-----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, KpHAvNyP3QBKCBWRcp0r9HD+omU6P0Dk0jGupP92NAcFrPThHFBaOSfvtZrN0CB/ rgKBODeZOGZV/cQaL736og== /in/edgar/work/20000627/0000950129-00-003432/0000950129-00-003432.txt : 20000920 0000950129-00-003432.hdr.sgml : 20000920 ACCESSION NUMBER: 0000950129-00-003432 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20000401 FILED AS OF DATE: 20000627 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENT ELECTRONICS CORP CENTRAL INDEX KEY: 0000793024 STANDARD INDUSTRIAL CLASSIFICATION: [5065 ] IRS NUMBER: 741763541 STATE OF INCORPORATION: TX FISCAL YEAR END: 0328 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09520 FILM NUMBER: 661701 BUSINESS ADDRESS: STREET 1: 1111 GILLINGHAM LN CITY: SUGAR LAND STATE: TX ZIP: 77478 BUSINESS PHONE: 2812434000 MAIL ADDRESS: STREET 1: 1111 GILLINGHAM LN CITY: SUGAR LAND STATE: TX ZIP: 77478 10-K 1 e10-k.txt KENT ELECTRONICS CORPORATION - DATED APRIL 1, 2000 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended April 1, 2000 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 0-14643 KENT ELECTRONICS CORPORATION (Exact Name of Registrant as Specified in its Charter) Texas 74-1763541 (State or other jurisdiction (I.R.S. employer of incorporation or organization) identification no.) 1111 Gillingham Lane 77478 Sugar Land, Texas (Zip Code) (Address of principal executive offices) Registrant's telephone number, including area code: (281) 243-4000 Securities registered pursuant to Section 12(b) of the Act: Common Stock, without par value New York Stock Exchange, Inc. 4 1/2% Convertible Subordinated Notes Due 2004 (Title of each class) (Name of each exchange on which registered) Securities registered pursuant to Section 12(g) of the Act: None. 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. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant as of June 21, 2000 was approximately $777,805,084. As of June 21, 2000, there were outstanding 28,446,028 shares of Common Stock, without par value. DOCUMENTS INCORPORATED BY REFERENCE The Proxy Statement for the 2000 Annual Meeting of Shareholders of the Registrant (Sections entitled "Kent Common Stock Beneficially Owned by Directors, Officers and Five Percent Shareholders", "Compensation Tables", "Executive Officers" and "Proposal 1 - Election of Directors", and Subsections entitled "Section 16(a) Beneficial Ownership Reporting Compliance" and "Certain Transactions") is incorporated by reference in Part III of this Report. ================================================================================ 2 PART I This Annual Report on Form 10-K contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance or trends and may contain the words "believe," "anticipate," "expect," "estimate," "project," "will be," "will continue," "will likely result," or words or phrases of similar meaning. All forward-looking statements should be read in conjunction with the cautionary statements included elsewhere herein which discuss certain risks and other important factors that could cause the Company's actual results or performance to differ materially from those stated in such forward-looking statements. (See Item 7. - Management's Discussion and Analysis of Financial Condition and Results of Operations, Risks Relating to Forward-Looking Statements.) ITEM 1. BUSINESS THE COMPANY Kent Electronics Corporation (the "Company") is a national specialty distributor, network integrator and full-service contract manufacturer. The Company has strategically aligned its operations into three complementary business units that seek to develop competitive advantages within targeted markets. o Kent Components distributes electronic connectors, electronic wire and cable, and other passive and electromechanical products and interconnect assemblies used in assembling and manufacturing electronic products. The division also provides value-added services such as cable assembly, fan assembly, taping and reeling, and component modification as well as a variety of materials management services. o Kent Datacomm offers a full range of end-to-end network solutions and professional services, including design consulting, source selection, product configuration and installation, and warranty and technical support. The division's areas of expertise include voice over IP, video to the desktop, network security, wireless, network management and structured cabling solutions. The voice and data communication products it offers include network interface cards, switches, hubs, routers, modems, connectivity devices, fiber optics and copper cabling. o K*TEC Electronics is a full-service vertically integrated contract manufacturer whose capabilities include electronic interconnect assemblies, printed circuit board assemblies, sheet metal fabrication, powder painting, plastic injection molding, other subassemblies that are built to customers' specifications and final system integration (box build). The Company focuses on providing its customers a continuum of products and services that emphasizes technology-based materials management and manufacturing solutions. To successfully execute its strategy, during the three fiscal years ended April 1, 2000, the Company invested approximately $77 million in capital expenditures. These expenditures were primarily for information systems, equipment and construction of the Company's state-of-the-art 220,000 square foot distribution facility that began operating in fiscal 2000 and the adjacent state-of-the-art K*TEC facility in Sugar Land, Texas completed in spring 1997, consisting of approximately 472,000 square feet. INDUSTRY OVERVIEW Outsourcing is a rapidly growing trend in many industry sectors in the United States as companies seek to reduce costs and improve operating efficiencies. Electronics original equipment manufacturers ("OEMs") are increasingly outsourcing materials management and manufacturing operations, ranging from inventory management to complete box build combined with distribution to the end customer. Manufacturers of electronic products are responding to this trend by utilizing technology-based materials management and logistical solutions provided by distributors. In addition, the Company believes that there is an emerging trend of OEMs to align with contract manufacturers who have distribution capabilities and expertise. Because of its experience in both distribution and manufacturing, the Company is particularly well-positioned to capitalize on these trends. The Company expects networking customers, including corporations, educational institutions and governmental agencies, to rely 2 3 increasingly on value-added resources to design, deliver, install, fine-tune and maintain complex systems. The convergence of voice, data and video applications and the growth in electronic commerce and the Internet will continue to present opportunities to provide network integration services. The potential benefits from outsourcing materials management, manufacturing operations and network integration services include: FOCUSED RESOURCES. Because the electronics industry is experiencing greater levels of competition and more rapid technological change, many OEMs are focusing their resources on activities and technologies in which they add the greatest value. By offering comprehensive materials management solutions and integrated manufacturing services, the Company allows OEMs to focus on their core competencies, such as product development and marketing. IMPROVED INVENTORY MANAGEMENT AND PURCHASING POWER. Electronics OEMs are faced with increasing difficulties in efficiently planning, procuring and managing their inventories 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. By using the Company's volume procurement capabilities and expertise in inventory management, an OEM can reduce production and inventory costs. REDUCED TIME TO MARKET. Due to intense competitive pressures and rapid technological developments in the electronics industry, OEMs are faced with increasingly shorter 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 the Company's expertise in providing materials management, logistical and manufacturing solutions. REDUCED COSTS AND CAPITAL INVESTMENT. As electronic products have become more technologically advanced and shipped in greater volumes, the distribution and manufacturing processes have become increasingly automated, requiring greater investments in technology and capital equipment on an ongoing basis. The Company's materials management services allow manufacturers to operate more efficiently by relying on scheduled deliveries of components at the time they are needed in the production process, thereby reducing inventory levels. K*TEC's contract manufacturing services enable an OEM to gain access to advanced, high-volume manufacturing and distribution capabilities while reducing the OEM's capital requirements. ACCESS TO LEADING MANUFACTURING TECHNOLOGY. Electronic products and electronics manufacturing technology have become increasingly sophisticated and complex, making it more difficult and expensive for OEMs to maintain the necessary technological expertise to manufacture products internally. OEMs are motivated to work with a contract manufacturer in order to gain access to specialized process expertise and manufacturing know-how. ACCESS TO LEADING NETWORK INTEGRATION SERVICES. Corporations and educational and governmental institutions are faced with the challenge of developing and maintaining complex network systems to harness the potential of electronic commerce, the Internet and the convergence of voice, data and video applications. Networking customers are motivated to work with a network integrator in order to gain access to a selection of products and expertise in design, installation, security, monitoring and technical support. COMPANY STRATEGY The Company is pursuing the following strategies to capitalize on current and emerging electronics industry trends. PROVIDING A CONTINUUM OF CUSTOMER SERVICES. The Company provides a continuum of services to its customers, ranging from order fulfillment to box build combined with direct distribution to an OEM's customers. In response to evolving customer needs, the Company continues to shift from order fulfillment to technology-based materials management services. In addition, the Company continues to expand its 3 4 manufacturing relationships from subassemblies to box build as OEMs increase their demand for outsourced supply chain management solutions. REMAINING A KEY PLAYER IN TARGET MARKETS. The Company has focused on markets where it strives to maintain and enhance its position as a national distributor of premier products. The Company believes it can strengthen its position within these markets by expanding its supplier relationships and capitalizing on OEMs' shift toward using distribution channels. CAPITALIZING ON INDUSTRY CONSOLIDATION. The Company expects consolidation within the specialty distribution and contract manufacturing sectors of the electronics industry to continue in response to increasing demands on suppliers by OEMs to provide integrated, technology-based materials management and manufacturing solutions. The Company anticipates increased opportunities to acquire the production capacity of OEMs following the trend toward outsourcing manufacturing operations. In addition, the Company expects consultation to continue in the network integration sector in response to networking customers' increasing reliance on outsourced professional services. The Company will continue to evaluate and pursue acquisition opportunities that enhance its position as a national distributor, network integrator and contract manufacturer of electronic products. CAPITALIZING ON NETWORK TECHNOLOGY PROLIFERATION. The Company expects large networking customers to rely increasingly on value-added resources to install, fine-tune and maintain complex systems. In response to these customer needs, the Company has expanded its professional services, including network design and consultation, product configuration, network security, remote network monitoring and troubleshooting, and maintenance programs and technical support. Professional services provide an emergent source of revenues, as well as a means of solidifying relationships with customers and suppliers. MAXIMIZING SYNERGIES BETWEEN BUSINESS UNITS. The Company believes its three business units will continue to enjoy revenue and cost synergies and economies of scale. These benefits include: (i) greater product offerings to the Company's customers across business units, (ii) purchasing and volume procurement synergies, (iii) cost efficient opportunities to expand into new geographic markets by utilizing existing facilities and personnel, and (iv) shared warehousing and materials handling capabilities. FOCUSING ON CUSTOMER SERVICE. The Company continues to emphasize customer service as a competitive advantage. The Company's technology-based materials management services enable the Company to offer value-added solutions to its customers. Customers of Kent Components may enter orders and review the status of their orders in an on-line, real-time environment through an Internet connection. Similarly, K*TEC customers have Internet access to K*TEC's intranet in order to monitor printed circuit board production quality, board and box build assembly methods and product throughput in a real-time environment. Each customer's Internet site is secured and tailored for the customer's unique needs. The Company believes that through these and other customer service innovations it will continue to strengthen and develop customer relationships. SPECIALTY DISTRIBUTION Kent Components focuses primarily on providing its industrial and OEM customers with rapid and reliable deliveries of interconnect, passive and electromechanical products as well as a wide variety of materials management services. The division also provides value-added services such as cable assembly, fan assembly, taping and reeling, and component modification. Kent Components utilizes a computerized inventory control system to assist in the marketing of its products and to coordinate purchases from suppliers with sales to customers. Customers of Kent Components may enter orders and review the status of their orders in an on-line, real-time environment through an Internet connection. The division's computer system provides detailed on-line information regarding the availability of the Company's entire stock of inventory located at its stocking facilities as well as on-line access to the inventories of most of the Company's major suppliers. Through its integrated real-time information system, the Company can readily track customers' orders through the entire process of entering the order, reserving products to fill the order, ordering components from suppliers, if necessary, and shipping products to customers on scheduled dates. Kent Components is thus able to provide the type of distributor service required 4 5 by its OEM customers that have adopted the "just-in-time" method of inventory procurement. Kent Components serves numerous markets, including the computer, instrumentation, medical, networking systems and telecommunications markets. NETWORK INTEGRATION Kent Datacomm offers a full range of end-to-end network solutions. The division's areas of expertise include voice over IP, video to the desktop, network security, wireless, network management and structured cabling solutions. The voice and data communication products it offers include network interface cards, switches, hubs, routers, modems, connectivity devices, fiber optics and copper cabling. Kent Datacomm's professional services include project management, network design, product configuration, remote network monitoring and troubleshooting, maintenance programs, and 7-day-a-week, 24-hour-a-day technical support. Through a focused sales effort, the Company believes it is able to participate directly in the large and rapidly growing networking market, capitalizing on the increasing need for network bandwidth. Kent Datacomm serves mid to large scale enterprises in numerous industries, as well as educational institutions and governmental agencies. CONTRACT MANUFACTURING K*TEC provides vertically integrated electronic manufacturing products and services, including printed circuit board assembly and test, electronic interconnect assemblies, subassemblies, sheet metal fabrication and powder paint, plastic injection molding and box build. The Company has developed innovative material requirements planning relationships with a select group of OEMs in the computer, medical instrumentation, networking, semiconductor capital equipment and telecommunications industries. These relationships are supported by sophisticated in-house product design and technical support capabilities. K*TEC support teams work closely with K*TEC's customers through all stages of product planning and production to apply advanced design and production technology. K*TEC's computer systems have a computer aided design capability that allows its engineers to be on-line with an OEM's engineers when developing and changing product designs. In addition, K*TEC customers have Internet access to K*TEC's intranet in order to monitor printed circuit board production quality, board and box build assembly methods and product throughput in a real-time environment. Each customer's Internet site is secured and tailored for the customer's unique needs. K*TEC's quality control standards provide another means of serving the needs of the Company's customers, since OEMs rely on suppliers to assure quality control for subassemblies rather than providing such quality control themselves. The Company believes that K*TEC's adherence to strict quality control standards and investment in state-of-the-art production facilities and equipment have attracted and retained important customers who have established extremely rigid product quality standards. K*TEC further complements its offering by providing full logistics support which allows the final assembly to be shipped directly to the customer's end customer. This supply chain management ability differentiates K*TEC as a resource in enhancing customers' cost-efficiency and time-to-market. SALES AND MARKETING Each of the Company's business units maintains its own direct sales force. At May 27, 2000, the Company employed approximately 400 sales representatives operating out of sales offices in 36 cities in 24 states. The Company's sales representatives undergo continuous training and attend classes in order to enhance both their technical expertise and sales techniques. Sales associates are compensated primarily on a commission basis. In the marketing of its products, the Company supplements the efforts of its direct sales force with direct mailings of brochures and catalogs, the publication of various white papers, as well as advertisements in trade journals. The Company concentrates its efforts in certain targeted markets in which it only distributes the products of a select group of leading suppliers. This facilitates sales personnel specialization within related product groupings, and permits sales representatives to develop a high degree of technical expertise. 5 6 COMPETITION The Company faces intense competition from a large number of distributors, suppliers and domestic and foreign manufacturers, some of which are larger, have greater financial resources and broader name recognition, and may, in some instances, have lower costs than the Company. According to industry publications, the Company was the seventh largest electronics distributor in the United States based on total 1999 calendar year sales. Industry publications estimate that ten distributors each had 1999 calendar year North American sales in excess of $500 million. Additionally, an industry publication estimated that Kent Datacomm was the sixth largest network value added reseller in the United States based on 1999 calendar year sales. The Company's manufacturing operations encounter competition from both domestic and foreign manufacturers. Foreign-manufactured products are often sold at prices below the Company's prices for comparable products. The Company's products are not protected from competition by any proprietary or intellectual property rights such as trade secrets or patents. The Company competes by providing its customers with reliable, rapid delivery of products that are priced at competitive levels and meet strict quality control standards. BACKLOG The Company's backlog (consisting of orders the Company believes to be firm) is based upon its internal tracking system, including verbal orders from customers, as well as written purchase orders, all of which may be modified, rescheduled or canceled without penalty. Historically, the Company's backlog figures have provided an indication of future sales in the short term, but traditional backlog has become a less meaningful indicator of future sales for the Company. In recent years, since the Company's business has been increasingly conducted through "just-in-time" and other materials management programs, the Company is required to provide materials in accordance with continually changing forecasts. The Company's estimated backlog, exclusive of "just-in-time" and other materials management programs and forecasts, was approximately $199 million as of April 1, 2000 and $73 million as of April 3, 1999. EMPLOYEES At May 27, 2000, the Company employed approximately 2,600 persons, all on a full time basis. The Company's employees are not subject to any collective bargaining agreement. In addition to its employees, the Company uses other workers on a contract basis, as its needs require. TRADEMARKS The Company has registered a number of trademarks and service marks relating to the operation of its business. These have been of value to the Company in the past and are expected to be of value in the future. The loss of a single trademark or service mark other than "KE Kent Electronics" or " K*TEC Electronics," in the opinion of management, would not have a material adverse effect on the conduct of its business. RECENT DEVELOPMENTS SINCE FISCAL YEAR END On May 22, 2000, the Company sold certain assets of its specialty wire and cable redistribution business. The Company believes that this transaction is consistent with its strategy of strengthening its core operations and effectively deploying its resources to serve high growth applications. The Company's redistribution assets which were sold generated annual revenues of approximately $93 million, representing 9% of the Company's total sales for the fiscal year ended April 1, 2000. The transaction is expected to be earnings-neutral to the Company in fiscal 2001. ITEM 2. PROPERTIES The Company's K*TEC facility located in Sugar Land, Texas consists of approximately 472,000 square feet. The Company's Sugar Land distribution facility, which was completed in Fiscal 2000 consists of approximately 220,000 square feet. The Company's facilities in Sugar Land are located on a 96 acre parcel of land. 6 7 The Company owns a 66,000 square foot office facility in Houston, Texas. The Company also owns a 2.7 acre tract of vacant land adjacent to the office facility. In nearby owned facilities, the Company uses approximately 18,000 square feet of space for office purposes and approximately 97,000 square feet for specialty distribution and network integration operations. The following table summarizes the principal properties leased by the Company:
APPROXIMATE LEASE LOCATION SQUARE FOOTAGE EXPIRES -------- -------------- ------- Austin, Texas 35,940(1) 2001 Fountain Valley, California 16,996 2003 Houston, Texas 151,000 2003 Linden, New Jersey 15,021 2004 McKean, Pennsylvania 56,700 2000 Milipitas, California 39,800 2003 Philadelphia, Pennsylvania 20,000 2001 Plano, Texas 52,432 2004 Santa Fe Springs, California 22,000 2001 Schaumburg, Illinois 19,614 2002 St. Paul, Minnesota 21,642 2005
(1) includes two leased properties in Austin, Texas. As of May 27, 2000, the Company's other facilities located in Bloomington, Illinois; Carrollton, Texas; Cedar Rapids, Iowa; Columbia, Maryland; Columbus, Ohio; Dayton, Ohio; Durham, Oregon; El Paso, Texas; Englewood, Colorado; Houston, Texas; Huntsville, Alabama; Indianapolis, Indiana; Irvine, California; Kentwood, Michigan; Livermore, California; Lowell, Massachusetts; McAllen, Texas; Miami, Florida; Mt. Laurel, New Jersey; New York, New York; Novi, Michigan; O'Hara Township, Pennsylvania; Orlando, Florida; Overland Park, Kansas; Pewaukee, Wisconsin; Pine Brook, New Jersey; Pittsford, New York; Plainview, New York; Raleigh, North Carolina; Redmond, Washington; Richardson, Texas; Salem, New Hampshire; San Angelo, Texas; San Antonio, Texas; San Diego, California; San Jose, California; Santa Clara, California; Seneca, New York; Solon, Ohio; Tempe, Arizona; Wallingford, Connecticut; and Warrensville Heights, Ohio occupied an aggregate of approximately 234,191 square feet subject to leases expiring at various times through the year 2005. Most of these leases are subject to renewal at the option of the Company for a term at least equal to the initial term, but at a newly determined rental rate. The Company is a party to certain leases through which the Company leased certain properties primarily used in connection with the Company's specialty wire and cable redistribution business, which was sold. In connection with the sale, the Company is in the process of obtaining landlord consents with respect to the assignment of the properties leased by the Company located in Baton Rouge, Louisiana; Cerritos, California; Charlotte, North Carolina; Dallas, Texas; Denver, Colorado; Exton, Pennsylvania; Kent, Washington; Lombard, Illinois; Norcross, Georgia; and Tampa, Florida. These leased properties consist of an aggregate of approximately 249,525 square feet and are subject to leases expiring at various times through the year 2004. ITEM 3. LEGAL PROCEEDINGS The Company is not party to any material pending legal proceedings, other than ordinary routine litigation incidental to its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 7 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS COMMON STOCK PRICE RANGE The Company's Common Stock is listed on the New York Stock Exchange and trades under the symbol "KNT." The following table presents the high and low closing prices for the Company's Common Stock for each fiscal quarter of the Company's fiscal years ended 1999 and 2000 and for a portion of the Company's current quarter, as reported by the New York Stock Exchange.
FISCAL YEAR 1999 HIGH LOW - ---------------- ---- --- First Quarter .................................... $ 23.81 $ 17.88 Second Quarter ................................... 18.69 8.00 Third Quarter .................................... 17.88 7.81 Fourth Quarter ................................... 13.75 8.31
FISCAL YEAR 2000 - ---------------- First Quarter .................................... $ 19.81 $ 9.13 Second Quarter ................................... 19.81 14.56 Third Quarter .................................... 24.06 16.38 Fourth Quarter ................................... 34.88 20.75
FISCAL YEAR 2001 - ---------------- First Quarter (through June 21, 2000) ............ $ 31.19 $ 24.50
On May 11, 2000, there were 1,213 holders of record of the Company's Common Stock. DIVIDEND POLICY Historically, the Company has reinvested earnings available for distribution to holders of Common Stock, and accordingly, the Company has not paid any cash dividends on its Common Stock. Although the Company intends to continue to invest future earnings in its business, it may determine at some future date that payment of cash dividends on Common Stock would be desirable. The payment of any such dividends would depend, among other things, upon the earnings and financial condition of the Company. 8 9 ITEM 6. SELECTED FINANCIAL DATA The following table summarizes selected consolidated financial data of the Company for each fiscal year of the five-year period ended April 1, 2000. The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements, including the notes thereto, included elsewhere herein.
Fiscal Years Ended --------------------------------------------------------------------- April 1, April 3, March 28, March 29, March 30, 2000 1999 1998 1997(1) 1996 --------- --------- --------- --------- --------- (In thousands, except per share data and ratio) Statement of Earnings Data: Net sales .................................. $ 993,938 $ 637,064 $ 659,400 $ 516,757 $ 425,810 Cost of sales .............................. 824,694 536,519 512,147 396,054 313,643 --------- --------- --------- --------- --------- Gross profit ........................ 169,244 100,545 147,253 120,703 112,167 Selling, general and administrative expenses ............. 134,310 100,992 90,854 73,607 66,106 Merger and integration costs ............... -- -- -- 5,500 -- --------- --------- --------- --------- --------- Operating profit (loss) ............. 34,934 (447) 56,399 41,596 46,061 Other income (expense): Interest expense .................... (10,470) (10,495) (5,272) (1,192) (898) Other - net (principally interest and dividend income) ................ 5,579 11,236 7,040 4,696 3,932 --------- --------- --------- --------- --------- Earnings before income taxes ....... 30,043 294 58,167 45,100 49,095 Income taxes ............................... 11,792 112 22,741 17,479 19,303 --------- --------- --------- --------- --------- Net earnings ........................ $ 18,251 $ 182 $ 35,426 $ 27,621 $ 29,792 ========= ========= ========= ========= ========= Earnings per common share: Basic ............................... $ 0.65 $ 0.01 $ 1.33 $ 1.08 $ 1.28 ========= ========= ========= ========= ========= Diluted ............................. $ 0.63 $ 0.01 $ 1.26 $ 1.00 $ 1.21 ========= ========= ========= ========= ========= Weighted average shares: Basic ............................... 28,062 27,674 26,598 25,580 23,192 ========= ========= ========= ========= ========= Diluted ............................. 28,888 28,099 28,097 27,580 24,722 ========= ========= ========= ========= ========= Ratio of earnings to fixed charges(2) ...... 3.4x 1.0x 9.8x 20.1x 27.4x
April 1, April 3, March 28, March 29, March 30, 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- (In thousands) Balance Sheet Data: Working capital ............................ $ 337,336 $ 385,778 $ 366,482 $ 150,884 $ 172,758 Total assets ............................... 731,135 604,641 591,710 325,594 305,174 Long-term debt, less current maturities .... 212,000 207,000 207,000 -- 1,258 Mandatorily redeemable preferred stock ..... -- -- -- -- 2,200 Stockholders' equity ....................... 344,732 321,169 312,569 262,367 230,968
- ---------- (1) Includes non-recurring merger and integration charges of $5.5 million ($3.4 million, net of taxes, or $0.13 (basic) and $0.12 (diluted) per share). Exclusive of such charges, fiscal 1997 net earnings were $31.0 million, or $1.21 (basic) and $1.12 (diluted) per share, and the ratio of earnings to fixed charges was 22.4x. (2) For purposes of computing the ratio of earnings to fixed charges, "earnings" consist of earnings before income taxes plus fixed charges. "Fixed charges" consist of interest expense, amortization of deferred financing costs and that portion of rental expense deemed representative of the interest factor. 9 10 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Consolidated Financial Statements, including the notes thereto, included elsewhere herein. This discussion includes financial information relating to the Company's specialty wire and cable redistribution business which was sold on May 22, 2000. RESULTS OF OPERATIONS The following table presents, as a percentage of net sales, certain selected consolidated financial data for each of the three fiscal years indicated.
Fiscal Years Ended -------------------------------------- April 1, April 3, March 28, 2000 1999 1998 -------- -------- --------- Distribution* .................................... 74.7% 71.5% 63.4% Manufacturing .................................... 25.3 28.5 36.6 -------- -------- -------- Net sales ........................................ 100.0 100.0 100.0 Cost of sales .................................... 83.0 84.2 77.7 -------- -------- -------- Gross profit ..................................... 17.0 15.8 22.3 Selling, general and administrative expenses ..... 13.5 15.9 13.8 -------- -------- -------- Operating profit (loss) .......................... 3.5 (0.1) 8.5 Other income (expense) Interest expense ............................ (1.1) (1.6) (0.8) Other - net (principally interest and dividend income) ......................... 0.6 1.8 1.1 -------- -------- -------- Earnings before income taxes ..................... 3.0 0.0 8.8 Income taxes ..................................... 1.2 0.0 3.4 -------- -------- -------- Net earnings ..................................... 1.8% 0.0% 5.4% ======== ======== ========
* Includes specialty distribution and network integration businesses. The principal products the Company distributes consist of connectors, receptacles and sockets, which collectively accounted for approximately 12%, 12% and 16% of the Company's total sales in its fiscal years ended in 2000, 1999 and 1998, respectively, and other electronic connecting components, such as cable and wiring products, which accounted for approximately 12%, 21% and 17% of the Company's total sales in such years and networking equipment which accounted for approximately 17%, 14% and 8% of the Company's total sales in such years. In addition, the Company distributes capacitors, resistors and electromechanical parts. COMPARISON OF FISCAL 2000 WITH FISCAL 1999 Net sales for the fiscal year ended April 1, 2000 increased $356.9 million, or 56.0%, to $993.9 million. Sales from the Company's specialty distribution and network integration businesses, which represented 74.7% of net sales for fiscal 2000, increased $287.2 million, or 63.0%, while contract manufacturing sales increased $69.7 million, or 38.4%. The specialty distribution and network integration sales increase reflected internal growth primarily from increased demand for networking products and services, and interconnect, passive and electromechanical products as well as contributions from acquisitions in fiscal 2000. The contract manufacturing sales increase primarily resulted from higher sales to manufacturers of semiconductor capital equipment and customers in the network systems industry, partially offset by lower sales to manufacturers of computers. Gross profit increased $68.7 million, or 68.3%, compared to the prior year. Gross profit as a percentage of sales increased to 17.0% in fiscal 2000 from 15.8% in fiscal 1999. The increase in gross profit was primarily due to increased sales combined with an increase in the gross profit percentage. The increase in the gross profit percentage was due to growth in the specialty distribution and network integration businesses, an improved pricing environment for certain products and services, and improvements in plant and equipment utilization in the Company's contract manufacturing business. Selling, general and administrative (SG&A) expenses increased $33.3 million, or 33.0%, when compared to the prior fiscal year. The increase in SG&A expenses was primarily due to expenses necessary to support the 10 11 growth in the Company's operations, including acquisitions and the expansion of network integration services. As a percentage of sales, SG&A expenses decreased to 13.5% from 15.9% in the preceding year. The decrease as a percentage of sales was the result of the continued focus on cost containment and leveraging operating expenses on higher sales. Interest expense consists primarily of interest on the 4.5% Convertible Subordinated Notes due 2004 (the "Notes") issued in September and October 1997. Other-net consists principally of interest and dividend income generated by cash and cash equivalents. The decrease in interest and dividend income was due to lower cash balances primarily as a result of acquisitions in fiscal 2000. Net earnings for fiscal 2000 were $18.3 million compared to $0.2 million for fiscal 1999. The improved profitability was primarily the result of increased gross profit partially offset by both an increase in SG&A expenses and a decrease in interest and dividend income. COMPARISON OF FISCAL 1999 WITH FISCAL 1998 Net sales for the fiscal year ended April 3, 1999 decreased $22.3 million, or 3.4%, to $637.1 million. Sales from the Company's specialty distribution and network integration businesses, which represented 71.5% of net sales, increased 8.9% while contract manufacturing sales decreased $59.7 million, or 24.8%. The specialty distribution and network integration sales increase reflected internal growth primarily from increased demand for networking products and services, wire and cable from both existing customers and an expanded customer base. The specialty distribution and network integration sales increase was slightly offset by lower sales of interconnect, passive and electromechanical products compared to the prior year. The contract manufacturing sales decrease primarily resulted from a decline in sales to manufacturers of computers, and semiconductor capital equipment, partially offset by increased sales to customers in the network systems industry. Gross profit decreased $46.7 million, or 31.7%, compared to the prior year. Gross profit as a percentage of sales decreased to 15.8% in fiscal 1999 from 22.3% in fiscal 1998. The decrease in gross profit was primarily due to decreased sales combined with a decrease in the gross profit percentage. The decrease in the gross profit percentage was due to plant and equipment under-utilization in the Company's contract manufacturing facilities, the ramp up of new contract manufacturing customers, product mix changes and continued pricing pressures. SG&A expenses increased $10.1 million, or 11.2%, when compared to the prior fiscal year. As a percentage of sales, SG&A expenses increased to 15.9% from 13.8% in the preceding year. The increase as a percentage of sales was primarily due to costs associated with the ramp up of new customers in the contract manufacturing division, expansion of network integration services and expenses necessary to support the Company's existing operations. Interest expense increased $5.2 million due to a full year of interest in fiscal 1999 on the Notes issued in September and October 1997. Other-net consists principally of interest and dividend income generated by cash and cash equivalents and trading securities. The increase in interest and dividend income resulted from a full year of investment of the net proceeds from the Notes, partially offset by a decline in short-term interest rates. Net earnings for fiscal 1999 were $0.2 million compared to $35.4 million for fiscal 1998. The reduction of net earnings was primarily due to the lower gross profit combined with higher SG&A expenses. LIQUIDITY AND CAPITAL RESOURCES At April 1, 2000, working capital was $337.3 million, a decrease of $48.5 million, or 12.6%, since April 3, 1999. The decrease was primarily the result of the cash expended for acquisitions in fiscal 2000 and for the retirement of the acquired companies' debt, offset by growth in accounts receivable and inventories in relation to current and future sales levels. 11 12 Included in the Company's working capital at April 1, 2000 are investments of $105.2 million, a decrease of $101.7 million since April 3, 1999. The Company's investment strategy is low-risk and short-term, keeping the funds readily available to meet capital requirements as they arise in the normal course of business. At April 1, 2000, funds were invested primarily in institutional money market funds. These investments are compatible with the Company's stated investment strategy. The Company intends to apply its capital resources to expand its business by establishing or acquiring similar specialty distribution, network integration and manufacturing operations in geographic areas that are attractive to the Company, by acquiring new facilities and by enlarging or improving existing facilities. In addition to the capital required to purchase existing businesses or to fund start-up operations, the expansion of the Company's operations at both new and existing locations will require greater levels of capital to finance the purchase of additional equipment, increased levels of inventory and greater accounts receivable. The Company believes that current resources, along with funds generated from operations, should be sufficient to meet its current capital requirements. RISKS RELATING TO FORWARD-LOOKING STATEMENTS The Company is including the following cautionary statements to secure the protection of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for all forward-looking statements made by the Company in this Annual Report on Form 10-K. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or trends, and may contain the words "believe," "anticipate," "expect," "estimate," "project," "will be," "will continue," "will likely result," or words or phrases of similar meaning. In addition, from time to time, the Company (or its representatives) may make forward-looking statements of this nature in its annual report to shareholders, proxy statement, quarterly reports on Form 10-Q, current reports on Form 8-K, press releases or in oral or written presentations to shareholders, securities analysts, members of the financial press or others. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the Company, are expressly qualified by these cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the forward-looking statements speak only of the Company's views as of the date the statement was made, and the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date thereof. Forward-looking statements involve risks and uncertainties which could cause actual results, performance or trends to differ materially from those expressed in the forward-looking statements. The Company believes that all forward-looking statements made by it have a reasonable basis, but there can be no assurance that management's expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct. Factors that could cause actual results to differ materially from those discussed in the forward-looking statements include, but are not limited to, the factors discussed below. DOWNWARD PRESSURE ON MARGINS. In fiscal 1999, the Company experienced downward pressure on its gross profit margin primarily due to a lower percentage of certain high margin sales combined with underutilization of infrastructure within its contract manufacturing business. Higher sales volume and improved utilization rates led to increased absorption of manufacturing overhead and improved margins in fiscal 2000. The Company anticipates that this margin pressure resulting from product mix changes will continue to be offset during fiscal 2001 by improving utilization rates, and as a result, the Company expects that its contract manufacturing gross profit margin will improve during fiscal 2001, although there can be no assurance that this will be the case. However, as the Company expects its contract manufacturing business to become a larger percentage of total Company sales in fiscal 2001, overall Company gross profit margins may remain flat or decline. CYCLES IN THE ELECTRONICS INDUSTRY; GENERAL ECONOMIC CONDITIONS. The Company's business depends on sustained demand for the products it distributes and manufactures. Although the Company has historically enjoyed high rates of growth in sales, the electronics industry is subject to economic cycles and has, in the past, and is likely in the future, to experience recessionary periods. A general recession in the electronics industry could have a material adverse effect on the Company's business, results of operation and financial condition, especially if a downturn occurred in the Company's specialty distribution, network integration and manufacturing businesses simultaneously. 12 13 DEPENDENCE ON K*TEC CUSTOMERS; UNCERTAINTY OF INCREASING CONTRACT MANUFACTURING SALES. For many years K*TEC has strategically developed long-term relationships with a select group of OEMs resulting in a concentrated customer base. The Company expects that sales to a relatively small number of customers will continue to account for a significant portion of K*TEC's sales in the future. The loss of, or a significant decline in orders from, one or more of K*TEC's key customers could have a material adverse effect on the Company's business, results of operations and financial condition. In addition, the Company has substantially increased its contract manufacturing capacity in recent years. There can be no assurance, however, that the Company will be able to secure the new OEM relationships that will be essential to utilizing this capacity and achieving significant sales growth in the Company's contract manufacturing business. MANAGEMENT OF GROWTH. In recent years, the Company has expanded its business through internal growth and acquisitions, and the Company anticipates that it will continue this expansion in the future. To effectively manage this expansion, the Company will be required to attract and retain highly skilled managers and personnel and to evaluate the adequacy of existing systems and procedures, including, but not limited to, information management systems, financial and internal control systems, and management structure. In addition, if the Company enters new markets, it will be required to, among other things, establish suitable distribution centers, hire personnel and establish distribution channels. Moreover, the Company anticipates that in response to the growing trend of OEMs to outsource manufacturing operations, the Company will expand K*TEC's box build operations and increasingly combine those operations with the Company's distribution capabilities. There can be no assurance that management will adequately anticipate all of the changing demands that growth and industry conditions and trends will impose on the Company or that the Company will be able to adapt timely its pricing, costs, systems, procedures and structure to such demands. Any failure to anticipate and respond promptly and effectively to such changing demands and industry trends could have a material adverse effect on the Company's business, results of operations and financial condition. COMPETITION. The markets for the Company's products and services are highly competitive. The Company competes with a large number of distributors, suppliers and domestic and foreign manufacturers. Foreign-manufactured products are often sold at prices below the Company's prices for comparable products. The Company's products are not protected from competition by any proprietary or intellectual property rights such as trade secrets or patents. There can be no assurance that the Company will continue to compete successfully against the distributors, suppliers and manufacturers within its industry, some of which are larger, have greater financial resources and broader name recognition, and may, in some instances, have lower costs than the Company. In addition, although the Company continues to focus on cost containment, there can be no assurance that increasingly intense competition will not cause pricing or marketing pressures that reduce gross profit margins or increase SG&A expenses as a percentage of sales. Reduced gross profit margins and increased SG&A expenses as a percentage of sales, either alone or together, could have a material adverse effect on the Company's business, results of operations and financial condition. RISKS ASSOCIATED WITH ACQUISITIONS. The Company will continue to evaluate opportunities to acquire complementary businesses, assets or technologies, and the Company expects to pursue acquisitions that it believes will enhance its position as a national specialty distributor, network integrator and contract manufacturer of electronic products. There can be no assurance, however, that the Company will be able to identify and acquire complementary businesses, assets or technologies. Among other things, the Company may not be able to identify acquisition candidates in desirable geographic or product markets on terms that are satisfactory to the Company. Acquisitions also involve significant financial risks such as (1) potential liabilities of the acquired businesses; (2) the dilutive effect of the issuance of additional equity securities; (3) the incurrence of additional debt; (4) the financial impact of amortizing goodwill and other intangible assets involved in any acquisitions that are accounted for using the purchase method of accounting; and (5) possible adverse tax and accounting effects. Moreover, acquisitions require the expenditure of large amounts of capital, and the Company's competitors for acquisitions may have significantly greater financial resources than the Company. Therefore, to finance acquisitions, the Company may have to raise additional funds through either public or private financings which could be dilutive to existing shareholders. 13 14 In addition, there can be no assurance that the Company will be able to integrate successfully the operations, facilities and management of any acquired business or realize any expected synergies, including cost reductions, from any acquisition. Acquisitions involve other significant operating risks such as (1) the diversion of management's attention to the assimilation of the businesses to be acquired; (2) the risk that the acquired business will fail; (3) the need to implement financial and other systems and add management resources; (4) the risk that key employees of the acquired businesses will leave after the acquisition; and (5) unforeseen difficulties in the acquired operations. Moreover, there can be no assurance that any acquisition will not have an adverse effect on the Company's relationships with customers or suppliers of an acquired business. Failure to integrate successfully any acquisition made by the Company could have a material adverse effect on the Company's business, results of operations and financial condition. DEPENDENCE ON SIGNIFICANT SUPPLIERS. As is customary in the electronics distribution industry, the Company primarily operates under short-term contracts with its suppliers. In the Company's past experience, such contracts have typically been renewed from year to year. In the fiscal year ended April 1, 2000, the Company's purchases from Cisco Systems and Tyco Electronics represented approximately 14% and 11%, respectively, of the Company's total purchases. Although the Company believes that it may be able to obtain competitive products of comparable quality from other suppliers, the loss of such suppliers could have a material adverse effect on the Company's business, results of operations and financial condition. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. In the normal course of business, the Company could be exposed to market risk from changes in interest rates. The Company continually monitors exposure to market risk and, when appropriate, develops strategies to manage this risk. Management does not use derivative financial instruments for trading or to speculate on changes in interest rates. Currently, the Company's interest rate risk, if any, relates to its temporary investments and its 4 1/2% Convertible Subordinated Notes Due 2004. 14 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders Kent Electronics Corporation We have audited the consolidated balance sheets of Kent Electronics Corporation and Subsidiaries as of April 1, 2000 and April 3, 1999, and the related consolidated statements of earnings, cash flows and stockholders' equity for each of the three years in the period ended April 1, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kent Electronics Corporation and Subsidiaries as of April 1, 2000 and April 3, 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended April 1, 2000, in conformity with generally accepted accounting principles in the United States. GRANT THORNTON LLP Houston, Texas May 8, 2000 15 16 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS APRIL 1, 2000 AND APRIL 3, 1999 (IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS 2000 1999 --------- --------- CURRENT ASSETS Cash and cash equivalents (including temporary investments of $105,164 in 2000 and $206,919 in 1999) .................. $ 101,052 $ 207,942 Accounts receivable, net ................................................... 181,953 103,364 Inventories Materials and purchased products ...................................... 190,735 118,535 Work in process ....................................................... 6,960 6,349 --------- --------- 197,695 124,884 Other ...................................................................... 13,328 17,549 --------- --------- Total current assets .................................................. 494,028 453,739 PROPERTY AND EQUIPMENT Land ....................................................................... 8,168 8,168 Buildings .................................................................. 44,294 43,817 Equipment, furniture and fixtures .......................................... 134,850 124,194 Leasehold improvements ..................................................... 2,965 2,681 --------- --------- 190,277 178,860 Less accumulated depreciation and amortization ........................ (67,323) (50,496) --------- --------- 122,954 128,364 OTHER ASSETS .................................................................. 10,429 7,095 COST IN EXCESS OF NET ASSETS ACQUIRED, less accumulated amortization of $5,387 in 2000 and $3,320 in 1999 .......................... 103,724 15,443 --------- --------- $ 731,135 $ 604,641 ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable ........................................................... $ 108,088 $ 47,149 Accrued compensation ....................................................... 26,203 13,862 Other accrued liabilities .................................................. 17,812 6,950 Income taxes ............................................................... 589 -- Current maturities of long-term debt ....................................... 4,000 -- --------- --------- Total current liabilities ............................................. 156,692 67,961 LONG-TERM DEBT, less current maturities ....................................... 212,000 207,000 DEFERRED INCOME TAXES ......................................................... 11,824 8,511 LONG-TERM LIABILITIES ......................................................... 5,887 -- COMMITMENTS AND CONTINGENCIES ................................................. -- -- STOCKHOLDERS' EQUITY Preferred stock, $1 par value per share; authorized 2,000,000 shares; none issued ............................................................... -- -- Common stock, no par value; authorized 60,000,000 shares; 28,375,032 shares issued and 28,325,032 shares outstanding in 2000 and 28,013,375 shares issued and 27,963,375 shares outstanding in 1999...................... 68,579 63,553 Additional paid-in capital ................................................. 117,797 117,511 Retained earnings .......................................................... 159,333 141,082 --------- --------- 345,709 322,146 Less common stock in treasury - at cost, 50,000 shares ..................... (977) (977) --------- --------- 344,732 321,169 --------- --------- $ 731,135 $ 604,641 ========= =========
The accompanying notes are an integral part of these statements. 16 17 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
2000 1999 1998 --------- --------- --------- Net sales ............................................... $ 993,938 $ 637,064 $ 659,400 Cost of sales ........................................... 824,694 536,519 512,147 --------- --------- --------- Gross profit ......................................... 169,244 100,545 147,253 Selling, general and administrative expenses ............ 134,310 100,992 90,854 --------- --------- --------- Operating profit (loss) .............................. 34,934 (447) 56,399 Other income (expense) Interest expense ..................................... (10,470) (10,495) (5,272) Other - net (principally interest and dividend income) 5,579 11,236 7,040 --------- --------- --------- Earnings before income taxes ......................... 30,043 294 58,167 Income taxes ............................................ 11,792 112 22,741 --------- --------- --------- NET EARNINGS .................................... $ 18,251 $ 182 $ 35,426 ========= ========= ========= Earnings per common share: Basic ................................................ $ 0.65 $ 0.01 $ 1.33 ========= ========= ========= Diluted .............................................. $ 0.63 $ 0.01 $ 1.26 ========= ========= ========= Weighted average shares: Basic ................................................ 28,062 27,674 26,598 ========= ========= ========= Diluted .............................................. 28,888 28,099 28,097 ========= ========= =========
The accompanying notes are an integral part of these statements. 17 18 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998 (IN THOUSANDS)
2000 1999 1998 --------- --------- --------- Cash flows from operating activities Net earnings ..................................................................... $ 18,251 $ 182 $ 35,426 Adjustments to reconcile net earnings to net cash (used) provided by operating activities Depreciation and amortization ............................................... 19,349 15,075 11,607 Provision for losses on accounts receivable ................................. 589 98 302 Loss (gain) on sale of property and equipment ............................... 16 (445) 4 Stock option expense ........................................................ 286 322 667 Unrealized loss on trading securities ....................................... -- 327 54 Net sales (purchases) of trading securities ................................. -- 29,619 (30,000) Change in assets and liabilities, net of effects from business acquisitions Accounts receivable ...................................................... (52,525) 2,670 (17,599) Inventories .............................................................. (48,366) (9,792) (20,598) Other current assets ..................................................... 6,244 (11,795) (1,731) Other assets ............................................................. 2,628 5,098 (7,575) Accounts payable ......................................................... 33,544 (2,029) 6,861 Accrued compensation ..................................................... 10,170 2,669 3,070 Other accrued liabilities ................................................ 1,344 (82) (1,019) Income taxes ............................................................. 591 (2,946) (81) Deferred income taxes .................................................... 3,435 8,604 1,187 Long-term liabilities .................................................... -- (1,792) 83 --------- --------- --------- Net cash (used) provided by operating activities ...................... (4,444) 35,783 (19,342) --------- --------- --------- Cash flows from investing activities Capital expenditures ............................................................. (10,980) (18,895) (46,923) Business acquisitions, net of cash acquired ...................................... (71,906) -- -- Proceeds from sale of property and equipment ..................................... 19 3,051 13 --------- --------- --------- Net cash used by investing activities ................................. (82,867) (15,844) (46,910) --------- --------- --------- Cash flows from financing activities Issuance of long-term debt ....................................................... -- -- 207,000 Payment of long-term debt of acquired businesses ................................. (24,605) -- -- Issuance of common stock ......................................................... 4,718 4,152 6,891 Tax effect of common stock issued upon exercise of employee stock options ........ 308 3,944 7,218 --------- --------- --------- Net cash (used) provided by financing activities ...................... (19,579) 8,096 221,109 --------- --------- --------- Net (decrease) increase in cash and cash equivalents ................................ (106,890) 28,035 154,857 Cash and cash equivalents at beginning of year ...................................... 207,942 179,907 25,050 --------- --------- --------- Cash and cash equivalents at end of year ............................................ $ 101,052 $ 207,942 $ 179,907 ========= ========= ========= Supplemental disclosures of cash flow information: Cash paid (received) during the year for: Interest .................................................................... $ 9,315 $ 9,345 $ 4,118 Income taxes ................................................................ (1,823) 787 15,138
The accompanying notes are an integral part of these statements. 18 19 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FISCAL YEARS ENDED MARCH 28, 1998, APRIL 3, 1999 AND APRIL 1, 2000 (IN THOUSANDS)
Common Stock Additional --------------------- paid-in Retained Treasury Shares Amount capital earnings stock -------- -------- ---------- -------- -------- BALANCE AT MARCH 29, 1997 .................................. 26,252 $ 41,348 $116,522 $105,474 $ (977) Common stock issued upon exercise of employee stock options, including tax effect ........... 929 14,109 -- -- -- Amortization of unearned compensation related to stock option plans .................................. -- -- 667 -- -- Net earnings for the year .................................. -- -- -- 35,426 -- -------- -------- -------- -------- -------- BALANCE AT MARCH 28, 1998 .................................. 27,181 55,457 117,189 140,900 (977) Common stock issued upon exercise of employee stock options, including tax effect ........... 782 8,096 -- -- -- Amortization of unearned compensation related to stock option plans .................................. -- -- 322 -- -- Net earnings for the year .................................. -- -- -- 182 -- -------- -------- -------- -------- -------- BALANCE AT APRIL 3, 1999 ................................... 27,963 63,553 117,511 141,082 (977) Common stock issued upon exercise of employee stock options, including tax effect ........... 362 5,026 -- -- -- Amortization of unearned compensation related to stock option plans .................................. -- -- 286 -- -- Net earnings for the year .................................. -- -- -- 18,251 -- -------- -------- -------- -------- -------- BALANCE AT APRIL 1, 2000 ................................... 28,325 $ 68,579 $117,797 $159,333 $ (977) ======== ======== ======== ======== ========
The accompanying notes are an integral part of this statement. 19 20 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998 DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF BUSINESS Kent Electronics Corporation (the "Company") is a national specialty electronics distributor and network integrator. The Company also provides contract manufacturing services. The Company's customers are primarily industrial users, original equipment manufacturers, financial institutions, service organizations, and education and governmental agencies located primarily throughout the United States. PRINCIPLES OF CONSOLIDATION Kent Electronics Corporation consolidates its accounts with those of its wholly-owned subsidiaries. All material intercompany transactions have been eliminated. FISCAL YEAR The Company's fiscal year ends on the Saturday closest to the end of March. The fiscal years ended April 1, 2000 and March 28, 1998 both consisted of 52 weeks. The fiscal year ended April 3, 1999 consisted of 53 weeks. USE OF ESTIMATES In preparing the financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS The Company's presentation of cash includes cash equivalents. Cash equivalents are defined as short-term investments with maturity dates at purchase of ninety days or less. Cash equivalents include $105.2 million and $203.6 million invested in institutional money market funds at April 1, 2000 and April 3, 1999, respectively. Securities purchased under agreements to resell (reverse repurchase agreements) result from transactions that are collateralized by negotiable securities and are carried at the amounts at which the securities will subsequently be resold. It is the policy of the Company not to take possession of securities purchased under agreements to resell. At April 3, 1999, agreements to resell securities in the amount of $3.3 million with a three-day maturity were outstanding. Temporary investments may be greater than the cash and cash equivalents balance because they may be offset by individual bank accounts with a book overdraft position within the same bank where multiple accounts are maintained. 20 21 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998 TRADING SECURITIES The Company has classified all investment securities as trading securities which are measured at fair value in the financial statements with unrealized gains and losses included in earnings. Realized and unrealized gains and losses, included in other income, are reflected in the following table: 2000 1999 1998 ----- ----- ----- (In thousands) Net unrealized loss on trading securities at beginning of year ................. $ -- $ 54 $ -- Increase in unrealized loss included in earnings during the year.. -- 327 54 Realized loss from sale of trading securities ........................... -- (381) -- ----- ----- ----- Net unrealized loss on trading securities at end of year ....................... $ -- $ -- $ 54 ===== ===== =====
INVENTORIES Inventories are valued at the lower of cost (first-in, first-out) or market. PROPERTY AND EQUIPMENT Property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized over the life of the lease or the service life of the improvements, whichever is shorter. COSTS IN EXCESS OF NET ASSETS ACQUIRED Costs in excess of net assets acquired represents the excess of the purchase price over the value of net assets acquired and is being amortized on a straight-line basis over 40 years. Management evaluates these costs for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. Impairment would be recognized if the carrying amounts of such costs cannot be recovered by the net cash flows they will generate. REVENUE RECOGNITION Revenues for product sales are recognized upon shipment of merchandise to customers. Revenues and anticipated profits under long-term contracts are recorded on the percentage of completion basis, under which a portion of the total contract price is accrued based on the ratio of costs incurred to estimated costs at completion. Revenues from maintenance contracts are recognized ratably over the life of the contracts, ranging from one to three years. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and amounts included in other assets and liabilities meeting the definition of a financial instrument approximates fair value. The fair value of the Company's long-term debt, including current maturities, was estimated to be $186.6 million at April 1, 2000, and $155.3 million at April 3, 1999, compared to a carrying value of $216.0 million at April 1, 2000 and $207.0 million at April 3, 1999. The fair value of marketable debt was based on quoted market prices and the fair value of other debt was based on the discounted present value of cash flows using the Company's estimated borrowing rate. 21 22 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998 EARNINGS PER SHARE Basic earnings per common share is computed using the weighted average number of shares outstanding. Diluted earnings per common share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to outstanding options to purchase common stock. Incremental shares of 0.8 million, 0.4 million and 1.5 million in 2000, 1999 and 1998, respectively, were used in the calculation of diluted earnings per common share. Options to purchase 0.1 million, 1.1 million and 0.4 million shares of common stock in 2000, 1999 and 1998, respectively, were not included in the computation of diluted earnings per common share because the option exercise price was greater than the average market price of the common stock. The calculation of earnings per share does not include approximately 4.2 million shares issuable upon conversion of the 4.5% Convertible Subordinated Notes because inclusion of such shares would be antidilutive. STOCK-BASED COMPENSATION The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plans and does not recognize compensation expense for its stock-based compensation plans other than for options granted with exercise prices of less than the stock's market value at the date of grant. The footnotes include the pro forma disclosures of the effect on net income and earnings per share as if the fair value method suggested in Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" had been applied. BUSINESS ACQUISITIONS In November 1999, the Company acquired all the outstanding common stock of Orange Coast Datacomm, Inc., Orange Coast Cabling, Inc. and Go Telecomm, Inc., collectively known as Orange Coast, for an aggregate purchase price of approximately $17.7 million, which includes the issuance of an unsecured promissory note in the amount of $9.0 million. The note is due in principal installments of $4.0 million in January 2001, $4.0 million in January 2002 and $1.0 million in January 2003. Amounts outstanding under the note accrue interest at a rate of 4.5%. Orange Coast provides comprehensive end-to-end voice and data network solutions to major corporations from offices in Irvine and Santa Clara, California. In June 1999, the Company acquired certain assets and assumed certain liabilities of Advacom, Inc. (Advacom) for a cash purchase price of $33.0 million plus the assumption of approximately $21.8 million of interest bearing obligations which were retired on the day of closing. Advacom is a Pennsylvania based distributor of electronic connectors, and passive and electromechanical components. In April 1999, the Company acquired all the outstanding common stock of SabreData, Inc. (SabreData) for a cash purchase price of $31.0 million plus the assumption of approximately $2.2 million of interest bearing obligations which were subsequently retired. SabreData is a Texas based network integrator. The Company has accounted for these acquisitions using the purchase method of accounting, and accordingly, the acquired assets and liabilities have been recorded at their estimated fair values at the date of acquisition. The operating results arising from the acquisitions are included in the consolidated statements of earnings from the acquisition date. The following unaudited pro forma consolidated results of operations assume that the purchase acquisitions occurred on March 29, 1998. The pro forma results have been prepared for comparative purposes only and do not purport to indicate the results of operations which would actually have occurred had the combination been in effect, or which may occur in the future. 22 23 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998
2000 1999 ------------------------------- (In thousands) Net sales ....................... $ 1,025,291 $ 804,296 Net earnings (loss) ............. 17,004 (1,956) Earnings (loss) per common share: Basic ........................ $ 0.61 $ (0.07) Diluted ...................... $ 0.59 $ (0.07)
ACCOUNTS RECEIVABLE The Company's allowance for doubtful accounts was $0.9 million at April 1, 2000, $1.0 million at April 3, 1999 and $1.2 million at March 28, 1998. The provision for allowance was $0.6 million in 2000, $0.1 million in 1999 and $0.3 million in 1998. Charge-offs, net of recoveries, were $0.6 million in 2000, $0.3 million in 1999 and $0.4 million in 1998. OTHER ASSETS At April 1, 2000, other current assets included $3.0 million of receivables from certain officers and directors of the Company. At April 3, 1999, other current assets and other assets included $1.4 million and $1.8 million, respectively, of such receivables. INCOME TAXES The Company accounts for income taxes using the liability method. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities. The provision for income taxes consisted of the following:
2000 1999 1998 ----------------------------------- (In thousands) Current ..................................... $ 9,087 $ (6,914) $ 15,417 Tax reduction for exercise of stock options.. credited to stockholders' equity ........ 307 3,944 7,218 Deferred .................................... 2,398 3,082 106 -------- -------- -------- $ 11,792 $ 112 $ 22,741 ======== ======== ========
A reconciliation of income taxes computed at the statutory federal income tax rate and income taxes reported in the consolidated statements of earnings follows:
2000 1999 1998 -------------------------------- (In thousands) Tax at statutory rate ................................ $10,515 $ 103 $20,358 Increases (reductions) State income taxes, net of federal tax effect... 1,047 245 1,780 Other-net ...................................... 230 (236) 603 ------- ------- ------- Income taxes as reported ............................. $11,792 $ 112 $22,741 ======= ======= =======
23 24 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998 Net deferred tax liabilities at April 1, 2000 and April 3, 1999 consist of the following:
2000 1999 ---------------------- (In thousands) Current deferred asset Allowance for doubtful accounts ............... $ 341 $ 345 Accounts receivable basis differences ......... 348 -- Capitalization of additional inventory costs... 3,204 2,012 Inventory reserve ............................. 444 -- Accrued expenses not currently deductible, net of reversals .......................... 1,360 597 Net operating losses .......................... 1,217 1,233 Other ......................................... 468 29 -------- -------- $ 7,382 $ 4,216 ======== ======== Long-term deferred liability Fixed asset basis differences ................. $(13,906) $(10,823) Deductible goodwill ........................... (940) (274) Stock compensation ............................ 534 446 Net operating losses .......................... 60 143 Deferred compensation ......................... 2,411 1,973 Other ......................................... 17 24 -------- -------- $(11,824) $ (8,511) ======== ========
Acquired net operating losses of approximately $0.3 million at April 1, 2000, expire in various amounts through 2003, and are subject to annual usage limitations. State tax loss carryforwards of approximately $26.1 million at April 1, 2000, expire primarily in 2004. The current deferred asset is included in other current assets in the accompanying balance sheets. DEBT In September and October 1997, the Company issued $207.0 million of 4.5% Convertible Subordinated Notes due 2004 (the "Notes"). The Notes are convertible into Kent common stock at a conversion price of $49.53 per share, subject to adjustment in certain events. Interest is payable semi-annually on March 1 and September 1 of each year, and the Notes are redeemable at the option of the Company at set redemption prices (which range from 100.64% to 102.57% of principal), plus accrued interest, beginning September 6, 2000. COMMITMENTS AND CONTINGENCIES The Company conducts a portion of its operations in leased office, warehouse, and manufacturing facilities and also leases transportation equipment. Rent expense for 2000, 1999 and 1998 was approximately $6.1 million, $4.5 million and $4.1 million, respectively. As of April 1, 2000, the Company's minimum rental commitments under noncancelable operating leases were $6.9 million in 2001; $6.0 million in 2002; $4.5 million in 2003; $2.0 million in 2004; $0.7 million in 2005 and $0.1 million thereafter. The Company has instituted a self-insurance program for employees' major medical coverages. Claims under the self-insurance program are insured for amounts greater than $0.1 million per employee. The aggregate annual self-insured amount varies based on participant levels and was limited to approximately $8.2 million as of April 1, 2000. Claims are accrued as incurred and the total expense under the program was approximately $6.8 million, $5.2 million and $3.9 million in 2000, 1999 and 1998, respectively. 24 25 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998 The Company is engaged in litigation occurring in the normal course of business. In the opinion of management, based upon advice of counsel, the ultimate outcome of these lawsuits will not have a material impact on the Company's consolidated financial statements. The Company has severance agreements with certain executive officers that become operative only upon a change in control of the Company. Compensation which may be payable under these agreements has not been accrued in the consolidated financial statements as a change in control, as defined, has not occurred. STOCKHOLDERS' EQUITY FAIR PRICE PROVISION The Company has adopted a fair price provision relating to certain business combinations. The fair price provision provides that, except in certain circumstances, a business combination between the Company and an interested shareholder must be approved by the affirmative vote of the holders of 80% of the outstanding voting stock, unless certain pricing and procedural requirements regarding the business combination are satisfied. STOCKHOLDER RIGHTS PLAN Under the Company's stockholder rights plan, there is one equity purchase right associated with each outstanding share of the Company's common stock. Upon the occurrence of certain events, each right would entitle the holder to purchase, at a price of $100, one one-hundredth of a share of the Company's Series A Preferred Stock. Additionally, under certain circumstances, each holder of rights may be entitled to purchase either the Company's common stock or securities of an acquiring entity at half of market value. 25 26 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998 STOCK OPTIONS AND WARRANTS At April 1, 2000, the Company had nonqualified stock option plans which allow for the grant of 3.5 million common shares for options, of which 0.8 million are available for future grants. Options granted under the plans have a maximum term of 15 years and are exercisable under the terms of the respective option agreements. Under some plans, options may be granted with exercise prices of less than the stock's market value at the date of grant. On September 1, 1998, the Stock Option Committee of the Company's Board of Directors approved a stock option repricing program whereby each eligible stock option was amended to have an exercise price equal to $8.94, the closing market price of the Company's common stock on that date. Options held by the Company's directors and executive officers were excluded from the repricing program. As a result, approximately 0.6 million options were amended. The terms during which the amended stock options may be exercised were extended two years for approximately 0.4 million options. All other terms and conditions remained the same. A summary of the Company's stock option activity and related information follows:
2000 1999 1998 ----------------------------------------------------------------- Weighted Weighted Weighted average average average (In thousands, except per share data) exercise exercise exercise Options price Options price Options price ------- -------- ------- -------- ------- -------- Outstanding at beginning of year .......................... 2,253 $14.47 2,736 $15.16 3,435 $12.00 Granted ........................... 959 14.01 469 9.94 506 23.94 Exercised ......................... (362) 13.20 (782) 5.00 (929) 7.37 Lapsed/forfeited .................. (198) 14.19 (170) 17.91 (276) 17.58 ------ ------ ------ ------ ------ ------ Outstanding at end of year ........ 2,652 $14.51 2,253 $14.47 2,736 $15.16 ====== ====== ====== ====== ====== ====== Exercisable at end of year ........ 983 $16.67 1,008 $16.86 1,357 $11.38 ====== ====== ====== ====== ====== ======
The following table summarizes the weighted average fair value per share at date of grant of options granted during the year:
2000 1999 1998 --------------------------- --------------------------- ---------------------------- Weighted Weighted Weighted Weighted Weighted Weighted average average average average average average fair value exercise price fair value exercise price fair value exercise price ---------- -------------- ---------- -------------- ---------- -------------- Exercise price equals market price ...... $ 7.16 $ 14.01 $ 4.98 $ 9.94 $ 9.54 $ 23.94
26 27 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998 The following table summarizes significant ranges of outstanding and exercisable options at April 1, 2000:
Options Outstanding Options Exercisable --------------------------------------------- -------------------------- Weighted average Weighted Weighted remaining life average average (In thousands, except per share data) Options (in years) exercise price Options exercise price ------- ---------------- --------------- ------- -------------- Range of exercise prices $ 6.96 - $10.44 ........ 841 7.42 $ 8.93 222 $ 9.44 $11.78 - $17.67 ........ 775 7.36 12.45 190 12.41 $18.00 - $27.00 ........ 986 4.03 19.90 521 19.61 $29.63 - $44.44 ........ 50 1.90 34.28 50 34.28 ------ ------ 2,652 983 ====== ======
The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:
2000 1999 1998 ----------- ---------- ---------- Expected life ...... 3.5 years 3.7 years 2.6 years Interest rate ...... 5.6% 5.0% 5.8% Volatility ......... 65.9% 65.1% 58.3% Dividend yield ..... 0.0% 0.0% 0.0%
Stock-based compensation costs would have reduced net earnings by approximately $2.3 million, $3.3 million and $1.8 million in 2000, 1999 and 1998, and $0.08, $0.12 and $0.07 per basic and diluted share if the fair values of the options granted in those years had been recognized as compensation expense over the vesting period of the grant. In February 2000, the Company issued five-year warrants at the exercise price of $22.81 for the purchase of 0.3 million shares of the Company's common stock in conjunction with the award from a customer of a three-year manufacturing contract. The warrants vest over the three-year contract based upon the attainment of certain revenue targets, and the estimated fair value of the warrants will be amortized into cost of sales. TAX-DEFERRED SAVINGS AND RETIREMENT PLAN AND OTHER BENEFITS The Company sponsors a Tax-Deferred Savings and Retirement Plan (the Plan) covering substantially all employees. Under the Plan, a participating employee may allocate up to 12% of salary, and the Company makes matching contributions of up to 3% thereof. Additionally, the Company may elect to make additional contributions at its option. Such contributions accrue to employee accounts regardless of whether they have elected to participate in the salary deferral option of the Plan. The Company contributed approximately $2.0 million, $1.4 million and $1.1 million to the Plan in 2000, 1999 and 1998, respectively. The Company has a deferred compensation plan whereby the participant may elect to defer a maximum of 100% of compensation. Since inception of the plan, the amount of deferred compensation has been deposited in a trust, and accordingly the assets of the trust are included in other assets and the deferred compensation liability is included in other long-term liabilities. The Company has a deferred benefit plan whereby the participant will receive minimum annual payments subsequent to retirement of the participant for the greater of 15 years, participant's life or the life of participant's spouse. Annual expenses will be approximately $2.3 million through March 31, 2001, based on accruing the present value of the minimum benefits through the date the participant vests in the payments. 27 28 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FISCAL YEARS ENDED APRIL 1, 2000, APRIL 3, 1999 AND MARCH 28, 1998 SUBSEQUENT EVENTS (UNAUDITED) On May 22, 2000, the Company sold certain assets of its specialty wire and cable redistribution business. The Company believes that this transaction is consistent with its strategy of strengthening its core operations and effectively deploying its resources to serve high growth applications. The Company's redistribution assets which were sold generated annual revenues of approximately $93 million, representing 9% of the Company's total sales for the fiscal year ended April 1, 2000. QUARTERLY FINANCIAL DATA (UNAUDITED) The following is a summary of unaudited quarterly financial data for fiscal years 2000, 1999 and 1998:
First Second Third Fourth Quarter Quarter Quarter Quarter ----------------------------------------------------- (In thousands, except per share data) Year ended April 1, 2000 Net sales $ 205,176 $ 236,073 $ 259,035 $ 293,654 Gross profit 32,030 39,710 44,958 52,546 Net earnings 1,909 3,684 5,228 7,430 Basic earnings per share .07 .13 .19 .26 Diluted earnings per share .07 .13 .18 .25 --------- --------- --------- --------- Year ended April 3, 1999 Net sales $ 157,057 $ 147,500 $ 155,424 $ 177,083 Gross profit 31,088 19,351 23,709 26,397 Net earnings (loss) 4,108 (3,521) (939) 534 Basic earnings (loss) per share .15 (.13) (.03) .02 Diluted earnings (loss) per share .15 (.13) (.03) .02 --------- --------- --------- --------- Year ended March 28, 1998 Net sales $ 152,080 $ 167,487 $ 177,426 $ 162,407 Gross profit 34,859 37,908 40,150 34,336 Net earnings 8,775 9,605 10,128 6,918 Basic earnings per share .33 .36 .38 .26 Diluted earnings per share .32 .34 .36 .25 --------- --------- --------- ---------
28 29 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III In accordance with paragraph (3) of General Instruction G to Form 10-K, Part III of this Report is omitted because the Company has filed with the Securities and Exchange Commission, not later than 120 days after April 1, 2000, a definitive proxy statement pursuant to Regulation 14A involving the election of directors. Reference is made to the sections of such proxy statement entitled "Kent Common Stock Beneficially Owned by Directors, Officers and Five Percent Shareholders", "Compensation Tables", "Executive Officers" and "Proposal 1 -- Election of Directors", and the subsections of such proxy statement entitled "Section 16(a) Beneficial Ownership Reporting Compliance" and "Certain Transactions", which sections and subsections of such proxy statement are incorporated herein. 29 30 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) FINANCIAL STATEMENTS AND EXHIBITS: 1. FINANCIAL STATEMENTS:
PAGE ---- Report of Independent Certified Public Accountants................................... 15 Consolidated balance sheets at April 1, 2000 and April 3, 1999....................... 16 Consolidated statements of earnings for the years ended April 1, 2000, April 3, 1999 and March 28, 1998.............................. 17 Consolidated statements of cash flows for the years ended April 1, 2000, April 3, 1999 and March 28, 1998.............................. 18 Consolidated statement of stockholders' equity for the years ended March 28, 1998, April 3, 1999, and April 1, 2000............................. 19 Notes to consolidated financial statements........................................... 20
2. EXHIBITS: 3.1* -- Amended and Restated Articles of Incorporation of Kent Electronics Corporation. Incorporated by reference to Exhibit 3.1 to the Company's Registration Statement on Form S-3 (Registration No. 333-20265) filed with the Securities and Exchange Commission ("SEC") on January 23, 1997. 3.2* -- Certificate of Designation, Preferences and Rights of Series A Preferred Stock. Incorporated by reference to Exhibit 3.3 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended March 30, 1991. 3.3* -- Amended and Restated Bylaws of Kent Electronics Corporation. Incorporated by reference to Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the Fiscal Quarter ended September 26, 1998. 4.1* -- Specimen stock certificate for the Common Stock of Kent Electronics Corporation. Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-2 (Registration No. 33-40066) filed with the SEC on April 19, 1991. 4.2* -- Rights Agreement between Kent Electronics Corporation and ChaseMellon Shareholder Services, L.L.C. dated October 21, 1999. Incorporated by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the Fiscal Quarter ended October 2, 1999. 4.3* -- Indenture between Kent Electronics Corporation, as Issuer, and Texas Commerce Bank National Association, as Trustee, dated as of September 23, 1997. Incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q/A for the Fiscal Quarter ended September 27, 1997 (the "1998 Second Quarter Form 10-Q/A"). 10.1* -- 1991 Non-Employee Director Stock Option Plan, as amended. Incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended March 28, 1992 (the "1992 Form 10-K").(1) 10.2 -- Amended and Restated 1996 Non-Employee Director Stock Option Plan.(1) 30 31 10.3* -- Amended and Restated 1987 Stock Option Plan. Incorporated by reference to Exhibit 10.3 to 1992 Form 10-K.(1) 10.4* -- Amendments of Amended and Restated 1987 Stock Option Plan. Incorporated by reference to Exhibit 10.8 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended April 3, 1993 (the "1993 Form 10-K").(1) 10.5* -- Stock Option Plan and Agreement for the Company's Executive Vice President Sales-Distribution between Kent Electronics Corporation and Larry D. Olson dated May 8, 1995. Incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended April 1, 1995 (the "1995 Form 10-K").(1) 10.6* -- Stock Option Plan and Agreement for the Company's Executive Vice President Operations-Distribution between Kent Electronics Corporation and Mark A. Zerbe dated May 8, 1995. Incorporated by reference to Exhibit 10.12 to 1995 Form 10-K.(1) 10.7* -- Stock Option Plan and Agreement for the Company's Vice President, Secretary and Treasurer between Kent Electronics Corporation and Stephen J. Chapko dated May 8, 1995. Incorporated by reference to Exhibit 10.13 to 1995 Form 10-K.(1) 10.8* -- Stock Option Plan and Agreement for the Company's Vice President, Corporate Controller between Kent Electronics Corporation and David D. Johnson dated May 9, 1996. Incorporated by reference to Exhibit 10.13 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended March 30, 1996 (the "1996 Form 10-K").(1) 10.9* -- 1996 Employee Incentive Plan. Incorporated by reference to Exhibit 10.14 to 1996 Form 10-K.(1) 10.10* -- Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan and Trust (As Amended and Restated Effective March 26, 1989). Incorporated by reference to Exhibit 10.15 to 1996 Form 10-K.(1) 10.11 -- First Amendment to Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan dated November 15, 1995. (1) 10.12 -- Second Amendment to Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan (As Amended and Restated Effective March 26, 1989) dated April 1, 1996. (1) 10.13 -- Third Amendment to Kent Electronics Corporation Tax-Deferred Savings and Plan (As Amended and Restated Effective March 26, 1989) dated April 1, 1996. (1) 10.14* -- Form of Agreement by and between Kent Electronics Corporation and Morrie K. Abramson dated March 16, 1993. Incorporated by reference to Exhibit 10.21 to 1993 Form 10-K.(1) 10.15* -- Form of Executive Health Care Benefits and Consulting Agreement by and between Kent Electronics Corporation and Morrie K. Abramson dated January 27, 1993. Incorporated by reference to Exhibit 10.22 to 1993 Form 10-K.(1) 31 32 10.16* -- Employment Agreement dated January 3, 1996 by and between Morrie K. Abramson and Kent Electronics Corporation. Incorporated by reference to Exhibit 10.22 to 1996 Form 10-K.(1) 10.17* -- Kent Electronics Corporation Chief Executive Officer Deferred Compensation Plan and Agreement dated January 3, 1996 by and between Kent Electronics Corporation and Morrie K. Abramson. Incorporated by reference to Exhibit 10.23 to 1996 Form 10-K.(1) 10.18* -- Trust Agreement for Kent Electronics Corporation Chief Executive Officer Deferred Compensation Plan and Agreement and Employment Agreement dated January 3, 1996 by and between Kent Electronics Corporation and Texas Commerce Bank National Association, as trustee. Incorporated by reference to Exhibit 10.24 to 1996 Form 10-K.(1) 10.19* -- Amendment to 1991 Non-Employee Director Stock Option Plan. Incorporated by reference to Exhibit 10.4 to 1998 Second Quarter Form 10-Q/A.(1) 10.20* -- Amendment to Amended and Restated 1987 Stock Option Plan. Incorporated by reference to Exhibit 10.5 to 1998 Second Quarter Form 10-Q/A.(1) 10.21* -- Amendment to Stock Option Plan and Agreement for the Company's Executive Vice President Sales-Distribution between Kent Electronics Corporation and Larry D. Olson dated July 2, 1997. Incorporated by reference to Exhibit 10.6 to 1998 Second Quarter Form 10-Q/A.(1) 10.22* -- Amendment to Stock Option Plan and Agreement for the Company's Executive Vice President Operations-Distribution between Kent Electronics Corporation and Mark A. Zerbe dated July 2, 1997. Incorporated by reference to Exhibit 10.7 to 1998 Second Quarter Form 10-Q/A.(1) 10.23* -- Amendment to Stock Option Plan and Agreement for the Company's Vice President, Secretary and Treasurer between Kent Electronics Corporation and Stephen J. Chapko dated July 2, 1997. Incorporated by reference to Exhibit 10.8 to 1998 Second Quarter Form 10-Q/A.(1) 10.24* -- Amendment to Stock Option Plan and Agreement for the Company's Vice President, Corporate Controller between Kent Electronics Corporation and David D. Johnson dated July 2, 1997. Incorporated by reference to Exhibit 10.9 to 1998 Second Quarter Form 10-Q/A.(1) 10.25* -- Amendment No. 1 to Employment Agreement by and among Morrie K. Abramson, Rolaine S. Abramson and Kent Electronics Corporation dated August 18, 1997. Incorporated by reference to Exhibit 10.10 to 1998 Second Quarter Form 10-Q/A.(1) 10.26* -- Amendment No. 2 to Employment Agreement by and among Morrie K. Abramson, Rolaine S. Abramson and Kent Electronics Corporation dated November 10, 1998. Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Fiscal Quarter ended December 26, 1998 (the "1999 Third Quarter Form 10-Q").(1) 10.27* -- Severance Agreement by and between Kent Electronics Corporation and Terrence M. Hunt dated November 10, 1998. Incorporated by reference to Exhibit 10.2 to 1999 Third Quarter Form 10-Q.(1) 32 33 10.28* -- Severance Agreement by and between Kent Electronics Corporation and Larry D. Olson dated November 10, 1998. Incorporated by reference to Exhibit 10.3 to 1999 Third Quarter Form 10-Q.(1) 10.29* -- Severance Agreement by and between Kent Electronics Corporation and Frank M. Billone dated November 11, 1998. Incorporated by reference to Exhibit 10.4 to 1999 Third Quarter Form 10-Q.(1) 10.30* -- Severance Agreement by and between Kent Electronics Corporation and Stephen J. Chapko dated November 11, 1998. Incorporated by reference to Exhibit 10.5 to 1999 Third Quarter Form 10-Q.(1) 10.31* -- Severance Agreement by and between Kent Electronics Corporation and Richard J. Hightower dated November 11, 1998. Incorporated by reference to Exhibit 10.6 to 1999 Third Quarter Form 10-Q.(1) 10.32* -- Severance Agreement by and between Kent Electronics Corporation and Mark A. Zerbe dated November 11, 1998. Incorporated by reference to Exhibit 10.7 to 1999 Third Quarter Form 10-Q.(1) 10.33* -- Amended and Restated 1998 Stock Option Plan. Incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the Fiscal Year Ended April 3, 1999 (the "1999 Form 10-K).(1) 10.34* -- 1999 Stock Option Plan. Incorporated by reference to Exhibit 10.35 to the 1999 Form 10-K.(1) 10.35 -- Separation Agreement and General Release by Terrence M. Hunt effective as of February 29, 2000.(1) 11 -- Computation of Earnings Per Share. 12 -- Computation of Ratio of Earnings to Fixed Charges. 21 -- Subsidiaries of Kent Electronics Corporation. 23 -- Consent of Independent Certified Public Accountants. 27 -- Financial Data Schedule. -------------- * Incorporated by reference. (1) Management contract or compensatory plan or agreement. (b) REPORTS ON FORM 8-K: The Company filed a Current Report on Form 8-K dated June 14, 2000 reporting under "Item 5. Other Events" the announcement of the sale of certain assets of its specialty wire and redistribution business. 33 34 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, thereunto duly authorized. KENT ELECTRONICS CORPORATION (Registrant) By: /s/ Morrie K. Abramson -------------------------------- Morrie K. Abramson Chairman of the Board and Chief Executive Officer Date: June 27, 2000 34 35 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.
Signature Title Date --------- ----- ---- /s/ Morrie K. Abramson Chairman of the Board and Chief Executive June 27, 2000 - ----------------------- Officer and Director (Principal Executive Officer) Morrie K. Abramson /s/ Larry D. Olson President and Chief Operating Officer and June 27, 2000 - ----------------------- Director Larry D. Olson /s/ Stephen J. Chapko Executive Vice President, Chief Financial Officer, June 27, 2000 - ----------------------- Treasurer and Secretary (Principal Financial Stephen J. Chapko Officer) /s/ David D. Johnson Vice President, Corporate Controller June 27, 2000 - ----------------------- (Principal Accounting Officer) David D. Johnson /s/ Max S. Levit Director June 27, 2000 - ----------------------- Max S. Levit /s/ David Siegel Director June 27, 2000 - ----------------------- David Siegel /s/ Richard C. Webb Director June 27, 2000 - ----------------------- Richard C. Webb /s/ Alvin L. Zimmerman Director June 27, 2000 - ----------------------- Alvin L. Zimmerman
36 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ------- ----------- 10.2 Amended and Restated 1996 Non-Employee Director Stock Option Plan. 10.11 First Amendment to Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan. 10.12 Second Amendment to Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan (As Amended and Restated Effective March 26, 1989). 10.13 Third Amendment to Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan (As Amended and Restated Effective March 26, 1989). 10.35 Separation Agreement and General Release by Terrence M. Hunt effective as of February 29, 2000. 11 Computation of Earnings Per Share. 12 Computation of Ratio of Earnings to Fixed Charges. 21 Subsidiaries of Kent Electronics Corporation. 23 Consent of Independent Certified Public Accountants. 27 Financial Data Schedule.
EX-10.2 2 ex10-2.txt AMENDED 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION 1 EXHIBIT 10.2 KENT ELECTRONICS CORPORATION AMENDED AND RESTATED 1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN ARTICLE I PURPOSE Kent Electronics Corporation, a Texas corporation (the "Company"), is dependent for the successful conduct of its business on the initiative, effort and judgment of its directors. This Amended and Restated 1996 Non-Employee Director Stock Option Plan (the "Plan") is intended to provide the independent directors of the Company additional compensation for their service as directors and an incentive, through options to acquire stock in the Company, to increase the value of the Company's common stock, without par value ("Common Stock"). ARTICLE II ADMINISTRATION The Plan shall be administered by the Board of Directors of the Company (the "Board"). Subject to the express provisions of the Plan and the policies of each stock exchange on which any of the Company's stock at any time may be traded, the Board shall have plenary authority (i) to construe and interpret the Plan, (ii) to define the terms used therein, (iii) to prescribe, amend and rescind rules and regulations relating to the Plan, and (iv) to make all other determinations necessary or advisable for the administration of the Plan. All determinations and interpretations made by the Board shall be binding and conclusive on all participants in the Plan and their legal representatives and beneficiaries. No member of the Board shall be liable for any action, failure to act, determination or interpretation made in good faith with respect to the Plan or any transaction under the Plan. ARTICLE III ELIGIBILITY AND PARTICIPATION Under the Plan each director who is not a full-time employee of the Company or any of its subsidiaries (each, a "Non-Employee Director") shall, effective as of the date of his initial election to the Board, be granted a stock option to purchase from the Company a certain number of shares of Common Stock to be determined as follows: 7,500 shares if his initial election is at the Company's annual meeting of shareholders or after the Company's annual meeting of shareholders, but before the end of the Company's second fiscal quarter; 5,625 shares if his initial election is during the Company's third fiscal quarter; 3,750 shares if his initial election is during the Company's fourth fiscal quarter; and 1,875 shares if his initial election is during the Company's first fiscal quarter, but before the Company's annual meeting of shareholders. In addition, each Non-Employee Director (i) shall, after his initial election to the Board and effective as of the date of each annual meeting of shareholders beginning with the Company's 1998 annual meeting of shareholders, be granted a stock option to purchase from the Company 7,500 shares of Common Stock and (ii) shall, effective as of September 3, 1997, be granted a 1 2 stock option to purchase from the Company 2,500 shares of Common Stock. All options to purchase Common Stock granted under this Article III shall be at a price determined and set forth in Article IV. ARTICLE IV ---------- TERMS AND CONDITIONS OF STOCK OPTIONS; STOCK OPTION PRICE; TRANSFERABILITY (a) Each stock option granted under the Plan shall be evidenced by a Stock Option Agreement (the "Agreement") in such form as may be hereafter approved by the Board on the advice of counsel to the Company. The Agreement shall be executed by the Company and the optionee. The sale of the shares issued on the exercise of a stock option by any person subject to Section 16 of the 1934 Act shall not be allowed until at least six months after the later of (i) the approval of this Plan by the shareholders of the Company in accordance with Article VIII hereof or (ii) the grant of the stock option. Such determination for each stock option is to be made prior to or at the time that stock option is granted. Each stock option granted hereunder shall expire if not exercised within five years of the date of grant. (b) The per share stock option price shall be an amount equal to the Fair Market Value (as defined below) of the Common Stock on the date of grant of the stock option. In no event shall the stock option price be less than the par value of the Company's Common Stock. (c) Except as set forth below, the stock options granted hereunder shall not be transferable otherwise than by will or operation of the laws of descent and distribution or pursuant to a qualified domestic relations order as defined in the Internal Revenue Code of 1986, as amended (the "Code"), or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the rules thereunder. During the lifetime of the optionee, stock options granted hereunder shall be exercisable only by the optionee, the optionee's guardian or legal representative. In addition to non-transferable stock options, the Board may grant stock options that are transferable, without payment of consideration, to immediate family members of the optionee or to trusts or partnerships for such family members; the Board may also amend outstanding stock options to provide for such transferability. (d) No stock option granted hereunder shall be exercisable unless the Plan and all shares issuable on the exercise thereof have been registered under the Securities Act of 1933, as amended (the "1933 Act") and all other applicable securities laws, and there is available for delivery a prospectus meeting the requirements of Section 10 of the 1933 Act, or the Company shall have first received the opinion of its counsel that registration under the 1933 Act and all other applicable securities laws is not required in connection with such issuance. At the time of exercise, if the shares with respect to which the stock option is being exercised have not been registered under the 1933 Act and all other applicable securities laws, the Company may require the optionee to provide the Company whatever written assurance counsel for the Company may require that the shares are being acquired for investment and not with a view to the distribution thereof, and that the shares will not be disposed of without the written opinion of such counsel that registration under the 1933 Act and all other applicable securities laws is not required. 2 3 Share certificates issued to the optionee upon exercise of the stock option shall bear a legend to the foregoing effect to the extent counsel for the Company deems it advisable. (e) For all purposes under the Plan, the Fair Market Value of a share of Common Stock on a particular date, or on the most recent prior date on which Common Stock was traded, shall be equal to the reported closing price per share as reported by the New York Stock Exchange, Inc. or other principal exchange or market on which the Common Stock is traded. In the event Common Stock is not publicly traded at the time a determination of its value is required to be made hereunder, the determination of its Fair Market Value shall be made by the Board of Directors in such manner as it deems appropriate. (f) A stock option shall lapse in the following situations: (1) If the directorship of a Non-Employee Director terminates for any reason other than death, all unexercised stock options theretofore granted shall expire ten days after the date of such termination of directorship, unless such stock options shall have terminated earlier under the terms or under other provisions of the Plan. (2) If the directorship of a Non-Employee Director terminates by reason of death, all unexercised stock options, if any, shall become immediately exercisable and may be exercised until the expiration of one year from the date of death of the Non-Employee Director or until the expiration of the term of the stock option, whichever is earlier. Such stock option may be exercised by any designated beneficiary of the Non-Employee Director, subject to all other provisions of the Plan. ARTICLE V SHARES SUBJECT TO PLAN AND DURATION OF PLAN The term of the Plan shall continue until the earlier to occur of (i) May 7, 2006, ten years from the effective date of the Plan as originally approved by the shareholders of the Company, or (ii) the date on which there have been granted to Non-Employee Directors pursuant to the Plan stock options to purchase an aggregate of 200,000 shares of the Common Stock; provided, however, that all outstanding stock options granted under the Plan shall continue to be governed by the terms and conditions of the Plan. Shares subject to stock options under the Plan may be either authorized and unissued shares or issued shares that have been acquired by the Company and held in its treasury, in the sole discretion of the Board. When stock options have been granted under the Plan and have lapsed unexercised or partially unexercised or have been surrendered for cancellation by the optionee thereof, the unexercised shares which were subject thereto may be reoptioned under the Plan. 3 4 ARTICLE VI ADJUSTMENTS (a) Adjustments Upon Changes in Capitalization. Subject to any required action by the Company's directors and shareholders, the number of shares provided for in each outstanding stock option and the price per share thereof, and the number of shares provided for in the Plan, shall be proportionately adjusted for any increase or decrease in the number of issued shares of the Company's Common Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend (but only on the Common Stock), a stock split, a reverse stock split, or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company, and shall also be proportionately adjusted in the event of a spin-off, spin-out, or other distribution of assets to shareholders of the Company, to the extent necessary to prevent dilution of the interests of grantees pursuant to the Plan or of the other shareholders of the Company, as applicable. If the Company shall engage in a merger, consolidation, reorganization or recapitalization, each outstanding stock option (or if such transaction involves less than all of the shares of the Company's Common Stock, then a number of stock options proportionate to the number of such involved shares), shall become exercisable for the securities and other consideration to which a holder of the number of shares of the Company's Common Stock subject to each such stock option would have been entitled to receive in any such merger, consolidation, reorganization or recapitalization. (b) If, while unexercised stock options remain outstanding under the Plan, (i) the Company is merged into or consolidated with another corporation under circumstances where the Company is not the surviving corporation or where the Common Stock is converted into other securities, cash or other property in connection with such merger or consolidation, (ii) the Company is recapitalized in such a manner that shares of the Common Stock are converted into or exchanged for other securities of the Company, (iii) the Company sells or otherwise disposes of substantially all of its assets to another person, corporation or entity, (iv) over 30% of the Common Stock of the Company is acquired by another person, corporation or entity in exchange for stock (or stock and securities) of such corporation or (v) over 30% of the then outstanding Common Stock is acquired in a single transaction or a series of related transactions, then, unless the terms of the transaction described in clauses (i), (ii), (iii), (iv) or (v) above provide that after the effective date of such merger, consolidation, recapitalization, exchange, sale or acquisition, as the case may be, each holder of an outstanding stock option shall be entitled, upon exercise of such stock option to receive, in lieu of shares of the Company's Common Stock, shares of such stock or other securities of the Company or the surviving or acquiring corporation or such other property at the same rate per share as the holders of shares of the Company's Common Stock received pursuant to the terms of the merger, consolidation, exchange, recapitalization, sale or acquisition, all outstanding stock options shall be cancelled as of the effective date of any such merger, consolidation, recapitalization, exchange, sale or acquisition. At least 30 days notice of such cancellation shall be given to each holder of a stock option and each holder of a stock option shall have the right to exercise such stock options in full during a 30-day period preceding the effective date of such merger, consolidation, recapitalization, exchange, sale or acquisition. (c) Change of Par Value. In the event of a change in the Company's Common Stock which is limited to a change of all of its authorized shares without par value into the same number of shares with a par value, the shares resulting from any such change shall be deemed to be Common Stock within the meaning of the Plan. 4 5 (d) Miscellaneous. The adjustments provided for in this Article shall be made by the Board whose determination in that respect shall be final, binding and conclusive. Except as hereinbefore expressly provided in this Article, the holder of a stock option shall not be entitled to the privilege of stock ownership as to any shares of Common Stock or other stock not actually issued and delivered to the holder, and any issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect and no adjustment by reason thereof shall be made with respect to the number or price of shares of the Company's Common Stock subject to any stock option. The grant of a stock option pursuant to the Plan shall not affect in any way the right or power of the Company to, among other things, make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge or to consolidate or to dissolve or liquidate or sell or transfer all or any part of its business or assets. ARTICLE VII ----------- POWER TO AMEND The Board of Directors may amend, terminate or suspend this Plan at any time and from time to time; provided, however, that the Plan shall not be amended more than once every six months, other than to comport with changes in the Code, ERISA, or the regulations thereunder, or the regulations thereunder. However, no termination or amendment of the Plan may, without the consent of the holder of any Option then outstanding, adversely affect the rights of such holder under the Options. ARTICLE VIII ------------ EFFECTIVE DATE; SHAREHOLDER APPROVAL The Plan shall be effective as of September 3, 1997, the date on which it received the unanimous approval of the Board. However, the Plan and all stock options granted under the Plan shall be void if the Plan is not approved by the shareholders within 12 months from the date the Plan is approved by the Board. The Plan shall be deemed approved by the holders of the outstanding voting stock of the Company by the affirmative votes of the holders of a majority of the outstanding voting stock of the Company present, or represented, and entitled to vote at a meeting of such shareholders duly held in accordance with the applicable laws of the state or other jurisdiction in which the Company is incorporated. No stock option granted under the Plan shall be exercisable in whole or in part unless and until such shareholder approval is obtained. 5 EX-10.11 3 ex10-11.txt 1ST AMEND. TO TAX-DEFERRED SAVINGS & RETIREMENT 1 EXHIBIT 10.11 FIRST AMENDMENT TO KENT ELECTRONICS CORPORATION TAX-DEFERRED SAVINGS AND RETIREMENT PLAN W I T N E S S E T H WHEREAS, KENT ELECTRONICS CORPORATION (the "Plan Sponsor") maintains the Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan (the "Plan") for the benefit of its eligible employees and their beneficiaries; and WHEREAS, in Section 11.1 of the Plan, the Plan Sponsor reserved the right to amend the Plan at any time; and WHEREAS, it has been determined that the Plan should be amended in order to set forth certain changes requested by the Internal Revenue Service in connection with the issuance of a favorable determination letter for the Plan, NOW, THEREFORE, the Plan is hereby amended, effective as of March 26, 1989, by this First Amendment thereto as follows: 1. The reference to the date "December 31, 1994" in the second paragraph of Section 1.10 of the Plan shall be changed to "December 31, 1993". 2. Except as modified herein, the Plan is specifically ratified and affirmed. 3. In order to effectuate the amendments described in Paragraph 1 above, the substitute page I-7 attached hereto shall be inserted into the Plan in place of the above described original section. IN WITNESS WHEREOF, the First Amendment to the Plan is executed this 15th day of November, 1995. PLAN SPONSOR: KENT ELECTRONICS CORPORATION ATTEST: By: /s/ Kim K. Johnson By: /s/ Stephen J. Chapko ------------------------ ----------------------------- Printed Name: Kim K. Johnson Printed Name: Stephen J. Chapko Title: Corporate Accounting Title: Vice President - Treasurer 1 2 TRUSTEE: SMITH BARNEY PRIVATE TRUST COMPANY By:/s/ Donald E. Rose ------------------------- Printed Name: Donald E. Rose Title: Vice President 2 EX-10.12 4 ex10-12.txt 2ND AMEND. TO TAX-DEFERRED SAVINGS & RETIREMENT 1 EXHIBIT 10.12 SECOND AMENDMENT TO THE KENT ELECTRONICS CORPORATION TAX-DEFERRED SAVINGS AND RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE MARCH 26, 1989) WHEREAS, Kent Electronics Corporation (the "Company") desires to amend the Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan (the "Plan") to revise the term "Entry Date" to mean the first day of each calendar quarter as it was intended and as the Plan has been operated although such provision was inadvertently defined otherwise in the prior amendment and restatement of the Plan; and WHEREAS, the Company desires to amend the Plan to make certain other changes and clarifications therein; NOW, THEREFORE, having reserved the right to amend the Plan, Kent Electronics Corporation hereby amends the Plan as follows: 1. Effective as of March 26, 1989, the term "Entry Date" in Section 1.14 of the Plan shall be amended in its entirety to read as follows: "'Entry Date' shall mean the date on which the Employee becomes a Member by commencing participation in the Plan after having met the eligibility requirements under the applicable provisions of the Plan, which date shall be the first date of the periodic pay period commencing coincident with or next following the first day of the Plan Year, April 1, June 1, or September 1 of the Plan Year." 2. The third paragraph of Section 3.1(a) shall be clarified by adding the following to the end thereof: "With respect to Plan Years commencing after December 31, 1988, Base Compensation in excess of the limit imposed under Section 401(a)(17) of the Code, which, for Plan Years commencing after December 31, 1998, but on or before December 31, 1993, shall be $200,000 (as adjusted, as may be determined by the Commissioner of the Internal Revenue, at the same time and in the same manner as prescribed in Section 401(a)(17) of the Code) for the Plan Year shall be disregarded, and rules pertaining to treatment of family members set out in the third paragraph of the definition of Highly Compensated Employee shall apply, except that in applying such rules, the term "family" shall include only the spouse and any lineal descendants of the Employee who has not attained age 19 before the close of the applicable Plan Year. For Plan Years commencing on or after January 1, 1994, Base Compensation shall not exceed $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17) of the Code for a Plan Year. The rules pertaining to the treatment of family members set out in the third paragraph of the definition of Highly Compensated Employee shall apply, except that in applying such rules, the term 2 "family" shall include only the spouse and any lineal descendants of the Employee who have not attained age 19 before the close of the applicable Plan Year. The foregoing limitations under Code Section 401(a)(17) shall apply to all Base Compensation received during the Plan Year including Base Compensation received during the Plan Year prior to a Member's Entry Date if the Entry Date is on any other day other than the first day of the Plan Year." 3. Effective as of March 31, 1996, the last paragraph in Section 3.1(a) shall be amended in its entirety to read as follows: "Reductions authorized under the Compensation Deferral Agreement shall be irrevocable, except that Elective Contributions may be increased or decreased on the first day of any periodic pay period coincident with the next following the first day of the next month (or such other date(s) as may be prescribed by the Administrative Committee) with reasonable notice as may be required by the Administrative Committee. Elective Contributions may be discontinued at any time with reasonable notice as may be required by the Administrative Committee; provided, however, if Elective Contributions are discontinued at the request of an Member, such Contributions may not be resumed until the first day of any periodic pay period coincident with or next following the first day of the following month (or any other such date(s) as may be prescribed by the Administrative Committee) following receipt by the Administrative Committee of reasonable notice as may be required by the Administrative Committee. Under special circumstances, the Administrative Committee may permit different or additional effective dates for increases or decreases of Elective Contributions authorized under Compensation Deferral Agreements, or may waive the otherwise applicable notice requirement, in order to prevent hardship to any Member, provided that the waiver is not contrary to the best interest of the other Members." 4. Effective as of March 31, 1996, Section 6.6(iii) at paragraph 3 shall be amended to delete the first sentence in paragraph 3 of said section on page VI-7. 5. Effective as of March 1, 1996, the first sentence of Section 6.8 shall be clarified to add the following after the word "Member" in the second line thereof; "who is currently employed by an Employer and," and effective as of March 31, 1996, the first paragraph in Section 6.8 shall be amended to add the following after the word "educational fees" in item (v) thereof: "or related room and board expenses as permitted under the regulations issued under the Code." 6. Effective as of March 31, 1996, the second paragraph of Section 6.8 shall be amended in its entirety to read as follows: 2 3 "Notwithstanding the immediately preceding paragraph, effective as of March 31, 1996, in the event that the amount available to the Member for withdrawal from his Non-Forfeitable Contributions Account is not sufficient to relieve his financial hardship that is attributed to items (i)-(v) in the preceding paragraph, then the Member may withdraw the additional amount needed to satisfy the hardship from the vested portion of his Employer Contributions Account and Rollover Account, if any. Any requested hardship withdrawal may also include an additional amount necessary to pay any federal, state or local income taxes or penalties (including additional taxes under Section 72(t) of the Code) that are reasonably expected to result form the withdrawal." 7. Effective as of March 31, 1996, the Plan shall be amended to add new Section 6.12 as follows: "6.12 Plan Loans." "From and after March 31, 1996, a Member who is an Employee and, to the extent not resulting in discrimination prohibited by Section 401(a)(4) of the Code, any other Member or any Beneficiary (including an "alternate payee" within the meaning of Code Section 414(p)(8) (who is a "party in interest" with respect to the Plan within the meaning of ERISA Section 3(14) and who must be eligible to obtain a Plan loan in order for the exemptions set forth in 29 C.F.R. Section 2550.408b-1 to apply to the Plan, hereinafter "Borrower," may make an application to the Administrative Committee to borrow from the Accounts maintained by or for the Borrower in the Trust Fund, and the Administrative Committee in its sole discretion may permit such a loan. Any such loan shall be withdrawn from the Borrower's Accounts on a pro rata basis from the investment funds and money sources in the Borrower's Account. Loans shall be granted in a uniform and non-discriminatory manner on terms and conditions determined by the Administrative Committee which shall not result in more favorable treatment of Highly Compensated Employees and shall be set forth in written procedures promulgated by the Administrative Committee in accordance with applicable governmental regulations. All such loans shall be subject to the following terms and conditions: (a) The amount of the loan shall not exceed the lessor of (i) $50,000 (minus the Borrower's highest outstanding loan balance during the previous 12 months) or (ii) fifty percent of the present value of the Borrower's vested account balance under the Plan. The Borrower may have no more than two outstanding loans at any time. A Borrower may request no more than one new loan each calendar quarter. Loans cannot be refinanced. (b) The loan shall be for a term not to exceed five years, unless the loan is used to acquire any dwelling unit which within a reasonable time is used as a principle residence of the Borrower. The loan for principle place of residence shall not exceed a term for 15 years. The Borrower must 3 4 provide evidence as required by the Administrative Committee in its sole discretion that the loan's proceeds will be used for the purchase of a principle place of residence. The loan shall be evidenced by a note signed by the Borrower. The loan shall be payable in periodical installments and shall bear interest at a fixed interest rate equal to the prime rate quoted in the Wall Street Journal as being representative of the base rate on corporate loans at large U.S. money center commercial banks on the first day of the month in which the loan is made, plus one percent (or such other amount as may be established by the Administrative Committee in writing on a uniform and consistent basis and set forth in procedures in accordance with applicable governmental regulations). Payments by a Borrower who is an employee receiving compensation from the employer will be made by means of payroll deduction from the Borrower's compensation; provided, however, that the repayment period cannot span beyond 90 days following a Borrower's termination of employment for any reason. A Borrower may repay an outstanding loan in a lump sum before the scheduled due date for repayment of such loan with no prepayment penalties. (c) The minimum loan amount is $1,000. In the event an installment payment is not paid on a scheduled due date, the Administrative Committee shall give written notice to the Borrower sent to his last known address. If such installment payment is not paid within 60 days or (any another amount of time as may be designated by the Administrative Committee and in accordance with treasury regulations), the Administrative Committee may proceed with foreclosure in order to collect the full remaining loan balance or shall make other appropriate arrangements with the Borrower as the Administrative Committee deems appropriate and in accordance with treasury regulations. Foreclosures need not be effected until the occurrence of a distributable event under the terms of the Plan and no rights against the Borrower or the security shall be deemed waived by the Plan as a result of such delay. (d) The unpaid balance of the loan, together with interest thereon, shall become due and payable upon the date of distribution of the Borrower's Account or as set forth the applicable procedures designated by the Administrative Committee, and the Trustee shall first satisfy the indebtedness from the amount payable to the Borrower or to the Borrower's Beneficiary before making any payments to the Borrower or to the Beneficiary. (e) A request by a Borrower for a loan shall be made by telephone through a voice response system specifying the amount of the loan. 4 5 (f) A loan to the Borrower shall be considered an investment of the separate accounts of the Borrower from which the loan is made. All loan repayments shall be reinvested in accordance with the Member's current investment election for future contributions as provided in the Plan." IN WITNESS WHEREOF, the Company which is the Plan Sponsor has caused this Second Plan Amendment to be executed this 1st day of April, 1996, to be effective as stated herein. PLAN SPONSOR/COMPANY: KENT ELECTRONICS CORPORATION By: /s/ Stephen J. Chapko ------------------------------------------- Name: Stephen J. Chapko Title: Vice President, Treasurer and Secretary 5 EX-10.13 5 ex10-13.txt 3RD AMEND. TO TAX-DEFERRED SAVINGS & RETIREMENT 1 EXHIBIT 10.13 THIRD AMENDMENT TO THE KENT ELECTRONICS CORPORATION TAX-DEFERRED SAVINGS AND RETIREMENT PLAN (AS AMENDED AND RESTATED EFFECTIVE MARCH 26, 1989) WHEREAS, Kent Electronics Corporation desires to amend the Kent Electronics Corporation Tax-Deferred Savings and Retirement Plan (the "Plan") to incorporate changes as required or made desirable by the United States Services Employment and Re-employment Rights Act of 1994, the Uruguay Roundtable Amendments Act, Small Business Job Protections Act of 1996, and the Taxpayer Relief Act of 1997; NOW, THEREFORE, the Plan shall be amended as follows: 1. Effective January 1, 1997, Section 1.15 shall be amended in its entirety to read as follows: "Highly Compensated Employee shall mean (a) Employees who during the Plan Year (also the 'determination year') or preceding Plan Year (the 'look-back year') were at any time a 5% owner of Employer and (b) Employees with compensation in the preceding Plan Year from the Employer in excess of $80,000, (as adjusted by Commissioner under the Internal Revenue for any given year) and, if the Administrative Committee elects in its sole discretion, the Employee was a member of the top-paid 20% group of Employees. "For the purposes of determining who is a Highly Compensated Employee, the term 'compensation' has the meaning given such term by Code Section 415(c)(3). "Any Employee who is a non-resident alien who receives no earned income (within the meaning of Section 911(d)(2) of the Code) from the Employer which constitutes income from sources within the United States (within the meaning of Section 861(a)(3) of the Code) shall not be treated as an Employee for the purposes of determining whether an Employee is a Highly Compensated or Non-Highly Compensated Employee. "Notwithstanding the foregoing the determination of who is a Highly Compensated Employee shall be made in accordance with Section 414(q) of the Code and the applicable regulations thereunder and as elected by the Administrative Committee in accordance with applicable regulations." 2. Section 1.15 shall be amended to provide that the definition of "Leased Employee," is amended effective January 1, 1997, by substituting "performed under primary direction or control by the recipient" for "of a type historically performed by employees in the business field of the recipient Employer." 1 2 3. Effective for re-employments after December 12, 1994, Section 1.3 shall be amended to add the following at the end thereof: "Notwithstanding any provision of this Plan to the contrary, contributions, benefits and service credit with respect to qualified military service will be provided in accordance with Code Section 414(u)." 4. Any reference is this Plan and Trust to Family Member Aggregation Rules is stricken effective with the first day of the first Plan Year beginning after December 31, 1996. 5. Effective January 1, 1997, the second paragraph in Section 3.3(i) is amended in its entirety as follows: "Any distribution of excess contributions for any plan year shall be made to Highly Compensated Employees on the basis of the amount of contributions by, or on behalf of, each of such Employees in accordance with the following method: Step 1: The Administrative Committee shall calculate the dollar amount of excess contributions for each affected Highly Compensated Employees. Step 2: The Administrative Committee shall then determine the total of the dollar amounts calculated in Step 1. This total amount in Step 2 (total excess contributions) shall be distributed in accordance with Steps 3 and 4 below: Step 3: The elective contributions of the Highly Compensated Employee with the highest dollar amount of elective contributions shall be reduced by the amount required to cause that Highly Compensated Employee's elective contributions to equal the dollar amount of the elective contributions of the Highly Compensated Employee with the next highest dollar amount of elective contributions. This amount shall be distributed to the Highly Compensated Employee with the highest dollar amount. However, if a lesser reduction, when added to the total dollar amount already distributed under this step, would equal the total excess contributions, the lesser reduction amount shall be distributed. Step 4: If the total amount distributed is less than the total excess contributions, reductions shall continue to be made in accordance with Step 3 until the total amount distributed equals the total excess contributions. If these distributions are made, the cash or deferred arrangement is treated as meeting the nondiscrimination test of Code section 401(k)(3) regardless of whether the ADP, if recalculated after distributions, would satisfy Code section 401(k)(3)." 2 3 6. Section 3.3(j) is amended by the addition as the last paragraph: "From and after January 1, 1997, any distribution of excess aggregate contributions for any plan year shall be made to Highly Compensated Employees on the basis of the amount of contributions by, or on behalf of, each of such Employees in accordance with the following method: Step 1: The Administrative Committee shall calculate the dollar amount of excess aggregate contributions for each affected Highly Compensated Employee. Step 2: The Administrative Committee shall then determine the total of the dollar amounts calculated in Step 1. This total amount in Step 2 (total excess aggregate contributions) shall be distributed in accordance with Steps 3 and 4 below: Step 3: The matching contributions of the Highly Compensated Employee with the highest dollar amount of matching contributions shall be reduced by the amount required to cause that Highly Compensated Employee's matching contributions to equal the dollar amount of the matching contributions of the Highly Compensated Employee with the next highest dollar amount of matching contributions. This amount shall be distributed to the Highly Compensated Employee with the highest dollar amount. However, if a lesser reduction, when added to the total dollar amount already distributed under this step, would equal the total excess aggregate contributions, the lesser reduction amount shall be distributed. Step 4: If the total amount distributed is less than the total excess aggregate contributions, reductions shall continue to be made in accordance with Step 3 until the total amount distributed equals the total excess aggregate contributions. If these distributions are made, the arrangement is treated as meeting the nondiscrimination test of Code section 401(m)(3) regardless of whether the ADP, if recalculated after distributions, would satisfy Code section 401(m)(3). This paragraph shall control notwithstanding any other provision in the Plan to the contrary." 7. Effective August 1, 1998, Sections 6.6 (ii) and (iii) shall be amended by substituting the dollar amount of "$5,000.00" in the place of "$3,500.00." 8. Effective August 1, 1998, Section 6.6(a)(i)(v) shall be amended as follows: "With respect to Employees who attain age 70 1/2 on or after August 1, 1998, and who are not 5%-owners, benefits shall commence upon the later of termination of employment or the Required Beginning Date." 3 4 IN WITNESS WHEREOF, this Amendment has been executed this 1st day of August, 1998. Signed, sealed, and delivered in the presence of: KENT ELECTRONICS CORPORATION By: /s/ Stephen J. Chapko ------------------------------- Date: 8/1/98 4 EX-10.35 6 ex10-35.txt SEPARATION AGREEMENT AND GENERAL RELEASE 1 EXHIBIT 10.35 SEPARATION AGREEMENT AND GENERAL RELEASE I, Terrence M. Hunt, understand that my employment with Kent Electronics Corporation, successor by merger to Futronix Acquisition Company (the "Company"), in Houston, Texas is terminated effective February 29, 2000 (the "Termination Date"). I have been offered and agree to accept from the Company separation pay in a lump sum payment in the total amount of One Hundred Sixty-Five Thousand Twenty-Two and No/100 Dollars ($165,022.00), less payroll withholdings (the "Termination Compensation"). I understand and agree that this money is not otherwise due me and is an option being exercised by the Company, as provided in the Employment Agreement dated as of October 7, 1996 between Kent Electronics Corporation, Futronix Acquisition Company and me (the "Employment Agreement"). I further understand that unless the Company and I enter into this Separation Agreement and General Release (the "Agreement"), I do not have a right to any of the separation benefits described in this document. The separation pay will be paid after the revocation period has expired and within 45 days after the Termination Date. In consideration for the Termination Compensation, I voluntarily and knowingly waive, release, and discharge the Company, its parent, successors, subsidiaries, affiliates, employees, officers, directors, owners, and agents (the "Other Entities") from all claims, liabilities, demands, and causes of action of any kind whatsoever, at common law, statutory, constitutional, or otherwise, known or unknown, arising on or before the Termination Date, which I may have or claim to have against the Company and/or the Other Entities directly or indirectly attributable to my relationship or association with the Company and/or the Other Entities, except for the Company's obligations with respect to the Termination Compensation. I agree not to file a lawsuit to assert any such claims. This waiver, release and discharge includes, but is not limited to: (1) claims arising under federal, state, or local laws prohibiting employment discrimination such as, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Equal Pay Act, Section 1981 of the Civil Rights Act of 1866, the Americans with Disabilities Act, Section 451 of the Texas Labor Code, and the Texas Commission on Human Rights Act, (2) claims for breach of contract, (3) claims for personal injury, harm, or other damages (whether intentional or unintentional), (4) claims growing out of any legal restrictions on the Company's right to terminate its employees, (5) claims for wages or any other compensation, or (6) claims for benefits (except those for which rights are vested under applicable plan documents) including, without limitation, those arising under the Employee Retirement Income Security Act. Notwithstanding anything herein contained to the contrary, my execution of this Separation Agreement and General Release shall not affect, inhibit, alter or amend any of the respective rights, liabilities and obligations of Landlord or Tenant pursuant to a Lease Agreement dated November 12, 1993, by and between T. M. Hunt, Trustee, as Landlord, and Futronix Corporation, as Tenant, which Lease was assigned to the Company by operation of law as a result of merger. Any such rights, liabilities and obligations shall continue from and after the date of this Agreement and may be enforced by any of the parties to the Lease in any manner authorized by the Lease or the laws of the State of Texas. 2 In further consideration for the Termination Compensation, I agree not to seek reinstatement or future employment with the Company. I understand that nothing herein relieves me of any covenants regarding confidential information, noncompetition and non-solicitation to which I agreed in the Employment Agreement or the Reorganization Agreement dated September 25, 1996. I understand and agree not to discuss or disclose any of the terms of this Separation Agreement and General Release with any person or entity except for my spouse, my attorney, my tax advisor, and government tax authorities or except as required by law. I understand that I have the right to discuss all aspects of this Separation Agreement and General Release with a private attorney, have been encouraged to do so by the Company, and have done so to the extent I desired. Further, I understand that I have up to twenty-one (21) days after the Termination Date to sign this Separation Agreement and General Release in order to consider all of its terms. This Separation Agreement and General Release may be revoked by me in writing to the Company within seven (7) days after I sign it, and it shall not become effective or enforceable until the revocation period has expired. If this Separation Agreement and General Release is not signed by me within the twenty-one (21) day period after the Termination Date, I understand that it automatically is revoked and is null and void. I have carefully read and fully understand all of the terms of this Separation Agreement and General Release. I understand that this Separation Agreement and General Release sets forth the entire agreement between the Company and me. I acknowledge that I have not relied upon any representations or statements, written or oral, not set forth in this document. This Separation Agreement and General Release shall be governed by and interpreted under the laws of the State of Texas without regard to Conflict of Laws. AGREED AND ACCEPTED on this 15th day of March, 2000. /s/ Terrence M. Hunt -------------------- Terrence M. Hunt STATE OF TEXAS ) ) COUNTY OF HARRIS ) This instrument was acknowledged before me on the 15th day of March, 2000, by the person known to me to be Terrence M. Hunt. /s/ Ermelinda A. Ortiz ---------------------- Notary Public, State of TEXAS Printed Name of Notary: Ermelinda A. Ortiz ------------------ My Commission Expires: 2-22-2003 --------- 2 EX-11 7 ex11.txt COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (IN THOUSANDS, EXCEPT PER SHARE DATA)
Fiscal Years Ended ----------------------------------------------------------------------- April 1, 2000 April 3, 1999 ----------------------------------------------------------------------- Per- Per- Share Share Income Shares Amount Income Shares Amount ------- ------- ------- ------- ------- ------- BASIC EARNINGS PER SHARE Net Earnings $18,251 28,062 $ 0.65 $ 182 27,674 $ 0.01 ======= ======= EFFECT OF DILUTIVE SECURITIES Excess of shares issuable upon exercise of stock options over shares deemed retired utilizing the treasury stock method -- 826 -- -- 425 -- ------- ------- ------- ------- ------- ------- DILUTED EARNINGS PER SHARE Net earnings plus assumed conversions $18,251 28,888 $ 0.63 $ 182 28,099 $ 0.01 ======= ======= ======= ======= ======= =======
Fiscal Years Ended -------------------------------- March 28, 1998 -------------------------------- Per- Share Income Shares Amount ------- ------- ------- BASIC EARNINGS PER SHARE Net Earnings $35,426 26,598 $ 1.33 ======= EFFECT OF DILUTIVE SECURITIES Excess of shares issuable upon exercise of stock options over shares deemed retired utilizing the treasury stock method -- 1,499 -- ------- ------- ------- DILUTED EARNINGS PER SHARE Net earnings plus assumed conversions $35,426 28,097 $ 1.26 ======= ======= =======
EX-12 8 ex12.txt COMPUTAITON OF RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12 KENT ELECTRONICS CORPORATION AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS, EXCEPT RATIO)
Fiscal years ended April 1, April 3, March 28, March 29, March 30, 2000 1999 1998 1997(1) 1996 -------- -------- --------- --------- --------- Earnings before income taxes $30,043 $ 294 $58,167 $45,100 $49,095 Add fixed charges 12,492 12,009 6,647 2,363 1,857 ------- ------- ------- ------- ------- Earnings as adjusted $42,535 $12,303 $64,814 $47,463 $50,952 ======= ======= ======= ======= ======= Fixed charges: Interest expense $10,470 $10,495 $ 5,272 $ 1,192 $ 898 Interest portion of rental expense(2) 2,022 1,514 1,375 1,171 959 ------- ------- ------- ------- ------- Total fixed charges $12,492 $12,009 $ 6,647 $ 2,363 $ 1,857 ======= ======= ======= ======= ======= Ratio of earnings to fixed charges 3.4x 1.0x 9.8x 20.1x 27.4x ======= ======= ======= ======= =======
(1) Includes non-recurring merger and integration charges of $5.5 million, pre-tax, in fiscal year 1997. Exclusive of such charges, the ratio of earnings to fixed charges for fiscal year 1997 was 22.4. (2) The interest factor of rental expense is estimated at one-third of total rental expense, which the Company believes to be a reasonable approximation. EX-21 9 ex21.txt SUBSIDIARIES OF KENT ELECTRONICS CORPORATION 1 EXHIBIT 21 SUBSIDIARIES OF KENT ELECTRONICS CORPORATION
STATE OF SUBSIDIARY INCORPORATION - ---------- ------------- K*TEC Electronics Corporation Delaware Kent Datacomm Corporation Texas
EX-23 10 ex23.txt CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCT. 1 EXHIBIT 23 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our report dated May 8, 2000, accompanying the consolidated financial statements included in the Annual Report of Kent Electronics Corporation and Subsidiaries on Form 10-K for the year ended April 1, 2000. We do hereby consent to the incorporation by reference of said report in the Registration Statements of Kent Electronics Corporation on Form S-8, File Nos. 33-12028, 33-17821, 33-18527, 33-66030, 333-20367, 333-86279 and 333-86281. GRANT THORNTON LLP Houston, Texas June 27, 2000 EX-27 11 ex27.txt FINANCIAL DATA SCHEDULE
5 0000793024 KENT ELECTRONICS CORPORATION 1,000 12-MOS APR-01-2000 APR-01-2000 101,052 0 182,885 932 197,695 494,028 190,277 67,323 731,135 156,692 207,000 0 0 67,602 277,130 731,135 993,938 993,938 824,694 824,694 0 589 10,470 30,043 11,792 18,251 0 0 0 18,251 0.65 0.63
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