-----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, Q0zD3cgjpaCC48kloWr0XHH6siazov4bD4tF6qK64OUXsbc5+2Sz+zAsAzjRuv1o EO3KElvQbcdqaCcDrqqK/w== 0000912057-96-009565.txt : 19960515 0000912057-96-009565.hdr.sgml : 19960515 ACCESSION NUMBER: 0000912057-96-009565 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960330 FILED AS OF DATE: 19960514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INACOM CORP CENTRAL INDEX KEY: 0000818815 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 470681813 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16114 FILM NUMBER: 96564094 BUSINESS ADDRESS: STREET 1: 200 FARNAM EXECUTIVE CNTR STREET 2: 10810 FARNAM DR CITY: OMAHA STATE: NE ZIP: 68154 BUSINESS PHONE: 4023923900 MAIL ADDRESS: STREET 1: 10810 FARNAM DRIVE STREET 2: SUITE 200 CITY: OMAHA STATE: NE ZIP: 68154 FORMER COMPANY: FORMER CONFORMED NAME: VALCOM INC DATE OF NAME CHANGE: 19910812 10-Q 1 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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 30, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER: 0-16114 INACOM CORP. (Exact name of registrant as specified in its charter) DELAWARE 47-0681813 (State or other jurisdiction (I.R.S. Employer of Identification Number) incorporation or organization)
10810 FARNAM, SUITE 200 OMAHA, NEBRASKA 68154 (Address of principal executive offices) TELEPHONE NUMBER (402) 392-3900 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 twelve months, and (2) has been subject to such filing requirements for the past ninety days: Yes _X_ No ___ As of May 1, 1996 there were 10,051,176 common shares of the registrant outstanding. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- INACOM CORP. AND SUBSIDIARIES CONDENSED AND CONSOLIDATED BALANCE SHEETS (UNAUDITED) (AMOUNTS IN THOUSANDS)
MARCH 30, DECEMBER 30, 1996 1995 ----------- ------------ ASSETS Current assets: Cash and cash equivalents........................................................... $ 47,629 20,690 Accounts receivable, net............................................................ 171,524 160,306 Inventories......................................................................... 320,197 352,948 Other current assets................................................................ 6,115 5,996 ----------- ------------ Total current assets.............................................................. 545,465 539,940 ----------- ------------ Other assets, net..................................................................... 19,060 17,831 Cost in excess of net assets of business acquired, net of accumulated amortization.... 24,579 24,966 Property and equipment, net........................................................... 41,292 41,501 ----------- ------------ $ 630,396 624,238 ----------- ------------ ----------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.................................................................... $ 287,336 331,221 Notes payable and current portion of long-term debt................................. 126,667 83,526 Other current liabilities........................................................... 37,636 34,253 ----------- ------------ Total current liabilities......................................................... 451,639 449,000 ----------- ------------ Long-term debt........................................................................ 23,667 23,667 Other long-term liabilities........................................................... 2,796 2,796 Stockholders' equity: Capital stock: Class A preferred stock of $1 par value. Authorized 1,000,000 shares; none issued........................................................................... -- -- Common stock of $.10 par value. Authorized 30,000,000 shares; issued 10,051,176 shares........................................................................... 1,005 1,004 Additional paid-in capital........................................................ 89,781 89,528 Retained earnings................................................................. 61,864 58,874 ----------- ------------ 152,650 149,406 Less: Cost of common shares in treasury of 19,989 in 1995................................. -- 161 Unearned restricted stock........................................................... 356 470 ----------- ------------ Total stockholders' equity........................................................ 152,294 148,775 ----------- ------------ $ 630,396 624,238 ----------- ------------ ----------- ------------
1 INACOM CORP. AND SUBSIDIARIES CONDENSED AND CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED) (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THIRTEEN WEEKS ENDED ---------------------- MARCH 30, APRIL 1, 1996 1995 ----------- --------- Revenues: Computer products...................................................................... $ 597,722 449,770 Computer services...................................................................... 28,139 22,801 Communication products and services.................................................... 16,220 11,385 ----------- --------- 642,081 483,956 ----------- --------- Direct costs: Computer products...................................................................... 564,231 421,868 Computer services...................................................................... 8,203 7,313 Communication products and services.................................................... 12,466 8,859 ----------- --------- 584,900 438,040 ----------- --------- Gross margin............................................................................. 57,181 45,916 Selling, general and administrative expenses............................................. 47,241 39,516 ----------- --------- Operating income......................................................................... 9,940 6,400 Interest expense......................................................................... 4,873 2,817 ----------- --------- Earnings before income tax............................................................... 5,067 3,583 Income tax expense....................................................................... 2,077 1,469 ----------- --------- Net earnings............................................................................. $ 2,990 2,114 ----------- --------- ----------- --------- Earnings per share....................................................................... $.29 .21 ----------- --------- ----------- --------- Weighted average shares outstanding...................................................... 10,300 10,300 ----------- --------- ----------- ---------
2 INACOM CORP. AND SUBSIDIARIES CONDENSED AND CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (AMOUNTS IN THOUSANDS)
THIRTEEN WEEKS ENDED --------------------- MARCH 30, APRIL 1, 1996 1995 ---------- --------- Cash flows from operating activities: Net earnings............................................................................ $ 2,990 2,114 Adjustments to reconcile net earnings to net cash used in operating activities: Depreciation and amortization......................................................... 5,329 4,973 Increase in accounts receivable....................................................... (11,218) (581) Decrease (increase) in inventories.................................................... 32,751 (33,930) Increase in other current assets...................................................... (119) (253) (Decrease) increase in accounts payable............................................... (43,885) 15,722 Increase in other current liabilities................................................. 3,383 1,401 ---------- --------- Net cash used in operating activities............................................... (10,769) (10,554) ---------- --------- Cash flows from investing activities: Additions to property and equipment..................................................... (3,318) (2,195) Proceeds from notes receivable.......................................................... 168 407 Increase in other assets................................................................ (2,698) (714) ---------- --------- Net cash used in investing activities............................................... (5,848) (2,502) ---------- --------- Cash flows from financing activities: Proceeds from short-term debt........................................................... 43,141 14,971 Proceeds from exercise of stock options................................................. 415 -- ---------- --------- Net cash provided by financing activities........................................... 43,556 14,971 ---------- --------- Net increase in cash and cash equivalents................................................. 26,939 1,915 Cash and cash equivalents, beginning of the period........................................ 20,690 10,514 ---------- --------- Cash and cash equivalents, end of the period.............................................. $ 47,629 12,429 ---------- --------- ---------- ---------
3 INACOM CORP. AND SUBSIDIARIES NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS The condensed and consolidated financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The condensed and consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report to Stockholders incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 1995. The results of operations for the three months ended March 30, 1996 are not necessarily indicative of the results for the entire fiscal year ending December 28, 1996. 2. ACCOUNTS RECEIVABLE The Company entered into an agreement in June 1995 (which agreement was amended and restated in August 1995) to sell $100 million of accounts receivable, with limited recourse, to an unrelated financial institution. New qualifying receivables are sold to the financial institution as collections reduce previously sold receivables in order to maintain a balance of $100 million sold receivables. On March 30, 1996, $21.4 million of additional accounts receivable were designated to offset potential obligations under limited recourse provisions; however, historical losses on Company receivables have been substantially less than such additional amount. At March 30, 1996, the interest rate was 5.83%. 3. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out method) or market and consist of computer hardware, software, voice and data equipment and related materials. 4. COMMON STOCK Earnings per share of common stock have been computed on the basis of the weighted average number of shares of common stock outstanding during each period presented. 5. MARKETING DEVELOPMENT FUNDS Primary vendors of the Company provide various incentives, in cash or credit against obligations, for promoting and marketing their product offerings. The funds or credits received are based on the purchases or sales of the vendor's products and are earned through performance of specific marketing programs or upon completion of objectives outlined by the vendors. Funds or credits earned are applied to direct costs or selling, general and administrative expenses depending on the objectives of the program. Funds or credits from the Company's primary vendors typically range from 1% to 3% of purchases from these vendors. 6. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION For purposes of the condensed and consolidated statement of cash flows, the Company considers cash and cash investments with a maturity of three months or less to be cash equivalents. Interest and income taxes paid are summarized as follows (dollars in thousands):
1996 1995 --------- --------- Interest paid.............................................................. $ 4,453 2,648 Income taxes paid.......................................................... $ 238 1,063 --------- --------- --------- ---------
4 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS The following tables set forth, for the indicated periods, revenue by classification and the mix of revenue.
THIRTEEN WEEKS ENDED ---------------------- INCREASE MARCH 30, APRIL 1, ---------------------- TOTAL REVENUES (IN THOUSANDS) 1996 1995 DOLLARS PERCENT - -------------------------------------------------------------------- ----------- --------- --------- ----------- Computer products................................................... $ 597,722 449,770 147,952 32.9% Computer services................................................... 28,139 22,801 5,338 23.4% Communication products and services................................. 16,220 11,385 4,835 42.5% ----------- --------- --------- --- Total............................................................. $ 642,081 483,956 158,125 32.7% ----------- --------- --------- --- ----------- --------- --------- --- THIRTEEN WEEKS ENDED ---------------------- MARCH 30, APRIL 1, 1996 1995 ----------- --------- Revenue: Computer products........................................................................ 93.1% 92.9% Computer services........................................................................ 4.4 4.7 Communication products and services...................................................... 2.5 2.4 ----- ----- Total revenue.......................................................................... 100.0% 100.0% ----- ----- ----- -----
Revenues for the first quarter of 1996 increased $158.1 million or 32.7% over the first quarter of 1995. Revenue growth resulted primarily from computer product sales which increased $148.0 million or 32.9% during the first quarter of 1996 compared to the same period in 1995. Revenue from computer services increased $5.3 million or 23.4% during the first quarter of 1996 compared to the same period in 1995. Revenue from communication products and services increased $4.8 million or 42.5% during the first quarter of 1996 compared to the same period in 1995. Revenues increased as a result of overall industry growth, an increase in sales through the existing company owned locations and independent resellers, and the sale of products to new independent resellers. The increase in computer product sales resulted from an increase in sales through the independent reseller channel ($87.3 million or 38.1% over the first quarter of 1995) and through an increase in sales through the Company-owned business centers ($57.5 million or 28.0% over the first quarter of 1995). Revenue from computer services increased as a result of increased sales efforts for such service offerings and the inclusion of these services with increasing computer product sales. Revenue from communication products and services has increased as a result of broad based growth from the communications product offerings. 5 The following tables set forth, for the indicated periods, gross margin and gross margin percentages by classification.
THIRTEEN WEEKS ENDED ---------------------- AS % OF TOTAL MARCH 30, APRIL 1, PERCENT ------------------------ TOTAL GROSS MARGIN (IN THOUSANDS) 1996 1995 INCREASE 1996 1995 - ---------------------------------------------------------- ----------- --------- -------- ----------- ----------- Computer products......................................... $ 33,491 27,902 20.0% 58.6% 60.8% Computer services......................................... 19,936 15,488 28.7% 34.9% 33.7% Communication products and services....................... 3,754 2,526 48.6% 6.5% 5.5% ----------- --------- --- ----- ----- Total................................................... $ 57,181 45,916 24.5% 100.0% 100.0% ----------- --------- --- ----- ----- ----------- --------- --- ----- -----
THIRTEEN WEEKS ENDED --------------------- MARCH 30, APRIL 1, TOTAL GROSS MARGIN (PERCENTAGE) 1996 1995 - ---------------------------------------------------------- --------- --------- Computer products......................................... 5.6% 6.2% Computer services......................................... 70.8% 67.9% Communication products and services....................... 23.1% 22.2% --- --- Company gross margin percentage........................... 8.9% 9.5% --- --- --- ---
While gross margin percentages declined from the 1995 first quarter to the 1996 first quarter, the gross margin percentage in computer product sales was the same in the 1996 first quarter as the 5.6% in the fourth quarter of 1995. The decrease in gross margin percentage for the computer products resulted from a greater proportion of lower margin independent reseller channel sales in the first quarter of 1996 versus higher margin computer product sales in the Company-owned business centers. The increase in gross margin percentage for computer services resulted from an increase in the mix of services to include more higher margin systems integration services versus the support and technology procurement services. The increase in gross margin percentage for the communication products and services resulted from an increase in mix of revenues to include more higher margin long distance and non-product services. Selling, general and administrative (SG&A) expenses for the quarter ended March 30, 1996 were $47.2 million versus $39.5 million for the corresponding period in 1995. SG&A as a percent of revenue was 7.4% in the first quarter of 1996 versus 8.2% in the first quarter of 1995. The increase in spending resulted primarily from the costs of handling the increased revenues and an increase in investment for computer service offerings. The decrease in SG&A as a percent of revenue resulted from leverage achieved through operational efficiencies resulting from investments in distribution center automation and information systems. Interest expense was $4.9 million in the first quarter of 1996 versus $2.8 million in the first quarter of 1995. Interest expense increased due to higher average daily borrowings. Average daily borrowings for the first quarter of 1996 were $123.5 million more than the average borrowings for the same period in the prior year while the average borrowing rate decreased approximately 0.6 of a percentage point from the same period in the prior year. The increase in the average daily borrowings resulted from the Company's decision in the first quarter of 1996 to take advantage of early pay discounts offered by some of the Company's major vendors and an increase in accounts receivable resulting from the increase in revenues. The effective tax rate was 41.0% for the first quarter of 1996 and 1995. 6 The following tables set forth, for the indicated periods, net earnings by classification.
THIRTEEN WEEKS ENDED ------------------------ AS % OF TOTAL MARCH 30, APRIL 1, PERCENT ------------------------ TOTAL NET EARNINGS (IN THOUSANDS) 1996 1995 INCREASE 1996 1995 - ---------------------------------------------------------- ----------- ----------- ----------- ----------- ----------- Computer products......................................... $ 1,557 973 60.0% 52.1% 46.0% Computer services......................................... 1,127 1,008 11.8% 37.7% 47.7% Communication products and services....................... 306 133 130.1% 10.2% 6.3% ----------- ----- ----- ----- ----- Total................................................... $ 2,990 2,114 41.4% 100.0% 100.0% ----------- ----- ----- ----- ----- ----------- ----- ----- ----- -----
Net earnings were $3.0 million or $.29 per share for the quarter ended March 30, 1996 versus $2.1 million or $.21 per share for the corresponding period in 1995. This increase resulted from the factors discussed above. LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of liquidity are provided through a working capital financing agreement for $350.0 million, a revolving credit facility for $40.0 million and $30.3 million in two private placement notes. The Company entered into a working capital financing agreement in June 1995 with a financial services organization and terminated previous revolving credit facilities. The $350.0 million working capital financing agreement expires June 29, 1998. At March 30, 1996, $80.0 million was outstanding under the working capital line and the interest rate was 7.3% based on LIBOR. The working capital financing agreement is secured by accounts receivable and inventory. The Company entered into a revolving credit facility agreement in February 1996 with a financial institution. The $40.0 million revolving credit facility agreement expires in February 1997. At March 30, 1996, $40.0 million was outstanding under the revolving credit facility and the interest rate was 6.7% based on LIBOR. The revolving credit facility is secured by accounts receivable and inventory. The two private placement notes are held by unaffiliated insurance companies. The principal amount of the first note, $13.3 million, is payable in two annual installments of $6.7 million commencing on May 31, 1996 and bears interest at 10.31% payable quarterly. The principal amount of the second note, $17 million, is payable in five annual installments of $3.4 million commencing on February 28, 1997 and bears interest at 6.83% payable quarterly. The notes are secured by accounts receivable and inventory. The debt agreements contain certain restrictive covenants, including the maintenance of minimum levels of working capital, tangible net worth, fixed charge coverage, limitations on incurring additional indebtedness and restrictions on the amount of net loss that the Company can incur. The Company was in compliance with the covenants contained in the agreements at March 30, 1996. Long-term debt was 13.5% of total long-term debt and equity at March 30, 1996 versus 18.0% at April 1, 1995. The decrease is primarily a result of the increase in equity and a reduction in long-term debt due to the scheduled payment of $6.7 million of the private placement notes. The Company entered into an agreement in June 1995 (which agreement was amended and restated in August 1995) to sell $100 million of accounts receivable, with limited recourse, to an unrelated financial institution. New qualifying receivables are sold to the financial institution as collections reduce previously sold receivables in order to maintain a balance of $100 million sold receivables. On March 30, 1996, $21.4 million of additional accounts receivable were designated to offset potential obligations under limited recourse provisions; however, historical losses on Company receivables have been substantially less than such additional amount. At March 30, 1996, the implicit interest rate on the receivables sale transaction was 5.83% 7 During the first quarter of 1996 the Company used $10.8 million of cash in operations. Inventory decreased by $32.8 million during the first quarter with the decrease offset by a reduction in accounts payable of $43.9 million. Accounts receivable also increased $11.2 million during the first quarter. Inventory decreased during the quarter as a result of increased sales and accounts payable decreased as a result of the Company taking advantage of early pay discounts offered by some of the Company's major vendors. Accounts receivable increased during the quarter as a result of the increase in revenues. Cash used in investing activities for the first quarter of 1996 totaled $5.8 million, of which $3.3 million resulted from additions to property and equipment. Cash was also provided from financing activities through proceeds from short-term borrowings of $43.1 million. The Company believes the funding expected to be generated from operations and provided by the credit facilities will be sufficient to meet working capital and capital investment needs in 1996. 8 INACOM CORP. AND SUBSIDIARIES PART II -- OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders of the Company was held on April 18, 1996. Stockholders voted on the following two items: (a) Election of Directors
DIRECTOR VOTE FOR VOTE WITHHELD - -------------------------------------------------------------- ----------- ------------- Joseph Auerbach............................................... 9,022,695 27,186 Bill L. Fairfield............................................. 8,828,747 221,134 W. Grant Gregory.............................................. 9,025,147 24,734 Joseph T. Inatome............................................. 8,828,647 221,234 Rick Inatome.................................................. 8,823,747 226,134 Gary L. Schwendiman........................................... 9,026,047 23,834 Durward B. Varner............................................. 9,018,907 30,974
(b) Approval of appointment of independent accountants KPMG Peat Marwick for fiscal 1996. The stockholder vote on such proposal was: 9,036,678 for; 6,674 against; 6,529 abstain. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. None (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended March 30, 1996. 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 and by the undersigned hereunto duly authorized. INACOM CORP. By /s/ DAVID C. GUENTHNER ----------------------------------- David C. Guenthner EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Dated this 13th day of May, 1996. 10 EX-27 2 EXHIBIT 27
5 1,000 3-MOS DEC-28-1996 DEC-31-1995 MAR-30-1996 47,629 0 171,524 2,708 320,197 545,465 41,292 47,948 630,396 451,639 0 0 0 1,005 151,289 630,396 642,081 642,081 584,900 584,900 47,241 0 4,873 5,067 2,077 2,990 0 0 0 2,990 .29 .29
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