. This decrease is primarily attributable to decreased
demand within the semiconductor equipment and telecommunications customer base
of EMS. The three largest EMS customers accounted for approximately 20%, 9% and
8%, respectively, of 2002 EMS net sales (11%, 5% and 4%, respectively, of total
Reptron 2002 net sales) as compared to 17%, 10% and 6%, respectively, of 2001
EMS net sales (7%, 4% and 3%, respectively, of total Reptron 2001 net sales).
Gross Profit. Total gross profit decreased $7.7 million or 16.7%, from
$46.2 million in 2001 to $38.5 million in 2002. The gross margin increased from
11.6% in 2001 (14.6% excluding the $12.0 million non-cash inventory writedown in
the second quarter of 2001) to 12.0% in 2002 (13.0% excluding the $3.2 million
non-cash inventory writedown in the fourth quarter of 2002). The change in gross
profit margin, excluding the effect of the inventory writedowns, is primarily
attributable to the overall decline in business as a result of general economic
conditions.
ECD gross profit decreased $9.8 million, or 31.4%, from $31.2 million in
2001 to $21.4 million in 2002. ECD gross margin increased from 13.7% in 2001
(18.1% excluding the $10.0 million non-cash inventory writedown in the second
quarter of 2001 to reflect the rapid decline in market pricing for electronic
components and as a result of distributor supplier lines terminated by Reptron)
to 13.8% in 2002 (15.9% excluding the $3.2 million non-cash inventory writedown
in the fourth quarter of 2002 to reflect the decline in market pricing for
electronic components). The decrease in gross profit dollars and gross profit
margin, excluding the effect of the inventory writedowns, is primarily due to a
greater portion of total ECD sales being generated from sales from the memory
module business, Reptron Computer Products, which has a lower gross profit
margin, 10.5% in 2002, than sales from our base distribution business, 18.2% in
2002. Sales from the memory module business increased as a percentage of total
ECD net sales from 15.3% 2001 to 29.5% in 2002. The decrease in gross profit
dollars, excluding the effect of the inventory charges and the effect of our
memory module business, is primarily due to a decrease in sales experienced in
2002 as compared to 2001 in our base distribution business unit.
EMS gross profit Increased $2.1 million, or 14.1%, from $15.0 million in
2001 to $17.1 million in 2002 and gross margin increased from 8.7% in 2001 (9.9%
excluding the $2.0 million non-cash inventory writedown charge in the second
quarter of 2001) to 10.4% in 2002. The increase in gross profit and gross
margin, excluding the effect of the 2001 inventory writedown, is primarily
attributable to a more efficient materials procurement and a more effective
manufacturing process in 2002 versus 2001.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses decreased $10.0 million, or 15.0%, from $66.7 million
2001 ($67.8 million excluding a $1.1 million gain on the sale of assets in the
fourth quarter of 2001) to $56.7 million in 2002. These expenses, as a
percentage of net sales, increased from 16.7% in 2001 to 17.7% in 2002. The
overall decrease in selling, general and administrative expenses is primarily
attributable to cost cutting measures implemented in the second half of 2001 and
throughout 2002. The employee base declined 215 from 1,532 in 2001 to 1,317 in
2002, a 14% reduction in workforce, resulting in a corresponding reduction in
selling, general and administrative expenses. Additionally, the Company incurred
approximately $1.8 million of restructuring charges in 2002 related to the
conversion of Reptron Distribution sales model, in part, from a sales office
suite to a home office approach.
18
Interest Expense. Net interest expense decreased $2.7 million, or 25.4%,
from $10.8 million in 2001 to $8.0 million in 2002. The decrease is primarily
attributed to the decrease in average outstanding debt of $23.7 million, from
$147.6 million during 2001 to $123.9 million during 2002, and a decrease in our
overall average interest rate from 7.3% during 2001 to 6.5% during 2002.
Income Taxes. During 2002, we incurred losses before income taxes of $26.2
million. As a result, we recognized a deferred tax asset and an offsetting
valuation allowance of $8.7 million, resulting in no income tax benefit.
Realization of the tax loss carryforwards are contingent upon future taxable
earnings in the appropriate jurisdiction. Each carryforward item is reviewed for
expected utilization, using a "more likely than not" approach, based on the
character of the carryforward item (credit, loss, etc.), the associated taxing
jurisdiction (federal or state), the relevant history for the particular item,
the applicable expiration dates, and identified actions under our control in
realizing the associated carryforward benefits. We assess the available
positive and negative evidence surrounding the recoverability of the deferred
tax assets and apply judgment in estimating the amount of valuation allowance
necessary under the circumstances. We continue to assess and evaluate
strategies that will enable the carryforward, or a greater portion thereof, to
be utilized, and will reduce the valuation allowance appropriately for each
item at such time when it is determined that the "more likely than not"
criterion is satisfied.
2001 Compared to 2000
Net Sales. Total net sales decreased $177.8 million, or 30.9%, from $576.5
million in 2000 to $398.6 million in 2001.
ECD total net sales decreased $118.6 million, or 34.3%, from $345.9 million
in 2000 to $227.3 million in 2001. Management believes that this decrease
resulted primarily from a significant industry-wide slowdown in the sales volume
and price reductions of electronic components in the United States. Sales of
semiconductors, passive components and electromechanical components accounted
for 83%, 7% and 10%, respectively, of 2001 ECD net sales compared to 67%, 24%
and 9%, respectively, of 2000 ECD net sales. Sales generated from the top four
ECD vendors accounted for approximately $102 million, or 43% of 2001 ECD net
sales, as compared with approximately $147 million or 41% of 2000 ECD net
sales.
EMS net sales decreased $59.2 million, or 25.7%, from $230.6 million in
2000 to $171.4 million in 2001. This decrease is primarily attributable to
decreased demand within the semiconductor equipment and telecommunications
customer base of EMS. The three largest EMS customers accounted for
approximately 17%, 10% and 6%, respectively, of 2001 EMS net sales (7%, 4% and
3%, respectively, of total Reptron 2001 net sales) as compared to 16%, 9% and
8%, respectively, of 2000 EMS net sales (6%, 4% and 3%, respectively, of total
Reptron 2000 net sales).
Gross Profit. Total gross profit decreased $47.4 million or 50.7%, from
$93.6 million in 2000 to $46.2 million in 2001. During the second quarter of
2001, we recorded a non-cash inventory writedown charge of $12.0 million which
is included in cost of sales. As a result of this charge, gross margin decreased
from 14.6% to 11.6% in 2001 as compared to 16.2% in 2000. The remaining
decrease in gross profit is primarily attributable to the overall decline in
business as a result of general economic conditions.
ECD gross profit decreased $31.9 million, or 50.5%, from $63.0 million in
2000 to $31.2 million in 2001. During the second quarter of 2001, the ECD
segment recorded a non-cash inventory writedown charge of $10.0 million to
reflect the rapid decline in market pricing for electronic components and as a
result of distributor supplier lines terminated by Reptron. This charge is
included in cost of sales and caused gross margin to decline from 18.1% to 13.7%
in 2001. ECD gross margin was 18.2% in 2000. The decrease in gross profit
dollars, excluding the effect of the inventory charge, is due to a decrease in
sales experienced in 2001 as compared to 2000.
EMS gross profit decreased $15.6 million, or 50.9%, from $30.5 million in
2000 to $15.0 million in 2001. During the second quarter of 2001, the EMS
segment recorded a non-cash inventory writedown charge of $2.0 million as a
result of excess components due to significant reductions in customer demands
and decline in pricing of electronic components. This charge is included in cost
of sales and caused gross margin to decline from 9.9% to 8.7% in 2001 as
compared to 13.2% in 2000. The decrease in gross profit and gross margin from
prior periods is primarily attributable to the under-absorption of fixed costs
in the manufacturing process as a result of the significant reduction of sales
orders in 2001 versus 2000.
Selling, General, and Administrative Expenses. Selling, general, and
administrative expenses decreased $4.9 million, or 6.8%, from $71.5 million
2000 to $66.7 million ($67.8 million excluding a $1.1 million gain on the sale
of assets in the
19
fourth quarter of 2001) in 2001. These expenses, as a percentage of net sales,
increased from 12.4% in 2000 to 16.7% in 2001. The remaining decrease in
selling, general and administrative expenses is primarily attributable to cost
cutting measures implemented in 2001. Our overall employee base declined from
2,142 in 2000 to 1,532 in 2001, a 28.5% reduction in workforce.
Interest Expense. Net interest expense decreased $0.7 million, or 5.9%,
from $11.4 million in 2000 to $10.8 million in 2001. This decrease in net
interest expense is the result of the combination of an increase in average
outstanding debt of $7.9 million from $141.1 million in 2000 to $149.0 million
in 2001, and a decrease in average interest rates from 8.1% in 2000 to 7.2% in
2001.
LIQUIDITY AND CAPITAL RESOURCES
We primarily finance our operations through subordinated notes, bank credit
lines, operating cash flows, and short-term financing through supplier credit
lines.
Net cash used in or provided by operating activities has historically been
provided by net income (loss) levels combined with fluctuations in inventory,
accounts receivable and accounts payable. Operating activities for 2002 provided
cash of approximately $22.4 million. This cash flow resulted primarily from
decreases in accounts receivables of $11.3 million, inventories of $19.1
million, income taxes receivable of $7.0 million, and an increase in accrued
expenses of $1.2 million. Days sales in accounts receivable were approximately
50 days at December 31, 2002 compared to 60 days at December 31, 2001.
Annualized inventory turns for 2002 were 4.7 times compared to 3.7 times for
2001.
Capital expenditures totaled approximately $4.2 million in 2002. These
capital expenditures were primarily for manufacturing equipment and the
conversion of available floor space in our Tampa, Florida manufacturing facility
into office space for our distribution division's support staff and corporate
headquarters. These expenditures were funded by the working capital line of
credit.
Credit Agreement. Three lenders have made available to us a $60 million
revolving credit facility (the "Credit Agreement") through October 10, 2005.
Borrowings under the Credit Agreement are collateralized by substantially all
assets of Reptron including inventory, accounts receivable, equipment and
general intangibles and certain of our real property. The Credit Agreement
limits the amount of capital expenditures and prohibits the payment of dividends
without the lender's consent. Amounts outstanding under the Credit Agreement as
of December 31, 2002 were approximately $33.6 million. As of December 31, 2002,
approximately $6.2 million was available under this Credit Agreement.
The Credit Agreement contains certain covenants including a minimum
quarterly measure of earnings before interest, taxes, depreciation and
amortization ("EBITDA") as defined by the Credit Agreement. Reptron was not in
compliance with the minimum quarterly EBITDA covenant as of December 31, 2002.
Additionally, management believes that Reptron will not meet the EBITDA
covenants required under the Credit Agreement for at least the calendar quarters
ending March 31 and June 30, 2003. Additionally, we are in default of the Credit
Agreement as a result of our default of the Convertible Notes (see below). As a
result of these defaults, our lenders could make demand for immediate repayment
of all outstanding advances under the Credit Agreement and exercise their rights
as a secured lender as provided under the Credit Agreement. Additionally, some
of the advance ratios provided under our Credit Agreement have been made more
restrictive, thereby reducing our liquidity. Notwithstanding our lender's right
to make demand for immediate and full repayment of all outstanding advances
under the Credit Agreement, our lenders continue to provide us financing under
the Credit Agreement. Management is working with our lenders to develop
arrangements for our lenders to waive these defaults under the Credit Agreement
as well as negotiating an amendment to the Credit Agreement directed toward
reducing the EBITDA covenants required in future calendar quarters. We cannot
assure you that we will receive the necessary waivers and adjustments to these
covenants. If our lenders were to terminate the Credit Agreement, for any
reason, or substantially reduce the amount available under the Credit Agreement,
it is unlikely that we would be able to continue our operations without the
benefit of protection under the United States Bankruptcy laws, all of which
would have a material adverse effect on our business and financial condition.
Convertible Notes. As of December 31, 2002, there was outstanding
approximately $76.3 million of Convertible Notes. The holders of the Convertible
Notes have the right to convert any portion of the principal amount of the
outstanding Convertible Notes, at the date of conversion, into shares of our
common stock at any time prior to the close of business on August 1, 2004, at a
conversion rate of 35.0877 shares of common stock per $1,000 principal amount
of the Convertible Notes (equivalent to a conversion price of approximately
$28.50 per share). There is no requirement that the holders of the
20
Convertible Notes convert on or before August 1, 2004. Additionally, the
Company has the right to require the redemption of the Convertible Notes under
certain circumstances. We believe it is extremely unlikely that the Convertible
Notes will be either converted or redeemed given the Company's financial
condition and the trading price for its stock.
The Company failed to make the February 1, 2003 interest payment due to
holders of the Convertible Notes. Reptron does not have adequate liquidity to
make this interest payment and we cannot determine when, if ever we will have
the ability to do so. Because we were unable to cure this default on or before
March 5, 2003, under identified conditions described in the Notes and under
that certain Trust Indenture between Reptron and Reliance Trust Company (the
predecessor to the current trustee, US Bank), dated August 5, 1997 pursuant to
which the Notes were issued, the outstanding principal indebtedness of the
Convertible Notes can be currently accelerated and become immediately due and
payable.
Certain holders of the Convertible Notes have formed an ad-hoc
committee to discuss possible alternatives regarding in the restructuring of the
indebtedness and terms of repayment of the restructured debt under the
Convertible Notes. The ad-hoc committee represents approximately 56% of the
total outstanding principal due under the Convertible Notes. The ad-hoc
committee has retained legal counsel and we have engaged a consulting firm to
assist in the negotiations of this restructuring with the ad-hoc committee. If
we fail to reach an agreement, it is likely that the holders of the Convertible
Notes will make demand for payment of the defaulted interest and accelerate and
make demand for full and immediate repayment of the outstanding principal amount
due under the Convertible Note, all of which would have a material adverse
effect on our business and financial condition. We do not have sufficient
liquidity to satisfy such demands. In such event, it is probable that we would
seek protection under the United States Bankruptcy laws.
Future liquidity and cash requirements will depend on a wide range of
factors including the level of business in existing operations, credit lines
extended by trade suppliers, the need for expansion of manufacturing operations
in foreign countries (especially China) and capital expenditure requirements.
The ability to meet future liquidity requirements will depend upon the
successful negotiation of waivers of the defaults under our Credit Agreement,
renegotiating our Credit Agreement to reduce the future quarterly EBITDA
requirements, as well as restructuring the indebtedness represented by the
Convertible Notes. There can be no assurance of successful completion of any of
these items. Additionally, there can be no assurance that the lenders under our
Credit Agreement will continue to provide financing in light of the existing
defaults under the Credit Agreement or that the indebtedness under the
Convertible Notes will not be accelerated and become immediately due and
payable. Accordingly, there can be no assurance that Reptron will be able to
meet its working capital needs for any future period. As a result of the items
discussed above, the Report of Independent Certified Public Accountants included
elsewhere herein has been modified to indicate substantial doubt regarding our
ability to continue as a going concern.
CRITICAL ACCOUNTING POLICIES
The Company's financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires the Company to make
significant estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses during the reporting period and related
disclosure of contingent assets and liabilities. These estimates and assumptions
are based upon the Company's continuous evaluation of historical results and
anticipated future events. Actual results may differ from these estimates under
different assumptions or conditions.
The Securities and Exchange Commission (the "SEC") defines critical
accounting polices as those that are, in management's view, most important to
the portrayal of the Company's financial condition and results of operations and
those that require significant judgments and estimates. The Company believes the
following critical accounting policies involve the more significant judgments
and estimates used in the preparation of its consolidated financial statements:
Valuation of Receivables. The Company maintains an allowance for
doubtful accounts for estimated losses resulting from customer defaults. The
Company performs ongoing credit evaluations of its customers considering among
other things, the customers' payment history and current ability to pay. A
provision for uncollectible amounts is adjusted based on these evaluations and
historical experience. if the financial condition of a customer were to
deteriorate, resulting in an impairment of that customer's ability to make
payments to the Company, additional reserves may be required.
Valuation of Inventories. Inventories are recorded at the lower of cost
or estimated market value. Cost is determined using the first-in, first-out and
average cost methods. The Company's inventories are comprised, in part, of high
technology
21
components sold to rapidly changing and competitive markets whereby such
inventories may be subject to early technological obsolescence.
The Company evaluates inventories for excess, obsolescence or other
factors that may render inventories unmarketable at normal margins. Write-downs
are recorded so that inventories reflect the approximate net realizable value
and take into consideration the Company's contractual provisions with its
customers and suppliers governing price protection, stock rotation and return
privileges relating to obsolescence. Because of the large number of transactions
and the complexity of managing the process around price protections and stock
rotations, estimates are made regarding adjustments to the carrying amount of
inventories. Additionally, assumptions about future demand, market conditions
and decisions to discontinue certain product lines can impact the decision to
write down inventories. If assumptions about future demand change or actual
market conditions are less favorable than those projected by management,
additional write-downs of inventories may be required. In any case, actual
amounts could be different from those estimated.
Goodwill. In assessing the Company's goodwill for impairment in
accordance with the Financial Accounting Standards Board's ("FASB") Statement of
Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets," the Company is required to assess the valuation of its
reporting units, which involves making significant assumptions about the future
cash flows and overall performance of its reporting units. Should these
assumptions or the structure of the reporting units change in the future based
upon market conditions or changes in business strategy, the Company may be
required to record impairment charges to its goodwill.
Deferred Income Taxes. The carrying value of the Company's deferred
income lax assets is dependent upon the Company's ability to generate sufficient
future taxable income in certain tax jurisdictions. Should the Company determine
that it would not be able to realize all or part of its deferred tax assets in
the future, an adjustment to the deferred tax assets would be expensed in the
period such determination was made. The Company presently records a valuation
allowance to reduce its deferred tax assets to the amount that is more likely
than not expected to be realized. While the Company has considered future
taxable income and ongoing prudent and feasible tax planning strategies in
assessing the need for the valuation allowance, in the event that the Company
were to determine that it would be able to realize its deferred tax assets in
the future in excess of its net recorded amount (including the valuation
allowance), an adjustment to the deferred tax asset would increase income in the
period such determination was made.
Restructuring and Other Special Charges. The Company has recorded a
reserve of approximately $1.1 million in connection with restructuring its
distribution business. This reserve primarily includes estimates related to
employee separation costs and costs related to the consolidation of facilities.
Actual amounts could be different from those estimated.
Contingencies. The Company is the subject of various threatened or
pending legal actions and contingencies in the normal course of conduction its
business. The Company provides for costs related to these matters when a loss is
probable and the amount can be reasonably estimated. The Company assesses the
likelihood of adverse judgements or outcomes to these matters, as well as the
range of potential losses. A determination of the reserves required, if any, is
made after careful analysis. The required reserves may change in the future due
to new developments.
NEW ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 141, Business Combinations,
and SFAS 142, Goodwill and Intangible Assets. SFAS 141 is effective for all
business combinations completed after June 30, 2001. SFAS 142 is effective for
the year beginning January 1, 2002, however, certain provisions of that
Statement apply to goodwill and other intangible assets acquired between July 1,
2001 and the effective date of SFAS 142. The adoption of these pronouncements
did not have a material effect on our financial position or results of
operations.
A third party valuation consultant was engaged to assist in preparing
valuations on certain business units of Reptron for the purpose of evaluating
the impact of the adoption of SFAS 142. Based primarily on a report dated May
13, 2002 from the valuation consultant and our internal analysis, as of January
1, 2002, there is no impairment of the net goodwill associated with acquisitions
we made in prior periods. Beginning January 1, 2002, we ceased amortization of
goodwill. This amortization expense was approximately $ 0.8 million in 2001.
22
In July 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This Statement applies to all entities. It
applies to legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and (or) the normal
operation of a long-lived asset, except for certain obligations of lessees. This
Statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. We do not expect the adoption of this standard to
materially affect our financial condition or results of operations.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. This statement requires entities to recognize costs
associated with exit or disposal activities when liabilities are incurred rather
than when the entity commits to an exit or disposal plan, as currently required.
Examples of costs covered by this guidance include one-time employee termination
benefits, costs to terminate contracts other than capital leases, costs to
consolidate facilities or relocate employees, and certain other exit or disposal
activities. This statement is effective for fiscal years beginning after
December 31, 2002, and will impact any exit or disposal activities the Company
initiates after that date.
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements 4,
44, and 64, Amendment of FASB Statement 13, and Technical Corrections (SFAS
145). Among other provisions, SFAS 145 rescinds FASB Statement 4, Reporting
Gains and Losses from Extinguishment of Debt. Accordingly, gains or losses from
extinguishment of debt should not be reported as extraordinary items unless the
extinguishment qualifies as an extraordinary item under the criteria of
Accounting Principles Board Opinion 30, Reporting the Results of Operations--
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions (APB 30). Gains or
losses from extinguishment of debt, which do not meet the criteria of APB 30,
should be reclassified to income from continuing operations in all prior periods
presented. The provisions of SFAS 145 will be effective for fiscal years
beginning after May 15, 2002.
In December 2002, the FASB issued SFAS No. 148 (SFAS 148), Accounting for
Stock-Based Compensation -- Transition and Disclosure: an amendment of FASB
Statement 123 (SFAS 123), to provide alternative transition methods for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in annual financial statements
about the method of accounting for stock-based employee compensation and the pro
forma effect on reported results of applying the fair value based method for
entities that use the intrinsic value method of accounting. The pro forma effect
disclosures are also required to be prominently disclosed in interim period
financial statements. This statement is effective for financial statements for
fiscal years ending after December 15, 2002 and is effective for financial
reports containing condensed financial statements for interim periods beginning
after December 15, 2002, with earlier application permitted. The Company does
not plan a change to the fair value based method of accounting for stock-based
employee compensation and has included the disclosure requirements of SFAS 148
in the accompanying financial statements.
In November 2002, FASB issued Interpretation 45, Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others (FIN 45), was issued, FIN 45 requires a guarantor entity,
at the inception of a guarantee covered by the measurement provisions of the
interpretation, to record a liability for the fair value of the obligation
undertaken in issuing the guarantee. FIN 45 applies prospectively to guarantees
the Company issues or modifies subsequent to December 31, 2002, but has certain
disclosure requirements effective for interim and annual periods ending after
December 15, 2002. The Company does not expect FIN 45 will have a material
effect on its 2003 financial statements.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities. FIN 46 clarifies the application of Accounting Research Bulletin 51,
Consolidated Financial Statements, for certain entities that do not have
sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties or in which equity
investors do not have the characteristics of a controlling financial interest
("Variable Interest Entities"). Variable Interest Entities within the scope of
FIN 46 will be required to be consolidated by their primary beneficiary. The
primary beneficiary of a Variable Interest Entity is determined to be the party
that absorbs a majority of the entity's expected losses, receives a majority of
its expected returns, or both. FIN 46 applies immediately to Variable Interest
Entities created after January 31, 2003, and to Variable Interest Entities in
which an enterprise obtains an interest after that date. It applies in the first
fiscal year or interim period beginning after June 15, 2003, to Variable
Interest Entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. The Company does not expect that the adoption
of the provisions of FIN 46 will have a material affect on its financial
condition or results of operations.
23
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
While Reptron had no holdings of derivative financial or commodity
instruments at December 31, 2002, we are exposed to financial market risks,
including changes in interest rates. Approximately 71% of interest bearing
borrowings have a fixed interest rate. However, borrowings under the working
capital Credit Agreement bear interest at a variable rate based on the Domestic
Rate Loan (5.5% at December 31, 2002). Based on the average floating rate
borrowings outstanding throughout 2002, a 90 basis point change in the interest
rates would have caused Reptron's interest expense, net of the income tax
effect, to change by approximately $380,000. Reptron believes that this amount
is not significant to its 2002 results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this Item are contained in pages
F-l through F-26 of this Report and are incorporated into this Item by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item is incorporated by reference to the
definitive proxy statement to be filed by Reptron for the Annual Meeting of
Shareholders to be held June 23, 2003.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this Item is incorporated by reference to the
definitive proxy statement to be filed by Reptron for the Annual Meeting of
Shareholders to be held June 23, 2003.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Information required by this Item is incorporated by reference to the
definitive proxy statement to be filed by Reptron for the Annual Meeting of
Shareholders to be held June 23, 2003.
Information regarding equity compensation plans required by this Item
is included in Item 5 of Part II of this report and is incorporated into this
Item by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this Item is incorporated by reference to the
definitive proxy statement to be filed by Reptron for the Annual Meeting of
Shareholders to be held June 23, 2003.
24
ITEM 14. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Within 90 days prior to the date of this report, we carried out an
evaluation (the "Evaluation"), under the supervision and with the participation
of our Chief Executive Officer and Principal Accounting Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures ("Disclosure Controls"). Based on the Evaluation, our Chief Executive
Officer and Principal Accounting Officer concluded that, subject to the
limitations noted below, our Disclosure Controls are effective in timely
alerting them to material information required to be included in our periodic
SEC reports.
Changes in Internal Controls
We have also evaluated our internal controls for financial reporting,
and there have been no significant changes in our internal controls or in other
factors that could significantly affect those controls subsequent to the date of
their last evaluation.
Limitations on the Effectiveness of Controls
Our management, including our Chief Executive Officer and Principal
Accounting Officer, does not expect that our Disclosure Controls and internal
controls will prevent all error and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion of two
or more people, or by management override of the control.
The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes
in conditions, or the degree of compliance with the policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control
system, missstatements due to error or fraud may occur and not be detected.
Chief Executive Officer and Principal Accounting Officer Certifications
Appearing immediately following the Signatures section of this report
there are Certifications of the Chief Executive Officer and the Principal
Accounting Officer. The Certifications are required in accord with Section 302
of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of
this report, which you are currently reading is the information concerning the
Evaluation referred to in the Section 302 Certifications and this information
should be read in conjunction with the Section 302 Certifications for a more
complete understanding of the topics presented.
25
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM
8-K
(a) The following documents are filed as part of the report:
1. and 2. The financial statements and schedule filed as part
of this report are listed separately in the Index to Financial
Statements and Schedules beginning on page F-l of this report.
3. For Exhibits see Item 15 (c), below.
(b) No reports on Form 8-K have been filed during the last quarter
of the fiscal year ended December 31, 2002, by Reptron.
(c) List of Exhibits:
Exhibit No. DESCRIPTION
- ----------- ------------------------------------------------------------------------
3.1 Articles of Incorporation (1)
3.l(a) Articles of Amendment to the Articles of Incorporation (5)
3.2 Bylaws(1)
4.1 Specimen Certificate for the Common Stock of Registrant (1)
4.2 Form of Indenture (4)
4.3 Form of Convertible Subordinated Note (included in Exhibit 4.2)
4.4 See Items 10.8 to 10.14 and Items 10.20 and 10.21
10.1 Reptron Electronics, Inc, Employee Profit Sharing Plan (1)
10.2 Reptron Electronics, Inc. Amended and Restated Incentive Stock Option
Plan (2)
10.3 Reptron Electronics, Inc. Non-Employee Director Stock Option Plan (2)
10.4 Reptron Electronics, Inc. 401(k) Retirement Savings Plan (3)
10.5 Employment Agreement between Michael L. Musto and Reptron Electronics,
Inc., dated June 5, 1998 (7)
10.6 Employment Agreement between Paul Plante and Reptron Electronics, Inc.,
dated January 5, 1999 (13)
10.7 Employment Agreement between Jack Killoren and Reptron Electronics,
Inc., dated January 14, 1999 (9)
10.8 Revolving Credit Facility and Security Agreement between PNC Bank,
National Association and Reptron Electronics, Inc., dated January 8,
1999 (8)
10.9 Revolving Credit and Security Agreement First Amendment between PNC
Bank, National Association and Reptron Electronics, Inc., dated
November 10, 1999 (11)
10.10 Revolving Credit and Security Agreement Second Amendment between PNC
Bank, National Association and Reptron, dated February 28, 2000 (11)
10.11 Revolving Credit and Security Agreement Third Amendment between PNC
Bank, National Association and Reptron Electronics, Inc., dated May 4,
2000 (15)
10.12 Revolving Credit and Security Agreement Fourth Amendment between PNC
Bank, National Association and Reptron Electronics, Inc., dated July
20, 2000 (13)
26
Exhibit No. DESCRIPTION
- ----------- ------------------------------------------------------------------------
10.13 Revolving Credit and Security Agreement Fifth Amendment between PNC
Bank, National Association and Reptron Electronics, Inc., dated
September 27, 2001 (14)
10.14 Revolving Credit and Security Agreement Sixth Amendment between PNC
Bank, National Association and Reptron Electronics, Inc., dated
December 31, 2001 (15)
10.15 Distributor Contract between the Electronic Components Division of
Seiko Instruments U.S.A., Inc. and Reptron Electronics, Inc., dated
February 11, 1998 (6)
10.16 Distributor Contract between Micro Printer Division of Seiko
Instruments U.S.A., Inc. and Reptron Electronics, Inc., dated February
4, 1998 (6)
10.17 Distributor Agreement between Samsung Semiconductor, Inc. and Reptron
Electronics, Inc., dated June 1, 1998 (8)
10.18 Distributor Agreement between Samsung Display Devices Inc. and Reptron
Electronics, Inc., dated June 24, 1999 (10)
10.19 Commercial Mortgage Agreement between General Electric Capital Business
Asset Funding Corporation and Reptron Electronics, Inc. dated February
29, 2000 (12)
10.20 Revolving Credit and Security Agreement Seventh Amendment between PNC
Bank, National Association and Reptron Electronics, Inc., dated June
26, 2002 (16)
10.21 Loan and Security Agreement between Congress Financial and Reptron
Electronics, Inc., dated October 10, 2002 (17)
10.22 Employment Agreement between Leigh Adams and Reptron Electronics, Inc.,
dated December 5, 1997
23.1 Consent of Grant Thornton LLP
24.1 Power of Attorney (See Signature Page)
99.1 Certification by the Chief Executive Officer of Reptron Electronics,
Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
99.2 Certification by the Principal Accounting Officer of Reptron
Electronics, Inc. pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
- --------------------------------
(1) Filed with Reptron's Registration Statement on Form S-l, dated February
8,1994 (File No. 33-75040).
(2) Filed with Reptron's Registration Statement on Form S-8, dated December
22, 1994 (File No. 33-87854)
(3) Filed with Reptron's Registration Statement on Form S-8, dated June 6,
1997 (File No. 333-28727)
(4) Filed with Reptron's Amendment No. 1 to Registration Statement on Form
S-3, dated August 4, 1997 (File No. 333-31605)
(5) Filed with Reptron's Form 10-Q for the quarter ended June 30, 1997
(6) Filed with Reptron's Form 10-K for the year ended December 31, 1997
(7) Filed with the Company's Form 10-Q for the quarter ended June 30, 1998
(8) Filed with Reptron's Form 10-K for the year ended December 31, 1998
(9) Filed with Reptron's Form 10-Q for the quarter ended March 31, 1999
(10) Filed with Reptron's Form 10-Q for the quarter ended September 30, 1999
(11) Filed with Reptron's Form 10-K for the year ended December 31, 1999
(12) Filed with Reptron's Form 10-Q for the quarter ended March 31, 2000
(13) Filed with Reptron's Form 10-K for the year ended December 31, 2000
(14) Filed with Reptron's Form 10-Q for the quarter ended September 30, 2001
27
(15) Filed with Reptron's Form 10-K for the year ended December 31, 2001
(16) Filed with Reptron's Form 10-Q for the quarter ended June 30, 2002
(17) Filed with Reptron's Form 10-Q for the quarter ended September 30, 2002
28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of Tampa,
State of Florida, on March 31, 2003.
REPTRON ELECTRONICS, INC.
By: /s/ Michael L. Musto
------------------------------
Michael L. Musto,
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated. Each person whose
signature appears below constitutes and appoints Paul J. Plante, his true and
lawful attorney-in-fact and agent, with full power of substitution and
revocation, for him and in his name, place and stead, in any and all capacities,
to sign any and all amendments to this report and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or either
of them, may lawfully do or cause to be done by virtue hereof.
SIGNATURES TITLE DATE
---------- ----- -----
/s/ Michael L. Musto Chief Executive Officer, and Director April 15, 2003
- ----------------------- (Principal Executive Officer)
Michael L. Musto
/s/ Paul J. Plante__ President, Chief Operating Officer, April 15, 2003
- ----------------------- Principal Accounting Officer and
Paul J. Plante Director (Principal Financial Officer)
/s/ Leigh A. Lane Secretary and Director April 15, 2003
- -----------------------
Leigh A. Lane
/s/ William L. Elson Director April 15, 2003
- -----------------------
William L. Elson
/s/ Bertram Miner Director April 15, 2003
- -----------------------
Bertram Miner
/s/ Vincent Addonisio Director April 15, 2003
- -----------------------
Vincent Addonisio
29
CERTIFICATIONS
1. Michael L. Musto, certify that:
1. I have reviewed this annual report on Form 10-K of Reptron Electronics, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 15, 2003 /s/ Michael L. Musto
-----------------------------------------
Michael L. Musto, Chief Executive Officer
30
CERTIFICATIONS
I. Paul J. Plante, certify that:
1. I have reviewed this annual report on Form 10-K of Reptron Electronics, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 15, 2003 /s/ Paul J. Plante
-----------------------------------------
Paul J. Plante,
President and Chief Operating Officer
(Principal Accounting Officer)
31
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 17,2003, which includes an explanatory
paragraph for going concern matters, accompanying the consolidated financial
statements of Reptron Electronics, Inc. and our report dated March 17, 2003
accompanying the schedule of Reptron Electronics, Inc., that are included in the
Company's Form 10-K for the year ended December 31, 2002. We hereby consent to
the incorporation by reference of said reports in the Registration Statement of
Reptron Electronics, Inc., on Forms S-8 (File No. 33-103936, Effective March 19,
2003, File No. 333-28727, effective June 6, 1997 and File No. 33-87854,
effective December 22, 1994).
GRANT THORNTON LLP
Tampa, Florida
March 17, 2003
32
EXHIBIT 99.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Reptron Electronics, Inc. (the
"Company") on Form 10-K for the fiscal year ended December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Form
10-K"), I, Michael L. Musto, Chief Executive Officer, and Director of the
Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Form 10-K fully complies with the requirements of Section
13(a)or 15(d) of the Securities Exchange Act of 1934 (15
U.S.C. 78m or 78o(d)); and
(2) The information contained in the Form 10-K fairly presents, in
all material respects,the financial condition and results of
operations of the Company.
Dated: April 15, 2003
/s/ Michael L. Musto
- -----------------------------
Michael L. Musto
Chief Executive Officer, and Director
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN
PROVIDED TO REPTRON ELECTRONICS, INC. AND WILL BE RETAINED BY REPTRON
ELECTRONICS, INC. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS
STAFF UPON REQUEST
33
EXHIBIT 99.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Reptron Electronics, Inc. (the
"Company") on Form 10-K for the fiscal year ended December 31, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Form
10-K"), I, Paul J. Plante, President and Chief Operating Officer, and Director
of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(3) The Form 10-K fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (15
U.S.C. 78m or 78o(d)); and
(4) The information contained in the Form 10-K fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Dated: April 15, 2003
/s/ Paul J. Plante
- -----------------------------
Paul J. Plante
President, Chief Operating Officer,
Principal Accounting Officer, and Director
(Principal Financial Officer)
A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906 HAS BEEN
PROVIDED TO REPTRON ELECTRONICS, INC. AND WILL BE RETAINED BY REPTRON
ELECTRONICS, INC. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS
STAFF UPON REQUEST
34
CASH FORECAST - EXIT FINANCING
Dec 15-19 Dec 22-26 Dec 29-Jan 2 Jan 5-9 Jan 12-16 Jan 19-23
--------- --------- ------------ ------- --------- ---------
Revolver Balance 7,548,253 8,190,388 8,566,302 8,180,116 8,645,800 7,865,017
Collections:
Hibbing 1,120,552 1,120,552 860,000 1,032,000 688,000 688,000
Tampa / Gaylord 1,839,343 1,759,371 1,305,000 1,305,000 1,667,500 1,522,500
Display 257,022 267,022 189,940 189,940 208,934 189,940
Modules & Distribution
Total Collections 3,226,917 3,146,945 2,354,940 2,526,940 2,564,434 2,400,440
Disbursements:
Hibbing 1,099,920 699,920 573,800 648,560 449,040 449,040
Tampa / Gaylord 2,016,819 1,070,435 806,900 806,900 1,017,150 933,050
Display 180,213 180,213 133,964 133,954 145,360 133,964
Modules & Distribution 0 0 0 0 0 0
Corporate 572,100 1,672,290 354,090 1,403,200 172,100 1,817,290
Pre-Petition Trades
Total Disbursements 3,869,052 3,622,859 1,868,754 2,992,624 1,783,650 3,333,344
Revolver Balance 8,190,388 8,666,302 8,180,116 8,645,800 7,865,017 8,797,921
Weekly Billings 3,049,117 3,180,495 1,981,000 2,101,000 2,205,500 2,054,500
Gross AR Balance 14,791,006 14,824,556 14,450,617 14,024,677 13,665,743 13,319,804
Ineligible Receivables (3,254,021) (3,261,402) (3,179,13[?]) (3,085,429) (3,143,121) (3,063,555)
Eligible Receivables 11,536,985 11,563,154 11,271,481 10,939,248 10,522,622 10,256,249
Advance Rate 85% 85% 85% 85% 85% 85%
Collateral Value of AR 9,806,437 9,828,681 9,580,759 9,298,361 8,944,229 8,717,812
Collateral Value of Inv 3,850,000 3,600,000 3,500,000 3,500,000 3,400,000 3,400,000
Total Collateral Value 13,656,437 13,428,681 13,080,759 12,798,361 12,344,229 12,117,812
AR Reserves (576,849) (578,158) (563,574) (546,962) (526,131) (512,812)
Reserves (800,000) (800,000) (800,000) (800,000) (800,000) (800,000)
Availability 4,089,199 3,384,221 3,537,069 2,805,598 3,153,081 2,007,078
Jan 26-30 Feb 2-6 Feb 9-13 Feb 16-20 Feb 23-27 March 1-5
--------- ------- ------- --------- --------- ---------
Revolver Balance 8,797,921 8,281,193 8,706,707 8,123,671 8,184,754 7,148,166
Collections:
Hibbing 1,032,000 968,000 1,100,000 1,232,000 1,100,000 600,000
Tampa / Gaylord 1,450,000 1,026,000 1,254,000 1,596,000 1,824,000 1,161,000
Display 170,948 185,738 221,117 221,117 256,495 220,000
Modules & Distribution
Total Collections 2,652,946 2,179,738 2,575,117 3,049,117 3,180,495 1,981,000
Disbursements:
Hibbing 248,560 211,440 288,000 364,560 288,000 98,000
Tampa / Gaylord 291,000 195,080 177,320 375,680 307,920 273,380
Display 122,567 131,443 152,670 152,670 173,897 152,000
Modules & Distribution 0 0 0 0 0 0
Corporate 474,090 1,217,290 374,090 1,217,290 374,090 1,217,290
Pre-Petition Trades 1,000,000 850,000 1,000,000 1,000,000 1,000,000 750,000
Total Disbursements 2,136,217 2,605,253 1,992,080 3,110,200 2,143,907 2,490,670
Revolver Balance 8,281,193 8,706,707 8,123,671 8,184,754 7,148,166 7,657,836
Weekly Billings 2,208,000 2,052,000 2,444,000 2,921,000 3,133,000 1,981,000
Gross AR Balance 12,874,858 12,747,120 12,616,003 12,487,887 12,440,391 12,440,391
Ineligible Receivables (3,089,966) (3,059,309) (3,027,841) (2,997,093) (2,985,694) (2,985,694)
Eligible Receivebles 9,784,892 9,587,811 9,588,163 9,490,794 9,454,697 9,454,697
Advance Rate 85% 85% 85% 85% 85% 85%
Collateral Value of AR 8,317,158 8,234,640 8,149,938 8,067,175 8,036,493 8,036,493
Collateral Value of Inv 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
Total Collateral Value 12,317,158 12,234,640 12,149,938 12,067,175 12,036,493 12,036,493
AR Reserves (489,245) (484,391) (479,408) (474,540) (472,735) (472,735)
Reserves 0 0 0 0 0 0
Availability 3,546,721 3,043,542 3,546,859 3,407,881 4,415,592 3,905,922
March 8-12 March 15-19 March 22-26 March 29-Apr 2 Apr 5-9
----------- ----------- ----------- -------------- -------
Revolver Balance 7,657,836 7,273,906 7,789,726 7,425,326 7,939,216
Collections:
Hibbing 720,000 480,000 480,000 720,000 660,000
Tampa / Gaylord 1,161,000 1,483,500 1,354,500 1,290,000 1,161,000
Display 220,000 242,000 220,000 198,000 231,000
Modules & Distribution
Total Collections 2,101,000 2,205,500 2,054,500 2,208,000 2,052,000
Disbursements:
Hibbing 167,600 128,400 128,400 267,600 232,800
Tampa / Gaylord 273,380 660,430 585,610 548,200 473,380
Display 152,000 165,200 152,000 138,800 158,600
Modules & Distribution 0 0 0 0 0
Corporate 374,090 1,317,290 374,090 1,317,290 374,090
Pre-Petition Trades 750,000 450,000 450,000 450,000 450,000
Total Disbursements 1,717,070 2,721,320 1,690,100 2,721,890 1,688,870
Revolver Balance 7,273,906 7,789,726 7,425,326 7,939,216 7,576,086
Weekly Billings 2,101,000 2,205,500 2,054,500 2,208,000 2,291,440
Gross AR Balance 12,440,391 12,440,391 12,440,391 12,440,391 12,679,831
Ineligible Receivables (2,985,694) (2,985,694) (2,985,694) (2,985,694) (3,043,159)
Eligible Receivebles 9,454,697 9,454,697 9,454,697 9,454,697 9,636,672
Advance Rate 85% 85% 85% 85% 85%
Collateral Value of AR 8,036,493 8,036,493 8,036,493 8,036,493 8,191,171
Collateral Value of Inv 4,000,000 4,000,000 4,000,000 4,000,000 4,000,000
Total Collateral Value 12,036,493 12,036,493 12,036,493 12,036,493 12,191,171
AR Reserves (472,735) (472,735) (472,735) (472,735) (481,834)
Reserves 0 0 0 0 0
Availability 4,289,852 3,774,032 4,138,432 3,624,542 4,133,252
EXHIBIT 3
HIBBING
Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-4
------ ------ ------ ------ ------ ------ ----- -----
Monthly Billings 3,609,000 4,668,965 4,300,000 4,400,000 3,000,000 3,000,000 3,000,000 3,250,000
Forecasted Weekly Collections % of Rev
60 Days after Billing
Dec 1-5 22.0% 1,027,172
Dec 8-12 30.0% 1,400,690
Dec 15-19 24.0% 1,120,552
Dec 22-26 24.0% 1,120,552
Dec 29-Jan 2 20.0% 860,000
Jan 5-9 24.0% 1,032,000
Jan 12-16 16.0% 688,000
Jan 19-23 16.0% 688,000
Jan 26-30 24.0% 1,032,000
Feb 2-6 22.0% 968,000
Feb 9-13 25.0% 1,100,000
Feb 16-20 28.0% 1,232,000
Feb 23-27 25.0% 1,100,000
Mar 1-Mar 5 20.0% 600,000
Mar 8-12 24.0% 720,000
Mar 15-19 16.0% 480,000
Mar 22-26 16.0% 480,000
Mar 29-Apr 2 24.0% 720,000
April 5-9 22.0% 660,000
April 12-16 25.0% 750,000
April 19-23 28.0% 840,000
April 26-30 25.0% 750,000
May 3-7 20.0% 600,000
May 10-14 24.0% 720,000
May 17-21 16.0% 480,000
May 24-28 16.0% 480,000
May 31-June 4 24.0% 720,000
June 7-11 22.0% 715,000
June 14-18 25.0% 812,500
June 21-25 28.0% 910,000
June 28-July 2 25.0% 812,500
TAMPA & GAYLORD
Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04
------ ------ ------ ------ ------ ------ ------ ------
Monthly Billings 7,799,000 7,997,142 7,250,000 5,700,000 6,450,000 6,450,000 6,450,000 7,358,000
Forecasted Weekly Collections % of Rev
60 Days after Billing
Dec 1-5 25.0% 1,999,286
Dec 8-12 30.0% 2,399,143
Dec 15-19 23.0% 1,839,343
Dec 22-26 22.0% 1,759,371
Dec 29-Jan 2 18.0% 1,305,000
Jan 5-9 18.0% 1,305,000
Jan 12-16 23.0% 1,667,500
Jan 19-23 21.0% 1,522,500
Jan 26-30 20.0% 1,450,000
Feb 2-6 18.0% 1,026,000
Feb 9-13 22.0% 1,254,000
Feb 16-20 28.0% 1,596,000
Feb 23-27 32.0% 1,824,000
Mar 1-Mar 5 18.0% 1,161,000
Mar 8-12 18.0% 1,161,000
Mar 15-19 23.0% 1,483,500
Mar 22-26 21.0% 1,354,500
Mar 29-Apr 2 20.0% 1,290,000
April 5-9 18.0% 1,161,000
April 12-16 22.0% 1,419,000
April 19-23 28.0% 1,806,000
April 26-30 32.0% 2,064,000
May 3-7 16.0% 1,161,000
May 10-14 18.0% 1,161,000
May 17-21 23.0% 1,483,500
May 24-28 21.0% 1,354,500
May 31-June 4 20.0% 1,290,000
June 7-11 18.0% 1,324,440
June 14-18 22.0% 1,618,760
June 21-25 28.0% 2,060,240
June 28-July 2 32.0% 2,354,560
DISPLAY & INTEGRATION
Sep-03 Oct-03 Nov-03 Dec-03 Jan-04 Feb-04 Mar-04 Apr-04
------ ------ ------- ------ ------ ------ ------ ------
Monthly Billings 989,473 988,972 949,698 884,467 1,100,000 1,100,000 1,100,000 1,200,000
Forecasted Weekly Collections % Of Rev
60 Days after Billing
Dec 1-5 21.0% 207,684
Dec 8-12 25.0% 247,243
Dec 15-19 27.0% 267,022
Dec 22-26 27.0% 267,022
Dec 29-Jan 2 20.0% 189,940
Jan 5-9 20.0% 189,940
Jan 12-16 22.0% 208,934
Jan 19-23 20.0% 189,940
Jan 26-30 18.0% 170,946
Feb 2-6 21.0% 185,738
Fab 9-13 25.0% 221,117
Feb 16-20 25.0% 221,117
Feb 23-27 29.0% 256,495
Mar 1-Mar 5 20.0% 220,000
Mar 8-12 20.0% 220,000
Mar 15-19 22.0% 242,000
Mar 22-26 20.0% 220,000
Mar 29-Apr 2 18.0% 198,000
April 5-9 21.0% 231,000
April 12-16 25.0% 275,000
April 19-23 25.0% 275,000
April 26-30 29.0% 319,000
May 3-7 20.0% 220,000
May 10-14 20.0% 220,000
May 17-21 22.0% 242,000
May 24-28 20.0% 220,000
May 31-June 4 18.0% 198,000
June 7-11 21.0% 252,000
June 14-18 25.0% 300,000
June 21-25 25.0% 300,000
June 28-July 2 29.0% 348,000
Dec 15-19 Dec 22-26 Dec 29-Jan 2 Jan 5-9 Jan 12-16 Jan 19-23 Jan 26-30 Feb 2-6 Feb 9-13
--------- --------- ------------ --------- --------- --------- --------- ------- --------
Cost of product 649,920 649,920 498,800 598,560 399,040 399,040 598,560 561,440 838,000
Others 450,000 50,000 75,000 50,000 50,000 50,000 50,000 50,000 50,000
Total 1,099,920 699,920 573,800 648,560 449,040 449,040 648,560 611,440 688,000
60 day billings 1,120,552 1,120,552 860,000 1,032,000 688,000 688,000 1,032,000 968,000 1,100,000
% of sales 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58,00%
Feb 16-20 Feb 23-27 March 1-5 March 8-12 March 15-19 March 22-26 Mar 29-APR 2 Apr 5-9
--------- --------- ---------- ----------- ----------- ----------- ------------ -------
Cost of product 714,560 638,000 348,000 417,600 278,400 278,400 417,800 382,800
Others 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Total 764,560 688,000 398,000 467,600 328,400 328,400 467,600 432,800
60 day billings 1,232,000 1,100,000 600,000 720,000 480,000 480,000 720,000 660,000
% of sales 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00%
TG Disbursements
Dec 15-19 Dec 22-26 Dec 29-Jan 2 Jan 5-9 Jan 12-16 Jan 19-23 Jan 26-30 Feb 2-6
--------- --------- ------------ -------- --------- --------- --------- --------
Cost of Product 1,066,819 1,020,435 756,900 756,900 967,150 883,050 841,000 595,080
Others 950,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Total 2,016,819 1,070,435 806,900 806,900 1,017,150 533,050 891,000 645,080
60 day billings 1,839,343 1,759,371 1,305,000 1,305,000 1,867,500 1,522,500 1,450,000 1,026,000
% of sales 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00%
Feb 9-13 Feb 16-20 Feb 23-27 March 1-5 March 8-12 March 15-19 March 22-26 Mar 29-Apr 2
--------- --------- --------- --------- ---------- ----------- ----------- ------------
Cost of Product 727,320 925,680 1,057,920 673,380 673,380 860,430 785,610 748,200
Others 50,000 50,000 (150,000) 50,000 50,000 50,000 50,000 50,000
Total 777,320 976,680 907,920 723,380 723,380 910,430 835,610 798,200
60 day billings 1,254,000 1,596,000 1,824,000 1,161,000 1,161,000 1,483,500 1,354,500 1,290,000
% of sales 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00%
TG Disbursements
Dec 15-19 Dec 22-28 Dec 29-Jan 2 Jan 5-9 Jan 12-16 Jan 19-23 Jan 26-30 Feb 2-6 Feb 9-13
--------- --------- ------------ -------- --------- --------- --------- -------- ---------
Cost of Product 1,066,819 1,020,435 756,900 756,900 967,150 883,050 841,000 595,080 727,320
Others 950,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Total 2,016,819 1,070,435 806,900 806,900 1,017,150 933,050 891,000 645,080 777,320
60 day billings 1,839,343 1,759,371 1,305,000 1,305,000 1,667,500 1,522,500 1,450,000 1,026,000 1,254,000
% of sales 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00%
Feb 16-20 Feb 23-27 March 1-5 March 8-12 March 15-19 March 22-26 Mar 29-Apr 2 Apr 5-9
--------- --------- --------- ---------- ----------- ----------- ------------ --------
Cost of Product 925,680 1,057,920 673,380 673,380 860,430 785,610 748,200 673,380
Others 50,000 (150,000) 50,000 50,000 50,000 50,000 50,000 50,000
Total 975,680 907,920 723,380 723,380 910,430 835,610 798,200 723,380
60 day billings 1,596,000 1,824,000 1,161,000 1,161,000 1,483,500 1,354,500 1,290,000 1,161,000
% of sales 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00% 58.00%
Display Disbursements
Dec 15-19 Dec 22-26 Dec 29-Jan 2 Jan 5-9 Jan 12-15 Jan 19-23 Jan 26-30 Feb 2-6 Feb 9-13
--------- --------- ------------ ------- --------- --------- --------- ------- --------
Cost of product 160,213 160,213 113,964 113,964 125,360 113,954 102,557 111,443 132,670
Others 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Total 180,213 180,213 133,964 133,964 145,360 133,964 122,567 131,443 152,670
160,213 160,213 113,964 113,964 125,360 113,964 102,567 111,443 132,670
60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00%
Feb 16-20 Feb 23-27 March 1-5 March 8-12 March 15-19 March 22-26 Mar 29-Apr 2 Apr 5-9
--------- --------- --------- ---------- ----------- ----------- ------------ -------
Cost of product 132,670 153,897 132,000 132,000 145,200 132,000 118,800 138,600
Others 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Total 152,670 173,897 152,000 152,000 165,200 152,000 138,800 158,600
132,670 153,897 132,000 132,000 145,200 132,000 118,800 138,600
60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00% 60.00%
DEC 15-19 DEC 22-26 DEC 29-JAN 2 JAN 5-9 JAN 12-16 JAN 19-23 JAN 26-30 FEB 2-6
--------- --------- ------------ ------- --------- --------- --------- ---------
Vendor
Payroll 330,000 1,200,000 - 1,200,000 - 1,600,000 - 1,000,000
Acordie 50,000 50,000
Blue Cross/Blue Shield 125,000 100,000 100,000 100,000 100,000 100,000 100,000 80,000
Computershare Stock Purchase Plan - 990 90 900 - 990 90 990
Hartford 50,000 50,000
Highmark Life 21,000
Jefferson Pilot 30,000 30,000
Merrill Lynch 401k - 42,000 21,000 21,000 - 42,000 21,000 42,000
Regency 2,100 4,300 3,000 4,300 2,100 4,300 3,000 4,300
Spectera 6,000
Unisource 50,000 50,000
Professional Fees - 275,000 - - - - 100,000 20,000
Bankrupcty Exp - Mating / printing 75,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Others / Interest 40,000 40,000 40,000 40,000 60,000 60,000 60,000 60,000
Total 572,100 1,672,290 354,090 1,403,200 172,100 1,817,290 474,090 1,217,290
FEB 9-13 FEB 16-20 FEB 23-27 MARCH 1-5 MARCH 8-12 MARCH 15-19 MARCH 22-26
-------- --------- --------- --------- ---------- ----------- -----------
Vendor
Payroll - 1,000,000 - 1,000,000 - 1,100,000 -
Acordie 50,000 50,000 50,000 50,000
Blue Cross/Blue Shield 80,000 80,000 80,000 80,000 80,000 80,000 80,000
Computershare Stock Purchase Plan 90 990 90 990 90 990 90
Hartford 50,000 50,000 50,000 50,000
Highmark Life
Jefferson Pilot 30,000 30,000 30,000 30,000
Merrill Lynch 401k 21,000 42,000 21,000 42,000 21,000 42,000 21,000
Regency 3,000 4,300 3,000 4,300 3,000 4,300 3,000
Spectera
Unisource 50,000 50,000 50,000 50,000
Professional Fees 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Bankrupcty Exp - Mating / printing 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Others / Interest 60,000 60,000 60,000 60,000 60,000 60,000 60,000
Total 374,090 1,217,290 374,090 1,217,290 374,090 1,317,290 374,090
MAR 29-APR 2 APR 5-9
------------ -------
Vendor
Payroll 1,100,000 -
Acordie 50,000
Blue Cross/Blue Shield 80,000 80,000
Computershare Stock Purchase Plan 990 90
Hartford 50,000
Highmark Life
Jefferson Pilot 30,000
Merrill Lynch 401k 42,000 21,000
Regency 4,300 3,000
Spectera
Unisource 50,000
Professional Fees 20,000 20,000
Bankrupcty Exp - Mating / printing 10,000 10,000
Others / Interest 60,000 60,000
Total 1,317,290 374,090
DEC 1-DEC 5 DEC 8-12 DEC 15-19 DEC 22-26 DEC 29-JAN 2 JAN 5-9 JAN 12-16 JAN 19-23 JAN 26-30 FEB 2-6
---------- -------- --------- --------- ----------- ------- --------- --------- --------- -------
Vendor
E-Tech
Princeton
Continental Promotion Group 0.00 0.00
Georgia Natural Gas
Others
Total 0.00 0.00 0.00 0.00
REPTRON ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
OCT NOV DEC Q4-03 2003 JANUARY FEBRUARY MARCH Q1-04 APRIL MAY
Total Net Sales 13,809 12,200 11,400 37,409 150,575 10,550 10,550 10,550 31,650 11,908 11,908
Total COGS 12,193 10,807 10,146 33,146 131,313 9,318 9,247 9,177 27,742 10,192 10,192
--------------------------------------------- ----------------------------------------------------
Total Gross Profit 1,616 1,393 1,254 4,263 19,262 1,232 1,303 1,374 3,908 1,716 1,716
Total SG&A 1,507 1,405 1,405 4,317 18,337 1,329 1,279 1,214 3,621 1,332 1,332
Operating Income 109 (12) (151) (54) 925 (97) 24 160 87 384 384
Total Interest 504 100 100 704 5,405 256 251 251 757 249 251
Pre-Tax Income (395) (112) (251) 758 4,408 (353) (227) (91) (670) 135 133
Income Tax Expense/
Gain on Reorg - - (51,874) (51,874) (51,874) (141) (91) (36) (268) 54 53
Net Income (Loss) (395) (112) 51,623 51,116 47,394 (212) (136) (54) (402) 81 80
============================================= ====================================================
Depr/Amort 60 60 60 180 720 6O 60 60 180 60 60
Depr/Amort 435 431 431 1,297 5,475 430 430 430 1,290 430 430
--------------------------------------------- ----------------------------------------------------
Total Depr/Amort 495 491 491 1,477 6,195 490 490 490 1,470 490 490
EBITDA 604 479 340 1,423 7,120 393 514 650 1,557 874 874
============================================= ====================================================
Margin Analysis
GP Margin 11.7% 11.4% 11.0% 11.4% 12.5% 11.7% 12.4% 13.0% 12.3% 14.4% 14.4%
Total SG&A 10.9% 11.5% 12.3% 11.5% 12.2% 12.6% 12.1% 11.5% 12.1% 11.2% 11.2%
Operating Income 0.8% -0.1% -1.3% -0.1% 0.6% -0.9% 0.2% 1.5% 0.3% 3.2% 3.2%
Total Interest 3.6% 0.8% 0.9% 1.9% 3.6% 2.4% 2.4% 2.4% 2.4% 2.1% 2.1%
Pre-Tax Income -2.9% -0.9% -2.2% -2.0% -3.0% -3.3% -2.1% -0.9% -2.1% 1.1% 1.1%
Net Income -2.9% -0.9% 452.8% 136.5% 31.5% -2.0% -1.3% -0.5% -1.3% 0.7% 0.7%
EBITDA 4.4% 3.9% 3.0% 3.9% 4.7% 3.7% 4.9% 6.2% 4.9% 7.3% 7.3%
JUNE Q2-04 JULY AUGUST SEPT Q3-04 OCT NOV DEC Q4-04 2004
Total Net Sales 11,908 35,724 13,400 13,400 13,400 40,200 14,100 14,100 14,100 42,300 149,874
Total COGS 10,192 30,576 11,378 11,378 11,378 34,133 11,937 11,937 11,937 35,810 128,261
-------------------------------------------------------------------------------------------------
Total Gross Profit 1,715 5,148 2,022 2,022 2,022 8,067 2,164 2,164 2,164 6,491 21,613
Total SG&A 1,332 3,996 1,384 1,384 1,384 4,152 1,431 1,431 1,431 4,293 16,261
Operating Income 384 1,152 538 638 638 1,915 733 733 733 2,198 5,352
Total Interest 262 762 258 256 265 779 260 256 257 772 1,070
Pre-Tax Income 122 390 381 382 373 1,136 473 477 476 1,426 2,282
Income Tax Expense/
Gain on Reorg 49 156 152 153 149 454 189 191 190 570 913
Net Income (Loss) 73 234 228 229 224 682 284 286 286 855 1,369
=================================================================================================
Depr/Amort 60 180 60 60 60 180 60 60 60 180 720
Depr/Amort 430 1,290 430 430 429 1,289 429 429 429 1,287 5,156
-------------------------------------------------------------------------------------------------
Total Depr/Amort 490 1,470 490 490 489 1,489 489 489 489 1,467 5,876
EBITDA 874 2,522 1,128 1,128 1,127 3,384 1,222 1,222 1,222 3,665 11,228
=================================================================================================
Margin Analysis
GP Margin 14.4% 14.4% 15.1% 15.1% 15.1% 15.1% 15.3% 15.3% 15.3% 15.3% -14.4%
Total SG&A 11.2% 11.2% 10.3% 10.3% 10.3% 10.3% 10.1% 10.1% 10.1% 10.1% 10.8%
Operating Income 3.2% 3.2% 4.8% 4.8% 4.8% 4.8% 5.2% 5.2% 5.2% 5.2% 3.6%
Total Interest 2.2% 2.1% 1.9% 1.9% 2.0% 1.9% 1.6% 1.8% 1.8% 1.8% 2.0%
Pre-Tax Income 1.0% 1.1% 2.8% 2.9% 2.8% 2.8% 3.4% 3.4% 3.4% 3.4% 1.5%
Net Income 0.6% 0.7% 1.7% 1.7% 1.7% 1.7% 2.0% 2.0% 2.0% 2.0% 0.9%
EBITDA 7.3% 7.3% 8.4% 8.4% 8.4% 8.4% 8.7% 8.7% 8.7% 8.7% 7.5%
2005 2006 2007 2008
Total Net Sales 161,864 174,813 188,798 203,902
Total COGS 137,988 148,452 160,361 173,190
-------------------------------------
Total Gross Profit 23,876 26,331 28,437 30,712
Total SG&A 16,499 17,442 18,356 19,439
Operating Income 7,377 8,889 10,081 11,273
Total Interest 3,011 2,477 2,804 2,587
Pre-Tax Income 4,366 6,412 7,277 8,686
Income Tax Expense/
Gain on Reorg 1,746 2,565 2,911 3,474
Net Income (Loss) 2,620 3,547 4,366 5,211
=====================================
Depr/Amort 60 60 60 60
Depr/Amort 4,456 4,106 3,756 3,405
-------------------------------------
Total Depr/Amort 4,516 4,166 3,816 3,465
EBITDA 11,593 13,055 13,697 14,739
=====================================
Margin Analysis
GP Margin 14.8% 15.1% 15.1% 15.1%
Total SG&A 10.2% 10.0% 9.7% 9.5%
Operating Income 4.6% 5.1% 5.3% 5.5%
Total Interest 1.9% 1.4% 1.5% 1.3%
Pre-Tax Income 2.7% 3.7% 3.9% 4.3%
Net Income 1.6% 2.2% 2.3% 2.6%
EBITDA 7.3% 7.5% 7.4% 7.2%
REPTRON ELECTRONICS, INC.
REPTRON DISPLAY & SYSTEM INTEGRATION
STATEMENT OF OPERATIONS
OCT NOV DEC Q4-03 2003 JANUARY FEBRUARY MARCH Q1-04 APRIL MAY JUNE Q2-04
-------------------------------------- ----------------------------------------------------------------
Net Sales 1,184 1,000 1,000 3,184 13,051 1,100 1,100 1,100 3,300 1,300 1,300 1,300 3,900
Cost of Sales 957 800 800 2,557 10,026 880 880 880 2,540 1,021 1,021 1,021 3,062
-------------------------------------- ----------------------------------------------------------------
Gross Profit 227 200 200 627 3,025 220 220 220 660 280 280 280 839
SG&A 215 200 200 615 2,429 182 182 182 545 215 215 215 644
Corp O/H Charge - - - - - 28 28 28 85 28 28 28 85
-------------------------------------- ----------------------------------------------------------------
Total SG&A 215 200 200 615 2,429 210 210 210 629 243 243 243 728
Operating Income 12 - - 12 596 10 10 10 31 37 37 37 110
Interest 10 10 10 30 572 25 19 25 70 25 25 26 76
Pre-Tax Income 2 (10) (10) (18) 24 (15) (9) (15) (35) 12 12 11 34
Income Tax - - - - - (6) (4) (6) (16) 5 5 4 14
Net Income 2 (10) (10) (18) 24 (9) (5) (9) (24) 7 7 6 21
====================================== ================================================================
Depr/Amount 8 8 5 24 81 7 7 7 21 7 7 7 21
EBITDA 20 8 8 36 677 17 17 17 52 44 44 44 131
====================================== ================================================================
Margin Analysis
Gross Profit 19.2% 20.0% 20.0% 19.7% 23.2% 20.0% 20.0% 20.0% 20.0% 21.5% 21.5% 21.5% 21.5%
Total SG&A 18.2% 20.0% 20.0% 19.3% 18.6% 19.1% 19.1% 19.1% 19.1% 18.7% 18.7% 18.7% 18.7%
Operating Income 1.0% 0.0% 0.0% 0.4% 4.6% 0.9% 0.9% 0.9% 0.9% 2.8% 2.8% 2.8% 2.8%
Interest 0.8% 1.0% 1.0% 0.9% 4.4% 2.3% 1.8% 2.3% 2.1% 1.9% 1.9% 2.0% 1.9%
Pre-tax Income 0.2% -1.0% -1.0% -0.6% 0.2% -1.4% -0.5% -1.4% -1.2% 0.9% 0.9% 0.8% 0.9%
Net Income 0.2% -1.0% -1.0% -0.6% 0.2% -0.8% -0.5% -0.8% -0.7% 0.6% 0.5% 0.5% 0.5%
EBITDA 1.7% 0.8% 0.8% 1.1% 5.2% 1.6% 1.6% 1.6% 1.6% 3.4% 3.4% 3.4% 3.4%
JULY AUGUST SEPT Q3-04 OCT NOV DEC Q4-04 2004 2005 2006 2007 2008
---------------------------------------------------------------------- ----------------------------------
Net Sales 1,100 1,100 1,100 3,300 1,000 1,000 1,000 3,000 13,500 14,580 15,746 17,006 18,367
Cost of Sales 864 864 864 2,591 785 785 785 2,355 10,647 11,227 12,125 13,095 14,142
---------------------------------------------------------------------- ----------------------------------
Gross Profit 237 237 237 710 215 215 215 845 2,853 3,353 3,622 3,911 4,224
SG&A 182 182 182 670 165 165 165 495 2,353 2,770 2,913 3,061 3,306
Corp O/H Charge 28 28 28 85 28 28 28 55 339 353 367 381 397
---------------------------------------------------------------------- ----------------------------------
Total SG&A 210 210 210 755 193 193 193 580 2,692 3,123 3,280 3,442 3,703
Operating Income 27 27 27 (45) 22 22 22 65 161 231 342 469 522
Interest 26 25 26 78 26 25 25 77 300 298 307 281 281
Pre-Tax Income 1 1 0 (123) (4) (4) (4) (11) (139) (67) 35 188 241
Income Tax 0 1 0 1 (2) (1) (1) (5) (5) (27) 14 75 96
Net Income 1 1 0 (124) (2) (2) (2) (7) (134) (40) 21 113 145
====================================================================== ==================================
Depr/Amount 7 7 6 20 6 6 6 18 60 80 80 80 80
EBITDA 34 34 33 (25) 28 28 28 83 241 311 422 549 602
====================================================================== ==================================
Margin Analysis
Gross Profit 21.5% 21.5% 21.5% 21.5% 21.5% 21.5% 21.5% 21.5% 21.1% 23.0% 23.0% 23.0% 23.0%
Total SG&A 19.1% 19.1% 19.1% 22.9% 19.3% 19.3% 19.3% 19.3% 19.9% 21.4% 20.8% 20.2% 20.2%
Operating Income 2.4% 2.4% 2.4% -1.4% 2.2% 2.2% 2.2% 2.2% 1.2% 1.6% 2.2% 2.8% 2.8%
Interest 2.3% 2.3% 2.4% 2.3% 2.6% 2.5% 2.5% 2.6% 2.2% 2.0% 2.0% 1.7% 1.5%
Pre-tax Income 0.1% 0.1% 0.0% -3.7% -0.4% -0.4% -0.4% -0.4% -1.0% -0.5% 0.2% 1.1% 1.3%
Net Income 0.1% 0.1% 0.0% -3.8% -0.2% -0.2% -0.2% -0.2% -1.0% -0.3% 0.1% 0.7% 0.8%
EBITDA 3.1% 3.1% 3.0% -0.8% 2.8% 2.8% 2.8% 2.8% 1.8% 2.1% 2.7% 3.2% 3.3%
REPTRON ELECTRONICS, INC.
REPTRON MANUFACTURING SERVICES - Combined
STATEMENT OF OPERATIONS
OCT NOV DEC Q4-03 2003 JANUARY FEBRUARY MARCH Q1-04
------ ------- ------ ------ ------- ------- -------- ----- ------
Net Sales 12,625 11,200 10,400 34,225 137,524 9,450 9,450 9,450 28,350
Direct Material 7,491 6,528 6,103 20,122 80,503 5,481 5,481 5,481 16,443
Direct Labor 1,075 1,004 909 2,968 11,452 883 812 741 2,435
------ ------ ------ ------ ------- ----- ----- ----- ------
Manufacturing Margin 4,059 3,668 3,388 11,115 45,569 3,086 3,158 3,228 9,472
Manufacturing O/H 2,670 2,475 2,334 7,479 29,332 2,075 2,075 2,075 6,224
Total COGS 11,235 10,007 9,346 30,589 121,287 8,438 8,367 8,297 25,102
------ ------ ------ ------ ------- ----- ----- ----- ------
Gross Profit 1,389 1,193 1,054 3,636 16,237 1,012 1,063 1,154 3,248
SG&A 922 795 795 2,512 9,761 790 790 775 2,356
Corp O/H Charge 370 410 410 1,190 6,127 329 279 229 836
------ ------ ------ ------ ------- ----- ----- ----- ------
Total SG&A 1,292 1,205 1,205 3,702 15,908 1,119 1,069 1,004 3,192
Operating Income 97 (12) (151) (66) 329 (107) 14 150 56
Total Interest 494 90 90 674 4,833 230 232 225 687
Pre-Tax Income (397) (102) (241) (740) (4,504) (338) (218) (76) (631)
Income Tax/ Gain on Reorg - - (51,874) (51,874) (51,874) (135) (87) (30) (252)
Net Income (397) (102) 51,633 51,134 47,370 (203) (131) (45) (376)
====== ====== ====== ====== ======= ===== ===== ===== ======
Depr Amort 427 423 423 1,273 5,394 423 423 423 1,269
EBITDA 524 411 272 1,207 5,723 316 437 573 1,325
====== ====== ====== ====== ======= ===== ===== ===== ======
MARGIN ANALYSIS
Direct Material 59.3% 58.3% 58.7% 58.8% 58.5% 58.0% 58.0% 58.0% 58.0%
Direct Labor 8.5% 9.0% 8.7% 8.7% 6.3% 9.3% 8.8% 7.8% 8.6%
MFG Margin 32.2% 32.8% 32.6% 32.5% 33.1% 32.7% 33.4% 34.2% 33.4%
MFG O/H 21.1% 22.1% 22.4% 21.9% 21.3% 22.0% 22.0% 22.0% 22.0%
Total COGS 89.0% 89.3% 89.9% 89.4% 88.2% 89.3% 88.5% 87.8% 88.5%
Gross Profit 11.0% 10.7% 10.1% 10.6% 11.8% 10.7% 11.5% 12.2% 11.5%
Total SG&A 10.2% 10.8% 11.6% 10.8% 11.6% 11.8% 11.3% 10.6% 11.3%
Operating Income 0.8% -0.1% -1.4% -0.2% 0.2% -1.1% 0.1% 1.8% 0.2%
Interest 3.9% 0.8% 0.9% 2.0% 3.5% 2.4% 2.5% 2.4% 2.4%
Pre-Tax Income -3.1% -0.9% -2.3% -2.2% -3.3% -3.5% -2.3% -0.5% -2.2%
Net Income -3.1% -0.9% 496.5% 149.4% 34.4% -2.1% -1.4% -0.5% -1.3%
EBITDA 4.2% 3.7% 2.6% 3.5% 4.2% 3.3% 4.6% 6.1% 4.7%
APRIL MAY JUNE Q2-04 JULY AUGUST SEPT Q3-04 OCT
------ ------ ------ ------ ------ ------ ------ ------ ------
Net Sales 10,608 10,608 10,808 31,824 12,300 12,300 12,300 36,900 13,100
Direct Material 6,153 6,153 5,153 18,456 7,073 7,073 7,073 21,218 7,533
Direct Labor 832 832 632 2,497 964 964 964 2,893 1,028
------ ------ ------ ------ ------ ------ ------ ------ ------
Manufacturing Margin 3,623 3,623 3,623 10,869 4,263 4,263 4,263 12,790 4,540
Manufacturing O/H 2,187 2,187 2,187 8,560 2,475 2,478 2,478 7,433 2,592
Total COGS 9,172 9,172 9,172 27,515 10,514 10,514 10,514 31,543 11,152
------ ------ ------ ------ ------ ------ ------ ------ ------
Gross Profit 1,436 1,436 1,436 4,309 1,786 1,786 1,786 5,357 1,949
SG&A 861 851 861 2,582 946 946 946 2,837 1,009
Corp O/H Charge 229 229 229 686 229 229 229 686 229
------ ------ ------ ------ ------ ------ ------ ------ ------
Total SG&A 1,089 1,089 1,069 3,267 1,174 1,174 1,174 3,523 1,238
Operating Income 347 347 347 1,042 612 612 612 1,835 711
Total Interest 224 226 238 686 232 231 239 701 234
Pre-Tax Income 123 121 112 356 380 381 373 1,133 477
Income Tax/ Gain on Reorg 49 48 45 142 152 152 149 453 191
Net Income 74 73 67 213 228 229 224 680 286
====== ====== ====== ====== ====== ====== ====== ====== ======
Depr/Amort 423 423 423 1,269 423 423 423 1,269 423
EBITDA 770 770 770 2,311 1,035 1,035 1,035 3,104 1,134
====== ====== ====== ====== ====== ====== ====== ====== ======
MARGIN ANALYSIS
Direct Material 58.0% 58.0% 58.0% 58.0% 57.5% 57.5% 57.5% 57.5% 57.5%
Direct Labor 7.8% 7.8% 7.8% 7.8% 7.8% 7.8% 7.8% 7.8% 7.8%
MFG Margin 34.2% 34.2% 34.2% 34.2% 34.7% 34.7% 34.7% 34.7% 34.7%
MFG O/H 20.6% 20.6% 20.6% 20.6% 20.1% 20.1% 20.1% 20.1% 19.8%
Total COGS 66.5% 86.5% 86.5% 86.5% 85.5% 85.5% 85.5% 85.5% 85.1%
Gross Profit 13.5% 13.5% 13.5% 13.5% 14.5% 14.5% 14.5% 14.5% 14.9%
Total SG&A 10.3% 10.3% 10.3% 10.3% 9.5% 9.5% 9.5% 9.5% 9.4%
Operating Income 3.3% 3.3% 3.3% 3.3% 5.0% 5.0% 5.0% 5.0% 5.4%
Interest 2.1% 2.1% 2.2% 2.2% 1.9% 1.9% 1.9% 1.9% 1.8%
Pre-Tax Income 1.2% 1.1% 1.1% 1.1% 3.1% 3.1% 3.0% 3.1% 3.6%
Net Income 0.7% 0.7% 0.6% 0.7% 1.9% 1.9% 1.8% 1.8% 2.2%
EBITDA 7.3% 7.3% 7.3% 7.3% 8.4% 8.4% 8.4% 8.4% 8.7%
NOV DEC Q4-04 2004 2005 2006 2007 2008
------ ------ ------ ------- ------- ------- ------- -------
Net Sales 13,100 13,100 39,300 136,374 147,294 159,067 171,792 185,535
Direct Material 7,533 7,533 22,598 78,716 84,920 91,168 98,462 106,339
Direct Labor 1,028 1,028 3,083 10,908 11,551 12,475 13,473 14,551
------ ------ ------ ------- ------- ------- ------- -------
Manufacturing Margin 4,540 4,540 13,520 46,750 50,813 55,423 59,857 64,646
Manufacturing O/H 2,592 2,592 7,775 27,990 30,291 32,714 35,331 38,158
Total COGS 11,152 11,152 33,455 117,614 126,762 136,358 147,266 159,047
------ ------ ------ ------- ------- ------- ------- -------
Gross Profit 1,949 1,949 5,846 18,750 20,522 22,709 24,526 26,488
SG&A 1,009 1,009 3,027 10,802 10,388 11,075 11,725 12,442
Corp O/H Charge 229 229 686 2,893 2,988 3,087 3,169 3,294
------ ------ ------ ------- ------- ------- ------- -------
Total SG&A 1,238 1,238 3,713 13,695 13,376 14,162 14,914 15,737
Operating Income 711 711 2,133 5,066 7,146 8,547 9,612 10,751
Total Interest 230 231 696 2,770 2,713 2,170 2,524 2,306
Pre-Tax Income 481 480 1,437 2,295 4,433 6,378 7,069 6,445
Income Tax/ Gain on Reorg 192 192 575 918 1,773 2,551 2,835 3,378
Net Income 288 288 862 1,377 2,680 3,827 4,253 5,067
====== ====== ====== ======= ======= ======= ======= =======
Depr/Amort 423 423 1,259 5,075 4,376 4,026 3,678 3,326
EBITDA 1,134 1,134 3,402 10,142 11,522 12,573 13,286 14,077
====== ====== ====== ======= ======= ======= ======= =======
MARGIN ANALYSIS
Direct Material 57.5% 57.5% 57.5% 57.7% 57.7% 57.3% 57.3% 57.3%
Direct Labor 7.8% 7.8% 7.8% 8.0% 7.8% 7.8% 7.8% 7.8%
MFG Margin 34.7% 34.7% 34.7% 34.3% 34.5% 34.8% 34.8% 34.8%
MFG O/H 19.8% 19.8% 19.8% 20.5% 20.6% 20.6% 20.6% 20.6%
Total COGS 85.1% 85.1% 85.1% 86.2% 86.1% 85.7% 85.7% 85.7%
Gross Profit 14.9% 14.9% 14.9% 13.8% 13.9% 14.3% 14.3% 14.3%
Total SG&A 9.4% 9.4% 9.4% 10.0% 9.1% 6.9% 6.7% 8.5%
Operating Income 5.4% 5.4% 5.4% 3.7% 4.9% 5.4% 5.6% 5.6%
Interest 1.8% 1.8% 1.8% 2.0% 1.8% 1.4% 1.5% 1.2%
Pre-Tax Income 3.7% 3.7% 3.7% 1.7% 3.0% 4.0% 4.1% 4.6%
Net Income 2.2% 2.2% 2.2% 1.0% 1.8% 2.4% 2.5% 2.7%
EBITDA 6.7% 6.7% 6.7% 7.4% 7.8% 7.9% 7.7% 7.6%
REPTRON ELECTRONICS INC.
REPTRON MANUFACTURING SERVICES - TAMPA&GAYLORD
STATEMENT OF OPERATIONS
OCT NOV DEC Q4-03 2003 JANUARY FEBRUARY MARCH Q1-04 APRIL MAY JUNE Q2-04
--------------------------------------- --------------------------------------------------------------
Net Sales 7,994 7,100 5,400 20,494 82,846 6,450 6,450 6,450 19,350 7,358 7,358 7,358 22,074
Direct Material 4,513 4,047 3,078 11,738 45,997 3,741 3,741 3,741 11,223 4,268 4,268 4,268 12,603
Direct Labor 704 669 524 1,917 7,332 613 581 516 1,709 589 589 589 1,766
--------------------------------------- --------------------------------------------------------------
Manufacturing Margin 2,677 2,384 1,796 6,640 28,520 2,096 2,129 2,193 6,418 2,502 2,502 2,502 7,505
Manufacturing O/H 1,469 1,491 1,134 4,094 17,036 1,355 1,355 1,355 4,064 1,472 1,472 1,472 4,415
Total COGS 6,786 6,227 4,736 17,749 71,365 5,708 5,676 5,612 16,996 6,328 6,328 6,328 18,984
--------------------------------------- --------------------------------------------------------------
Gross Profit 1,208 873 664 2,746 11,484 742 774 839 2,354 1,030 1,030 1,030 3,090
SG&A 570 495 495 1,560 6,427 535 535 535 1,606 607 607 607 1,821
Corp O/H Charge 275 280 280 835 4,167 257 207 157 520 157 157 157 470
--------------------------------------- --------------------------------------------------------------
Total SG&A 845 775 775 2,395 10,594 792 742 692 2,226 764 764 764 2,291
Operating Income 383 98 (111) 351 890 (50) 32 145 128 266 266 266 799
Total Interest 188 60 60 308 2,015 163 164 160 487 158 161 167 487
Pre-Tax Income 175 38 (171) 43 (1,126) (214) (132) (13) (359) 107 106 100 313
Income Tax/Gain on Reorg - - (51,874) (51,674) (51,874) (66) (53) (5) (144) 43 42 40 125
Net Income 175 38 51,703 51,917 50,749 (128) (79) (8) (216) 64 64 60 188
======================================= ==============================================================
Deprt/Amort 314 300 300 914 3,982 300 300 300 900 300 300 300 500
EBITDA 677 398 189 1,265 4,872 250 332 446 1,028 586 586 586 1,699
Margin Analysis
Direct Material 57.7% 57.0% 57.0% 57.3% 56.7% 58.0% 58.0% 58.0% 58.0% 58.0% 58.0% 58.0% 58.0%
Direct Labor 8.8% 9.7% 9.7% 9.4% 8.8% 9.5% 9.0% 8.0% 8.8% 8.0% 8.0% 8.0% 8.0%
MFG Margin 33.5% 33.3% 33.3% 33.4% 34.4% 32.5% 33.0% 34.0% 33.2% 34.0% 34.0% 34.0% 34.0%
MFG O/H 18.4% 21.0% 21.0% 20.0% 20.6% 21.0% 21.0% 21.0% 21.0% 20.0% 20.0% 20.0% 20.0%
Total CDGS 84.9% 87.7% 87.7% 86.6% 86.1% 88.5% 88.0% 87.0% 87.8% 86.0% 86.0% 86.0% 86.0%
Gross Profit 15.1% 12.3% 12.3% 13.4% 13.9% 11.5% 12.0% 13.0% 17.2% 14.0% 14.0% 14.0% 14.0%
Total SG&A 10.5% 10.9% 14.4% 11.7% 12.8% 12.3% 11.5% 10.7% 11.5% 10.4% 10.4% 10.4% 10.4%
Operating Income 4.5% 1.4% -2.1% 1.7% 1.1% -0.8% 0.5% 2.3% 0.7% 3.6% 3.6% 3.6% 3.6%
Interest 2.4% 0.8% 1.1% 1.5% 2.4% 2.5% 2.8% 2.5% 2.5% 2.2% 2.2% 2.3% 2.2%
Per-Tax Income 2.2% 0.5% -3.2% 0.2% -1.4% -3.3% -2.1% -0.2% -1.9% 1.5% 1.4% 1.4% 1.4%
Net Income 2.2% 0.5% 957.5% 253.3% 61.3% -2.0% -1.2% -0.1% -1.1% 0.9% 0.9% 0.8% 0.9%
EBITDA 8.5% 5.6% 3.5% 6.2% 5.9% 3.9% 5.1% 6.9% 5.3% 7.7% 7.7% 7.7% 7.7%
======================================= ===============================================================
JULY AUGUST SEPT Q3-04 OCT NOV DEC Q4-04 2004 2005 2006 2007 2008
--------------------------------------- ---------------------------------------------------------------
Net Sales 8,350 8,350 8,350 25,060 9,000 9,000 9,000 27,000 93,474 100,952 109,028 117,750 127,170
Direct Material 4,801 4,801 4,801 14,404 5,175 5,175 5,175 15,525 53,955 58,047 62,146 67,118 72,487
Direct Labor 668 668 668 2,004 720 720 720 2,160 7,639 8,076 8722 9,420 10,174
------------------------------------- ----------------------------------------------------------------
Manufacturing Margin 2,881 2,881 2,881 8,642 3,105 3,105 3,105 9,315 31,880 34,828 38,160 41,213 44,510
Manufacturing O/H 1,628 1,628 1,628 4,885 1,710 1,710 1,710 5,130 18,493 20,190 21,806 23,550 25,434
Total COGS 7,098 7,098 7,098 21,293 7,605 7,605 7,605 22,815 80,087 86,314 92,674 100,088 108,095
------------------------------------- ----------------------------------------------------------------
Gross Profit 1,253 1,253 1,253 3,758 1,395 1,395 1,395 4,185 13,387 14,838 16,354 17,663 19,076
SG&A 689 689 689 2,067 743 743 743 2,228 7,721 7,576 7,972 8,420 8,924
Corp O/H Charge 157 157 157 470 157 157 157 470 2,030 2,091 2,154 2,218 2,285
------------------------------------- ----------------------------------------------------------------
Total SG&A 846 846 846 2,537 899 899 899 2,698 9,751 9,667 10,126 10,638 11,208
Operating Income 407 407 407 1,221 496 496 496 1,487 3,636 4,971 6,228 7,024 7,867
Total Interest 164 163 169 496 165 163 163 491 1,961 1,898 1,518 1,753 1,595
Pre-Tax Income 243 244 230 725 331 333 333 997 1,575 3,073 4,710 5,271 6,272
Income Tax/Gain on Reorg 97 98 95 290 132 133 133 399 670 1,229 1,884 2,108 2,509
Net Income 146 146 143 435 158 200 200 598 1,005 1,844 2,825 3,163 3,763
===================================== ================================================================
Deprt/Amort 300 300 300 900 300 300 300 900 3,600 3,100 2,850 2,600 2,350
EBITDA 707 707 707 2,121 796 796 796 2,387 7,236 8,071 9,070 9,624 10,217
===================================== ================================================================
Margin Analysis
Direct Material 57.5% 57.5% 57.5% 57.5% 57.5% 57.5% 57.5% 57.5% 57.7% 57.5% 57.0% 57.0% 57.0%
Direct Labor 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.0% 8.2% 8.0% 8.0% 8.0% 8.0%
MFG Margin 34.5% 34.5% 34.5% 34.5% 34.5% 34.5% 34.5% 34.5% 34.1% 34.5% 35.0% 35.0% 35.0%
MFG O/H 19.5% 19.5% 19.5% 19.5% 19.0% 19.0% 19.0% 19.0% 19.8% 20.0% 20.0% 20.0% 20.0%
Total CDGS 85.0% 85.0% 85.0% 85.0% 84.5% 84.5% 84.5% 84.5% 85.7% 85.5% 85.0% 85.0% 85.0%
Gross Profit 15.0% 15.0% 15.0% 15.0% 15.5% 15.5% 15.5% 15.5% 14.3% 14.5% 15.0% 15.0% 15.0%
Total SG&A 10.1% 10.1% 10.1% 10.1% 10.0% 10.0% 10.0% 10.0% 10.4% 9.6% 9.3% 9.0% 8.8%
Operating Income 4.9% 4.9% 4.9% 4.9% 5.5% 5.5% 5.5% 5.5% 3.5% 4.9% 5.7% 6.0% 6.2%
Interest 2.0% 2.0% 2.0% 2.0% 1.8% 1.8% 1.8% 1.8% 2.1% 1.9% 1.4% 1.5% 1.3%
Per-Tax Income 2.9% 2.9% 2.9% 2.9% 3.7% 3.7% 3.7% 3.7% 1.8% 3.0% 4.3% 4.5% 4.9%
Net Income 1.7% 1.8% 1.7% 1.7% 2.2% 2.2% 2.2% 2.2% 1.1% 1.8% 2.6% 2.7% 3.0%
EBITDA 8.5% 8.5% 8.5% 8.5% 8.8% 8.8% 8.8% 8.8% 7.7% 8.0% 8.3% 8.2% 8.0%
REPTRON ELECTRONICS, INC.
REPTRON MANUFACTURING SERVICES - HIBBING
STATEMENT OF OPERATIONS
OCT NOV DEC Q4-03 2003 JANUARY FEBRUARY MARCH Q1-04 APRIL MAY JUNE Q2-04
--- --- --- ----- ---- ------- -------- ----- ----- ----- --- ---- -----
Net Sales 4,631 4,100 5,000 13,731 54,676 3,000 3,000 3,000 9,000 3,250 3,250 3,250 9,750
Direct Material 2,878 2,481 3,025 8,384 33,506 1,740 1,740 1,740 5,220 1,885 1,885 1,885 5,655
Direct Labor 371 316 385 1,072 4,121 270 231 225 726 244 244 244 731
----- ----- ----- ----- ------ ----- ----- ----- ----- ----- ----- ----- -----
Manufacturing Margin 1,382 1,304 1,590 4,276 17,050 990 1,029 1,035 3,054 1,121 1,121 1,121 3,364
Manufacturing O/H 1,201 984 1,200 3,385 12,296 720 720 720 2,160 715 715 715 2,145
Total COGS 4,450 3,780 4,610 12,840 49,922 2,730 2,691 2,685 8,106 2,844 2,844 2,844 8,531
----- ----- ----- ----- ------ ----- ----- ----- ----- ----- ----- ----- -----
Gross Profit 181 320 390 891 4,754 270 309 315 894 406 406 406 1,219
SG&A 352 300 300 952 3,354 255 255 240 750 254 254 254 761
Corp O/H Charge 95 130 130 355 1,960 72 72 72 216 72 72 72 216
----- ----- ----- ----- ------ ----- ----- ----- ----- ----- ----- ----- -----
Total SG&A 447 430 430 1,307 5,314 327 327 312 966 325 325 325 975
Operating Income (266) (110) (40) (416) (560) (57) (18) 3 (72) 81 81 81 243
Total Interest 306 30 30 366 2,818 67 67 65 200 65 66 69 200
Pre-Tax Income (572) (140) (70) (782) (3,378) (124) (85) (62) (271) 16 15 12 43
Income Tax - - - - - (50) (34) (25) (109) 6 6 5 17
Net Income (572) (140) (70) (782) (3,378) (74) (52) (37) (163) 9 9 7 25
===== ===== ===== ====== ====== ===== ===== ===== ===== ===== ===== ===== =====
Dept/Amort 113 123 123 359 1,412 123 123 123 369 123 123 123 269
EBITDA (153) 13 83 (57) 852 66 105 126 297 204 204 204 612
===== ===== ===== ====== ====== ===== ===== ===== ===== ===== ===== ===== =====
Margin Analysis
Direct Material 62.1% 60.5% 60.5% 61.1% 61.3% 58.0% 58.0% 58.0% 58.0% 58.0% 58.0% 58.0% 58.0%
Direct Labor 8.0% 7.7% 7.7% 7.8% 7.5% 9.0% 7.7% 7.5% 8.1% 7.5% 7.5% 7.5% 7.5%
MGF Margin 29.8% 31.8% 31.6% 31.1% 31.2% 33.0% 34.3% 34.5% 33.9% 34.5% 34.5% 34.5% 34.5%
MFG O/H 25.9% 24.0% 24.0% 24.7% 22.5% 24.0%. 24.0% 24.0% 24.0% 22.0% 22.0% 22.0% 22.0%
Total COGS 96.1% 92.2% 92.2% 93.5% 91.3% 91.0% 89.7% 89.5% 90.1% 87.5% 87.5% 87.5% 87.5%
Gross Profit 3.9% 7.8% 7.5% 8.5% 8.7% 9.0% 10.3% 10.5% 9.9% 12.5% 12.5% 12.5% 12.5%
Total SG&A 9.7% 10.5% 8.6% 9.5% 9.7% 10.9% 10.9% 10.4% 10.7% 10.0% 10.0% 10.0% 10.0%
Operating Income -5.7% -2.7% -0.8% -3.0% -1.0% -1.8% -0.6% 0.1% -0.8% 2.5% 2.5% 2.5% 2.5%
Interest 6.6% 0.7% 0.6% 2.7% 5.2% 2.2% 2.2% 2.2% 2.2% 2.0% 2.0% 2.1% 2.0%
Pre-Tax Income -12.4% -3.4% -1.4% -5.7% -6.2% -4.1% -2.8% -2.1% -3.0% 0.5% 0.5% 0.4% 0.4%
Net Income -12.4% -3.4% -1.4% -5.7% -6.2% -2.5% -1.7% -1.2% -1.8% 0.3% 0.3% 0.2% 0.3%
EBITDA -3.3% 0.3% 1.7% -0.4% 1.6% 2.2% 3.5% 4.2% 3.3% 6.3% 6.3% 6.3% 6.3%
JULY AUGUST SEPT Q3-04 OCT NOV DEC Q4-04 2004 2005 2006 2007 2008
---- ------ ---- ----- --- --- --- ----- ---- ---- ---- ---- ----
Net Sales 3,950 3,950 3,950 11,850 4,100 4,100 4,100 12,300 42,900 46,332 50,039 54,042 58,365
Direct Material 2,271 2,271 2,271 6,814 2,358 2,358 2,358 7,073 24,761 26,873 29,022 31,344 33,852
Direct Labor 296 296 296 889 308 308 308 923 3,269 3,475 3,753 4,053 4,377
----- ----- ----- ----- ----- ----- ----- ----- ------ ------ ------ ------ ------
Manufacturing Margin 1,383 1,383 1,383 4,149 1,435 1,435 1,435 4,305 14,870 15,985 17,263 16,644 20,136
Manufacturing O/H 849 849 849 2,548 882 882 882 2,645 9,497 10,100 10,908 11,781 12,724
Total COGS 3,417 3,417 3,417 10,250 3,547 3,547 3,547 10,640 37,527 40,446 43,584 47,178 50,953
----- ----- ----- ----- ----- ----- ----- ----- ------ ------ ------ ------ ------
Gross Profit 533 533 533 1,600 554 554 554 1,661 5,373 5,884 8,355 6,863 7,412
SG&A 257 257 257 770 267 267 267 800 3,080 2,812 3,102 3,305 3,519
Corp O/H Charge 72 72 72 216 72 72 72 216 863 897 933 971 1,010
----- ----- ----- ----- ----- ----- ----- ----- ------ ------ ------ ------ ------
Total SG&A 329 329 329 986 338 338 338 1,015 3,943 3,709 4,036 4,275 4,528
Operating Income 205 205 205 614 215 215 215 645 1,430 2,175 2,319 2,588 2,884
Total Interest 68 67 70 205 69 58 68 205 809 815 651 771 711
Pre-Tax Income 137 137 134 408 146 147 147 441 621 1,360 1,668 1,817 2,173
Income Tax 55 55 54 163 58 59 59 176 248 544 667 727 869
Net Income 82 82 81 245 88 88 88 264 372 815 1,001 1,090 1,304
===== ===== ===== ====== ===== ===== ===== ====== ====== ====== ====== ====== ======
Dept/Amort 123 123 123 369 123 123 123 369 1,476 1,276 1,176 1,076 976
EBITDA 328 328 328 983 338 338 338 1,014 2,906 3,451 3,495 3,654 3,860
===== ===== ===== ====== ===== ===== ===== ====== ====== ====== ====== ====== ======
Margin Analysis
Direct Material 57.5% 57.5% 57.5% 57.5% 57.5% 57.5% 57.5% 57.5% 57.7% 58.0% 58.0% 58.0% 58.0%
Direct Labor 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.6% 7.5% 7.5% 7.5% 7.5%
MGF Margin 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 35.0% 34.7% 34.5% 34.5% 34.5% 34.5%
MFG O/H 21.5% 21.5% 21.5% 21.5% 21.5% 21.5% 21.5% 21.5% 22.1% 21.8% 21.8% 21.8% 21.8%
Total COGS 86.5% 86.5% 86.5% 86.5% 86.5% 86.5% 86.5% 86.5% 87.5% 87.3% 87.3% 87.3% 87.3%
Gross Profit 13.5% 13.5% 13.5% 13.5% 13.5% 13.5% 13.5% 13.5% 12.5% 12.7% 12.7% 12.7% 12.7%
Total SG&A 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% 8.3% 9.2% 8.0% 8.1% 7.9% 7.8%
Operating Income 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 5.2% 3.3% 4.7% 4.6% 4.8% 4.9%
Interest 1.7% 1.7% 1.8% 1.7% 1.7% 1.7% 1.7% 1.7% 1.9% 1.6% 1.3% 1.4% 1.2%
Pre-Tax Income 3.5% 3.5% 3.4% 3.4% 3.8% 3.6% 3.6% 3.6% 1.4% 2.9% 3.3% 3.4% 3.7%
Net Income 2.1% 2.1% 2.0% 2.1% 2.1% 2.2% 2.1% 2.1% 0.9% 1.8% 2.0% 2.0% 2.2%
EBITDA 8.3% 8.3% 8.3% 8.3% 8.2% 8.2% 8.2% 8.2% 6.8% 7.4% 7.0% 6.8% 6.6%
REPTRON ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
SEP-03 OCT-03 NOV-03 DEC-03 JAN-04 FEB-04 MAR-04 APR-04 MAY-04 JUN-04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
ASSETS
CURRENT ASSETS
Cash 816 812 812 812 812 812 812 812 812 812
Accounts Receivable net 16,519 16,045 15,848 13,439 12,739 11,889 11,889 13,247 14,805 14,605
Inventories 22,036 21,766 21,264 19,719 18,752 18,210 18,210 19,022 19,834 19,834
Prepaids & Other 1,859 3,377 3,377 3,377 3,377 3,377 3,377 3,377 3,377 3,377
Tax Assets - - - - - - - - - -
-----------------------------------------------------------------------------------------
Total Current Assets 40,730 42,000 41,301 37,347 35,880 34,288 34,288 36,458 38,828 38,628
PROPERTY, PLANT & EQUIPMENT 20,902 20,828 20,628 20,628 20,378 20,128 19,878 19,628 19,378 19,128
GOODWILL 26,779 26,779 26,779 26,779 26,779 26,779 26,779 26,779 26,779 26,779
DEFERRED TAX ASSETS 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480
OTHER ASSETS 1,698 1,682 1,682 1,682 1,682 2,017 2,017 2,017 2,017 2,017
-----------------------------------------------------------------------------------------
TOTAL ASSETS 92,589 93,569 92,870 88,916 86,999 85,692 85,442 87,362 89,282 89,032
=========================================================================================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 14,851 17,481 13,910 13,245 11,768 11,677 11,588 13,155 13,457 13,758
Current Porting of LTD 617 617 617 617 617 617 617 617 617 617
Accrued Expenses 9,883 9,867 9,867 3,858 3,408 3,408 3,408 3,408 3,408 3,408
Income Tax Payable - - - - - - - - - -
Other - - - - - - - - - -
-----------------------------------------------------------------------------------------
Total Current Liabilities 25,351 27,965 24,394 17,720 15,793 15,702 15,603 17,180 17,482 17,783
LONG-TERM DEBT
Inter -Currency
Payable/Receivable - - - - - - - - -
Convertible Notes 76,315 76,315 76,315 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Capital Leases & Mortgages 3,778 3,617 3,556 3,495 3,434 3,373 3,312 3,251 3,239 3,260
Bank Line of Credit 13,928 7,715 10,760 8,232 8,515 7,497 7,450 7,784 9,335 8,689
-----------------------------------------------------------------------------------------
Total Long-Term Debt 94,021 87,647 90,631 41,727 41,949 40,870 40,762 41,035 42,574 41,949
DEFERRED TAX LIABILITIES - - - - - - - - - -
EQUITY
Common Stock 64 64 64 64 64 64 64 64 64 64
Additional Paid-in Capital 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146
Retained Earnings (49,993) (45,253) (45,365) 6,258 6,047 5,911 5,856 5,937 6,017 6,090
-----------------------------------------------------------------------------------------
Total Equity (26,783) (22,043) (22,155) 29,468 29,257 29,121 29,066 29,147 29,227 29,300
TOTAL LIABILITIES & EQUITY 92,589 93,569 92,870 88,916 86,999 85,692 85,442 87,362 89,282 89,032
=========================================================================================
Days Sales to Inventory
Days Sales Outstanding
Days Sales In Payable
-----------------------------------------------------------------------------------------
Cash Conversion Cycle - - - - - - - - - -
-----------------------------------------------------------------------------------------
JUL-04 AUG-04 SEP-04 OCT-04 NOV-04 DEC-04 2005 2006 2007 2008
------ ------ ------ ------ ------ ------ ---- ---- ---- ----
ASSETS
CURRENT ASSETS
Cash 812 812 812 812 812 812 812 812 4,016 7,489
Accounts Receivable net 16,097 17,589 17,589 18,289 18,989 18,989 19,830 21,416 23,129 24,979
Inventories 20,597 21,360 21,360 21,742 22,123 22,123 23,586 25,244 27,284 29,445
Prepaids & Other 3,377 3,377 3,377 3,377 3,377 3,377 3,377 3,377 3,377 3,377
Tax Assets - - - - - - - - - -
------------------------------------------------------------------------------------------
Total Current Assets 40,883 43,138 43,138 44,220 45,301 45,301 47,605 50,849 57,785 85,290
PROPERTY, PLANT & EQUIPMENT 18,878 18,628 18,378 18,128 17,878 17,628 15,628 14,328 13,378 12,778
GOODWILL 26,779 26,779 26,779 26,779 26,779 26,779 26,779 26,779 26,779 26,779
DEFERRED TAX ASSETS 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480
OTHER ASSETS 2,017 2,017 2,017 2,017 2,017 2,017 2,017 2,017 2,017 2,017
------------------------------------------------------------------------------------------
TOTAL ASSETS 91,037 93,042 92,792 93,624 94,455 94,205 94,509 96,453 102,438 109,344
==========================================================================================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 15,771 16,115 16,462 17,669 18,035 18,402 18,731 19,876 21,463 23,177
Current Porting of LTD 617 617 617 617 617 617 617 617 617 617
Accrued Expenses 3,408 3,408 3,408 3,408 3,408 3,408 3,408 3,408 3,408 3,408
Income Tax Payable - - - - - - - - - -
Other - - - - - - - - - -
------------------------------------------------------------------------------------------
Total Current Liabilities 19,796 20,141 20,487 21,694 22,060 22,427 22,756 23,901 25,488 27,202
LONG-TERM DEBT
Inter -Currency
Payable/Receivable - - - - - - - - - -
Convertible Notes 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Capital Leases & Mortgages 3,280 3,297 3,311 3,323 3,333 3,340 3,364 3,340 3,372 3,351
Bank Line of Credit 8,433 3,546 9,012 8,341 8,510 7,601 4,932 1,908 1,908 1,908
------------------------------------------------------------------------------------------
Total Long-Term Debt 41,713 43,142 42,323 41,664 41,843 40,941 38,295 35,248 35,281 35,259
DEFERRED TAX LIABILITIES - - - - - - - - - -
EQUITY
Common Stock 64 64 64 64 64 64 64 64 64 64
Additional Paid-in Capital 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146
Retained Earnings 6,319 8,540 6,772 7,056 7,342 7,627 10,247 14,094 18,460 23,672
------------------------------------------------------------------------------------------
Total Equity 29,529 29,750 29,982 30,266 30,552 30,837 33,457 37,304 41,570 46,282
TOTAL LIABILITIES & EQUITY 91,037 93,042 92,792 93,624 94,455 94,205 94,509 96,453 102,438 109,344
==========================================================================================
Days Sales to Inventory
Days Sales Outstanding
Days Sales In Payable
------------------------------------------------------------------------------------------
Cash Conversion Cycle - - - - - - - - - -
------------------------------------------------------------------------------------------
REPTRON ELECTRONICS, INC.
REPTRON MANUFACTURING SERVICES - TAMPA&GAYLORD
BALANCE SHEET
SEP-03 OCT-03 NOV-03 DEC-03 JAN-04 FEB-04 MAR-04 APR-04 MAY-04 JUN-04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
ASSETS
CURRENT ASSETS
Cash 3 2 2 2 2 2 2 2 2 2
Accounts Receivable, net 10,593 9,714 9,015 6,421 4,721 5,771 5,771 6,679 7,587 7,587
Inventories 12,517 12,037 11,289 9,754 9,445 10,111 10,111 10,638 11,164 11,164
Prepaids & Other 402 611 611 611 611 611 611 611 611 611
Tax Assets - - - - - - - - - -
------ ------ ------ -------- ------- ------ ------- ------- ------- -------
Total Current Assets 23,615 22,364 20,917 18,788 14,782 16,495 16,495 17,930 19,364 19,364
PROPERTY, PLANT & EQUIPMENT 17,266 17,047 17,047 17,047 16,647 16,647 16,447 16,247 16,047 15,847
GOODWILL - - - - - - - - - -
DEFERRED TAX ASSETS - - - - - - - - - -
OTHER ASSETS 28 28 28 28 28 28 28 28 28 28
------ ------ ------ -------- ------- ------ ------- ------- ------- -------
TOTAL ASSETS 40,909 39,439 37,992 33,863 31,657 33,170 32,970 34,205 35,439 35,239
====== ====== ====== ======== ======= ====== ======= ======= ======= =======
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 9,503 10,481 7,984 6,228 7,131 7,091 7,011 8,114 8,322 8,530
Current Porting Of LTD 410 410 410 410 410 410 410 410 410 410
Accrued Expenses 2,573 2,144 2,144 2,144 2,144 2,144 2,144 2,144 2,144 2,144
Income Tax payable - - - - - - - - - -
Other - - - - - - - - - -
------ ------ ------ -------- ------- ------ ------- ------- ------- -------
Total Current Liabilities 12,456 13,035 10,538 8,762 9,685 9,645 9,565 10,668 10,668 11,064
LONG TERM DEBT
Inter Company Payable Receivable 22,500 20,453 21,515 (32,511) (35,443) (33,760) (33,821) (33,704) (32,740) (33,205)
Convert table Notes - - - - - - - - - -
Capital Leases & Mortgages 3,398 3,251 3,201 3,151 3,101 3,051 3,001 2,951 2,950 2,947
Bank Line Of Credit - - - - - - - - - -
------ ------ ------ -------- ------- ------ ------- ------- ------- -------
Total Long-Term Debt 25,896 23,704 24,716 (29,380) (32,342) (30709) (30,820) (30,753) (29,790) (30,258)
DEFERRED TAX LIABILITIES - - - - - - - - - -
EQUITY
Common Stock - - - - - - - - - -
Additional Paid in Capital - - - - - - - - - -
Retained Earnings 2,525 2,700 2,738 54,442 54,313 54,234 54,226 54,290 54,354 54,414
------ ------ ------ -------- ------- ------ ------- ------- ------- -------
Total Equity 2,525 2,700 2,738 54,442 54,313 54,234 54,226 54,290 54,354 54,414
TOTAL LIABILITIES & EQUITY 40,909 39,439 37,992 32,883 31,657 33,170 32,970 34,205 35,439 35,239
====== ====== ====== ======== ======= ====== ======= ======= ======= =======
Days Sales Inventory 50 50 50 20 60 60 60 60 60 60
Days Sales Outstanding 40 40 40 40 45 45 45 45 45 45
Days Sales in Payable (40) (40) (39) (40) (38) (38) (38) (39) (40) (41)
------ ------ ------ -------- ------- ------ ------- ------- ------- -------
Cash Conversion Cycle 50 50 51 50 57 67 67 66 65 64
------ ------ ------ -------- ------- ------ ------- ------- ------- -------
Total Fixed Assets -100 -100 -100 -100 -100 -100
Indeed Amount 0 0 0 0 -50 -50
Current Lease 0 0 0 0 -50 -100
Lease Payment 0 0 0 0 -1.38889 -2.77778
JUL-04 AUG-04 SEP-04 OCT-04 NOV-04 DEC-04 2005 2006 2007 2008
------ ------ ------ ------ ------ ------ ---- ---- ---- ----
ASSETS
CURRENT ASSETS
Cash 2 2 2 2 2 2 2 2 2 2
Accounts Receivable, net 8,579 9,571 9,571 10,221 10,871 10,871 12,446 13,442 14,517 15,679
Inventories 11,898 12,232 12,232 12,605 12,979 12,979 14,189 15,234 16,453 17,769
Prepaids & Other 611 611 611 611 611 611 611 611 611 611
Tax Assets - - - - - - - - - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Current Assets 20,890 22,416 22,416 23,439 24,463 24,463 27,248 29,289 31,583 34,061
PROPERTY, PLANT & EQUIPMENT 15,647 15,447 15,447 15,047 14,847 14,647 13,147 12,147 11,397 10,897
GOODWILL - - - - - - - - - -
DEFERRED TAX ASSETS - - - - - - - - - -
OTHER ASSETS 28 28 28 28 28 28 28 28 28 28
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL ASSETS 36,565 37,691 37,691 38,514 39,338 39,138 40,423 41,464 43,006 44,986
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
LIABILITIES & EQUITY
CURRENT LIABILITIES
Account payable 9,800 10,034 10,297 11,251 11,501 11,731 11,988 12,695 13,711 14,806
Current Porting Of LTD 410 410 410 410 410 410 410 410 410 410
Accrued Expenses 2,144 2,144 2,144 2,144 2,144 2,144 2,144 2,144 2,144 2,144
Income Tax Payable - - - - - - - - - -
Other - - - - - - - - - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Current Liabilities 12,354 12,588 12,821 13,805 14,055 14,305 14,542 15,249 16,265 17,362
LONG TERM DEBT
Inter Company Payable Receivable (33,291) (32,340) (32,909) (33,260) (32,878) (33,515) (34,144) (36,538) (39,105) (41,873)
Convert table Notes - - - - - - - - - -
Capital Leases & Mortgages 2,943 2,937 2,930 2,922 2,912 2,901 2,734 2,634 2,572 2,455
Bank Line Of Credit - - - - - - - - - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Long-Term Debt (30,349) (29,403) (29,979) (30,338) (29,964) (30,614) (31,410) (33,902) (36,536) (39,418)
DEFERRED TAX LIABILITIES - - - - - - - - - -
EQUITY
Common Stock - - - - - - - - - -
Additional paid in Capital - - - - - - - - - -
Retained Earnings 54,559 54,706 54,848 55,047 55,247 55,446 57,290 60,118 63,279 67,042
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Equity 54,559 54,706 54,848 55,047 56,247 55,446 57,290 60,118 63,279 67,042
TOTAL LIABILITIES & EQUITY 36,565 37,891 37,691 38,514 39,338 39,138 40,423 41,464 43,008 44,986
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Days Sales Inventory 60 60 60 60 60 60 60 60 60 60
Days Sales Outstanding 45 45 45 45 45 45 45 45 45 45
Days Sales in Payable (42) (43) (44) (45) (46) (47) (50) (50) (50) (50)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Cash Conversion Cycle 63 62 61 60 59 58 55 55 55 56
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
-100 -100 -100 -100 -100 -100 -1200 -1500 -1850 -1850
-50 -50 -50 -50 -50 -50 -600 -800 -925 -925
-150 -200 -250 -300 -350 -400 -1000 -1800 -2325 -2650
-4.16667 -5.55556 -6.94444 -8.33333 -9.72222 -11.1111 -166.667 -300 -387.5 -441.667
REPTRON ELECTRONICS, INC.
REPTRON MANUFACTURING SERVICES - HIBBING
BALANCE SHEET
SEP-03 OCT-03 NOV-03 DEC-03 JAN-04 FEB-04 MAR-04 APR-04 MAY-04 JUN-04
------ ------ ------ ------ ------- ------ ------ ------ ------ --------
ASSETS
CURRENT ASSETS
Cash 1 1 1 1 1 1 1 1 1 1
Accounts Receivable, net 4,494 4,660 5,151 5,520 6,420 4,420 4,420 4,570 4,920 4,920
Inventories 7,045 7,348 7,640 7,787 7,046 5,761 5,761 5,905 6,051 6,051
Prepaids & Others 622 625 625 625 625 625 625 825 625 625
Tax Assets - - - - - - - - - -
--------------------------------- ------------------------------------------------------
Total Current Assets 12,162 12,634 13,417 13,933 14,092 10,807 10,807 11,202 11,597 11,597
PROPERTY, PLANT & EQUIPMENT 3,356 3,247 3,247 3,247 3,197 3,147 3,097 3,047 2,997 2,947
GOODWILL 18,970 18,970 18,970 18,970 18,970 18,970 18,970 18,970 15,970 18,970
DEFERRED TAX ASSETS - - - - - - - - - -
OTHER ASSETS - - - - - - - - - -
--------------------------------- ------------------------------------------------------
TOTAL ASSETS 34,488 34,851 35,634 36,150 36,259 32,924 32,874 33,219 33,564 33,514
================================= ======================================================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 4,739 5,955 4,971 6,602 3,590 3,539 3,531 3,833 3,927 4,020
Current Porting Of LTD 207 207 207 207 207 207 207 207 207 207
Accrued Expenses 1,161 1,103 1,103 1,103 1,103 1,103 1,103 1,103 1,103 1,103
Income Tax Payable - - - - - - - - - -
Other - - - - - - - - - -
--------------------------------- ------------------------------------------------------
Total Current Liabilities 6,107 7,265 6,291 7,372 4,900 4,849 4,841 5,143 5,237 5,330
LONG-TERM DEBT
Inter-Company Payable/Receivable 20,168 27,665 29,782 29,288 31,955 28,734 28,740 28,784 29,038 28,863
Convertible Notes - - - - - - - - - -
Capital Leases & Mortgages 380 366 355 344 333 322 311 300 289 313
Bank Line of Credit - - - - - - - - - -
--------------------------------- ------------------------------------------------------
Total Long-Term Debt 28,548 28,231 30,137 29,632 32,288 29,056 29,051 29,084 29,327 29,176
DEFERRED TAX LIABILITIES - - - - - - - - - -
EQUITY
Common Stock - - - - - - - - - -
Additional Paid-In Capital - - - - - - - - - -
Retained Earnings (167) (545) (785) (855) (929) 961 (1,018) (1,009) (999) (992)
--------------------------------- ------------------------------------------------------
Total Equity (167) (545) (785) (855) (929) 961 (1,018) (1,009) (999) (992)
TOTAL LIABILITIES & EQUITY 34,488 34,851 35,634 36,150 36,259 32,924 32,874 33,219 33,564 33,514
================================= ======================================================
Days Sales In Inventory 60 50 60 60 60 60 60 60 60 60
Days Sales Outstanding 40 35 40 40 40 40 40 40 40 40
Days Sales In Payable (40) (40) (40) (40) (40) (40) (40) (41) (42) (43)
--------------------------------- ------------------------------------------------------
Cash Conversion Cycle 60 55 60 50 60 60 60 59 58 57
--------------------------------- ------------------------------------------------------
Total Fixed Assets -73 -73 -73 -73 -73 -73
Leased Amount 0 0 0 0 0 -36.5
Cumm Lease 0 0 0 0 0 -36.5
Lease Payment 0 0 0 0 0 -1.01389
JUL-04 AUG-04 SEP-04 OCT-04 NOV-04 DEC-04 2005 2006
-------- -------- -------- -------- -------- -------- -------- -------
ASSETS
CURRENT ASSETS
Cash 1 1 1 1 1 1 1 1
Accounts Receivable, net 5,620 6,320 6,320 6,470 6,520 6,620 5,451 5,887
Inventories 6,437 6,824 6,824 6,910 6,996 6,996 6,741 7,181
Prepaids & Others 625 625 625 625 625 625 625 625
Tax Assets - - - - - - - -
--------------------------------------------------------------- ------------------
Total Current Assets 12,683 13,770 13,770 14,006 14,242 14,242 12,818 13,694
PROPERTY, PLANT & EQUIPMENT 2,897 2,847 2,797 2,747 2,697 2,647 2,147 1,847
GOODWILL 18,970 18,970 18,970 18,970 18,970 18,970 18,970 18,970
DEFERRED TAX ASSETS - - - - - - - -
OTHER ASSETS - - - - - - - -
--------------------------------------------------------------- ------------------
TOTAL ASSETS 34,550 35,587 35,537 35,723 35,909 35,859 33,935 34,511
=============================================================== ==================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 4,943 5,055 5,167 5,480 5,597 5,713 5,618 5,984
Current Porting Of LTD 207 207 207 207 207 207 207 207
Accrued Expenses 1,103 1,103 1,103 1,103 1,103 1,103 1,103 1,103
Income Tax Payable - - - - - - - -
Other - - - - - - - -
--------------------------------------------------------------- ------------------
Total Current Liabilities 6,253 6,365 6,477 6,790 6,907 7,023 6,928 7,294
LONG-TERM DEBT
Inter-Company Payable/Receivable 28,871 29,690 29,425 29,191 29,153 28,880 25,045 25,178
Convertible Notes - - - - - - - -
Capital Leases & Mortgages 337 359 381 401 421 439 630 705
Bank Line of Credit - - - - - - - -
--------------------------------------------------------------- ------------------
Total Long-Term Debt 29,208 30,049 29,806 29,592 29,573 29,319 25,674 25,883
DEFERRED TAX LIABILITIES - - - - - - - -
EQUITY
Common Stock - - - - - - - -
Additional Paid-In Capital - - - - - - - -
Retained Earnings (910) (828) (747) [?] (571) 483 333 1,334
--------------------------------------------------------------- ------------------
Total Equity (910) (828) (747) [?] (571) 483 333 1,334
TOTAL LIABILITIES & EQUITY 34,550 35,587 35,537 35,723 35,909 35,859 33,935 34,511
=============================================================== ==================
Days Sales In Inventory 60 60 60 60 60 60 60 60
Days Sales Outstanding 40 40 40 40 40 40 40 40
Days Sales In Payable (44) (45) (46) (47) (48) (49) (50) (50)
--------------------------------------------------------------- ------------------
Cash Conversion Cycle 56 55 54 53 52 51 50 50
--------------------------------------------------------------- ------------------
Total Fixed Assets -73 -73 -73 -73 -73 -73 -876 -776
Leased Amount -36.5 -36.5 -36.5 -36.5 -36.5 -38.5 -438 -388
Cumm Lease -73 -109.5 -146 -182.5 -219 -255.5 -593.5 -1081.5
Lease Payment -2.02778 -3.04157 -4.05556 -5.06944 -6.08333 -7.09722 -115.583 -180.25
2007 2008
-------- --------
ASSETS
CURRENT ASSETS
Cash 1 1
Accounts Receivable, net 6,358 6,866
Inventories 7,735 8,376
Prepaids & Others 625 625
Tax Assets - -
-------------------
Total Current Assets 14,739 15,868
PROPERTY, PLANT & EQUIPMENT 1,647 1,547
GOODWILL 18,970 18,970
DEFERRED TAX ASSETS - -
OTHER ASSETS - -
-------------------
TOTAL ASSETS 35,356 36,385
===================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 5,453 6,980
Current Porting Of LTD 207 207
Accrued Expenses 1,103 1,103
Income Tax Payable - -
Other - -
-------------------
Total Current Liabilities 7,773 8,290
LONG-TERM DEBT
Inter-Company Payable/Receivable 24,359 23,472
Convertible Notes - -
Capital Leases & Mortgages 801 896
Bank Line of Credit - -
-------------------
Total Long-Term Debt 25,159 24,368
DEFERRED TAX LIABILITIES - -
EQUITY
Common Stock - -
Additional Paid-In Capital - -
Retained Earnings 2,424 3,728
-------------------
Total Equity 2,424 3,728
TOTAL LIABILITIES & EQUITY 35,356 36,385
===================
Days Sales In Inventory 60 60
Days Sales Outstanding 40 40
Days Sales In Payable (50) (50)
-------------------
Cash Conversion Cycle 50 50
-------------------
Total Fixed Assets -876 -876
Leased Amount -438 -438
Cumm Lease -1264 -1264
Lease Payment -210.687 -210.687
REPTRON ELECTRONICS, INC.
REPTRON DISPLAY & SYSTEM INTEGRATION
BALANCE SHEET
SEP-03 OCT-03 NOV-03 DEC-03 JAN-04 FEB-04 MAR-04 APR-04 MAY-04 JUN-04
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
ASSETS
CURRENT ASSETS
Cash 11 11 11 11 11 11 11 11 11 11
Accounts Receivable, net 1,329 1,668 1,679 1,495 1,595 1,695 1,695 1,895 2,095 2,095
Inventories 2,474 2,381 2,335 2,178 2,258 2,338 2,338 2,479 2,619 2,619
Prepaids & Other 88 89 89 89 89 89 89 89 89 89
Tax Assets - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Current Assets 3,902 4,149 4,114 3,773 3,953 4,133 4,133 4,474 4,814 4,814
PROPERTY, PLANT & EQUIPMENT 181 240 240 240 240 240 240 240 240 240
GOODWILL 7,809 7,809 7,809 7,809 7,809 7,809 7,809 7,809 7,809 7,809
DEFERRED TAX ASSETS - - - - - - - - - -
OTHER ASSETS 36 36 36 36 36 36 36 36 36 36
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL ASSETS 11,928 12,234 12,199 11,658 12,038 12,218 12,218 12,559 12,899 12,899
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 578 1,011 921 921 1,013 1,013 1,013 1,174 1,174 1,174
Current Porting Of LTD - - - - - - - - - -
Accrued Expenses 156 100 100 100 100 100 100 100 100 100
Income Tax Payable - - - - - - - - - -
Other - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Current Liabilities 744 1,111 1,021 1,021 1,113 1,113 1,113 1,274 1,274 1,274
LONG-TERM DEBT
Inter-Company Payable/Receivable 13,114 13,105 13,170 12,839 12,936 13,122 13,131 13,303 13,636 13,630
Convertible Notes - - - - - - - - - -
Capital Leases & Mortgages - - - - - - - - - -
Bank Line Of Credit - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Long-Term Debt 13,114 13,105 13,170 12,839 12,936 13,122 13,131 13,303 13,636 13,630
DEFERRED TAX LIABILITIES - - - - - - - - - -
EQUITY
Common Stock - - - - - - - - - -
Additional Paid-In Capital - - - - - - - - - -
Retained Earnings (1,930) (1,982) (1,992) (2,002) (2,011) (2,016) (2,026) (2,018) (2,011) (2,005)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Equity (1,930) (1,982) (1,992) (2,002) (2,011) (2,016) (2,026) (2,018) (2,011) (2,005)
TOTAL LIABILITIES & EQUITY 11,928 12,234 12,199 11,856 12,038 12,218 12,218 12,559 12,899 12,899
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Days Sales In Inventory 95 95 95 95 90 90 89 89 86 86
Days Sales Outstanding 45 45 45 45 45 45 45 45 45 45
Days Sales In Payable (35) (35) (35) (35) (35) (35) (35) (35) (35) (35)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Cash Conversion Cycle 105 105 105 105 100 100 99 98 98 96
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
JUL-04 AUG-04 SEP-04 OCT-04 NOV-04 DEC-04 2005 2006 2007 2008
------ ------ ------ ------ ------ ------ ---- ---- ---- ----
ASSETS
CURRENT ASSETS
Cash 11 11 11 11 11 11 11 11 11 11
Accounts Receivable, net 1,895 1,695 1,695 1,595 1,495 1,495 1,930 2,084 2,251 2,431
Inventories 2,462 2,305 2,305 2,227 2,148 2,148 2,656 2,829 3,056 3,300
Prepaids & Other 89 89 89 89 89 89 89 89 89 89
Tax Assets - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Current Assets 4,457 4,100 4,100 3,922 3,743 3,743 4,586 5,013 5,406 5,831
PROPERTY, PLANT & EQUIPMENT 240 240 240 240 240 240 240 240 240 240
GOODWILL 7,809 7,809 7,809 7,809 7,809 7,809 7,509 7,809 7,809 7,809
DEFERRED TAX ASSETS - - - - - - - - - -
OTHER ASSETS 36 36 36 36 36 36 36 36 36 36
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL ASSETS 12,542 12,185 12,185 12,007 11,828 11,828 12,771 13,096 13,491 13,916
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 994 994 994 903 903 903 1,091 1,163 1,256 1,356
Current Porting Of LTD - - - - - - - - - -
Accrued Expenses 100 100 100 100 100 100 100 100 100 100
Income Tax Payable - - - - - - - - - -
Other - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Current Liabilities 1,094 1,094 1,094 1,003 1,003 1,003 1,191 1,263 1,356 1,456
LONG-TERM DEBT
Inter-Company Payable/Receivable 13,453 13,095 13,095 13,009 12,833 12,835 13,630 13,856 14,053 14,232
Convertible Notes - - - - - - - - - -
Capital Leases & Mortgages - - - - - - - - - -
Bank Line Of Credit - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Long-Term Debt 13,453 13,095 13,095 13,009 12,833 12,835 13,630 13,856 14,053 14,232
DEFERRED TAX LIABILITIES - - - - - - - - - -
EQUITY
Common Stock - - - - - - - - - -
Additional Paid-In Capital - - - - - - - - - -
Retained Earnings (2,004) (2,003) (2,003) (2,006) (2,008) (2,010) (2,050) (2,030) (1,917) (1,772)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total Equity (2,004) (2,003) (2,003) (2,006) (2,008) (2,010) (2,050) (2,030) (1,917) (1,772)
TOTAL LIABILITIES & EQUITY 12,542 12,185 12,185 12,007 11,828 11,828 12,771 13,096 13,491 13,916
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Days Sales In Inventory 87 87 86 86 86 85 85 85 85 85
Days Sales Outstanding 45 45 45 45 45 45 45 45 45 45
Days Sales In Payable (35) (35) (35) (35) (35) (35) (35) (35) (35) (35)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Cash Conversion Cycle 97 97 96 96 96 95 95 95 95 95
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
REPTRON ELECTRONICS, INC.
REPTRON CORPORATE
BALANCE SHEET
SEP-03 OCT-03 NOV-03 DEC-03 JAN-04 FEB-04 MAR-04 APR-04 MAY-04 JUN-04
------- ------- ------- ------ ------ ------ ------ ------ ------ -------
ASSETS
CURRENT ASSETS
Cash 801 798 798 798 798 798 798 798 798 798
Accounts Receivable, Net 3 3 3 3 3 3 3 3 3 3
Inventories - - - - - - - - - -
Prepaids & Other 247 2,052 2,052 2,052 2,052 2,052 2,052 2,052 2,052 2,052
Tax Assets - - - - - - - - - -
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Total Current Assets 1,051 2,853 2,853 2,853 2,853 2,853 2,853 2,853 2,853 2,853
PROPERTY, PLANT & EQUIPMENT 99 94 94 94 94 94 94 94 94 94
GOODWILL - - - - - - - - - -
DEFERRED TAX ASSETS 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480
OTHER ASSETS 1,634 1,618 1,618 1,618 1,618 1,953 1,953 1,953 1,953 1,953
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
TOTAL ASSETS 5,264 7,045 7,045 7,045 7,045 7,380 7,380 7,380 7,380 7,380
======= ======= ======= ====== ====== ====== ====== ====== ====== ======
LIABILITIES & EQUITIES
CURRENT LIABILITIES
Accounts Payable 31 34 34 34 34 34 34 34 34 34
Current Porting Of LTD - - - - - - - - - -
Accrued Expenses 5,983 6,520 6,520 511 61 61 61 61 61 61
Income Tax Payable - - - - - - - - - -
Other - - - - - - - - - -
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Total Current Liabilities 6,014 6,554 6,554 545 95 95 95 95 95 95
LONG-TERM DEBT
Inter-Company Payable/Receivable (63,782) (61,423) (64,468) (9,616) (9,449) (8,096) (8,049) (8,383) (9,934) (9,287)
Convertible Notes 76,315 76,315 76,315 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Capital Leases & Mortgages - - - - - - - - - -
Bank Loan Of Credit 13,928 7,715 10,760 8,232 8,515 7,497 7,450 7,784 9,335 8,688
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Total Long-Term Debt 26,461 22,607 22,607 28,616 29,066 29,401 29,401 29,401 29,401 29,401
DEFERRED TAX LIABILITIES - - - - - - - - - -
EQUITY
Common Stock 64 64 64 64 64 64 64 64 64 64
Additional Paid-in Capital 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146
Retained Earnings (50,421) (45,326) (45,326) (45,326) (45,326) (45,326) (45,326) (45,326) (45,326) (45,326)
------- ------- ------- ------ ------ ------ ------ ------ ------ ------
Total Equity (27,211) (22,116) (22,116) (22,116) (22,116) (22,116) (22,116) (22,116) (22,116) (22,116)
TOTAL LIABILITIES & EQUITY 5,264 7,045 7,045 7,045 7,045 7,380 7,380 7,380 7,380 7,380
======= ======= ======= ====== ====== ====== ====== ====== ====== ======
JUL-04 AUG-04 SEP-04 OCT-04 NOV-04 DEC-04 2005 2006 2007 2008
------ ------ ------ ------ ------ ------ ---- ---- ---- ----
ASSETS
CURRENT ASSETS
Cash 798 798 798 798 798 798 798 798 4,002 7,475
Accounts Receivable, Net 3 3 3 3 3 3 3 3 3 3
Inventories - - - - - - - - - -
Prepaids & Other 2,052 2,052 2,052 2,052 2,052 2,052 2,052 2,052 2,052 2,052
Tax Assets - - - - - - - - - -
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Current Assets 2,853 2,853 2,853 2,853 2,853 2,853 2,853 2,853 6,057 9,530
PROPERTY, PLANT & EQUIPMENT 94 94 94 94 94 94 94 94 94 94
GOODWILL - - - - - - - - - -
DEFERRED TAX ASSETS 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480 2,480
OTHER ASSETS 1,953 1,953 1,953 1,953 1,953 1,953 1,953 1,953 1,953 1,953
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL ASSETS 7,380 7,380 7,380 7,380 7,380 7,380 7,380 7,380 10,584 14,057
====== ======= ======= ======= ======= ======= ======= ======= ======= =======
LIABILITIES & EQUITIES
CURRENT LIABILITIES
Accounts Payable 34 34 34 34 34 34 34 34 34 34
Current Porting Of LTD - - - - - - - - - -
Accrued Expenses 61 61 61 61 61 61 61 61 61 61
Income Tax Payable - - - - - - - - - -
Other - - - - - - - - - -
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Current Liabilities 95 95 95 95 95 95 95 95 95 95
LONG-TERM DEBT
Inter-Company Payable/Receivable (9,032) (10,445) (9,511) (8,940) (9,109) (8,200) (5,531) (2,507) 696 4,170
Convertible Notes 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Capital Leases & Mortgages - - - - - - - - - -
Bank Loan Of Credit 8,433 9,846 9,012 8,341 8,510 7,601 4,932 1,908 1,908 1,908
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Long-Term Debt 29,401 29,401 29,401 29,401 29,401 29,401 29,401 29,401 32,605 36,078
DEFERRED TAX LIABILITIES - - - - - - - - - -
EQUITY
Common Stock 64 64 64 64 64 64 64 64 64 64
Additional Paid-in Capital 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146 23,146
Retained Earnings (45,326) (45,326) (45,326) (45,326) (45,326) (45,326) (45,326) (45,326) (45,326) (45,326)
------ ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Equity (22,116) (22,116) (22,116) (22,116) (22,116) (22,116) (22,116) (22,116) (22,116) (22,116)
TOTAL LIABILITIES & EQUITY 7,380 7,380 7,380 7,380 7,380 7,380 7,380 7,380 10,584 14,057
====== ======= ======= ======= ======= ======= ======= ======= ======= =======
REPTRON ELECTRONICS, INC.
REPTRON MANUFACTURING SERVICES - TAMPA&GAYLORD
STATEMENT OF CASH FLOWS
OCT NOV DEC Q4-03 2003 JANUARY FEBRUARY MARCH Q1-04
------ ------ -------- -------- -------- -------- -------- ----- -------
Cash Flows From Operating Activities:
Net Income 175 38 51,703 51,917 51,917 (128) (79) (8) (216)
Depreciation & Amortization 314 300 300 914 914 300 300 300 900
Deferred Income Taxes - - - - - - - - -
(Gain) Loss on Disposal of FA - - - - - - - - -
Change in Assets & Liabilities:
Accounts Receivable 979 699 2,594 4,272 4,272 1,700 (1,050) - 650
Inventory 480 748 1,535 2,763 2,763 306 (663) - (357)
Prepaids (209) - - (209) (209) - - - -
Other Assets - - - - - - - - -
Accounts Payable 978 (2,497) (1,756) (3,275) (3,275) 904 (40) (81) 783
Accrued Expenses (429) - - (429) (429) - - - -
Income Taxes - - - - - - - - -
------ ------ -------- -------- -------- -------- -------- ----- -------
Cash From Operations 2,288 (712) 54,376 55,952 55,952 3,081 (1,533) 211 1,760
------ ------ -------- -------- -------- -------- -------- ----- -------
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - - - - -
Purchases of PP&E (95) (300) (300) (695) (695) (100) (100) (100) (300)
------ ------ -------- -------- -------- -------- -------- ----- -------
Net Cash From Investing Activities (95) (300) (300) (695) (695) (100) (100) (100) (300)
------ ------ -------- -------- -------- -------- -------- ----- -------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - - - - -
Net proceeds (payments) on InterCo-Debt (2,047) 1,062 (54,026) (55,011) (55,011) (2,931) 1,683 (61) (1,310)
Net proceeds (payments) on LT Debt (147) (50) (50) (247) (247) (50) (50) (50) (150)
Net proceeds (payments) on LOC - - - - - - - - -
------ ------ -------- -------- -------- -------- -------- ----- -------
Net Cash Flows From Financing Activities (2,194) 1,012 (54,076) (55,258) (55,258) (2,981) 1,633 (111) (1,460)
------ ------ -------- -------- -------- -------- -------- ----- -------
Net Change in Cash (1) - - (1) (1) - 0 0 0
Beginning Cash Balance 1 - - 1 1 - - 0 -
------ ------ -------- -------- -------- -------- -------- ----- -------
Ending Cash Balance - - - - - - 0 0 0
====== ====== ======== ======== ======== ======== ======== ===== =======
APRIL MAY JUNE Q2-04 JULY AUGUST SEPT Q3-04
------- ----- ----- -------- -------- -------- -------- --------
Cash Flows From Operating Activities:
Net Income 64 64 60 186 146 146 143 435
Depreciation & Amortization 300 300 300 900 300 300 300 900
Deferred Income Taxes - - - - - - - -
(Gain) Loss on Disposal of FA - - - - - - - -
Change in Assets & Liabilities:
Accounts Receivable (908) (908) - (1,816) (992) (992) - (1,984)
Inventory (527) (527) - (1,053) (534) (534) - (1,067)
Prepaids - - - - - - - -
Other Assets - - - - - - - -
Accounts Payable 1,103 208 208 1,519 1,271 233 233 1,737
Accrued Expenses - - - - - - - -
Income Taxes - - - - - - - -
------- ----- ----- -------- -------- -------- -------- --------
Cash From Operations 33 (863) 568 (263) 191 (846) 676 21
------- ----- ----- -------- -------- -------- -------- --------
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - - - -
Purchases of PP&E (100) (100) (100) (300) (100) (100) (100) (300)
------- ----- ----- -------- -------- -------- -------- --------
Net Cash From Investing Activities (100) (100) (100) (300) (100) (100) (100) (300)
------- ----- ----- -------- -------- -------- -------- --------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - - - -
Net proceeds (payments) on InterCo-Debt 117 964 (465) 617 (87) 951 (569) 296
Net proceeds (payments) on LT Debt (50) (1) (3) (54) (4) (5) (7) (17)
Net proceeds (payments) on LOC - - - - - - - -
------- ----- ----- -------- -------- -------- -------- --------
Net Cash Flows From Financing Activities 67 963 (468) 563 (91) 946 (576) 279
------- ----- ----- -------- -------- -------- -------- --------
Net Change in Cash (0) - 0 (0) (0) 0 (0) (0)
Beginning Cash Balance 0 (0) (0) 0 0 (0) (0) 0
------- ----- ----- -------- -------- -------- -------- --------
Ending Cash Balance (0) (0) 0 0 (0) (0) (0) (0)
======= ===== ===== ======== ======== ======== ======== ========
OCT NOV DEC Q4-04 2004 2005 2006 2007 2008
----- ----- -------- -------- -------- -------- -------- -------- --------
Cash Flows From Operating Activities:
Net Income 198 200 200 598 1,005 1,844 2,626 3,153 3,763
Depreciation & Amortization 300 300 300 900 3,600 3,100 2,650 2,600 2,350
Deferred Income Taxes - - - - - - - - -
(Gain) Loss on Disposal of FA - - - - - - - - -
Change in Assets & Liabilities:
Accounts Receivable (650) (650) - (1,300) (4,450) (1,575) (596) (1,075) (1,161)
Inventory (374) (374) - (748) (3,225) (1,210) (1,045) (1,219) (1,316)
Prepaids - - - - - - - - -
Other Assets - - - - - - - - -
Accounts Payable 964 250 250 1,484 5,523 237 707 1,016 1,097
Accrued Expenses - - - - - - - - -
Income Taxes - - - - - - - - -
----- ----- -------- -------- -------- -------- -------- -------- --------
Cash From Operations 459 (274) 750 935 2,453 2,396 4,342 4,484 4,732
----- ----- -------- -------- -------- -------- -------- -------- --------
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - - - - -
Purchases of PP&E (100) (100) (100) (300) (1,200) (1,600) (1,850) (1,850) (1,850)
----- ----- -------- -------- -------- -------- -------- -------- --------
Net Cash From Investing Activities (100) (100) (100) (300) (1,200) (1,600) (1,850) (1,850) (1,850)
----- ----- -------- -------- -------- -------- -------- -------- --------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - - - - -
Net proceeds (payments) on InterCo-Debt (350) 383 (639) (605) (1,003) (629) (2,392) (2,572) (2,766)
Net proceeds (payments) on LT Debt (8) (10) (11) (29) (250) (167) (100) (63) (117)
Net proceeds (payments) on LOC - - - - - - - - -
----- ----- -------- -------- -------- -------- -------- -------- --------
Net Cash Flows From Financing Activities (359) 374 (650) (635) (1,253) (796) (2,492) (2,634) (2,882)
----- ----- -------- -------- -------- -------- -------- -------- --------
Net Change in Cash (0) (0) 0 0 (0) (0) - 0 (0)
Beginning Cash Balance (0) (0) (0) (0) - (0) (0) (0) (0)
----- ----- -------- -------- -------- -------- -------- -------- --------
Ending Cash Balance (0) (0) (0) (0) (0) (0) (0) (0) (0)
===== ===== ======== ======== ======== ======== ======== ======== ========
REPTRON ELECTRONICS, INC.
REPTRON MANUFACTURING SERVICES - HIBBING
STATEMENT OF CASH FLOWS
OCT NOV DEC Q4-03 2003 JANUARY FEBRUARY MARCH Q1-04
------ ------ -------- -------- -------- -------- -------- ----- -------
Cash Flows From Operating Activities:
Net Income (572) (140) 70 (782) (782) (74) (51) (37) (163)
Depreciation & Amortization 113 123 123 359 359 123 123 123 369
Deferred Income Taxes - - - - - - - - -
(Gain) Loss on Disposal of FA - - - - - - - - -
Change in Assets & Liabilities:
Accounts Receivable (166) (491) (369) (1,026) (1,026) (900) 2,000 - 1,100
Inventory (303) (292) (147) (742) (742) 741 1,285 - 2,025
Prepaids (3) - - (3) (3) - - - -
Other Assets - - - - - - - - -
Accounts Payable 1,218 (984) 1,091 1,323 1,323 (2,472) (51) (8) (2,532)
Accrued Expenses (58) - - (58) (58) - - - -
Income Taxes - - - - - - - - -
------ ------ -------- -------- -------- -------- -------- ----- -------
Cash From Operations 227 (1,783) 628 (928) (928) (2,583) 3,306 78 800
------ ------ -------- -------- -------- -------- -------- ----- -------
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - - - - -
Purchases of PP&E (4) (123) (123) (250) (250) (73) (73) (73) (219)
------ ------ -------- -------- -------- -------- -------- ----- -------
Net Cash From Investing Activities (4) (123) (123) (250) (250) (73) (73) (73) (219)
------ ------ -------- -------- -------- -------- -------- ----- -------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - - - - -
Net proceeds (payments) on InterCo-Debt (303) 1,917 (494) 1,120 1,120 2,667 (3,222) 6 (548)
Net proceeds (payments) on LT Debt (14) (11) (11) (36) (36) (11) (11) (11) (33)
Net proceeds (payments) on LOC - - - - - - - - -
------ ------ -------- -------- -------- -------- -------- ----- -------
Net Cash Flows From Financing Activities (317) 1,906 (505) (1,084) (1,084) 2,656 (3,233) (5) (581)
------ ------ -------- -------- -------- -------- -------- ----- -------
Net Change in Cash (94) - 0 (94) (94) - - (0) (0)
Beginning Cash Balance 1 (93) (93) 1 1 (93) (93) (93) (93)
------ ------ -------- -------- -------- -------- -------- ----- -------
Ending Cash Balance (93) (93) (93) (93) (93) (93) (93) (93) (93)
====== ====== ======== ======== ======== ======== ======== ===== =======
APRIL MAY JUNE Q2-04 JULY AUGUST SEPT Q3-04
------- ----- ----- -------- -------- -------- -------- --------
Cash Flows From Operating Activities:
Net Income 9 9 7 [?] 82 82 81 245
Depreciation & Amortization 123 123 123 369 123 123 123 369
Deferred Income Taxes - - - - - - - -
(Gain) Loss on Disposal of FA - - - - - - - -
Change in Assets & Liabilities:
Accounts Receivable (250) (250) - (500) (700) (700) - (1,400)
Inventory (145) (145) - (290) (386) (386) - (773)
Prepaids - - - - - - - -
Other Assets - - - - - - - -
Accounts Payable 302 93 93 489 922 112 112 1,147
Accrued Expenses - - - - - - - -
Income Taxes - - - - - - - -
------- ----- ----- -------- -------- -------- -------- --------
Cash From Operations 40 (169) 224 94 41 (769) 315 (411)
------- ----- ----- -------- -------- -------- -------- --------
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - - - -
Purchases of PP&E (73) (73) (73) (219) (73) (73) (73) (219)
------- ----- ----- -------- -------- -------- -------- --------
Net Cash From Investing Activities (73) (73) (73) (219) (73) (73) (73) (219)
------- ----- ----- -------- -------- -------- -------- --------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - - - -
Net proceeds (payments) on InterCo-Debt 44 253 (175) 123 8 819 (264) 583
Net proceeds (payments) on LT Debt (11) (11) 24 2 23 22 21 67
Net proceeds (payments) on LOC - - - - - - - -
------- ----- ----- -------- -------- -------- -------- --------
Net Cash Flows From Financing Activities 33 242 (151) 125 32 842 (243) 630
------- ----- ----- -------- -------- -------- -------- --------
Net Change in Cash 0 (0) (0) 0 0 (0) (0) -
Beginning Cash Balance (93) (93) (93) (93) (93) (93) (93) (93)
------- ----- ----- -------- -------- -------- -------- --------
Ending Cash Balance (93) (93) (93) (93) (93) (93) (93) (93)
======= ===== ===== ======== ======== ======== ======== ========
OCT NOV DEC Q4-04 2004 2005 2006 2007 2008
----- ----- ----- -------- -------- -------- -------- -------- --------
Cash Flows From Operating Activities:
Net Income 88 88 88 264 372 816 1,001 1,090 1,304
Depreciation & Amortization 123 123 123 369 1,476 1,276 1,176 1,076 975
Deferred Income Taxes - - - - - - - - -
(Gain) Loss on Disposal of FA - - - - - - - - -
Change in Assets & Liabilities:
Accounts Receivable (150) (150) - (300) (1,100) 1,169 (436) (471) (509)
Inventory (86) (86) - (173) 791 255 (440) (574) (620)
Prepaids - - - - - - - - -
Other Assets - - - - - - - - -
Accounts Payable 313 117 117 546 (349) (96) 356 479 517
Accrued Expenses - - - - - - - - -
Income Taxes - - - - - - - - -
----- ----- ----- -------- -------- -------- -------- -------- --------
Cash From Operations 287 92 328 707 1,190 3,420 1,567 1,600 1,668
----- ----- ----- -------- -------- -------- -------- -------- --------
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - - - - -
Purchases of PP&E (73) (73) (73) (219) (876) (776) (876) (876) (876)
----- ----- ----- -------- -------- -------- -------- -------- --------
Net Cash From Investing Activities (73) (73) (73) (219) (876) (776) (876) (876) (876)
----- ----- ----- -------- -------- -------- -------- -------- --------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - - - - -
Net proceeds (payments) on InterCo-Debt (235) (38) (273) (546) (409) (2,835) (867) (819) (887)
Net proceeds (payments) on LT Debt 20 19 18 56 95 190 76 95 95
Net proceeds (payments) on LOC - - - - - - - - -
----- ----- ----- -------- -------- -------- -------- -------- --------
Net Cash Flows From Financing Activities (214) (19) (255) (488) (314) (2,644) (791) (724) (792)
----- ----- ----- -------- -------- -------- -------- -------- --------
Net Change in Cash (0) (0) 0 0 (0) - 0 0 -
Beginning Cash Balance (93) (93) (93) (93) (93) - - 0 (0)
----- ----- ----- -------- -------- -------- -------- -------- --------
Ending Cash Balance (93) (93) (93) (93) (93) - 0 (0) (0)
===== ===== ===== ======== ======== ======== ======== ======== ========
REPTRON ELECTRONICS, INC.
REPTRON DISPLAY & SYSTEM INTEGRATION
STATEMENT OF CASH FLOWS
OCT NOV DEC Q4-03 2003
----- ---- ----- ----- -----
Cash Flows From Operating Activities:
Net Income 2 (10) (10) (18) (18)
Depreciation & Amortization 8 8 8 24 24
Deferred Income Taxes - - - - -
(Gain) Loss on Disposal of FA - - - - -
Change in Assets & Liabilities:
Accounts Receivable (339) (11) 184 (166) (166)
Inventory 93 46 157 296 296
Prepaids (1) - - (1) (1)
Other Assets - - - - -
Accounts Payable 433 (90) - 343 343
Accrued Expenses (66) - - (56) (66)
Income Taxes - - - - -
---- --- ---- ---- -----
Cash From Operations 130 (57) 339 412 412
---- --- ---- ---- -----
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - -
Purchases of PP&E (67) (8) (8) (83) (83)
---- --- ---- ---- -----
Net Cash From Investing Activities (67) (8) (8) (83) (83)
---- --- ---- ---- -----
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - -
Net proceeds (payments) on InterCo-Debt (9) 65 (331) (275) (275)
Net proceeds (payments) on LT Debt - - - - -
Net proceeds (payments) on LOC - - - - -
---- --- ---- ---- -----
Net Cash Flows From Financing Activities (9) 65 (331) (275) (275)
---- --- ---- ---- -----
Net Change in Cash 54 0 - 54 54
Beginning Cash Balance 1 55 55 1 1
---- --- ---- ---- -----
Ending Cash Balance 55 55 55 55 55
==== === ==== ==== =====
JANUARY FEBRUARY MARCH Q1-04 APRIL MAY JUNE
------- -------- ----- ----- ----- ----- ----
Cash Flows From Operating Activities:
Net Income (9) (5) (9) (24) 7 7 6
Depreciation & Amortization 7 7 7 21 7 7 7
Deferred Income Taxes - - - - - - -
(Gain) Loss on Disposal of FA - - - - - - -
Change in Assets & Liabilities:
Accounts Receivable (100) (100) - (200) (200) (200) -
Inventory (80) (60) - (160) (141) (141) -
Prepaids - - - - - - -
Other Assets - - - - - - -
Accounts Payable 92 - - 92 162 - -
Accrued Expenses - - - - - - -
Income Taxes - - - - - - -
---- ----- -- ---- ---- ---- ----
Cash From Operations (90) (178) (2) (271) (165) (326) 13
---- ----- -- ---- ---- ---- ----
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - - -
Purchases of PP&E (7) (7) (7) (21) (7) (7) (7)
---- ----- -- ---- ---- ---- ----
Net Cash From Investing Activities (7) (7) (7) (21) (7) (7) (7)
---- ----- -- ---- ---- ---- ----
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - - -
Net proceeds (payments) on InterCo-Debt 97 185 9 292 172 333 (5)
Net proceeds (payments) on LT Debt - - - - - - -
Net proceeds (payments) on LOC - - - - - - -
---- ----- -- ---- ---- ---- ----
Net Cash Flows From Financing Activities 97 185 9 292 172 333 (6)
---- ----- -- ---- ---- ---- ----
Net Change in Cash (0) - (0) (0) 0 (0) (0)
Beginning Cash Balance 55 55 55 55 55 55 55
---- ----- -- ---- ---- ---- ----
Ending Cash Balance 55 55 55 55 55 55 55
==== ===== == ==== ==== ==== ====
Q2-04 JULY AUGUST SEPT Q3-04 OCT NOV DEC
----- ----- ------ ---- ----- --- ----- ---
Cash Flows From Operating Activities:
Net Income 21 1 1 0 2 (2) (2) (2)
Depreciation & Amortization 21 7 7 6 20 6 6 6
Deferred Income Taxes - - - - - - - -
(Gain) Loss on Disposal of FA - - - - - - - -
Change in Assets & Liabilities:
Accounts Receivable (400) 200 200 - 400 100 100 -
Inventory (281) 157 157 - 314 79 79 -
Prepaids - - - - - - - -
Other Assets - - - - - - - -
Accounts Payable 162 (181) - - (181) (90) - -
Accrued Expenses - - - - - - - -
Income Taxes - - - - - - - -
---- ---- ---- -- ---- --- ---- --
Cash From Operations (478) 184 365 6 555 92 182 4
---- ---- ---- -- ---- --- ---- --
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - - - -
Purchases of PP&E (21) (7) (7) (6) (20) (6) (6) (6)
---- ---- ---- -- ---- --- ---- --
Net Cash From Investing Activities (21) (7) (7) (6) (20) (6) (6) (6)
---- ---- ---- -- ---- --- ---- --
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - - - -
Net proceeds (payments) on InterCo-Debt 499 (177) (358) (0) (535) (86) (176) 2
Net proceeds (payments) on LT Debt - - - - - - - -
Net proceeds (payments) on LOC - - - - - - - -
---- ---- ---- -- ---- --- ---- --
Net Cash Flows From Financing Activities 499 (177) (358) (0) (535) (86) (176) 2
---- ---- ---- -- ---- --- ---- --
Net Change in Cash (0) 0 - 0 0 - (0) 0
Beginning Cash Balance 55 55 55 55 55 55 55 55
---- ---- ---- -- ---- --- ---- --
Ending Cash Balance 55 55 55 55 55 55 55 55
==== ==== ==== == ==== === ==== ==
Q4-04 2004 2005 2006 2007 2008
----- ---- ----- ----- ----- ----
Cash Flows From Operating Activities:
Net Income (7) (8) (40) 21 113 145
Depreciation & Amortization 18 80 80 80 80 80
Deferred Income Taxes - - - - - -
(Gain) Loss on Disposal of FA - - - - - -
Change in Assets & Liabilities:
Accounts Receivable 200 - (435) (154) (167) (180)
Inventory 157 30 [?] (173) 226 (244)
Prepaids - - - - - -
Other Assets - - - - - -
Accounts Payable (90) (17) 188 71 93 100
Accrued Expenses - - - - - -
Income Taxes - - - - - -
---- --- ---- ---- ---- ----
Cash From Operations 278 85 (715) (156) (107) (100)
---- --- ---- ---- ---- ----
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - -
Purchases of PP&E (18) (80) (80) (80) (80) (80)
---- --- ------ ---- ------ ------
Net Cash From Investing Activities (18) (80) (80) (80) (80) (80)
---- --- ------ ---- ------ ------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - -
Net proceeds (payments) on InterCo-Debt (260) (5) 795 236 187 180
Net proceeds (payments) on LT Debt - - - - - -
Net proceeds (payments) on LOC - - - - - -
---- --- ---- ---- ---- ----
Net Cash Flows From Financing Activities (260) (5) 795 236 187 180
---- --- ---- ---- ---- ----
Net Change in Cash (0) (0) 0 (0) 0 (0)
Beginning Cash Balance 55 55 55 55 55 55
---- --- ------ ---- ------ ------
Ending Cash Balance 55 55 55 55 55 55
==== === ====== ==== ====== ======
REPTRON ELECTRONICS, INC.
REPTRON CONSOLIDATED
STATEMENT OF CASH FLOWS
OCT NOV DEC Q4-03 2003
------- ------- ------- -------- -------
Cash Flows From Operating Activities:
Net Income (395) (112) 51,523 51,118 51,116
Depreciation & Amortization 495 491 491 1,477 1,477
Deferred Income Taxes - - - - -
Proceeds On Disposal - - - - -
Change in Assets & Liabilities:
Accounts Receivable 474 197 2,409 3,080 3,080
Inventory 270 503 1,545 2,318 2,316
Prepaids (2,018) - - (2,018) (2,018)
Other Assets 16 - - 16 16
Accounts Payable 2,630 (3,571) (565) (1,506) (1,606)
Accrued Expenses (18) - (6,009) (6,025) (5,025)
Income Taxes - - - - -
------ ------ ------- ------- -------
Cash From Operations 1,456 (2,493) 49,395 48,358 48,358
------ ------ ------- ------- -------
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - -
Purchases of PP&E (221) (491) (491) (1,203) (1,203)
------ ------ ------- ------- -------
Net Cash From Investing Activities (221) (491) (491) (1,203) (1,203)
------ ------ ------- ------- -------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - -
Net proceeds (payments) on InterCo-Debt - - - - -
Net proceeds (payments) on LT Debt (181) (51) (46,376) (46,598) (48,598)
Net proceeds (payments) on LOC (6,213) 3,045 (2,528) (5,696) (5,696)
------ ------ ------- ------- -------
Net Cash Flows From Financing Activities (6,374) 2,964 (48,904) (52,294) (52,294)
------ ------ ------- ------- -------
Net Change in Cash (5,139) - - (5,139) (5,139)
Beginning Cash Balance 800 (4,339) (4,339) 800 800
------ ------ ------- ------- -------
Ending Cash Balance (4,339) (4,339) (4,339) (4,339) (4,339)
====== ====== ======= ======= =======
JANUARY FEBRUARY MARCH Q1-04 APRIL MAY JUNE
------- -------- ------ ------ ------ ------ ------
Cash Flows From Operating Activities:
Net Income (212) (136) (54) (402) 81 80 73
Depreciation & Amortization 490 490 490 1,470 490 490 490
Deferred Income Taxes - - - - - - -
Proceeds On Disposal - - - - - - -
Change in Assets & Liabilities:
Accounts Receivable 700 850 - 1,550 (1,358) (1,358) -
Inventory 967 542 - 1,509 (812) (812) -
Prepaids - - - - - - -
Other Assets - (335) - (335) - - -
Accounts Payable (1,477) (92) (88) (1,657) 1,567 302 302
Accrued Expenses (450) - - (450) - - -
Income Taxes - - - - - - -
------- -------- ------ ------- ------ ------ ------
Cash From Operations 18 1,320 347 1,685 (32) (1,299) 865
------- -------- ------ ------- ------ ------ ------
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - - -
Purchases of PP&E (240) (240) (240) (720) (240) (240) (240)
------- -------- ------ ------- ------ ------ ------
Net Cash From Investing Activities (240) (240) (240) (720) (240) (240) (240)
------- -------- ------ ------- ------ ------ ------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - - -
Net proceeds (payments) on InterCo-Debt - - - - - - -
Net proceeds (payments) on LT Debt (61) (61) (61) (183) (61) (12) 22
Net proceeds (payments) on LOC 283 (1,019) (46) (782) 333 1,551 (647)
------- -------- ------ ------- ------ ------ ------
Net Cash Flows From Financing Activities 222 (1,080) (107) (965) 272 1,538 (625)
------- -------- ------ ------- ------ ------ ------
Net Change in Cash (0) 0 0 0 (0) (0) 0
Beginning Cash Balance (4,339) (4,339) (4,339) (4,339) (4,339) (4,339) (4,339)
------- -------- ------ ------- ------ ------ ------
Ending Cash Balance (4,339) (4,339) (4,339) (4,339) (4,339) (4,339) (4,339)
======= ======== ====== ======= ====== ====== ======
Q2-04 JULY AUGUST SEPT Q3-04 OCT NOV DEC
------ ------ ------ ------ ------ ----- ------ ------
Cash Flows From Operating Activities:
Net Income 234 228 229 224 682 284 286 285
Depreciation & Amortization 1,470 490 490 489 1,489 489 489 489
Deferred Income Taxes - - - - - - - -
Proceeds On Disposal - - - - - - - -
Change in Assets & Liabilities:
Accounts Receivable (2,716) (1,492) (1,492) - (2,984) (700) (700) -
Inventory (1,524) (763) (763) - (1,526) (382) (362) -
Prepaids - - - - - - - -
Other Assets - - - - - - - -
Accounts Payable 2,170 2,012 346 346 2,704 1,207 367 367
Accrued Expenses - - - - - - - -
Income Taxes - - - - - - - -
------ ------ ------ ------ ------ ----- ------ ------
Cash From Operations (466) 476 (1,190) 1,058 345 898 60 1,141
------ ------ ------ ------ ------ ----- ------ ------
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - - - -
Purchases of PP&E (720) (240) (240) (239) (719) (239) (239) (239)
------ ------ ------ ------ ------ ----- ------ ------
Net Cash From Investing Activities (720) (240) (240) (239) (719) (239) (239) (239)
------ ------ ------ ------ ------ ----- ------ ------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - - - -
Net proceeds (payments) on InterCo-Debt - - - - - - - -
Net proceeds (payments) on LT Debt (52) 19 17 15 51 12 10 7
Net proceeds (payments) on LOC (1,238) (255) 1,413 (834) 324 671 169 (909)
------ ------ ------ ------ ------ ----- ------ ------
Net Cash Flows From Financing Activities 1,186 (236) 1,430 (819) 374 (659) 179 (902)
------ ------ ------ ------ ------ ----- ------ ------
Net Change in Cash (0) (0) - (0) (0) 0 (0) 0
Beginning Cash Balance (4,339) (4,339) (4,339) (4,339) (4,339) (4,339) (4,339) (4,339)
------ ------ ------ ------ ------ ----- ------ ------
Ending Cash Balance (4,339) (4,339) (4,339) (4,339) (4,339) (4,339) (4,339) (4,339)
====== ====== ====== ====== ====== ===== ====== ======
Q4-04 2004 2005 2006 2007 2008
------ ------ ------ ------ ------ ------
Cash Flows From Operating Activities:
Net Income 855 1,389 2,620 3,847 4,366 5,211
Depreciation & Amortization 1,487 5,876 4,516 4,166 3,816 3,466
Deferred Income Taxes - - - - - -
Proceeds On Disposal - - - - - -
Change in Assets & Liabilities:
Accounts Receivable (1,400) (5,550) (841) (1,586) (1,713) (1,850)
Inventory (763) (2,405) (1,463) (1,658) (2,020) (2,181)
Prepaids - - - - - -
Other Assets - (335) - - - -
Accounts Payable 1,940 5,157 329 1,144 1,587 1,714
Accrued Expenses - (450) - - - -
Income Taxes - - - - - -
------ ------ ------ ------ ------ ------
Cash From Operations 2,096 3,663 5,161 5,914 5,037 6,361
------ ------ ------ ------ ------ ------
Cash Flows From Investing Activities:
Proceeds from sale of PP&E - - - - - -
Purchases of PP&E (717) (2,876) (2,516) (2,866) (2,866) (2,866)
------ ------ ------ ------ ------ ------
Net Cash From Investing Activities (717) (2,876) (2,516) (2,866) (2,866) (2,866)
------ ------ ------ ------ ------ ------
Cash Flows From Financing Activities:
Proceeds from exercise of stock options - - - - - -
Net proceeds (payments) on InterCo-Debt - - - - - -
Net proceeds (payments) on LT Debt 29 (155) 24 (24) 33 (21)
Net proceeds (payments) on LOC (1,411) (632) (2,669) (3,023) (0) 0
------ ------ ------ ------ ------ ------
Net Cash Flows From Financing Activities (1,382) (787) (2,645) (3,048) 33 (21)
------ ------ ------ ------ ------ ------
Net Change in Cash - (0) 0 0 3,204 3,473
Beginning Cash Balance (4,339) (4,339) (4,339) (4,339) (4,339) (1,135)
------ ------ ------ ------ ------ ------
Ending Cash Balance (4,339) (4,339) (4,339) (4,339) (1,135) 2,338
====== ====== ====== ====== ====== ======
REPTRON ELECTRONICS, INC.
CONSOLIDATED BORROWING BASE
OCT-03 NOV-03 DEC-03 JAN-04 FEB-04 MAR-04 APR-04 MAY-04 JUNE-04 JUL-04
--------------------------------------------------------------------------------
Accounts Receivable, Net 16,045 15,848 13,439 12,739 11,889 11,889 13,247 14,605 14,605 16,097
Add: AR Allowance - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Gross AR 15,045 15,848 13,439 12,739 11,889 11,889 13,247 14,605 14,605 16,097
Ineligible Receivables/Reserve 4,252 4,200 3,225 3,057 2,853 2,853 3,179 3,505 3,505 3,583
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Eligible Receivables 11,793 11,648 10,214 9,682 9,036 9,038 10,068 11,100 11,100 12,234
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Collateral Value of AR 10,024 9,901 8,682 8,229 7,680 7,680 8,558 9,435 9,435 10,399
====== ====== ====== ====== ====== ====== ====== ====== ======= =======
Inventory, net 21,766 21,264 19,719 18,752 18,210 18,210 19,022 19,834 19,834 20,597
Inventory Reserve - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Inventory 21,766 21,264 19,719 18,752 18,210 18,210 19,022 19,834 19,834 20,597
Ineligible Inventory 6,965 8,804 6,310 6,001 5,827 5,827 6,087 6,347 6,347 6,581
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Eligible Inventory 14,801 14,459 13,409 12,751 12,383 12.383 12,835 13,487 13,487 14,006
Inventory Advance Rate 25% 25% 25% 30% 30% 30% 30% 30% 30% 30%
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Collateral Value of Inventory 3,700 3,615 3,352 3,625 3,715 3,715 3,881 4,046 4,046 4,202
====== ====== ====== ====== ====== ====== ====== ====== ======= =======
LOC Balance 7,715 10,750 8,232 6,515 7,497 7,450 7,784 9,335 8,888 8,433
====== ====== ====== ====== ====== ====== ====== ====== ======= =======
Reserves:
Holdback Reserve 800 800 800 - - - - - - -
Letter of Credit - GE - - - - - - - - - -
Letter of Credit - WC - - - - - - - - - -
Other - - - - - - - - - -
------ ------ ------ ------ ------ ------ ------ ------ ------- -------
Total Reserves 800 800 800 - - - - - - -
====== ====== ====== ====== ====== ====== ====== ====== ======= =======
Availability 5,209 1,958 3,001 3,540 3,899 3,945 4,654 4,146 4,793 6,167
====== ====== ====== ====== ====== ====== ====== ====== ======= =======
AUG-04 SEP-04 OCT-04 NOV-04 DEC-04 2005 2006 2007 2008
-----------------------------------------------------------------------
Accounts Receivable, Net 17,589 17,589 18,289 18,989 18,989 19,830 21,416 23,129 24,979
Add: AR Allowance - - - - - - - - -
------ ------ ------- ------ ------ ------ ------ ------ ------
Gross AR 17,589 17,589 18,289 18,989 18,969 19,830 21,416 23,129 24,979
Ineligible Receivables/Reserve 4,221 4,221 4,389 4,557 4,557 4,557 4,557 4,557 4,557
------ ------ ------- ------ ------ ------ ------ ------ ------
Eligible Receivables 13,368 13,368 13,900 14,432 14,432 15,272 16,858 18,571 20,422
------ ------ ------- ------ ------ ------ ------ ------ ------
Collateral Value of AR 11,362 11,362 11,815 12,267 12,267 12,981 14,330 15,786 17,358
====== ====== ======= ====== ====== ====== ====== ====== ======
Inventory, net 21,360 21,360 21,742 22,123 22,123 23,586 25,244 27,264 29,445
Inventory Reserve - - - - - - - - -
------ ------ ------- ------ ------ ------ ------ ------ ------
Inventory 21,360 21,360 21,742 22,123 22,123 23,586 25,244 27,264 29,445
Ineligible Inventory 6,835 6,835 6,957 7,079 7,079 7,548 5,078 8,724 9,422
------ ------ ------- ------ ------ ------ ------ ------ ------
Eligible Inventory 14,525 14,525 14,784 15,044 15,044 16,038 17,166 18,539 20,022
Inventory Advance Rate 30% 30% 30% 30% 30% 30% 30% 30% 30%
------ ------ ------- ------ ------ ------ ------ ------ ------
Collateral Value of Inventory 4,357 4,357 4,435 4,513 4,513 4,812 5,150 5,562 6,007
====== ====== ======= ====== ====== ====== ====== ====== ======
LOC Balance 8,846 9,012 6,341 8,510 7,601 4,932 1,908 1,908 1,908
====== ====== ======= ====== ====== ====== ====== ====== ======
Reserves:
Holdback Reserve - - - - - - - - -
Letter of Credit - GE - - - - - - - - -
Letter of Credit - WC - - - - - - - - -
Other - - - - - - - - -
------ ------ ------- ------ ------ ------ ------ ------ ------
Total Reserves - - - - - - - - -
====== ====== ======= ====== ====== ====== ====== ====== ======
Availability 5,874 6,708 7,909 8,270 9,179 12,861 17,571 19,439 21,457
====== ====== ======= ====== ====== ====== ====== ====== ======
EXHIBIT 4
REPTRON ELECTRONICS, INC. - LIQUIDATION ANALYSIS (IN-COURT)
Book Value Liquidation Values (orderly wind-down)
($ in millions) 10/28/2003 "Low" % "High" %
- ----------------------------------------------------------------------------------------------------------------------
Cash 0.5 0.5 100% 0.5 100%
Total Accounts Receivable, Net (1) 17.1 13.9 81% 14.7 86%
Inventories ,net (2)
Computer Products 0.4 0.1 19% 0.1 24%
RMS-TG 11.6 3.0 26% 3.5 31%
RMS-H 7.8 1.8 23% 2.2 28%
Display & System Integration 2.8 0.8 28% 0.9 33%
-------------------------------------------------
Total Inventories, Net 22.6 5.6 25% 6.8 30%
Prepaid Expenses/Other 3.4 0.0 0% 0.0 0%
Property, Plant & Equipment
Tampa Facility (3) 7.9 6.7 85% 7.5 95%
Land & Building (Excluding Tampa facility) 3.0 1.5 50% 1.8 60%
Leasehold Improvements 2.3 0.0 0% 0.0 0%
Furniture, Fixtures & Equipment 11.9 1.2 10% 1.8 15%
Goodwill/Other Assets/Deferred Taxes 31.0 0.0 0% 0.0 0%
TOTAL BOOK VALUE 99.7
GROSS LIQUIDATION PROCEEDS 29.4 33.1
Percentage of Book Value 29% 33%
SECURED CLAIMS
Revolver Balance @10/28/03 9.8 100% 9.8 100%
Capital Leases and Mortgages (4) 4.7 100% 4.7 100%
----- -----
Total Secured Claims 14.5 14.5
Proceeds After Secured Claims 14.9 18.6
ADMINISTRATIVE CLAIMS (5)
Trustee Fees (6) 0.3 0.3
Wind-Down Expenses (7) 0.8 0.9
Professional Fees (8) 0.6 0.9
----- -----
Total Administrative Claims 1.7 2.2
NET LIQUIDATION PROCEEDS AVAILABLE TO UNSECURED CLAIMS 13.2 16.4
UNSECURED CLAIMS
6 3/4% Notes (Including Accrued Interest) (9) 82.3 82.3
AP 17.0 17.0
Accrued Expenses 4.5 4.5
----- -----
TOTAL UNSECURED CLAIMS 103.8 103.8
Recovery % for Unsecured Claims 12.7% 15.8%
NOTES
NOTE 1 - ACCOUNTS RECEIVABLE
Orderly liquidation percentages for AR were estimated based on the net advance
rates provided under the Company's current senior credit facility.
The assumed liquidation values used estimate there would be a 5%-10% additional
recovery over the senior lender's advance rate
($000's) 10/28/2003
----------
Net AR Balance for Borrowing Base Calc 14,141
Available under Borrowing Base 10,817
Net Advance Rate 76%
NOTE 2 - INVENTORIES
Orderly liquidation percentages for Inventory were estimated based on the net
advance rates provided under the Company's current senior credit facility. The
values used assumed a 5-10% additional recovery over the senior lender's advance
rate.
NOTE 3 - TAMPA FACILITY
The orderly liquidation value for this facility is based on management's
estimate.
NOTE 4 - CAPITAL LEASES AND MORTGAGES
Includes capital leases on equipment and mortgages on Gaylord and Tampa
facility.
NOTE 5 - ADMINISTRATIVE CLAIMS
Assumes no administrative claims related to employee related costs, taxes,
critical vendor payments or insurance premiums.
NOTE 6 - TRUSTEE FEES
Estimated to be 1% of gross liquidation proceeds
NOTE 7 - WIND-DOWN EXPENSES
Wind-down expenses were estimated based on a percentage of monthly SG&A
In addition to the wind-down expenses estimated below, the estimated inventory
recovery percentages take into account $2.4 million of commissions, payroll,
real property holding costs and other expenses associated with the liquidation
of inventory.
Low High
Monthly SG&A (proforma) 1,460
1st Month 20% 292 25% 365
2nd Month 15% 219 15% 219
3rd Month 5% 73 10% 146
4th Month 5% 73 5% 73
5th Month 5% 73 5% 73
6th Month 5% 73 5% 73
--- ---
Total 803 949
NOTE 8 - PROFESSIONAL FEES
Estimated at $100K to $150K per month for 6 months
NOTE 9 - 6 3/4% CONVERTIBLE SUBORDINATED NOTES
Amount Outstanding 76,315 $
Accrued Interest 6,009
Total Claim 82,324 $
EXHIBIT 5
REPTRON ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
AS OF CONFIRMATION
UNAUDITED PRO FORMA
OCT-03 ADJUSTMENTS CONFIRMATION
------ ----------- ------------
ASSETS
CURRENT ASSETS
Cash 805 - 805
Accounts Receivable, net 16,878 - 16,878
Inventories 20,577 - 20,577
Prepaids & Other 4,785 - 4,785
Tax Assets - - -
------- ------- ------
Total Current Assets 43,045 - 43,045
PROPERTY, PLANT & EQUIPMENT 20,628 - 20,628
GOODWILL 26,779 - 26,779
DEFERRED TAX ASSETS (1) 2,480 (2,480) -
OTHER ASSETS (2) 1,695 (350) 1,345
------- ------- ------
TOTAL ASSETS 94,627 (2,830) 91,797
===================================================
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 18,200 - 18,200
Current Portion Of LTD 617 - 617
Accrued Expenses (3) 9,966 (6,009) 3,957
Income Tax Payable - - -
Other - - -
---------------------------------------------------
Total Current Liabilities 28,783 (6,009) 22,774
LONG-TERM DEBT
Inter-Company Payable/Receivable 3 - 3
Convertible Notes (4) 76,315 (46,315) 30,000
Capital Leases & Mortgages 3,617 - 3,617
Bank Line Of Credit 7,715 - 7,715
---------------------------------------------------
Total Long-Term Debt 87,650 (46,315) 41,335
DEFERRED TAX LIABILITIES - - -
EQUITY
Combined Equity / Retained Earnings (5) (21,806) 51,974 30,168
TOTAL LIABILITIES & EQUITY 94,627 (350) 94,277
===================================================
(1) Remove asset based on limitations of the asset going forward as well as
potential offset by the debt relief gain.
(2) Remove asset related to previous financing expenses.
(3) Remove accrued unpaid interest on the convertible notes.
(4) Effect change of old notes for new notes.
(5) Effect balance sheet changes to equity and retained earnings.
EXHIBIT 6
REPTRON ELECTRONICS, INC.
GOING CONCERN VALUATION ANALYSIS
Current Equity Trading Analysis
- -------------------------------
Average Stock Price (last 30 days) 0.18
shares outstanding 6,417,196
---------
Total Equity Value 1,155,095
Equity conversion through Ch 11
20 times current value 23,101,906 market cap
Add Debt to Valuation:
Revolver 9,000,000
New Notes 30,000,000
Capital Leases & Mortgages 3,600,000
Total Enterprise Value based on equity value 65,701,906
==========
Valuation Based on Cash Flow Multiples
- --------------------------------------
2004 Projected EBITDA 11,200,000
Multiples:
5 times 56,000,000
5.5 times 61,600,000
6 times 67,200,000
These multiples are on average for the electronic manufacturing services
industry.
Valuation Based on Asset Book Value
- -----------------------------------
Cash 509,000
Total Accounts Receivable, Net 17,100,000
Total Inventories, Net 22,593,000
Prepaid Expenses/Other 3,390,000
Property, Plant & Equipment
Land & Building 10,900,000
Leasehold Improvements 2,300,000
Furniture, Fixtures & Equipment 8,300,000
Goodwill/Other Assets/Deferred Taxes 31,047,000
Total Book Value of Assets 96,139,000
Less Intangibles
Goodwill/Other Assets/Deferred Taxes 31,047,000
65,092,000
==========
EXHIBIT 7
COVENANT TEST SHEET
October 27 - 31 Nov 03-07 Nov 10-14 Nov 17-21 Nov 23-28 Dec 1-Dec 5
Collections By Week 2,583,709.84 2,428,295.68 3,625,084.60 2,519,630.95 2,794,981.90 1,929,479.87
Cumulative Collections 2,583,709.84 5,012,005.52 8,637,090.12 11,156,721.07 13,951,702.97 15,881,182.84
Covenant Amount @ 85% 2,196,153.36 4,260,204.69 7,341,526.60 9,483,212.91 11,858,947.52 13,499,005.41
Actual Collections 5,493,568.18 2,143,267.79 3,404,091.64 2,998,987.46 1,883,684.00
Actual Cumulative Collections 5,493,568.18 7,636,835.97 11,040,927.61 14,039,915.07 15,923,599.07
Comparison to Covenant 1,233,363.49 295,309.37 1,557,714.70 2,180,967.55 2,424,593.66
Disbursements by Week 3,575,442.00 2,257,767.00 3,555,260.76 1,987,127.77 3,606,887.14 1,788,103.52
Cumulative Disbursements 3,575,442.00 5,833,209.00 9,388,469.76 11,375,597.53 14,982,484.67 16,770,588.19
Covenant Amount @ 115% 4,111,758.30 6,708,190.35 10,796,740.22 13,081,937.16 17,229,857.37 19,286,176.42
Actual Disbursements 3,500,000.00 2,270,000.00 2,900,000.00 3,400,000.00 3,625,000.00
Actual Cumulative Disbursements 3,500,000.00 5,770,000.00 8,670,000.00 12,070,000.00 15,695,000.00
Comparison to Covenant 3,208,190.35 5,026,740.22 4,411,937.16 5,159,857.37 3,591,176.42
Net Cash Provided (Used) (991,732.16) 170,528.68 69,823.84 532,503.18 (811,905.24) 141,376.35
Net Cash Provided (Used) Cum (991,732.16) (821,203.48) (751,379.64) (218,876.46) (1,030,781.70) (889,405.35)
Covenant Amount (944,384.00) (864,086.59) (251,707.93) (1,185,398.96) (1,022,816.15)
Actual Net Cash Provided (Used) 1,993,568.18 (126,732.21) 504,091.64 (401,012.54) (1,741,316.00)
Actual Net Cash Provided (Used) Cum 1,993,568.18 1,866,835.97 2,370,927.61 1,969,915.07 228,599.07
Comparison to Covenant 2,814,771.66 2,618,215.61 2,589,804.07 3,000,696.77 1,118,004.42
Dec 8-12 Dec 15-19 Dec 22-26 Dec 29-Jan 2 Jan 5-9 Jan 12-16
Collections By Week 2,876,685.52 3,297,614.40 3,756,273.28 3,612,398.80 2,616,691.68 2,772,869.60
Cumulative Collections 18,757,868.36 22,055,482.76 25,811,756.04 29,424,154.84 32,040,846.52 34,813,716.12
Covenant Amount @ 85% 15,944,188.11 18,747,160.35 21,939,992.63 25,010,531.61 27,234,719.54 29,591,658.70
Actual Collections 4,244,991.00 0.00 0.00 0.00 0.00 0.00
Actual Cumulative Collections 20,168,590.07 20,168,590.07 20,168,590.07 20,168,590.07 20,168,590.07 20,168,590.07
Comparison to Covenant 4,224,401.96 1,421,429.72 (1,771,402.56) (4,841,941.54) (7,066,129.47) (9,423,068.63)
Disbursements by Week 3,657,003.31 2,431,577.44 4,138,521.17 2,774,321.28 3,516,166.21 2,138,531.76
Cumulative Disbursements 20,427,591.50 22,859,168.94 26,997,690.11 29,772,011.39 33,288,177.60 35,426,709.36
Covenant Amount @ 115% 23,491,730.23 26,288,044.29 31,047,343.63 34,237,813.10 38,281,404.24 40,740,715.76
Actual Disbursements 1,400,000.00 0.00 0.00 0.00 0.00 0.00
Actual Cumulative Disbursements 17,095,000.00 17,095,000.00 17,095,000.00 17,095,000.00 17,095,000.00 17,095,000.00
Comparison to Covenant 6,396,730.23 9,193,044.29 13,952,343.63 17,142,813.10 21,186,404.24 23,645,715.76
Net Cash Provided (Used) (780,317.79) 866,036.96 (382,247.89) 838,077.52 (899,474.53) 634,337.84
Net Cash Provided (Used) Cum (1,669,723.14) (803,686.18) (1,185,934.07) (347,856.55) (1,247,331.08) (612,993.24)
Covenant Amount (1,920,181.62) (924,239.11) (1,363,824.18) (400,035.03) (1,434,430.74) (704,942.23)
Actual Net Cash Provided (Used) 2,844,991.00 0.00 0.00 0.00 0.00 0.00
Actual Net Cash Provided (Used) Cum 3,073,590.07 3,073,590.07 3,073,590.07 3,073,590.07 3,073,590.07 3,073,590.07
Comparison to Covenant 4,743,313.21 3,877,276.25 4,259,524.14 3,421,446.62 4,320,921.15 3,686,583.31
MONTHLY FINANCIAL REPORT FOR BUSINESS
FOR THE PERIOD BEGINNING October 28 2003 AND ENDING November 30, 2003
REPTRON ELECTRONICS, INC., Debtor Case No. 03-
35966-BKC-PGH
Petition Date: October 28, 2003
CURRENT CUMULATIVE
MONTH PETITION TO DATE
---------- ----------------
1. CASH AT BEGINNING OF PERIOD 684,130 684,130
2. RECEIPTS
A. Cash sales
Less: Cash Refunds
Net Cash Sales
B. Collection on A/R 13,951,703 13,951,703
C. Net Borrowings from Line 198,941
D. Other Receipts (Attach List)
3. TOTAL RECEIPTS 14,150,644 13,951,703
4. TOTAL CASH AVAILABLE FOR
OPERATIONS (Line 1 + Line 3) 14,635,833 14,635,833
5. DISBURSEMENTS
A. U. S. Trustee Quarterly Fees
B. Net Payroll 2,585,000 2,585,000
C. Payroll Taxes Paid 985,520 985,520
D. Sales and Use Tax 842 842
E. Other Taxes 107,581 107,581
F. Rent 110,766 110,766
G. Other Leases (Attachment 3) 24,578 24,578
H. Telephone 51,526 51,526
I. Utilities 107,264 107,264
J. Travel & Entertainment 42,531 42,531
K. Vehicle Expenses 646 646
L. Office Supplies 30,309 30,309
M. Advertising 1,441 1,441
N. Insurance (Attachment 7) 138,723 138,723
O. Purchases of Fixed Assets 7,384 7,384
P. Purchases of Inventory 8,938,396 8,938,396
Q. Manufacturing Supplies 29,051 29,051
R. Repairs & Maintenance 20,186 20,186
S. Payments to Secured Creditors 82,801 82,801
T. Other Operating Expenses 1,124,395 1,124,395
6. TOTAL CASH DISBURSEMENTS 14,388,940 14,388,940
7. ENDING CASH BALANCE
(LINE 4 - LINE 6) 246,893 246,893
ATTACHMENT 1
MONTHLY ACCOUNTS RECEIVABLE AGING AND RECONCILIATION
REPTRON ELECTRONICS, INC., Debtor Case No. 03-
35966-BKC-PGH
Petition Date: October 28, 2003
Reporting Period beginning October 28, 2003 and ending November 30, 2003
ACCOUNTS RECEIVABLE AT PETITION DATE: 17,066,926.86
ACCOUNTS RECEIVABLE RECONCILIATION (Include all accounts receivable,
pre-petition and post-petition, including charge card sales which have not been
received):
Beginning of Month Balance 17,066,927
PLUS: Current Month New Billings 13,781,462
LESS: Collection During the Month - 13,951,703
End of Month Balance 16,896,686
2
ATTACHMENT 2
MONTHLY ACCOUNTS PAYABLE AND SECURED PAYMENTS REPORT
REPTRON ELECTRONICS, INC., Debtor Case No. 03-36966-BKC-PGH
Petition Date: October 28, 2003
Reporting Period beginning October 28, 2003 and ending November 30, 2003
In the space below list all invoices or bills incurred and not paid since the
filing of the petition. do not include amounts owed prior to filing the
petition.
Date Days
Incurred Outstanding Vendor Description Amount
- -------- ----------- ------ ----------- ------
See attached "Current Post Petition Payables"
ACCOUNTS PAYABLE RECONCILIATION (Post Petition Only):
Opening Balance (total from prior report) 0
PLUS: New Indebtedness Incurred This Month
LESS: Amount Paid on Prior Accounts Payable
Ending Month Balance
SECURED: List the status of Payments to Secured Creditors and Lessors (Post
Petition Only)
Number Total
of Post Amount of
Secured Date Petition Post Petition
Creditor/ Payment Payment Payments Payments
Lessor Due Amount Delinquent Delinquent
------ --- ------ ---------- ----------
GE Capital 11/1/03 0 0
TransAmerica 11/1/03 0 0
Lease Finance 11/1/03 0 0
SBA 11/1/03 0 0
State of MN 11/1/03 0 0
3
ATTACHMENT 3
INVENTORY AND FIXED ASSETS REPORT
REPTRON ELECTRONICS, INC., Debtor Case No. 03-36966-BKC-PGH
Petition Date: October 28, 2003
Reporting Period beginning October 28, 2003 and ending November 30, 2003
INVENTORY REPORT
INVENTORY BALANCE AT PETITION DATE: 22,589,000
INVENTORY RECONCILIATION:
Inventory Balance at Beginning of Month 22,589,000
Inventory Purchased During Month
Inventory Used or Sold
Inventory On Hand at End of Month 20,437,717
METHOD OF COSTING INVENTORY: FIFO
FIXED ASSET REPORT
FIXED ASSETS FAIR MARKET VALUE AT PETITION DATE: 10,581,519
(Includes Property, Plant and Equipment)
BRIEF DESCRIPTION (First Report Only): Office equipment, production machinery,
leasehold improvements, building improvements
FIXED ASSETS RECONCILIATION:
Fixed Asset Book Value at Beginning of Month 10,581,519
LESS: Depreciation Expense ___________________
PLUS: New Purchases ___________________
Ending Monthly Balance ___________________
BRIEF DESCRIPTION OF FIXED ASSETS PURCHASES AND DISPOSALS DURING THE REPORTING
PERIOD:
Production machinery used to produce electronic parts
December 17, 2003
Paul Plante, President and COO
Reptron Electronics, Inc.
13700 Reptron Blvd.
Tampa, Fl 33626-3046
Dear Mr. Plante:
You have provided us with certain information and have discussed with us the
current and future needs for the post-confirmation financing described herein of
Reptron Electronics, Inc. and its subsidiaries or affiliates (the "Company").
In connection therewith, we are pleased to submit our commitment to provide a
secured revolving credit and term loan facility (the "Financing") of up to
Twenty Five Million ($25,000,000) Dollars to the Company (the "Credit
Facility"). The proceeds of the Credit Facility would be used (a) to refinance
all existing indebtedness owed by Borrowers to The CIT Group/Business Credit,
Inc. pursuant to the existing DIP credit facility, (b) to fund payments required
in order to substantially consummate the Company's Second Amended Plan of
Reorganization Under Chapter 11 of the Bankruptcy Code (the "Plan"), (c) to pay
transaction fees and expenses in respect of the Financing, and (d) subject to
the terms and conditions provided for under the Credit Facility, for the general
corporate purposes of the Company.
The exact structure and terms of the proposed Credit Facility cannot be
precisely stated until the completion of our field examinations, any additional
due diligence and final credit approval as a result of same. However, in
general, we contemplate that the Credit Facility may be structured as follows:
1. Revolving Credit Facility.
(a) Amount: Revolving loans of up to Twenty Five Million
($25,000,000) Dollars based upon the lending formulas, and
subject to the sublimits and other terms described below.
(b) Lending Formulas:
(i) Accounts: Up to eighty-five percent (85%) of the net
amount of eligible accounts receivable of the
Company, subject to a reserve for dilution in excess
of five percent (5%) for the preceding six (6) month
period as computed at each field exam. Eligible
accounts receivable and the net
EXHIBIT 8
amounts thereof will be determined by us pursuant to
general criteria which will be set forth in the loan
documentation. Generally, eligible accounts
receivable will exclude (i) accounts which are unpaid
more than sixty (60) days past the original due date
thereof, but in any event which are unpaid more than
ninety (90) days from the original invoice date, (ii)
accounts owed by an account debtor which has more
than fifty percent (50%) of the aggregate amount
thereof unpaid more than sixty (60) days past the
original due date thereof, but in any event which are
unpaid more than ninety (90) days past the original
invoice date thereof and/or due date, (iii) contra
accounts, (iv) poor credits, (v) employee or
affiliate accounts receivable, (vi) foreign accounts,
except for accounts of Diebold and Bayer up to agreed
upon limits, those accounts covered by foreign credit
insurance, or those accounts otherwise approved on a
case-by-case basis, (vii) sales to any customer to
the extent that such sales exceed at one time 15% or
more of Eligible Accounts except as specifically
approved for higher limits to be agreed upon after
due diligence on same for Diebold, Bayer, Datascope,
Zole Medical or any other account on a case-by-case
basis; and (viii) those other accounts which do not
constitute collateral acceptable for lending purposes
pursuant to criteria established by us.
(ii) Inventory: Up to the lesser of thirty percent (35%)
of the value of eligible raw materials and finished
goods inventory of the Company, valued at the lower
of cost or market, as determined by us, with cost
determined under the first-in-first-out method, or
eighty-five percent (85%) of the orderly liquidation
value, net of liquidation expenses based on an
appraisal of the inventory to be conducted
semi-annually at the expense of the Company by
independent appraisers acceptable to us, provided,
that, slow-moving inventory will be capped at the
level reflected in the most recent appraisal and
monitored monthly. Eligible inventory will be
determined by us pursuant to general criteria which
will be set forth in the loan documentation.
Generally, eligible inventory will exclude
work-in-process, packaging, slow-moving or obsolete
inventory, and those other items which do not
constitute collateral acceptable for lending purposes
pursuant to criteria established by us.
(iii) Equipment: Up to fifty percent (50%) of the net
forced liquidation value of the equipment subject to
our first perfected security interest and based on an
appraisal to be conducted at the expense of the
Company by independent appraisers acceptable to us. A
current appraisal must be received prior to including
equipment into the borrowing base, and the equipment
advance rate will subsequently reduce to zero if the
appraisal becomes more than twelve (12) months old
with no update authorized by the Company.
2
(c) Inventory Loan Limit: The maximum amount of loans available in
respect of eligible inventory shall not exceed Seven Million
($7,000,000) Dollars at any time, notwithstanding the total
value of eligible inventory, and including for this purpose
our reliance on eligible inventory to be acquired under
commercial letters of credit opened by or through us under the
letter of credit facility described below.
(d) Equipment Loan Limit: The maximum amount of loans available in
respect of eligible equipment shall not exceed One Million
Five Hundred Thousand ($1,500,000) Dollars, notwithstanding
the total value of eligible equipment, and beginning on April
1, 2004 and each quarter thereafter, the maximum amount shall
reduce by One Hundred Twenty-Five Thousand ($125,000) Dollars,
notwithstanding the total value of eligible equipment.
2. Letter of Credit Facility.
(a) Amount: Letters of credit arranged through us ("LCs") of up to
an aggregate amount at any time outstanding of Four Million
($4,000,000) Dollars, included within the overall Revolving
Credit Facility.
(b) LC Reserves Against Availability: Reserves against the
revolving loans otherwise available equal to (i) one hundred
percent (100%) minus the percentage set forth above for the
inventory lending formula multiplied by the cost of the goods
being purchased with the LC, plus (ii) duty, freight and cost
of transport within the U.S., will be required when opening
LCs for the purpose of purchasing eligible inventory. LCs
which are opened for other purposes approved by us will
require reserves of one hundred percent (100%) of the amount
of such LCs.
(c) Letter of Credit Fee: Two percent (2.0%) per annum on the
daily outstanding balance of the LCs payable monthly in
arrears. All applicable bank and opening charges will be in
addition to our fee and charged to the loan account of the
Company.
3. Collateral. All obligations of the Company and any corporate guarantors
to us will be secured by first and only security interests in and liens upon all
present and future assets of the Company and any corporate guarantors, including
all accounts, contract rights, general intangibles, chattel paper, documents,
instruments, deposit accounts, investment property, inventory, equipment,
fixtures and all products and proceeds thereof, but shall not be secured by real
property owned by the Company in Tampa, Florida subject to an existing mortgage,
except that, the order confirming the Plan shall provide that upon our request
we shall be provided a junior and subordinate mortgage lien upon said Tampa,
Florida Property.
4. Interest Rate. The interest rate on loans shall be at the "Applicable
Prime Rate Margin" above the rate announced from time to time by Wachovia Bank,
National
3
Association, as its "prime rate" or at the Company's option, the "Applicable
Eurodollar Margin" above the adjusted Eurodollar rate used by us (in each case
subject to a two percent (2.0%) higher rate after default). The adjusted
Eurodollar rate will be calculated based on the average of rates of interest per
annum at which Wachovia Bank, National Association is offered deposits of U.S.
dollars in the London interbank market adjusted by the reserve percentage
prescribed by governmental authorities as determined by us. Collections will be
credited to the loan account of the Company on a daily basis, allowing one (1)
business day after our receipt of a wire transfer of federal funds into our
payment account designated for such purpose.
The Applicable Margin for the first six (6) months and thereafter, if the
quarterly Debt Service Coverage Ratio as defined in the loan agreement is 1.2 to
1 or less, will be the Prime rate plus one percent (1.0%) or the adjusted
Eurodollar rate plus three percent (3.0%). Provided the quarterly Debt Service
Coverage Ratio is greater than 1.2 to 1 for a fiscal quarter (after the initial
six (6) months), the Applicable Margin for the three (3) months following the
month of receipt of the 10Q for the fiscal quarter will be adjusted based on the
attached pricing grid.
5. Fees. All fees listed below are in addition to interest and other fees
and charges provided for herein and may, at our option, be charged directly to
any loan account of the Company maintained with us.
(a) Closing Fee: Zero ($0) Dollars.
(b) Servicing Fee: Two Thousand Five Hundred ($2,500) Dollars for
each month or part thereof during the term of the
arrangements, payable monthly in advance.
(c) Unused Line Fee: The Applicable Unused Line Fee for the first
six (6) months and thereafter, if the quarterly Debt Service
Coverage Ratio as defined in the loan agreement is 1.2 to 1 or
less, will be three-eighths of one percent (0.375%) per annum
times (i) for the first eighteen (18) months, the difference
between the average monthly balance of revolving loans and LCs
outstanding under the Credit Facility and Twenty Million
($20,000,000) Dollars, and (ii) at all times thereafter, the
difference between the average monthly balance of revolving
loans and LCs outstanding under the Credit Facility and Twenty
Five Million ($25,000,000) Dollars, payable monthly. If the
quarterly Debt Service Coverage Ratio is greater than 1.2 to 1
for a fiscal quarter (after the initial six (6) months), the
Applicable Unused Line Fee for the three (3) months following
the month of receipt of the 10Q for such fiscal quarter will
be adjusted based on the attached pricing grid.
(d) Early Termination Fee: If the Credit Facility is terminated
for any reason prior to the end of the then current term:
(i) two percent (2.0%) of the Credit Facility if
terminated on or prior to the first (1st) anniversary
of the date of closing;
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(ii) one-half of one percent (0.5%) of the Credit Facility
if terminated after the first (1st) anniversary and
prior to the third (3rd) anniversary of the date of
closing or at any other time prior to the end of the
then current term
We agree to waive all prepayment penalty fees after one (1) year from
the closing, if Wachovia Bank, National Association replaces our
facility in full.
6. Term. The Credit Facility will have an initial term of three (3) years
from the date of closing, with a fourth (4th) year at our option and automatic
annual renewals thereafter unless either party gives sixty (60) days prior
written notice to the other party of the intention to terminate the Credit
Facility.
7. Expenses. The Company agrees to pay all reasonable legal and closing
expenses, including attorneys' fees and disbursements, filing and search fees,
appraisal fees and field examination expenses and per diem field examination
charges, whether or not this transaction closes. We charge eight hundred ($800)
dollars per person per day for our field examiners in the field and in the
office, plus travel, hotel and all other out-of-pocket expenses. Field
examinations will be limited to four (4) per year if no event of default exist
and will be limited to three (3) per year if excess availability exceeds Three
Million ($3,000,000) Dollars and no default exists. In addition, field
examination charges will be limited to Fifty Thousand ($50,000) per year plus
out-of-pocket expenses provided no event of default exist. All such expenses
shall be paid to us upon demand, together with such advance funds on account of
such expenses and charges as we may from time to time request. This Section
shall survive the expiration or termination of this letter.
8. Deposits. As evidence of our mutual good faith, and in consideration of
our having incurred and continuing to incur certain expenses in the expectation
of establishing the financing arrangements between us and the Company, we
request that the Company deposit with us Fifteen Thousand ($15,000) Dollars
against our expenses. This amount, together with any other deposits at any time
received by us will be:
(a) Returned to the Company, less the cost of our field
examinations, legal fees and other expenses directly related
to the loan application and credit review, if our credit
approval of the proposed financing is not obtained;
(b) Retained by us, and credited to the loan account of the
Company, less the expenses described in paragraph (a) above,
if the credit is approved and booked;
(c) Retained by us, as a fee in addition to expenses payable by
the Company as set forth above, if our credit approval of the
proposed financing is obtained and the transaction does not
close simultaneously with the acceptance of the Company's Plan
and exit of bankruptcy, whether as a result of your election
not to do business with us or a failure to fulfill any of the
conditions of the proposed financing as approved by us; or
5
(d) Retained by us, as a fee in addition to expenses payable by
the Company as set forth above, if at any time during the loan
and credit review, the Company intentionally misleads us or
intentionally fails to disclose material information which, if
disclosed, would have had a material adverse impact on the
loan approval.
9. Other Information and Conditions. Subject to such conditions as may be
established in connection with the credit approval, we would anticipate that the
closing of the Credit Facility will be subject to the satisfaction, in a manner
acceptable to us, of the following:
(a) We shall have received, in form and substance satisfactory to
us in our sole discretion, the Plan and the revised 13-week
cash flow and availability projections reflecting the payment
of the vendors in accordance with the Plan. In addition, the
Company shall furnish us with all financial information,
projections, budgets, business plans, cash flows and such
other information as we may reasonably request from time to
time. We shall have received current agings of receivables,
current perpetual inventory records and/or rollforwards of
accounts and inventory through the date of closing, together
with supporting documentation, and other documents and
information that will enable us to accurately identify and
verify the eligible collateral at or before closing in a
manner satisfactory to us and including documentation with
respect to inventory in transit, goods in bonded warehouses or
at other third-party locations. We may require daily or weekly
reporting of collateral information from the Company and/or
may establish in our records a loan account for the Company
prior to closing. Such actions should not be construed to
waive or modify any conditions to lending. Provided no Event
of Default exists and excess availability of at least Three
Million ($3,000,000) Dollars is maintained at all times,
reporting of inventory will only be required monthly.
Otherwise, inventory reporting will be required at least
weekly.
(b) Satisfactory legal review of the terms of the Credit Facility
and its structure by our counsel, and execution and delivery
of loan documents, all in form and substance satisfactory to
us. The loan documents will include, among other documents, a
loan agreement, security agreements, UCC financing statements,
intercreditor agreements with any subordinated creditors,
including any subordinated creditor with a junior lien on any
of the assets of the Company, agreements from certain third
parties, opinion letters of counsel, the guarantee of the
obligations of the Company to us by its corporate subsidiaries
and affiliates. Such loan documents will contain provisions,
representations, warranties, conditions, covenants and events
of default satisfactory to us and our counsel. With respect to
financial covenants, the loan documents will include only one
(1) financial covenant, which covenant will only be tested if
the excess availability under the Credit Facility falls below
Three Million ($3,000,000) Dollars at any time during the
fiscal quarter to be tested and no default exists. Such
financial covenant will be a quarterly Debt Service Coverage
ratio test as
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defined in the loan agreement and shall be greater than .9:1
for the fiscal quarter ended March 31, 2004, and shall be
greater than 1.2:1 for the fiscal quarter ended June 30, 2004
and at all times thereafter.
(c) The excess availability under the lending formulas provided
for above, subject to sublimits and reserves, shall be not
less than Two Million Five Hundred Thousand ($2,500,000)
Dollars at the closing, after the payment of fees and expenses
of the transaction and the application of the proceeds of the
initial loans, and after deduction for past due payables and
other obligations (except for those non-critical payables that
were no more than forty-five (45) days past due at the time of
the bankruptcy filing and expected to be repaid from the cash
flow generated from the restoration of thirty (30) to
forty-five (45) day terms from the respective vendors upon
payment of the pre-petition payables for similar amounts
outstanding). Accounts payable of the Company must be at a
level and in a condition reasonably acceptable to us.
(d) All subordinated debt to be on terms and conditions acceptable
to us. In addition to, and not in limitation of the forgoing,
we shall have received, in form and substance acceptable to
us, intercreditor and subordination agreements with any
subordinated creditors, including any subordinated creditor
with a junior lien on any of the assets of the Company.
(e) The Company shall have provided to us balance sheet, income
statement, cashflow, and availability projections (including
the assumptions underlying such projections), all in a level
of detail acceptable to us, prepared on a monthly basis for
the first year of the contract term and on a quarterly basis
thereafter.
(f) We shall have received a certified copy of a final
non-appealable order entered by the United States Bankruptcy
Court for the Southern District of Florida, West Palm Beach
Division (the "Bankruptcy Court"), in form and substance
acceptable to us, approving confirmation of the Plan
("Confirmation Order"), which Confirmation Order shall conform
to the Plan in all material respects and include such
provisions affecting the Financing as we may request, shall be
entered by the Bankruptcy Court after due notice to all
creditors and other parties-in-interest, shall not have been
stayed by the Bankruptcy Court (or by any other Court having
jurisdiction to issue any such stay) or reversed, vacated,
amended, supplemented or modified in any respect, and the time
to appeal the Confirmation Order shall have expired, no appeal
or petition for review, rehearing, or certiorari with respect
to the Confirmation Order shall be pending and the
Confirmation Order shall otherwise be in full force and
effect.
(g) All conditions precedent to the occurrence of the effective
date under the Plan shall have been satisfied in full, subject
only to our making of the initial loans pursuant to the Credit
Facility. In addition, the definitive documents shall provide
that after closing Company shall be in compliance with all
operating budgets and other transactions contemplated under
the Plan.
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(h) No material adverse change in the business, operations,
profits or prospects of the Company or in the condition of the
assets of the Company shall have occurred since the date of
our latest field examinations.
(i) We shall have received and reviewed each of the Company's
major customer contracts, which shall be in form and substance
satisfactory to us.
(j) We shall have received inventory appraisals, in form and
substance acceptable to us, provided, that, if such inventory
appraisals cannot be completed by closing, we shall have
received evidence, satisfactory to us, that the inventory
appraisals are in progress and could not be completed by
closing. After closing, inventory appraisals will be limited
to two (2) per year provided no defaults exist and provided
availability exceeds Three Million ($3,000,000) Dollars.
Otherwise, appraisals will be required as deemed appropriate
by us. However, the availability test for this purpose will
commence six (6) months from the date of the appraisal to be
ordered in conjunction with the closing of this transaction.
(k) This transaction and the events contemplated herein must close
by January 23, 2004.
The terms and conditions described in this letter are intended as an outline
only and this letter does not purport to include or summarize all of the terms,
conditions, covenants and other provisions which will be contained in the loan
documents.
This letter is delivered to the Company on the condition that its existence and
its contents will not be disclosed by the Company without our prior written
approval except (i) as may be required to be disclosed in any legal proceeding
or as may otherwise be required by law and (ii) on a confidential and "need to
know" basis, to your directors, officers, employees, advisors and agents.
Notwithstanding the foregoing, after acceptance of this commitment letter by the
Company, the Company may disclose the terms of this commitment letter with the
Company's disclosure statement with respect to the Company's Plan that will be
filed with the Bankruptcy Court. In no event shall we have any liability to the
Company, its creditors or any other parties-in-interest in connection with such
summary.
Unless accepted by the Company and as so accepted, received by us by the close
of business in Miami, Florida on December 17, 2003 with the deposit referred to
above, this commitment shall expire at such time.
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This letter is solely for your benefit and is not to be relied upon by any third
party.
We look forward to continuing to work with you and your associates in this
transaction.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
(FLORIDA)
By: /s/ Pat Cloninger
-------------------------
Pat Cloninger
Title: Vice President
ACCEPTED on this__________________day of December, 2003:
REPTRON ELECTRONICS, INC.
By: ______________________
Paul Plante
Title: President
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PERFORMANCE PRICING GRID (ONLY APPLICABLE IF DEBT SERVICE COVERAGE RATIO FOR THE
PRECEDING FISCAL QUARTER IS GREATER THAN 1.2:1):
QUARTERLY EXCESS APPLICABLE APPLICABLE APPLICABLE
AVAILABILITY (AT ALL PRIME RATE EURODOLLAR RATE UNUSED LINE
TIMES) MARGIN MARGIN FEE
- --------------------- ---------- --------------- -----------
>$12MM .25% 2.25% .25%
>$8mm up to $12MM .50% 2.50% .25%
> $5mm up to $8MM .75% 2.75% .375%
$5MM Or less 1% 3.00% .375%
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