-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hx78RggHEKwy8trPrBcIllaKQH3ku/5Kij5p6CbXcrLspLKf1gFsWt7FoWyeftoG Ryr3KbQedtDHXsXTc7h9kw== 0000950008-96-000269.txt : 19960814 0000950008-96-000269.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950008-96-000269 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN MICRO TECHNOLOGY INC CENTRAL INDEX KEY: 0000715842 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 942414428 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11560 FILM NUMBER: 96610602 BUSINESS ADDRESS: STREET 1: 254 E HACIENDA AVENUE CITY: CAMPBELL STATE: CA ZIP: 95008 BUSINESS PHONE: 4083790177 10-Q 1 FORM 10-Q Securities and Exchange Commission Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1996 Commission File Number 0-11560 ------------------------------- ------------------------------ WESTERN MICRO TECHNOLOGY, INC. ------------------------------ (Exact name of registrant as specified in its charter) California 94-2414428 ------------ ------------ (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 254 E. Hacienda Avenue, Campbell, CA 95008 ---------------------------------------- ----------- (Address of principal executive offices) (Zip Code) (408) 379-0177 N/A ------------------ ----- (Registrant's telephone number, Former name, former address and former including area code) fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for at least the past 90 days. YES |X| NO |_| Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 8, 1996 ----- ----------------------------- Common Shares, without par value 4,226,342 Page 1 of 14 pages. The exhibit index is located on page 13. WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARY INDEX Page ---- PART I - FINANCIAL INFORMATION Item 1. Financial Statements 3 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1996 and 1995 3 Consolidated Balance Sheets at June 30, 1996 and December 31, 1995 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders 10 Item 6. Exhibits and Reports on Form 8-K 11 Signatures 12 Index to Exhibits 14 When used in this Report, the words "estimate," "project," "intend" and "expect" and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of certain of such risks, see "Factors Affecting Future Results" on page 9. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release updates or revisions to these statements. Page 2 of 14 pages PART I - FINANCIAL INFORMATION Item 1. Financial Statements. -------------------- WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (Unaudited)
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------- ------------------ 1996 1995 1996 1995 ---------- -------- -------- -------- Net sales $ 32,365 $ 30,018 $ 59,981 $ 63,515 Cost of goods sold 28,459 26,421 52,495 55,875 -------- -------- -------- -------- Gross profit 3,906 3,597 7,486 7,640 -------- -------- -------- -------- Gross profit as % of sales 12.07% 11.98% 12.48% 12.03% Selling, general and administrative expenses 3,269 4,494 6,260 9,044 Restructuring costs -- 3,600 -- 3,600 -------- -------- -------- -------- Operating income (loss) 637 (4,497) 1,226 (5,004) Interest expense 197 287 434 562 Other income 106 -- 159 31 -------- -------- -------- -------- Income (loss) before income taxes 546 (4,784) 951 (5,535) Provision for income taxes 60 -- 94 -- -------- -------- -------- -------- Net income (loss) $ 486 $ (4,784) $ 857 $ (5,535) ======== ======== ======== ======== Net income (loss) per common share $ 0.11 $ (1.29) $ 0.19 $ (1.49) ======== ======== ======== ======== Number of shares used in per share calculation 4,529 3,705 4,443 3,705 ======== ======== ======== ======== The accompanying notes are an integral part of the financial statements.
Page 3 of 14 pages WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) (Unaudited)
ASSETS JUNE 30, DECEMBER 31, 1996 1995 -------- -------- Current Assets: Cash $ 79 $ 546 Trade accounts receivable, net of allowance for doubtful accounts of $332 at June 30, 1996 and $380 at December 31, 1995 20,332 14,258 Inventories, net 14,478 15,251 Other current assets 1,007 1,705 -------- -------- Total current assets 35,896 31,760 Property and equipment, net 2,728 1,720 Goodwill, net of accumulated amortization 3,474 2,206 Other assets 206 213 -------- -------- $ 42,304 $ 35,899 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Notes payable $ 8,089 $ 7,040 Current portion of capital leases 75 86 Accounts payable 19,769 15,950 Accrued expenses 1,249 1,372 -------- -------- Total current liabilities 29,182 24,448 Capital lease obligations, less current portion 82 117 Other 281 330 Shareholders' Equity: Preferred Stock, without par value, 10,000,000 shares authorized; none issued and outstanding -- -- Common Stock, without par value, 10,000,000 shares authorized; issued and outstanding: 4,207,145 at June 30, 1996 and 4,009,988 at December 31, 1995 16,485 15,587 Accumulated deficit (3,726) (4,583) -------- -------- Total Shareholders' Equity 12,759 11,004 -------- -------- $ 42,304 $ 35,899 ======== ======== The accompanying notes are an integral part of these financial statements.
Page 4 of 14 pages WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, ----------------- 1996 1995 ------- -------- Cash flows from operating activities: Net income (loss) $ 857 $(5,535) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 445 273 Gain on sale of equipment (22) -- Provision for doubtful accounts receivable -- 206 Provision for restructuring costs -- 3,600 Change in assets and liabilities: Accounts receivable (5,265) 230 Inventories 888 (492) Other current assets 698 154 Other assets 7 43 Accounts payable 2,847 2,714 Accrued expenses and other (127) (151) ------- ------- Net cash provided by operating activities 328 1,042 ------- ------- Cash flows from investing activities: Purchase of R&D, net of cash acquired (662) -- Proceeds from sale of equipment 22 -- Acquisition of property and equipment (1,331) (570) ------- ------- Net cash used in investing activities (1,971) (570) ------- ------- Cash flows from financing activities: Net proceeds from (payments on) short-term borrowings 1,049 (483) Payments on lease obligations (91) (58) Proceeds from exercise of stock options 218 6 Proceeds from equipment loan -- 101 ------- ------- Net cash provided by (used in) financing activities 1,176 (434) Net (decrease) increase in cash (467) 38 Cash--beginning of period 546 138 ------- ------- Cash--end of period $ 79 $ 176 ======= ======= The accompanying notes are an integral part of these financial statements.
Page 5 of 14 pages WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1996 (Unaudited) Note 1: The unaudited consolidated financial statements which include the accounts of Western Micro Technology, Inc. and its subsidiary have been prepared in accordance with the instructions to Form 10-Q and do not include all information and footnotes necessary to comply with generally accepted accounting principles. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. The consolidated statements of operations for the three and six months ended June 30, 1996 are not necessarily indicative of the results to be expected for a full year or for any other period. These financial statements should be read in conjunction with the Financial Statements and the notes thereto included in the Company's latest audited financial statements for the year ended December 31, 1995. Note 2: The December 31, 1995 balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. Note 3: Inventories, consisting primarily of purchased product held for resale, are stated at the lower of cost (first-in, first-out) or net realizable value. Note 4: Supplemental Cash Flow Information: Cash paid for interest in the six-month period ended June 30, 1996 and 1995 was $412,000 and $536,000 respectively. Note 5: On January 2, 1996, the Company acquired the assets of R&D Hardware Systems Company of Colorado ("R&D"), a privately held company, for $1,000,000 and 125,000 shares of the Company's common stock. The agreement between the Company and R&D (the "Agreement") also contains an earn-out provision which allows R&D to earn up to an additional 142,500 shares of the Company's common stock based on attainment of gross profit targets for certain fiscal year 1996 and 1997 sales (as defined in the Agreement) up to a cumulative value not to exceed $292,500. The assets purchased primarily consisted of certain inventories and trade accounts receivable of R&D. The acquisition has been accounted for as a purchase with the future results of R&D to be included in the Company's financial statements from the date of purchase. In connection with the acquisition, the Company recorded approximately $1,380,000 of goodwill and other intangible assets. For the year ended December 31, 1995, R&D had revenues of $9,557,000 with net income of $446,000. Page 6 of 14 pages Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations. --------------------- Recent Events - ------------- On January 2, 1996, the Company acquired the assets of R&D Hardware Systems Company of Colorado ("R&D"), a privately held company, for $1,000,000 and 125,000 shares of the Company's common stock. The agreement between the Company and R&D (the "Agreement") also contains an earn-out provision which allows R&D to earn up to an additional 142,500 shares of the Company's common stock based on attainment of gross profit targets for certain fiscal year 1996 and 1997 sales (as defined in the Agreement) up to a cumulative value not to exceed $292,500. The assets purchased primarily consisted of certain inventories and trade accounts receivable of R&D. The acquisition has been accounted for as a purchase with the future results of R&D to be included in the Company's financial statements from the date of purchase. In connection with the acquisition, the Company recorded approximately $1,380,000 of goodwill and other intangible assets. For the year ended December 31, 1995, R&D had revenues of $9,557,000 with net income of $446,000. Three Months Ended June 30, 1996 Compared to Three Months Ended June 30, 1995 - ----------------------------------------------------------------------------- The Company's revenues and gross profits for the quarter were generated entirely from the computer systems distribution business, as the Company sold its components distribution business in July 1995. Net sales for the three months ended June 30, 1996 of $32,365,000 were 8% higher than the net sales of $30,018,000 for the corresponding period in 1995. Prior period results include components distribution sales of approximately $10,435,000 and computer systems sales of approximately $19,583,000; indicating a 65% increase in computer systems sales for the first quarter of 1996 compared to the first quarter of 1995. Computer systems sales increased due to the expansion of the Company's computer systems distribution business and the acquisitions of International Parts, Inc. ("IPI") in November 1995 and R&D in January 1996. Gross profit as a percentage of sales for the three months ended June 30, 1996 was 12.07% compared to 11.98% for the same period one year ago. Selling, general, and administrative expenses decreased 27% in the three months ended June 30, 1996 from the same period a year ago due to the sale of the Company's components distribution assets, the corresponding transfer of the components-related employees and infrastructure to the buyer and continued management emphasis on reducing costs. In relation to the ongoing computer systems distribution business, the expenses saved as a result of the sale of the components business have been partially offset by necessary personnel increases as a result of higher systems sales, higher depreciation expense as a result of additions to the Company's infrastructure and higher amortization expense as a result of increased goodwill related to recent acquisitions. Page 7 of 14 pages Interest expense decreased 31% in the three months ended June 30, 1996 versus June 30, 1995 due to a reduction in bank borrowings as a result of the retirement of debt using the proceeds received from the sale of the Company's components distribution assets. The increase in other income is primarily due to commissions generated from assisting customers in obtaining lease financing for purchased computer systems and as a result of a gain recognized on the sale of equipment. Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995 - ------------------------------------------------------------------------- Net sales from operations for the six months ended June 30, 1996 were $59,981,000 as compared to $63,515,000 for the same period a year ago, a decrease of 6%. Net sales for the six months ended June 30, 1995 included semiconductor distribution sales of approximately $26,618,000 and computer systems sales of approximately $36,897,000, resulting in a year-to-year 63% increase in systems sales for the six months ended June 30, 1996. Gross profit as a percentage of net sales for the six months ended June 30, 1996 was 12.48%, compared to 12.03% for the same period one year ago. The increase is due to the fact that component gross profit margins, which are typically higher than computer system margins, were rapidly declining in the first six months of 1995 before the eventual sale of the component assets in July 1995. Selling, general and administrative expenses decreased 31% in the six months ended June 30, 1996 from the same period a year ago due to the sale of the Company's component distribution assets, the corresponding transfer of the components-related employees and infrastructure to the buyer and continued management emphasis on reducing costs. In relation to the ongoing computer systems distribution business, the expenses saved as a result of the sale of the components business have been partially offset by necessary personnel increases as a result of higher systems sales, higher depreciation expense as a result of infrastructure additions and higher amortization expense as a result of increased goodwill related to recent acquisitions. Interest expense decreased 23% in the six months ended June 30, 1996 versus June 30, 1995 due to a reduction in bank borrowings as a result of the retirement of debt from the proceeds received from the sale of the Company's components distribution assets. The increase in other income is primarily due to commissions generated from assisting customers in finding lease financing for purchased computer systems and as a result of a gain recognized on the sale of equipment. Liquidity and Capital Resources - ------------------------------- Net cash provided by operating activities during the six months ended June 30, 1996 totaled $328,000 compared to the net cash provided by operating activities of $1,042,000 for the six months ended June 30, 1995. The increase in the accounts receivable of $5,265,000 was primarily due to increased sales volume and the purchase of assets from R&D. This was offset by a decrease in inventory of $888,000 as a result of increased emphasis on inventory management and higher drop Page 8 of 14 pages shipment volume, and by an increase in accounts payable of $2,847,000 as a result of the increased sales volume. Net cash used in investing activities totaled $1,971,000 for the six months ended June 30, 1996, compared to net cash used in investing activities of $570,000 for the six months ended June 30, 1995. The significant investing activities for 1996 consist of the R&D asset purchase as well as continuing leasehold and computer hardware and software investments made at the Company's headquarters and sales office sites. The Company has a $15,000,000 line of credit with a bank which expires in April 1998. Borrowings under this line of credit are limited to 80% of eligible accounts receivable (up to a maximum of $11,000,000) and 40% of eligible inventories (up to a maximum of $4,000,000), as defined in the agreement, and are collateralized by substantially all of the Company's assets. Borrowings under this line were $8,089,000 at June 30, 1996. The Company has required substantial working capital to finance inventories, accounts receivable, capital expenditures and has financed its working capital requirements, software upgrades and equipment requirements primarily through bank borrowings. The Company believes it has the ability to obtain sufficient resources to fund its operations through calendar 1996. Factors Affecting Future Results - -------------------------------- The Company's past operating results have been, and its future operating results will be, subject to a variety of uncertainties. The Company's quarterly operating results may be subject to fluctuations as a result of a number of factors, including the addition or loss of key suppliers or customers, price competition and changes in the supply and demand for computer products. Price competition in the industries in which the Company competes is intense and could result in gross margin declines, which could have a material adverse impact on the Company's profitability. The Company's future success depends in part on the continued service of its key personnel, and its ability to identify and hire additional personnel. There is intense competition for qualified personnel in the areas of the Company's activities and there can be no assurance that the Company will be able to continue to attract and retain qualified personnel necessary for the development of its business. Loss of the services of, or failure to recruit, key sales and management personnel could be significantly detrimental to the Company. Page 9 of 14 pages PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. ----------------- Item 2. Changes in Securities. None. --------------------- Item 3. Defaults on Senior Securities. None. ----------------------------- Item 4. Submission of Matters to a Vote of Security Holders. At the Annual --------------------------------------------------- Meeting of Shareholders on May 16, 1996, the following proposals were voted on and approved by the holders of 3,530,612 shares of common stock, representing 83.9% of the outstanding shares on such date (4,204,645): (1) To elect a Board of six (6) directors to hold office until the next annual meeting of shareholders or until their respective successors have been elected and qualified:
Director Votes For Withheld ----------------------------- --------- -------- James J. Heffernan........... 3,371,070 159,542 Jerome A. Martin............. 3,371,770 158,842 P. Scott Munro............... 3,372,770 157,842 K. William Sickler........... 3,372,770 157,842 J. Larry Smart............... 3,372,770 157,842 William H. Welling........... 3,342,470 188,142
(2) To approve the amendment and restatement of the Company's 1994 Stock Option Plan: Votes For Against Abstain Broker Non-Votes --------- ------- ------- ---------------- 2,816,075 316,573 30,168 367,796 (3) To ratify the designation of Coopers & Lybrand L.L.P. as independent accountants for the period ending December 31, 1996: Votes For Against Abstain Broker Non-Votes --------- ------- ------- ---------------- 3,503,902 14,842 11,868 0 Item 5. Other Information. None. ----------------- Page 10 of 14 pages Item 6. Exhibits and Reports on Form 8-K. -------------------------------- A. Exhibits. -------- * Exhibit 10.1 1994 Stock Option Plan of Western Micro Technology, Inc. Exhibit 11.1. Computation of Net Income (Loss) Per Share * Denotes management compensation plan or arrangement. B. Reports on Form 8-K. ------------------- None. Page 11 of 14 pages SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Registrant: WESTERN MICRO TECHNOLOGY, INC. Dated: August 9, 1996 By /s/ P. SCOTT MUNRO ---------------------------------- P. Scott Munro Chief Executive Officer, President Dated: August 9, 1996 By /s/ JAMES W. DORST ---------------------------------- James W. Dorst Chief Financial Officer Page 12 of 14 pages INDEX TO EXHIBITS EXHIBIT PAGE - ------- ---- *10.1 1994 Stock Option Plan of Western Micro Technology, Inc., filed as Exhibit 4.1 to the Company's Registration Statement on Form S-8, filed with the Commission on July 26, 1996, is hereby incorporated by reference. 11.1 Statement Regarding Computation of Net Income (Loss) 14 Per Share for the Three and Six Months Ended June 30, 1996 and 1995 * Denotes management compensation plan or arrangement. Page 13 of 14 pages EX-11.1 2 EXHIBIT 11.1 EXHIBIT 11.1 WESTERN MICRO TECHNOLOGY, INC. AND SUBSIDIARY COMPUTATION OF NET INCOME (LOSS) PER SHARE (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (Unaudited)
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, -------------------- ------------------ 1996 1995 1996 1995 --------- --------- -------- -------- Weighted average shares outstanding for the period 4,205 3,705 4,193 3,705 Dilutive effect of stock options at average market price 324 -- 250 -- Average shares for computing primary net income (loss) per share 4,529 3,705 4,443 3,705 Adjustment for dilutive effect of stock options at ending market price -- -- 42 -- Average shares for computing fully diluted net income (loss) per share 4,529 3,705 4,485 3,705 ------- ------- ------- ------- Net income (loss) $ 486 $(4,784) $ 857 $(5,535) ======= ======= ======= ======= Net income (loss) per common share: Net income (loss) per primary share $ 0.11 $ (1.29) $ 0.19 $ (1.49) ======= ======= ======= ======= Net income (loss) per fully diluted share $ 0.11 $ (1.29) $ 0.19 $ (1.49) ======= ======= ======= =======
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 APR-01-1996 JUN-30-1996 79 0 20,664 332 14,478 35,896 6,204 3,476 42,304 29,182 0 0 0 16,485 0 42,304 32,365 32,365 28,459 3,269 0 0 197 546 60 486 0 0 0 486 .11 .11
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