-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, rgnk2lNMvZ2MkhRoxEjbAkelL2RdUODi2Yi/KFCI9hQy9rhfMK20k3Ndwd58/8Sz l/YqSf0EzD+P9giZgYnOgw== 0000907098-95-000014.txt : 19950530 0000907098-95-000014.hdr.sgml : 19950530 ACCESSION NUMBER: 0000907098-95-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN ELECTRONICS CORP CENTRAL INDEX KEY: 0000800286 STANDARD INDUSTRIAL CLASSIFICATION: 5045 IRS NUMBER: 222715444 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16345 FILM NUMBER: 95539070 BUSINESS ADDRESS: STREET 1: 4916 N ROYAL ATLANTA DR CITY: TUCKER STATE: GA ZIP: 30085 BUSINESS PHONE: 4044918962 MAIL ADDRESS: STREET 1: 4916 NORTH ROYAL ATLANTA DRIVE CITY: TUCKER STATE: GA ZIP: 30085 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 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 0-16345 SOUTHERN ELECTRONICS CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 22-2715444 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4916 North Royal Atlanta Drive, Tucker, Georgia 30085 (Address of principal executive offices) (Zip code) (404) 491-8962 (Registrant's telephone number, including area code) Not applicable (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the Registrant (1) has filed all reports requiredto 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 At April 21, 1995, there were 6,962,902 shares of Common Stock, $.01 par value, outstanding. SOUTHERN ELECTRONICS CORPORATION INDEX Page PART I. FINANCIAL INFORMATION Item 1 - Financial Statements: Condensed Consolidated Balance Sheets 2 Condensed Consolidated Statements of Earnings 3 Condensed Consolidated Statements of Stockholders' Equity 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7-8 PART II. OTHER INFORMATION Item 1 - Legal Proceedings 9 Item 2 - Changes in Securities 9 Item 3 - Default Upon Senior Securities 9 Item 4 - Submission of Matters to a Vote of Security Holders 9 Item 5 - Other Information 9 Item 6 - Exhibits and Reports on Form 8-K 9 ITEM 1: FINANCIAL STATEMENTS SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS March 31, June 30, ASSETS 1995 1994 (Unaudited) CURRENT ASSETS: Cash and cash equivalents $ 2,005,000 $ 741,000 Trade accounts receivable, net 25,301,000 19,893,000 Inventories 34,418,000 29,172,000 Deferred income taxes 1,402,000 1,402,000 Prepaid income taxes 542,000 Other current assets 424,000 163,000 TOTAL CURRENT ASSETS 63,550,000 51,913,000 PROPERTY AND EQUIPMENT, net 4,256,000 3,521,000 INTANGIBLES 329,000 338,000 $ 68,135,000 $55,772,000 March 31, June 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994 (Unaudited) CURRENT LIABILITIES: Revolving bank debt $ 8,940,000 $ - Trade accounts payable 21,721,000 23,640,000 Accrued liabilities 3,757,000 2,784,000 Income taxes payable 473,000 - TOTAL CURRENT LIABILITIES 34,891,000 26,424,000 STOCKHOLDERS' EQUITY: Preferred Stock 129,500 shares authorized, none issued Common stock, $.01 par value; 10,000,000 shares authorized and 7,063,947 shares issued 71,000 71,000 Additional paid-in capital 10,256,000 10,127,000 Retained earnings 24,425,000 20,418,000 Treasury stock, at cost, 125,590 and 105,304 shares (1,390,000) (1,268,000) Prepaid compensation - stock awards (118,000) - 33,244,000 29,348,000 $68,135,000 $55,772,000 SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, 1995 1994 1995 1994 NET SALES $101,132,000 $75,776,000 292,557,000 $225,965,000 COST OF SALES, Including buying and occupancy expenses 94,169,000 69,593,000 271,635,000 207,239,000 6,963,000 6,183,000 20,922,000 18,726,000 OTHER COSTS AND EXPENSES (INCOME): Selling, general, and administrative 4,546,000 3,681,000 14,072,000 10,392,000 Interest expense 133,000 37,000 397,000 199,000 Interest income (9,000) (9,000) 4,679,000 3,709,000 14,469,000 10,582,000 EARNINGS BEFORE INCOME TAXES 2,284,000 2,474,000 6,453,000 8,144,000 INCOME TAXES 866,000 938,000 2,446,000 3,101,000 NET EARNINGS $ 1,418,000 $ 1,536,000 $ 4,007,000 5,043,000 NET EARNINGS PER COMMON SHARE $ .20 $ .21 $ .57 $ .68 WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 7,053,000 7,325,000 7,074,000 7,417,000
SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) Common Stock Additional Prepaid Par Paid-In Retained Treasury Stock Compensation Shares Value Capital Earnings Shares At Cost Stock Awards BALANCE, June 30, 1994 7,063,947 $71,000 $10,127,000 $20,418,000 105,304 $(1,268,000) $ - Stock awards issued 24,500 129,000 (129,000) Stock options exercised 45 Treasury stock purchased 20,286 (122,000) Amortization of stock awards 11,000 Net earnings 4,007,000 BALANCE, March 31, 1995 7,088,492 $71,000 $10,256,000 $24,425,000 125,590 $(1,390,000) $(118,000)
See notes to condensed consolidated financial statements. SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended March 31, 1995 1994 OPERATING ACTIVITIES: Net earnings $ 4,007,000 $ 5,043,000 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities Depreciation and amortization 413,000 359,000 Compensation - stock awards 11,000 34,000 Changes in assets and liabilities (10,846,000) 8,465,000 Net cash provided by (used in) operating activities (6,415,000) 13,901,000 INVESTING ACTIVITIES: Purchases of equipment (1,139,000) (648,000) FINANCING ACTIVITIES: Borrowings (repayments) under line of credit, net 8,940,000 (9,258,000) Proceeds from issuance of common stock - 41,000 Purchase of treasury stock (122,000) (922,000) Net cash provided by (used in) financing activities 8,818,000 (10,139,000) NET INCREASE IN CASH AND CASH EQUIVALENTS 1,264,000 3,114,000 CASH AND CASH EQUIVALENTS, beginning of period 741,000 1,109,000 CASH AND CASH EQUIVALENTS, end of period $ 2,005,000 $ 4,223,000
SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Nine Months Ended March 31, 1995 and 1994 (Unaudited) A. Interim Financial Statements: The accompanying condensed consolidated financial statements of Southern Electronics Corporation and subsidiary (the "Company") have been prepared without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three months and nine months ended March 31, 1995 are not necessarily indicative of the operating results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K, filed with the Securities and Exchange Commission for the year ended June 30, 1994. B. Earnings Per Common Share: Earnings per common share have been calculated based on the weighted average number of common shares and common share equivalents outstanding during each period. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONSOLIDATED RESULTS OF OPERATIONS Three Months Ended March 31, 1995 Compared to Three Months Ended March 31, 1994 Net sales for the third quarter ended March 31, 1995 increased 33.5% compared to the third quarter ended March 31, 1994. This growth resulted primarily from the increase in sales to value-added resellers (VARS) and dealers served by the Company. Sales of microcomputers and computer peripheral products represented approximately 93.1% of the Company's business for the third quarter ended March 31, 1995 as compared to approximately 91.8% for the third quarter ended March 31, 1994. Sales of cellular telephone products accounted for approximately 6.9% of the business for the third quarter ended March 31, 1995 as compared to 8.2% for the year-earlier period. Gross profit as a percentage of net sales was 6.9% for the third quarter as compared to 8.2% for the same period in the prior year. This decrease is primarily attributable to more competitive pricing during the quarter ended March 31, 1995 as compared to the quarter ended March 31, 1994. Selling, general, and administrative expenses as a percentage of net sales decreased to 4.5% for the third quarter ended March 31, 1995 compared with 4.9% for the quarter ended March 31, 1994. This decrease is due primarily to cost control measures implemented in the third quarter ended March 31, 1995. Income tax expense was recorded at an effective annual rate of 37.9% for the third quarters ended March 31, 1995 and March 31, 1994. Nine Months Ended March 31, 1995 Compared to Nine Months Ended March 31, 1994 Net sales for the nine months ended March 31, 1995 increased 29.5% compared to the nine months ended March 31, 1994. This growth resulted primarily from the increase in sales to value-added resellers and dealers served by the Company. Sales of microcomputers and computer peripherals products represented approximately 90.7% of the Company's business for the nine months ended March 31, 1995 and as compared approximately to 90.2% for the nine months ended March 31, 1994. Sales of cellular telephone products accounted for approximately 9.3% of the business for both the nine months ended March 31, 1995 as compared to approximately 9.8% for the year-earlier period. Gross profit as a percentage of net sales was 7.1% for the nine months ended March 31, 1995 as compared to 8.3% for the same period in the prior year. This decease is primarily attributable to more competitive pricing during the nine months ended March 31, 1995 as compared to the nine months ended March 31, 1994. Selling, general, and administrative expenses as a percentage of net sales increased to 4.8 % for the nine months ended March 31, 1995 compared with 4.6% for the nine months ended March 31, 1994. This increase, as a percentage of sales, is primarily due to increased training, selling and marketing expenses. Income tax expense was recorded in the nine months ended March 31, 1995 at an effective annual rate of 37.9% as compared to 38.1% in the nine months ended March 31, 1994. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued) Financial Condition, Liquidity, and Capital Resources The Company and its wholly-owned operating subsidiary, Southern Electronics Distributors, Inc. ("SED"), are parties to a revolving credit loan agreement, as amended (the "Revolving Credit Agreement"), with National City Bank, Columbus, Ohio, which provides for an unsecured line of credit of $20,000,000. Outstanding loans bear interest at the bank's "reference rate" (9.0% at March 31, 1995). The Revolving Credit Agreement requires a commitment fee of 1/8% per annum payable quarterly against the unused availability. The Revolving Credit Agreement requires maintenance of certain minimum working capital and other financial ratios and has certain dividend restrictions. This agreement expires on February 28, 1996. The Company's liquidity requirements arise primarily from the funding of working capital needs, including inventories and trade accounts receivable. The Company funded these needs with internally generated funds and, at times, borrowings under its revolving credit line. During the nine months ended March 31, 1995, the Company used $6.4 million for operating activities compared to providing $13.9 million from operating activities in the comparable prior year period. At March 31, 1995, the Company had borrowings of $8,940,000, leaving an available balance of $11,060,000. Management believes that the Revolving Credit Agreement, together with vendor lines of credit and internally generated funds, will be sufficient to satisfy its working capital needs during fiscal 1995. Other Developments On March 15, 1995, the Company entered into a letter of intent ("Letter of Intent") with GBC Technologies, Inc. ("GBC") contemplating the merger of the Company into a wholly-owned subsidiary of GBC. The Letter of Intent provides that in the merger the shares of common stock of the Company would be converted into registered shares of common stock of GBC at a one-to-one exchange ratio. The Letter of Intent contemplates that the transaction would be structured as a tax-free merger and would be treated as a "pooling of interests" for accounting purposes. The merger is subject to the negotiation of a definitive agreement between the Company and GBC, satisfactory due diligence by both parties, registration with the Securities and Exchange Commission of the shares of common stock of GBC to be issued in the transaction and other customary conditions and approvals, including approvals by the shareholders of the Company and GBC. No definitive merger agreement has been entered into or negotiated by the Company and GBC. The Company and GBC are presently conducting a due diligence review of each other's business operations. PART II - OTHER INFORMATION Item 1. Legal Proceedings Not applicable Item 2. Changes in Securities Not applicable Item 3. Default Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K a) Exhibits. The following exhibits are incorporated by reference or filed with this report: Exhibit Number Description 10.28 Letter of Intent dated March 15, 1995 between the Registrant and GBC Technologies, Inc.(1) 10.29 Amendment No. Two and Amendment No. Three to Revolving Credit Agreement dated February 23, 1993 between the Registrant and Southern Electronics Distributors, Inc.(wholly-owned subsidiary of Registrant) and National City Bank, Columbus, (f/k/a BancOhio National Bank). (1) Incorporated herein by reference to Exhibit 1 to the Registrant's Current Report on Form 8-K filed March 17, 1995 (date of earliest event reported: March 15, 1995). (b) Reports on form 8-K The Registrant filed a Current Report on Form 8-K on March 17, 1995 reporting the execution and delivery, on March 15, 1995, of a Letter of Intent with GBC Technologies, Inc. ("GBC") contemplating the merger of the Registrant with a wholly-owned subsidiary of GBC. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SOUTHERN ELECTRONICS CORPORATION (Registrant) May 12, 1995 /s/ Gerald Diamond Gerald Diamond Chief Executive Officer Chairman of the Board (Principal Executive Officer) May 12, 1995 /s/ Larry G. Ayers Larry G. Ayers Vice President-Finance and Treasurer (Principal Accounting Officer) EX-10.29 2 Exhibit No. 10.29 AMENDMENT NO. TWO TO REVOLVING CREDIT AGREEMENT THIS AMENDMENT NO. TWO (the "Amendment") is made to the Revolving Credit Agreement (the "Agreement") dated February 23, 1993, executed by and between SOUTHERN ELECTRONICS CORPORATION, a corporation duly organized under the laws of the State of Delaware and SOUTHERN ELECTRONICS DISTRIBUTORS, INC., a corporation duly organized under the Laws of the State of Delaware (herein collectively or individually called "Borrower"), and NATIONAL CITY BANK, COLUMBUS (f/k/a BancOhio National Bank), a national banking association with its principal office at 155 East Broad Street, Columbus, Ohio 43251 (herein called "Bank"). WITNESSETH: WHEREAS, Borrower and Bank entered into the Agreement pursuant to which Bank extended a revolving credit loan up to a maximum principal amount of Twenty Million Dollars ($20,000,000.00) each loan pursuant to the terms of the Agreement, and which loans are evidenced by a Revolving Credit Note dated February 23, 1993 in the original principal amount of $20,000,000.00, as amended by Amendment No. One to Revolving Credit Agreement dated February 25, 1994 (the "Note"); and WHEREAS, Borrower and Bank desire to amend the Agreement to provide for a new Loan Termination Date as defined in the Agreement. NOW THEREFORE, the parties hereto, in consideration of the mutual promises and covenants herein contained, agree as follows: 1. Section 1.11 of the Agreement is hereby amended by deleting such section in its entirety and substituting therefore the following: 1.11 "Loan Termination Date" means May 31, 1995, or such later date (if any) to which it is hereafter extended by mutual written agreement of the parties. 2. Borrower hereby expressly acknowledges and confirms that the representatives and warranties of Borrower set forth in Section V of the Agreement are true and accurate on this date with the same effect as if made on and as of this date; that except as previously disclosed to Bank, no financial condition or circumstances exists as to Borrower which would inevitably result in the occurrence of an Event of Default under Section VII of the Agreement; and that except as previously disclosed to Bank, no event has occurred or no condition exists which constitutes, or with the running of time or the giving of notice would constitute an Event of Default under Section VII of the Agreement. 3. Except as herein expressly modified, the parties hereto ratify and confirm all of the terms, conditions, warranties and covenants of the Agreement, and of all security agreements, pledge agreements, or mortgage deeds which may have been executed in connection with the Agreement, including provisions for the payment of the Note pursuant to the terms of the Agreement. This Amendment does not constitute the extinguishment of any obligation or indebtedness previously incurred, nor does it in any manner effect or impair any security interest granted to Bank, all of such security interests to be continued in full force and effect until the indebtedness described herein is fully satisfied. 4. This Amendment shall be binding upon Borrower, and Bank and their respective successors and assigns, and shall inure to the benefit of Bank and its respective successors and assigns. Executed by the parties hereto in manner and form sufficient to bind them on this 2nd day of February, 1995. SOUTHERN ELECTRONICS CORPORATION By: /s/ Larry G. Ayers Its: V.P. Finance SOUTHERN ELECTRONICS DISTRIBUTORS, INC. By: /s/ Larry G. Ayers Its: V.P. Finance NATIONAL CITY BANK, COLUMBUS By: /s/ Ralph A. Kaparos Ralph A. Kaparos Its: Senior Vice President AMENDMENT NO. THREE TO REVOLVING CREDIT AGREEMENT THIS AMENDMENT NO. THREE (the "Amendment") is made to the Revolving Credit Agreement (the "Agreement") dated February 23, 1993, executed by and between SOUTHERN ELECTRONICS CORPORATION, a corporation duly organized under the laws of the State of Delaware and SOUTHERN ELECTRONICS DISTRIBUTORS, INC., a corporation duly organized under the Laws of the State of Delaware (herein collectively or individually called "Borrower"), and NATIONAL CITY BANK, COLUMBUS (f/k/a BancOhio National Bank), a national banking association with its principal office at 155 East Broad Street, Columbus, Ohio 43251 (herein called "Bank"). WITNESSETH: WHEREAS, Borrower and Bank entered into the Agreement pursuant to which Bank extended a revolving credit loan up to a maximum principal amount of Twenty Million Dollars ($20,000,000.00) each loan pursuant to the terms of the Agreement, and which loans are evidenced by a Revolving Credit Note dated February 23, 1993 in the original principal amount of $20,000,000.00, as amended by Amendment No. One to Revolving Credit Agreement dated February 25, 1994, and as further amended by Amendment No. Two to Revolving Credit Agreement dated February 21, 1995 (the "Note"); and WHEREAS, Borrower and Bank desire to amend the Agreement to provide for a new Loan Termination Date as defined in the Agreement. NOW, THEREFORE, the parties hereto, in consideration of the mutual promises and covenants herein contained, agree as follows: 1. Section 1.11 of the Agreement is hereby amended by deleting such section in its entirety and substituting therefore the following: 1.11 "Loan Termination Date" means February 28, 1996, or such later date (if any) to which it is hereafter extended by mutual written agreement of the parties. 2. Borrower hereby expressly acknowledges and confirms that the representatives and warranties of Borrower set forth in section V of the Agreement are true and accurate on this date with the same effect as if made on and as of this date; that except as previously disclosed to Bank, no financial condition or circumstances exists as to Borrower which would inevitably result in the occurrence of an Event of Default under Section VII of the Agreement; and that except as previously disclosed to Bank, no event has occurred or no condition exists which constitutes, or with the running of time or the giving of notice would constitute an Event of Default under Section VII of the Agreement. 3. Except as herein expressly modified, the parties hereto ratify and confirm all of the terms, conditions, warranties and covenants of the Agreement, and of all security agreements, pledge agreements, or mortgage deeds which may have been executed in connection with the Agreement, including provisions for the payment of the Note pursuant to the terms of the Agreement. This Amendment does not constitute the extinguishment of any obligation or indebtedness previously incurred, nor does it in any manner effect or impair any security interest granted to Bank, all of such security interests to be continued in full force and effect until the indebtedness described herein is fully satisfied. 4. This Amendment shall be binding upon Borrower, and Bank and their respective successors and assigns, and shall inure to the benefit of Bank and its respective successors and assigns. Executed by the parties hereto in manner and form sufficient to bind them on this 27 day of April, 1995. SOUTHERN ELECTRONICS CORPORATION By: /s/ Larry G. Ayers Its: V.P. Finance SOUTHERN ELECTRONICS DISTRIBUTORS, INC. By: /s/ Larry G. Ayers Its: V.P. Finance NATIONAL CITY BANK, COLUMBUS By: /s/ Ralph A. Kaparos Ralph A. Kaparos Its: Senior Vice President -----END PRIVACY-ENHANCED MESSAGE-----