-----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, Ga0D1oit3hPW8WniSfzjcWKA2T9XjL+ib5F3ZE8LxIOGHfDmHyf2PMp6Xas942Ra 0zKhAfTIJEX5RGDTMLLO6g== 0000907098-96-000093.txt : 19961205 0000907098-96-000093.hdr.sgml : 19961205 ACCESSION NUMBER: 0000907098-96-000093 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961101 SROS: NASD 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: 96651881 BUSINESS ADDRESS: STREET 1: 4916 N ROYAL ATLANTA DR CITY: TUCKER STATE: GA ZIP: 30085 BUSINESS PHONE: 7709418962 MAIL ADDRESS: STREET 1: 4916 NORTH ROYAL ATLANTA DRIVE CITY: TUCKER STATE: GA ZIP: 30085 10-Q 1 THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T 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 September 30, 1996 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) (770) 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 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 At November 1, 1996, there were 7,129,747 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 September 30, June 30, ASSETS 1996 1996 CURRENT ASSETS: Cash and cash equivalents $ 1,192,000 $ 662,000 Trade accounts receivable, net 50,578,000 44,621,000 Inventories 68,755,000 72,501,000 Deferred income taxes 1,230,000 1,230,000 Other current assets 1,059,000 527,000 TOTAL CURRENT ASSETS 122,814,000 119,541,000 PROPERTY AND EQUIPMENT, net 4,814,000 4,341,000 INTANGIBLES 7,338,000 7,423,000 $134,966,000 $131,305,000 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable $ 58,908,000 $75,508,000 Accrued liabilities 3,005,000 2,842,000 Income taxes payable 1,571,000 695,000 TOTAL CURRENT LIABILITIES 63,484,000 79,045,000 REVOLVING BANK DEBT 29,300,000 10,610,000 STOCKHOLDERS' EQUITY: Preferred Stock 129,500 shares authorized, none issued Common stock, $.01 par value; 25,000,000 shares authorized; 7,455,337 shares (September 30, 1996) and 7,444,712 shares (June 30, 1996) issued 75,000 74,000 Additional paid-in capital 12,210,000 12,204,000 Retained earnings 33,008,000 31,190,000 Treasury stock, at cost, 325,590 shares (September 30, 1996) and 125,590 shares (June 30, 1996) (2,715,000) (1,390,000) Prepaid compensation - stock awards (396,000) (428,000) 42,182,000 41,650,000 $134,966,000 $131,305,000
2 SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) Three Months Ended September 30, 1996 1995 NET SALES $160,114,000 $109,993,000 COST OF SALES, Including buying and occupancy expenses 151,113,000 103,385,000 9,001,000 6,608,000 OTHER COSTS AND EXPENSES Selling, general, and administrative 5,699,000 4,707,000 Interest expense, net 331,000 271,000 6,030,000 4,978,000 EARNINGS BEFORE INCOME TAXES 2,971,000 1,630,000 INCOME TAXES 1,153,000 620,000 NET EARNINGS $ 1,818,000 $ 1,010,000 NET EARNINGS PER COMMON SHARE $.24 $.14 WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 7,480,000 7,122,000
3 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, 1996 7,444,712 $74,000 $12,204,000 $31,190,000 125,590 $(1,390,000) $ (428,000) Stock options exercised 10,625 1,000 6,000 Amortization of stock awards 32,000 Treasury stock purchased 200,000 (1,325,000) Net earnings 1,818,000 BALANCE, September 30, 1996 7,455,337 $75,000 $12,210,000 $33,008,000 325,590 $(2,715,000) $ (396,000)
See notes to condensed consolidated financial statements. 4 SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended September 30, 1996 1995 OPERATING ACTIVITIES: Net earnings $ 1,818,000 $ 1,010,000 Adjustments to reconcile net earnings to net cash used in operating activities Depreciation and amortization 364,000 197,000 Compensation - stock awards 32,000 23,000 Changes in assets and liabilities (18,284,000) (4,990,000) Net cash used in operating activities (16,070,000) (3,760,000) INVESTING ACTIVITIES: Purchases of equipment (765,000) (223,000) FINANCING ACTIVITIES: Borrowings under line of credit, net 18,690,000 3,395,000 Purchase of treasury stock (1,325,000) 0 Net cash provided by financing activities 17,365,000 3,395,000 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 530,000 (588,000) CASH AND CASH EQUIVALENTS, beginning of period 662,000 790,000 CASH AND CASH EQUIVALENTS, end of period $ 1,192,000 $ 202,000
5 SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Three Months Ended September 30, 1996 and 1995 (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 ended September 30, 1996 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, 1996. 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. C. Common Stock: On August 6, 1996, the Company repurchased 200,000 shares of its common stock for approximately $1.3 million in an open market transaction under a stock buy-back program previously authorized by the Board of Directors. D. Newly Issued Accounting Standards: In March, 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be disposed of, which the Company adopted effective July 1, 1996. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles be reviewed for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, with any impairment losses being reported in the period on which the recognition criteria are first applied based on the fair value of the asset. Long lived assets and certain intangibles to be disposed of are required to be reported at the lower of carrying amount or fair value less cost to sell. The initial adoption of SFAS No. 121 had no impact on the Company's results of operations for the three months ended September 30, 1996. In October 1995, the Financial Accounting Standards Board issued SFAS No.123 "Accounting for Stock-Based Compensation" which the Company adopted effective July 1, 1996. SFAS No. 123 requires expanded disclosures of stock-based compensation arrangements with employees and encourages (but does not require) compensation cost to be measured based on the fair value of the equity instrument awarded. Companies are permitted, however, to continue to apply APB Opinion No. 25, which recognizes compensation cost based on the intrinsic value of the equity instrument awarded. The Company will continue to apply APB Opinion No. 25 to its stock based compensation awards to employees and will disclose the required pro forma effect on net income and earnings per share in its 1997 Annual Report. Accordingly, the initial adoption of SFAS No. 123 had no impact on the Company's results of operations for the three months ended September 30, 1996. 6 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONSOLIDATED RESULTS OF OPERATIONS Three Months Ended September 30, 1996 Compared to Three Months Ended September 30, 1995 Net sales for the first quarter ended September 30, 1996 increased 45.6% compared to the first quarter ended September 30, 1995. This growth resulted primarily from the increase in sales to customers in Latin America. Sales of microcomputers and computer peripheral products represented approximately 93.7% of the Company's business for the first quarter ended September 30, 1996 as compared to approximately 91.2% for the first quarter ended September 30, 1995. Sales of cellular telephone products accounted for approximately 6.3% of the business for the first quarter ended September 30, 1996 as compared to 8.8% for the year-earlier period. Gross profit as a percentage of net sales was 5.6% for the first quarter as compared to 6.0% for the same period in the prior year. This decrease is primarily attributable to more competitive pricing during the quarter ended September 30, 1996 as compared to the quarter ended September 30, 1995. Selling, general, and administrative expenses as a percentage of net sales decreased to 3.6% for the first quarter ended September 30, 1996 compared with 4.3% for the quarter ended September 30, 1995. This decrease is due primarily to greater revenue coverage of expenses and the Company's efforts to contain expense increases. Income tax expense was recorded at an effective annual rate of 38.8% for the first quarter ended September 30, 1996 and 38.0% for the first quarter ended September 30, 1995. 7 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 (the "Revolving Credit Agreement") with National City Bank, Columbus, Ohio, and Wachovia Bank of Georgia, N.A. which provides for an unsecured line of credit of $35,000,000. The Company may borrow at the prime rate offered by Wachovia Bank of Georgia, N.A., 8.25% at September 30, 1996, or the Company may fix the interest rate for periods of 30 to 180 days under various interest rate options. The Revolving Credit Agreement requires a commitment fee of 1/4% of the unused commitment. The Revolving Credit Agreement requires maintenance of certain minimum working capital and other financial ratios and has certain dividend restrictions. This agreement expires on August 31, 1998. At September 30, 1996, the Company had borrowings of $29,300,000 and irrevocable standby letters of credit of $700,000 outstanding under the Revolving Credit Agreement. The Company's liquidity requirements arise primarily from the funding of working capital needs, including inventories and trade accounts receivable. The Company funds its increases in inventories and accounts receivable with internally generated funds and, at times, borrowings under its Revolving Credit Agreement. 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 1997. Forward-Looking Information The matters discussed in this report and, in particular, information regarding future revenues and Southern Electronics Corporation's future business plans, consist of forward-looking information under the Private Securities Litigation Reform Act of 1995, and are subject to and involve risks and uncertainties which could cause actual results to differ materially from the forward-looking information. These risks and uncertainties include, but are not limited to, general economic conditions, industry trends, the dependence upon and/or loss of key suppliers or customers, the loss of strategic product shipping relationships, customer demand, product availability, competition (including pricing and availability), concentrations of credit risk, distribution efficiencies, capacity constraints, technological difficulties, risk of international operations including exchange rate fluctuations and the regulatory and trade environment(both domestic and foreign). 8 PAGE 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. Exhibit Number Description 27 Financial Data Schedule b) Reports on Form 8-K None 9 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) November 1, 1996 /s/ GERALD DIAMOND Gerald Diamond Chief Executive Officer Chairman of the Board (Principal Executive Officer) November 1, 1996 /s/ LARRY G. AYERS Larry G. Ayers Vice President-Finance and Treasurer (Principal Accounting Officer) 10 EXHIBIT INDEX Exhibit Number Description 27 Financial Data Schedule 11 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED CONSOLIDATED FINANCIAL STATEMENTS. 3-MOS JUN-30-1997 SEP-30-1996 1,192,000 0 50,578,000 0 68,755,000 122,814,000 4,814,000 0 134,966,000 63,484,000 0 0 0 75,000 42,107,000 134,966,000 160,114,000 160,114,000 151,113,000 151,113,000 5,699,000 0 331,000 2,971,000 1,153,000 1,818,000 0 0 0 1,818,000 0.24 0.24
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